Unit-I: Introduction

The word “strategy” is derived from the Greek word “strategos”; stratus (meaning army) and “ago”
(meaning leading/moving).
Strategy is an action that managers take to attain one or more of the organization’s goals.
Strategy can also be defined as “A general direction, set for the company and its various components to
achieve a desired state in the future. Strategy results from the detailed strategic planning process”.
Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take into
consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an organization
that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines
the business the company is to carry on, the type of economic and human organization it wants to be, and the
contribution it plans to make to its shareholders, customers and society at large.
Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of
an organization. The objective of a strategy is to maximize an organization’s strengths and to minimize the
strengths of the competitors.
Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

Definition:
Johnson and Scholes"Strategy is the direction and scope of an organisation over the long-term;which
achieves advantage for the organisation through its configuration of resources within a challenging
environment, to meet the needs of markets and to fulfill stakeholder expectations."

Strategy is a broad long term plan designed to achieve the overall objectives of the firm.
Where is the business trying to get to in the long-term? (Direction)
Which markets should a business compete in and what kinds of activities are involved in such markets?
(Markets; Scope)
How can the business perform better than the competition in those markets? (Advantage)
What resources (skills, assets, finance, relationships, technical competence and facilities) are required in
order to be able to compete? (Resources)
What external, environmental factors affect the businesses' ability to compete? (Environment)
What are the values and expectations of those who have power in and around the business? (Stakeholders)

Features of Strategy
1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the
firms must be ready to deal with the uncertain events which constitute the business environment.

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 2. Strategy deals with long term developments rather than routine operations, i.e. it deals with
probability of innovations or new products, new methods of productions, or new markets to be
developed in future.
3. Strategy is created to take into account the probable behavior of customers and competitors.
Strategies dealing with employees will predict the employee behavior.
4. Future Oriented: Strategy is significant because it is not possible to foresee the future. Without a
perfect foresight, the firms must be ready to deal with the uncertain events which constitute the
business environment.
5. Deals with Long Term Developments: Strategy deals with long term developments rather than
routine operations, i.e., it deals with probability of innovations or new products, new methods of
productions, or new markets to be developed in future.
6. Analysis of the Behaviour: Strategy is created to take into account the probable behavior of
customers and competitors. Strategies dealing with employees will predict the employee behavior.
7. Strategy Alternatives: It is not sufficient for the organisation to frame only a single strategy, to
achieve its objectives. Some organizations may survive with one or two strategies due to the fewer
complexities in their business. Large organisations need to frame alternative strategies in respect of
growth and survival of the organisation.
8. Deals with The Environment: In order to frame the strategies for an organisation, it is important to
analyse the internal and external environment, that affects the functioning of the organisation.
Internal Environment relates to the
Mission and Objectives Technology
Labour Management Relationship Physical, Financial and Human Resources.

External Environment relates to the

Competition Channel Intermediaries Society
Customers Government Policies Economic, Political, etc.

9. Allocation of Resources: There are three types of resources which are supposed to be allocated.
They are:

Reasons for Strategy:

Below we look at the reasons why strategy has become essential to successful companies
1. Direction 2. Continuation 3. Agenda Setting
4. Skills & Knowledge 5. Sustainability 6. Communication
7. Planning 8. Resource allocation 9. Identifying the Strengths and Weaknesses

Relevance or Importance of Strategy in Modern Business:

A document which is most important to your business or to your organization is the Marketing plan. This
marketing or business plan is made after a lot of strategic consideration. Without strategy, a company will
not move forward in an orderly manner.

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It is about success and failure, about the ability to plan wars and win them. Effective strategic management
can transform the performance of an organisation, make fortunes for shareholders or change the structure
of an industry. Ineffective strategic management can bankrupt companies and ruin the careers of executives.

1. Strategy helps long term planning: While you have to be prepared for the short term tactics, the main
job of Strategy is to prepare you for a 3 year or 5 year or even a 10-20 year plan in some cases. When
you plan for so many years down the line, you become creative and also you stand on the toes of your
feet because your competitors don’t look so strong 10 years down the line nor will you be insecure about
your business. You have a plan and you are now confident.
2. Strategy helps with sustainability and competitive advantage: It literally tells you how to rank your
competitors one by one and then overtake them on your ladder to success. Strategy has exactly that role.
3. Strategy helps in collecting input: Naturally, when you want to forecast the future as it will be 10 years
down the line, you have to collect a lot of input. This input might be from various internal customers like
stockholders, distributors, dealers or others. It might be from employees and it might also be from end
customers.
4. Strategy helps in preparation for different markets and products: Both, products and markets are
dynamic in nature. A product might have a certain competitor pop up very quickly who is taking
away market share. On the other hand, a new market which the company is entering, might be very
different from the previous markets where the company has established its hold.
5. Strategy Optimizes and increases profits: One of the tasks assigned to the strategy department is to
ensure price competitiveness while keeping an eye on margins. Besides doing that, Marketing strategy
actually tightens up the complete process and operations of the organization, thereby contributing to a
possibly increased profit and an increase revenue.
6. Strategy helps in improving Marketing communications: Because you are already analysing the
markets, the customers and trying to implement the strategy as best as possible, it becomes easier for
your marketing manager to design the communications strategy and the communications mix.
7. Strategy leads the organization with a single objective: The strategy for the organization is decided at
the very top and then percolated down the line. The good thing about this is, that it aligns the complete
organization with one objective.
8. Strategy helps with optimum utilization of resources: When you are planning to move your house
from one place to another, you always plan well in advance. You get rid of the things you don’t need
anymore or better yet, you might sell it at a good price.
9. Strategy can help with gap analysis: A key factor in the growth of any organization is gap analysis.
When we are trying to cater to our customers, there are numerous gaps which can arise from time to
time. These gaps might be service gaps, expectation gaps or anything else. Because strategy keeps
analysing the current performance of the firm, it also carries out gap analysis.
10. Allows Firms to Anticipate Changing Conditions
11. Provides Clear Objectives and Direction for Employers
12. Research in Advancing so that the Process can Help Managers

LEVELS OF STRATEGY
Strategies exist at several levels in any organisation – ranging from the overall business (or group of
businesses) to individuals working in it. Strategic management is the highest of these levels in the sense that
it is the broadest – applying to all parts of the firm – while also incorporating the longest time horizon. It
gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this
broad corporate strategy, there are typically business-level competitive strategies and functional unit
strategies.

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1. Corporate Strategy
It is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a
crucial level it acts as guide for strategic decision-making throughout the business. Corporate strategy is
often stated explicitly in a "mission statement".
Corporate strategy refers to the overarching strategy of the diversified firm. Such a corporate strategy
answers the questions of "in which businesses should we be in?" and "how does being in these businesses
create synergy and/or add to the competitive advantage of the corporation as a whole?"
There are different types of corporate strategies:
 Growth Strategy  Stability Strategy  Defensive Strategy  Combination Strategy

2. Business Unit Strategy

This type of strategy is concerned more with how a business competes successfully in a particular market. It
concerns strategic decisions, about choice of products, meeting needs of customers, gaining advantage over
competitors, exploiting or creating new opportunities, etc. It refers to the aggregated strategies of single
business firm or a strategic business unit (SBU) in a diversified corporation. According to Michael Porter, a
firm must formulate a business strategy, that incorporates either cost leadership, differentiation or focus, in
order to achieve a sustainable competitive advantage and long-term success. There are different types of
Business Unit strategies:
Cost Leadership Strategy Differentiation Strategy Focus Strategy
3. Functional Strategy
It is concerned with how each part of the business is organised to deliver the corporate and business-unit
level strategic direction. Functional strategy therefore focuses on issues of resources, processes, people, etc.
Example: Functions of banks, i.e., bank assurance, loans, deposits, etc.,
Functional strategies include marketing strategies, new product development strategies, human resource
strategies, financial strategies, legal strategies, supply-chain strategies, and information technology
management strategies. The emphasis is on short and medium term plans and is limited to the domain of
each department’s functional responsibility.

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4. Operating Strategy The strategies which represent still narrow initiatives and approaches than functional
strategies. It is concerned how to manage key organizational units within a business and how to perform
significant operating tasks.

Characteristics of levels of Strategies

Types of Strategies

I. FUNCTIONAL STRATEGIES
1. Marketing Strategies
Marketing strategies may differ depending on the unique situation of the individual business. However there
are a number of ways of categorizing some generic strategies. A brief description of the most common
categorizing schemes is presented below:

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Strategies based on market dominance – In this scheme, firms are classified based on their market share
or dominance of an industry.
(A) Leader – The firms, which have the major control and dominance in the market share, are called as the
leader. Example: Johnson and Johnson is the leader of baby products in the market and has dominance of
industry.
(B) Challenger – The firms which are new in the market and are posing a challenge to the existing firms are
called as the challenger. These firms believe in risk taking and generating new strategies.
(C) Follower – The firms which don’t take the initiative and just follow the policies and practices framed by
the leaders are called as the followers.
(D) Nicher – The firms which follow the strategies for the small group of the market are Nicher. The firm is
able to satisfy the customers and generally do not intimate the leaders or the competitors.

2. Finance Strategy
Financial Strategy means utilization of capital, sources of funds and distribution to shareholders having
significant impact on value creation. Normally, organization gives more emphasis on operational strategy to
improve operational efficiencies and altogether ignores systematic approach towards Financial Strategy. In
order to fulfill shareholders expectation and value creation, organization needs to properly align Operational
and Financial Strategy.
The core aspects of financial strategy are:
Safeguard an investment-grade rating Maintain financial and operational flexibility
Stable capital structure Pursue a continuous dividend policy
Ensure adequate liquidity Hedging of external financial risks

3. Production Strategies
Production strategies are broad long-term action plans. They are made for achieving the main objectives of
an organisation. Production strategies tell us what the production department must do to achieve the top
aims of the organisation. It provides a road map for the production department. So, production strategies are
long-term action plans of the organisation, for the production of goods and services. Production strategies
decide about the investment to be made for production, the technology to be used for production, the
training to be given to the production staff, the production schedule to be followed, etc.

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Production strategy can be focused on the following:
1. Quality: A company with a quality focus should provide goods or services, that are fit for their purpose
and meet customer requirements. Quality can be achieved through a skilled workforce, adequate technology
and effective utilization of quality standards.
2. Speed: This strategy entails delivering goods and services as fast as customers want. Speed can be
achieved by provisions such as spare capacity, rapid supplies and effective control of work flow.
3. Dependability: This means doing things on time, or keeping the delivery schedule as promised to the
customer. It is attained by effective scheduling, reliable equipment and commitment of the employees.
4. Flexibility: This involves being able to respond to changes in the product design, production volume and
variety and delivery time required by the customer.
5. Cost: Cost-efficiency is achieved by better capacity utilization, reduced overheads, multipurpose
equipment and higher productivity.

4. Personnel or HR Strategies
These are considered to be the crucial, and very important strategy for any organization as the human
resource always works for the achievement of the resources. The organization must adopt Human friendly
strategies for its employees, so that they can work more efficiently.

II. CORPORATE LEVEL STRATEGIES:

1. Integration Strategy: Integration in the strategic management process is a common issue for
corporations that own more than one business. Strategic integration consists of incorporating
the strategies of a corporation's various business units to share resources and provide greater return on
investment for the organization as a whole.
2. Diversification Strategy: Diversification strategies are used to extend the company’s product lines and
operate in several different markets. The general strategies include concentric, horizontal and
conglomerate diversification.
3. Retrenchment Strategies: Retrenchment strategy is a corporate level strategy that aims to reduce the
size or diversity of organizational operations. At times, it also becomes a means to ensure an
organization's financial stability. ... A retrenchment strategy aims at the contraction of organization's
activities to improve performance.
A strategy used by a corporation to reduce the diversity or overall size of the operations of the strategy.
This strategy is often used in order to cut expenses with the goal of becoming a more financial stable
business. Typically the strategy involves withdrawing from certain markets or the discontinuation of
selling some goods or services in order to make a beneficial turnaround.
4. Disinvestment Strategies: Divestment is a form of retrenchment strategy used by businesses when they
downsize the scope of their business activities. Divestment usually involves eliminating a portion of
a business. Firms may elect to sell, close, or spin-off a strategic business unit, major operating division,
or product line.
5. Stability Strategy: The Stability Strategy is adopted when the organization attempts to maintain its
current position and focuses only on the incremental improvement by merely changing one or more of its
business operations in the perspective of customer groups, customer functions and technology
alternatives, either individually or collectively.
6. Intensive Strategy:
Market penetration, market development, and product development are sometimes referred to as
intensive strategies because they require intensive efforts to improve a firm's competitive position with
existing products.

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7. Take-over Strategy: Takeover implies acquisition of control of a company through purchase or
exchange of shares with the objective of gaining control over the management of a company. It can take
place either through acquiring majority shares or by obtaining control of management of the business
and affairs of the target company.

STRATEGICMANAGEMENT – AN INTRODUCTION
Strategic Management is all about identification and description of the strategies that managers can carry, so
as to achieve better performance and a competitive advantage for their organization. An organization is said
to have competitive advantage, if its profitability is higher than the average profitability for all the
companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts, which a manager undertakes
and which decides the result of the firm’s performance. The manager must have a thorough knowledge and
analysis of the general and competitive organizational environment, so as to take right decisions. They
should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should
make the best possible utilization of strengths, minimize the organizational weaknesses, make use of arising
opportunities from the business environment and should not ignore the threats. Strategic management is
nothing but planning for both predictable as well as unfeasible contingencies. It is applicable to both small
as well as large organizations, as even a smallest organization faces competition and, by formulating and
implementing appropriate strategies, they can attain sustainability.

Definitions:
A Sharplin; Strategic Management is the formulation and implementation of plan and carrying out of
activities relating to the matter which are of vital, pervasive, or continuing importance to the total
organization.
Pearce & Robbinson; Strategic Management is defined as the set of decisions and actions in formulation
and implementation of strategies designed to achieve the objectives of an organization.
Glueck; Strategic Management is that act of decisions and actions which leads to development of an
effective strategy or strategies to help achieve corporate objectives.

Characteristics of Strategic Management

(a) Systematic and Continuous Process: Strategic Management is a systematic and continuous process. It
is a process for achieving certain objectives of the organization. It is basically concerned with making,
implementing and evaluating the decisions of the organization. This process will go on till the organization
lasts.
(b) Future Oriented: It is oriented to the future. It is a long range orientation, one that tries to anticipate the
events, rather than simply react as they occur.
(c) Focus on Objectives: The strategic management cannot work without objectives, because the focus of
strategic management is on the achievement of the objectives. Through proper strategy planning, making,
implementing and evaluating, the organization can achieve its objectives.
(d) Relates to the Environment: Strategic management relates to the internal and external environment not
only for the framing of the strategies but also for decision making, implementing and formulating. The
internal environment relates to man, materials, machines, mission, objectives, plans, policies, and other
resources
(e) Top Management Function: Strategic management is the top management function. The top
management devotes a lot of time and effort in respect of strategic matters, rather than the routine matters,
The environment is dynamic in nature, so the management gives more time to planning, making,
implementing, evaluating and controlling the Strategic Management.

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(f) Involves Multiple Decisions: Strategic management is totally based on the decisions. At every step
various decisions are to be made by the top management, so strategic management helps in taking correct
decisions at proper time. It involves multiple decisions like:
Scanning the environment Evaluation of strategies
Setting objectives Formulation of strategies
Implementation of strategies

Process of Strategic Management

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and

providing information for strategic purposes. It helps in analyzing the internal and external factors
influencing an organization. After executing the environmental analysis process, management should
evaluate it on a continuous basis and strive to improve it.
2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After conducting
environment scanning, managers formulate corporate, business and functional strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or
putting the organization’s chosen strategy into action. Strategy implementation includes designing the
organization’s structure, distributing resources, developing decision making process, and managing
human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key
strategy evaluation activities are: appraising internal and external factors that are the root of present
strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that
the organizational strategy as well as it’s implementation meets the organizational objectives.

Strategic Intent
Strategic intent as defined by Hamel and Prahalad is used to define and to communicate a sense of direction.
The direction is about the longer-term strategic position that the leaders of the organization wishes to
achieve through its processes of objective setting and strategy formulation.
Strategic intent comprises a sense of direction, a sense of discovering that will help in identifying
opportunities to meet new challenges and a sense of destiny – that will create inspiration and commitment
on the part of managers, employees, and the stakeholders. If a particular objective of a company becomes
extremely focused and directed towards a specific target, then it is said that company is showing a strategic
intent.
In short strategic intent refers to the purposes for which the organization strives for. These could be in the
form of vision, mission statement.

Strategic Fit

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The concept of stretch is diametrically opposite of idea of ‘fit’. In fit, company try to match its resources
with its current environment. Firms use SWOT techniques to assess organizational capabilities with
environmental opportunities. It helps to understand what the company can achieve with its resources within
the given environmental factors.
Strategic fit expresses the degree to which an organization is matching its resources and capabilities with
the opportunities in the external environment. The matching takes place through strategy and it is therefore
vital that the company has the actual resources and capabilities to execute and support the strategy. Strategic
fit can be used actively to evaluate the current strategic situation of a company as well as opportunities such
as M&A and divestitures of organizational divisions. Strategic fit is related to the Resource-based view of
the firm which suggests that the key to profitability is not only through positioning and industry selection
but rather through an internal focus which seeks to utilize the unique characteristics of the company’s
portfolio of resources and capabilities. A unique combination of resources and capabilities can eventually be
developed into a competitive advantage which the company can profit from.

Business Vision
A clear vision helps in developing a mission statement, which in turn facilitates setting of objectives of the
firm after analyzing external and internal environment. Though vision, mission and objectives together
reflect the “strategic intent” of the firm, they have their distinctive characteristics and play important roles in
strategic management.

A vision statement identifies where the organization wants or intends to be in future or where it should be to
best meet the needs of the stakeholders. It describes dreams and aspirations for future.

A vision is the potential to view things ahead of themselves. It answers the question “where we want to be”.
It gives us a reminder about what we attempt to develop. A vision statement is for the organization and it’s
members, unlike the mission statement which is for the customers/clients. It contributes in effective decision
making as well as effective business planning. It incorporates a shared understanding about the nature and
aim of the organization and utilizes this understanding to direct and guide the organization towards a better
purpose.

For instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any
device.” Wal-Mart’s vision is to become worldwide leader in retailing.

Johnson: Vision is "clear mental picture of a future goal created jointly by a group for the benefit of other
people, which is capable of inspiring and motivating those whose support is necessary for its achievement".

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Characteristics of Vision Statements
1. Possibility means the vision should entail innovative possibilities for dramatic organisational
improvements.
2. Desirability means the extent to which it draws upon shared organisational norms and values about the
way things should be done.
3. Actionability means the ability of people to see in the vision, actions that they can take that are relevant to
them.
4. Articulation means that the vision has imagery that is powerful enough to communicate clearly a picture
of where the organisation is headed.
5. It must be easily communicable: Everybody should be able to understand it clearly.
6. It must be graphic: It must paint a picture of the kind of company the management is trying to create.
7. It must be directional: It must say something about the company’s journey or destination.
8. It must be feasible: It must be something which the company can reasonably expect to achieve in due
course of time.
9. It must be focused: It must be specific enough to provide managers with guidance in making decisions.
10. It must be appealing to the long term interests of the stakeholders.
11. It must be flexible: It must allow company’s future path to change as events unfold and circumstances
change.

Advantages of Vision
Several advantages accrue to an organisation having a vision. Parikh and Neubauer point out the following
advantages:
1. Good vision fosters long-term thinking.
2. It creates a common identity and a shared sense of purpose.
3. It is inspiring and exhilarating.
4. It represents a discontinuity, a step function and a jump ahead so that the company knows what it is to be.
5. It fosters risk-taking and experimentation.
6. A good vision is competitive, original and unique. It makes sense in the market place.
7. A good vision represents integrity. It is truly genuine and can be used for the benefit of people.

Formulating a Vision Statement

Generally, in most cases, vision is inherited from the founder of the organisation who creates a vision.
Otherwise, some of the senior strategists in the organisation formulate the vision statement as a part of
strategic planning exercise.
Nutt and Backoff identify three different processes for crafting a vision:
1. Leader-dominated Approach: The CEO provides the strategic vision for the organisation. This approach
is criticized because it is against the philosophy of empowerment, which maintains that people across the
organisation should be involved in processes and decisions that affect them.
2. Pump-priming Approach: The CEO provides visionary ideas and selects people and groups within the
organisation to further develop those ideas within the broad parameters set out by the CEO.
3. Facilitation Approach: It is a “co-creating approach” in which a wide range of people participate in the
process of developing and articulating a vision. The CEO acts as a facilitator, orchestrating the crafting
process. According to Nutt and Backoff, it is this approach that is likely to produce better visions and more
successful organisational change and performance as more people have contributed to its development and
will therefore be more willing to act in accordance with it.

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Mission Statement
Thompson defines mission as “The essential purpose of the organisation, concerning particularly why it is in
existence, the nature of the business it is in, and the customers it seeks to serve and satisfy”.
Hunger and Wheelen simply call the mission as the “purpose or reason for the organisation’s existence”

A mission can be defined as a sentence describing a company's function, markets and competitive
advantages. It is a short written statement of your business goals and philosophies. It defines what an
organisation is, why it exists and its reason for being. At a minimum, a mission statement should define who
are the primary customers of the company, identify the products and services it produces, and describe the
geographical location in which it operates.

Characteristics of a Mission Statement

1. Not lengthy: A mission statement should be brief.
2. Clearly articulated: It should be easy to understand so that the values, purposes, and goals of the
organisation are clear to everybody in the organisation and will be a guide to them.
3. Broad, but not too general: A mission statement should achieve a fine balance between specificity and
generality.
4. Inspiring: A mission statement should motivate readers to action. Employees should find it worthwhile
working for such an organisation.
5. It should arouse positive feelings and emotions of both employees and outsiders about the organisation.
6. Reflect the firm’s worth: A mission statement should generate the impression that the firm is successful,
has direction and is worthy of support and investment.
7. Relevant: A mission statement should be appropriate to the organisation in terms of its history, culture
and shared values.
8. Current: A mission statement may become obsolete after some time. As Peter Drucker points out, “Very
few mission statements have anything like a life expectancy of thirty, let alone, fifty years. To be good
enough for ten years is probably all one can normally expect”. Changes in environmental factors and
organisational factors may necessitate modification of the mission statement.
9. Unique: An organisation’s mission statement should establish the individuality and uniqueness of the
company.
10. Enduring: A mission statement should continually guide and inspire the pursuit of organisational goals.
It may not be fully achieved, but it should be challenging for managers and employees of the organisation.
11. Dynamic: A mission statement should be dynamic in orientation allowing judgments about the most
promising growth directions and the less promising ones.
12. Basis for guidance: Mission statement should provide useful criteria for selecting a basis for generating
and screening strategic options.
13. Customer orientation: A good mission statement identifies the utility of a firm’s products or services to
its customers, and attracts customers to the firm.

Importance of Mission Statement

1. It helps to ensure unanimity of purpose within the organisation.
2. It provides a basis or standard for allocating organisational resources.
3. It establishes a general tone or organisational climate.
4. It serves as a focal point for individuals to identify with the organisation’s purpose and direction.
5. It facilitates the translation of objectives into tasks assigned to responsible people within the organisation.
6. It specifies organisational purpose and then helps to translate this purpose into objectives in such a way
that cost, time and performance parameters can be assessed and controlled.
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7. They provide managers with a unity of direction that transcends individual, parochial and transitory
needs.
8. They promote a sense of shared expectations among all levels and generations of employees.
9. They project a sense of worth and intent that can be identified and assimilated by company outsiders.

Distinction between Vision and Mission

Goals and Objectives:

Goals: A goal is considered to be an open-ended statement of what one wants to accomplish with no
quantification of what is to be achieved and no time criteria for its completion. For example, a simple
statement of “increased profitability” is thus a goal, not an objective, because it does not state how much
profit the firm wants to make.
“goals” denote what an organisation hopes to accomplish in a future period of time. They represent a future
state or outcome of the effort put in now.

Objectives are the end results of planned activity. They state what is to be accomplished by when and
should be quantified. For example, “increase profits by 10% over the last year” is an objective.
“Objectives” are the ends that state specifically how the goals shall be achieved. In this sense, objectives
make the goals operational. Objectives are concrete and specific in contrast to goals which are generalized.
While goals may be qualitative, objectives tend to be mainly quantitative, measurable and comparable.

Characteristics of Objectives:
1. Specific 2. Quantifiable 3. Measurable
4. Clear 5. Consistent 6. Reasonable
7. Challenging 8. Contain a deadline for achievement 9. Communicated throughout the organization

Role of Objectives
Objectives play an important role in strategic management. They are essential for strategy formulation and
implementation because:
1. They provide legitimacy 2. They state direction 3. They aid in evaluation
4. They create synergy 5. They reveal priorities 6. They focus coordination
7. They provide basis for resource 8. They act as benchmarks for 9. They provide motivation
allocation monitoring progress

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Distinction between Goals and Objectives
Goals Objectives
1. General Specific
2. Qualitative Quantitative and Measurable
3. Broad organization wide target Narrow targets set by operating divisions
4. Long-term results Immediate and short-term results

STRATEGIC BUSINESS UNITS

In business, a strategic business unit (SBU) is a profit center, which focuses on product offering and market
segment. SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign,
even though they may be part of a larger business entity.
An SBU may be a business unit within a larger corporation, or it may be a business unto itself. Corporations
may be composed of multiple SBUs, each of which is responsible for its own profitability. General Electric
is an example of a company with this sort of business organization. SBUs are able to affect most factors,
which influence their performance. Managed as separate businesses, they are responsible to a parent
corporation. General Electric has 49 SBUs.

Example of Strategic business units – The best example of strategic business unit would be to take
organizations like HUL, P&G or LG in focus. These organizations are characterized by multiple categories
and multiple product lines. For example, HUL may have a line of products in the shampoo category.
Similarly LG might have a line of products in the television category. Thus to track the investments against
returns, they may classify the category as a different SBU itself.

There are several reasons SBUs are used in an organization, and they are mentioned in my post on the
importance for using SBUs in a multi product organization. However, along with the reasons for using SBUs
there are also some powers, which need to be inferred on an SBU. Planning independence, empowerment
and others are such powers which influence a SBU. Three of such features are discussed below.

1. Empowerment of the SBU Manager

Several times, the empowerment of SBU managers is crucial for the success of the SBU/ products. This is
mainly because this manager is the one, who is actually in touch with the market and knows the best
strategies which can be used for optimum returns. Thus, on several times, the SBU manager might need a
higher investment for his products. At such times, the manager should be supported by the organization.
Only this confidence will help the manager in the progress of the SBU.

2. Degree of Sharing of one SBU with Another

This point is directly connected to the first one. What if one SBU needs some budget, but the same is not
offered, because the budget is being shared by two other SBUs and as it is, the budget is short. Thus, the first
SBU does not get the independence to implement some important strategies. Similarly, there might be other
restrictions applied to one SBU as it is using some resources which are shared by another SBU. This might
not always be negative. If one SBU gains more profit than usual, this revenue might also become useful for
the other SBU, thereby promoting growth of both of them. This is where sharing actually plays a positive
role.

3. Changes in the Market

An SBU absolutely needs to be flexible because it needs to adapt to any major changes in the market.

Prepared by: Dayananda Huded, Teaching Assistant, Dept. of Studies in Commerce, RCU PGC, JamkhandiPage 14
For example – if an LCD manager knows that LEDs are more in demand now, he needs to communicate to
the top management that he would also like a range of LED products to make the SBU even more profitable.
Thus by adding LED to its portfolio, the SBU can immediately become double profitable. Thus by adjusting
to change on SBU levels, the organization as a whole can become profitable. The key to Strategic business
management is to have a strict watch on the investment and returns from each SBU. The SBU manager too
plays a crucial role in this and hence he is recruited from the industry with extensive experience of that
particular industry. Portfolio/Multi SBU management is done at the absolute top level of the management.
Each and every change in the market, and its affect on SBUs is anticipated, which is then taken into
consideration. Hence, for a multi product organization, business management may actually mean product
portfolio management or SBU management.

Ethics in Strategic Management:

1. Protect the basic rights of the employees/workers.

2. Follow health, safety and environmental standards.
3. Continuously improvise the products, operations and production facilities to optimize the resource
consumption
4. Do not replicate the packaging style so as to mislead the consumers.
5. Indulge in truthful and reliable advertising.
6. Strictly adhere to the product safety standards.
7. Accept new ideas. Encourage feedback from both employees as well as customers.
8. Present factual information. Maintain accurate and true business records.
9. Treat everyone (employees, partners and customers) with respect and integrity.
10. The mission and vision of the company should be very clear to it.
11. Do not get engaged in business relationships that lead to conflicts of interest. Discourage black
marketing, corruption and hoarding.
12. Meet all the commitments and obligations timely.
13. Encourage free and open competition. Do not ruin competitors’ image by fraudulent practices.
14. The policies and procedures of the Company should be updated regularly.
15. Maintain confidentiality of personal data and proprietary records held by the company.
16. Do not accept child labour, forced labour or any other human right abuses.

Prepared by: Dayananda Huded, Teaching Assistant, Dept. of Studies in Commerce, RCU PGC, JamkhandiPage 15