Basic Concepts of Strategic

Management
Unit 1
 Meaning of Strategy
• 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”.
• A strategy is all about integrating organizational activities
and utilizing and allocating the scarce resources within the
organizational environment so as to meet the present
objectives. 
• Strategy, in short, bridges the gap between “where we
are” and “where we want to be”.
 Features of Strategy
• 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.
• 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.
• Strategy is created to take into account the probable behavior of
customers and competitors. Strategies dealing with employees
will predict the employee behavior.
• Strategy is a well defined roadmap of an organization. It defines
the overall mission, vision and direction of an organization. 
 Meaning of Strategic Management
• 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 companies in its
industry.

• Strategic management is the management of an organization’s

1. Mission Statement
It describes why an organization is operating
and thus provides a framework within which
strategies are formulated. It describes what the
organization does (i.e., present capabilities),
who all it serves (i.e., stakeholders) and what
makes an organization unique (i.e., reason for
existence).
 Features of a Mission
• Mission must be feasible and attainable. It should be possible to
achieve it.
• Mission should be clear enough so that any action can be taken.
• It should be inspiring for the management, staff and society at
large.
• It should be precise enough, i.e., it should be neither too broad
nor too narrow.
• It should be unique and distinctive to leave an impact in
everyone’s mind.
• It should be analytical, i.e., it should analyze the key components
of the strategy.
• It should be credible, i.e., all stakeholders should be able to
believe it.
 Cont..
2. Vision
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. 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.
 Features of Vision
• It must be unambiguous.(clear-cut / definite)
• It must be clear.
• It must harmonize with organization’s culture
and values.
• The dreams and aspirations must
be rational/realistic.
• Vision statements should be shorter so that
they are easier to memorize.
 Cont..
3. Goals and Objectives
• A goal is a desired future state or objective
that an organization tries to achieve. Goals
specify in particular what must be done if an
organization is to attain mission or vision.
Goals make mission more prominent and
concrete. They co-ordinate and integrate
various functional and departmental areas in
an organization.
 Features of Goals
• These are precise and measurable.
• These look after critical and significant issues.
• These are realistic and challenging.
• These must be achieved within a specific
time frame.
• These include both financial as well as non-
financial components.
 Phases of strategic management
1.Formulating a Plan
Formulation is the process of choosing the most profitable course of
action for success. This is the phase for setting objectives and
identifying the ways and means of achieving them. An analysis of
corporate strengths, weaknesses, opportunities and threats reveals
critical areas surrounding the products and services that need
attention.
2.Implementation of Strategies
Implementation is the execution of the necessary strategies to meet
the objectives that have been set. To ensure success, all employees
should understand their roles and responsibilities. Appropriate
activity measures provide necessary feedback with facts that identify
positive impacts and areas for change.
 Cont…
3.Evaluating the Strategy's Results
Evaluating strategies used in the implementation phase
serve as performance feedback. Some companies use a gap
analysis to compare how the company performed to set
goals. Analyzing present state compared to desired future
state identifies the need for new products or additions to
existing products.
4.Modification and Amplification
The modification phase is essential in correcting any
weaknesses or failures found during evaluation. Strengths
identified can lead to implementation in other areas.
 Globalization
• Globalization is making the whole world one single
market. It brings competition everywhere.
• Globalization refers to the increasing integration of
production, development and communication among
nations on a worldwide scale.
• Globalization is often divided into three categories:
economic, political and social. Though all three are
interdependent, economic and political forces are
usually the driving factors of globalization, while social
changes generally occur as a result of those activities.
 Models of strategic management
1. Mission
The mission -- the most basic part of the strategic management
model -- is a broad focus that the firm's top management team
must decide before any other strategic planning can take place.
A mission should roughly outline what a firm wants to do and
how it will do it.

2. Goals / Objectives
The firm's objectives follow from its mission. The objectives are
measurable goals for achieving the mission. Objectives might
include constructing a factory, successfully filing for a patent,
raising capital or others.
 Cont…
3. Situation Analysis
The situation analysis phase of the strategic management
model involves assessing the current environment. There are
a variety of frameworks for performing this analysis, but the
most commonly used is a SWOT analysis, which measures
the firm's strengths, weaknesses, opportunities and threats.

4. Strategy Formulation
The stage of strategy formulation takes into account the
firm's objectives and the situation analysis. Strategies are
created that aim to achieve the firm's objectives given the
environmental situation.
 Cont…
5. Application
The application stage of the strategic management model involves
the actual implementation of the strategies. This is often the most
difficult stage because it requires the most extensive cooperation of
all members of the organization. The application stage can take
several months or longer to complete.

6. Control
The control stage is the final step in the strategic management
model. The purpose of this stage is to make adaptations to the
strategy after the implementation. Often, the environment and even
firm objectives will change. This step is used to recognize this and
make adjustments to the firm strategies to adapt to these changes.
 Strategic decision making process
1. Identify Problems Requiring Decisions
• The first step in the process is to recognize that there
is a decision to be made. Decisions are not made
arbitrarily; they result from an attempt to address a
specific problem, need or opportunity.
• A supervisor in a retail shop may realize that he has
too many employees on the floor compared with the
day's current sales volume, for example, requiring
him to make a decision to keep costs under control.
 Cont..
2. Seek Information to Clarify Options
Managers seek out a range of information to clarify
their options once they have identified an issue that
requires a decision. Managers may seek to determine
potential causes of a problem, the people and
processes involved in the issue and any constraints
placed on the decision-making process.
 Cont..
3. Brainstorm Potential Solutions
Having a more complete understanding of the issue at hand, managers
move on to make a list of potential solutions. This step can involve
anything from a few seconds of though to a few months or more of
formal collaborative planning, depending on the nature of the decision.
4. Weight the Alternatives
There is always more than one option available for moving forward on a
given issue or a new project (including, of course, the option of doing
nothing). Compile a list of the pros and cons of each alternative, with a
particular emphasis on the ease, speed and amount of resources
needed for implementation. It pays to have the best information
available before moving ahead to the decision-making phase.
 Cont..
5. Choose an Alternative
• After your group weighs the pros and cons of each potential solution,
seek additional information if needed and select the option they feel has
the best chance of success at the least cost. Consider seeking outside
advice if you have gone through all the previous steps on your own;
asking for a second opinion can provide a new perspective on the
problem and your potential solutions.
6. Implement the Plan
• There is no time to second guess yourself when you put your decision
into action. Once you have committed to putting a specific solution in
place, get all of your employees on board and put the decision into
action with conviction. That is not to say that a managerial decision
cannot change after it has been enacted; savvy managers put monitoring
systems in place to evaluate the outcomes of their decisions.
 Cont…
7. Evaluate the Outcomes
Even the most experienced business owners can learn from
their mistakes. Always monitor the results of strategic
decisions you make as a small business owner; be ready to
adapt your plan as necessary, or to switch to another
potential solution if your chosen solution does not work out
the way you expected.