Prof. Sameer V.

Charania Strategic Management Introduction

1. INTRODUCTION TO STRATEGIC MANAGEMENT

Change (Transition):
Change is occurring at an accelerating rate. Today is not like yesterday, and tomorrow will
be different from today. Continuing today’s strategy is risky, so is turning to a new strategy.
Marketing is the most dynamic & challenging function of modern business. The ability of any
firm to survive in today cut-throat competitive world largely depends on its marketing
function. There are a few certainties that must be heeded:
1. Global forces will be continued to affect everyone’s business and personal life.
Manufacturing will move to more economically favorable locations
2. Technology will continue to advance and amaze us.
3. There is a continuous push toward deregulation of the economic sector. More people, in
more countries are convinced that market works better under relatively free condition
were buyers can decide what and where to buy and companies are free to decide what
to make and sell.
These three developments – globalization, technological advances, and deregulation spell
endless opportunities.
Meaning of Strategy:
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. In
business, strategy is referred to as a complex plan designed to bring the business unit from a
given position to a desired position in the future period of time.
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. While planning a strategy it is essential to consider that decisions are not taken
in a vacuum and that any act taken by a firm is likely to be met by a reaction from those
affected, competitors, customers, employees or suppliers.
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.
Meaning of Strategic Management:
Strategic management is the continuous planning, monitoring, analysis and assessment of
all that is necessary for an organization to meet its goals and objectives.
Strategic management activities transform the static plan into a system that provides
strategic performance feedback to decision making and enables the plan to evolve and grow
as requirements and other circumstances change.
Role of Strategic Management:
1. To incorporate various functional areas of the organization completely, as well as, to
ensure these functional areas harmonize and get together well.
2. To keep a continuous eye on the goals and objectives of the organization.
COMPONENTS OF A STRATEGIC MANAGEMENT
The strategy statement of a firm sets the firm’s long-term strategic direction and broad
policy directions. It gives the firm a clear sense of direction and a blueprint for the firm’s
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activities for the upcoming years. The main constituents of a strategic statement are as
follows:
1. Mission Statement
Mission statement is the statement that 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).
Once the mission statement is formulated, it serves the organization in long run, but it may
become ambiguous with organizational growth and innovations.
In today’s dynamic and competitive environment, mission may need to be redefined.
However, care must be taken that the redefined mission statement should have original
fundamentals/components.
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. Example: 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.
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 its members, unlike the mission statement which is for
the customers/clients. It contributes in effective decision making as well as effective
business planning. In order to realize the vision, it must be deeply instilled in the
organization, being owned and shared by everyone involved in the organization.
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. Policies are developed in an
organization so as to achieve these objectives.
SCHOOLS OF STRATEGIC FORMULATION AND IMPLEMENTATION & EVALUATION
Many companies have dedicated staff for strategy formulation. It is a very important
process for the company, as it tells the future direction which the company has to take and
the way that the company can succeed.
The 10 school of thoughts tell us how Strategy formulation can be done, and what are the
various ways that you can formulate a strategy.

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1. The Design School: The design school proposes a model of strategy making that looks at
strategy formation as a process of conception. It is a fit between internal capabilities and
external potentials. The CEO is the key strategist who develops the strategy and controls its
execution. Strategies become successful when process of strategy formulation is kept simple
and formal. Formulated strategies should be clear and the plan must be kept simple. The
strategy design process is complete once a strategy is formulated. Strategies can only be
implemented once they are fully formulated. The design school is laid the foundation of
strategic planning.
The Critical View of Design School:
• The key strategist is limited in his ability to assess internal and external conditions; a solely
top-down driven strategy formulation process can fail to tap the organization’s knowledge
• Formulated strategies are inflexible to change; both external changes in the environment
and internal changes in the organization cannot be taken into account until a new round of
strategy formulation begins
• Formulation of strategy gets separated from implementation of strategy which detaches
thinking from acting.
2. The Planning School: Here, strategy formation is considered a formal process. Also, the
thought process runs towards planning the entire strategy in a rigorous manner, so that the
firm advances forward. The complete process and the plan which the company implements
is documented from the start to finish. In short the strategy planning is treated as distinctive
processes. In planning school thought of strategy the plan is given more importance
whenever the management wants to take new decisions. With the plan in hand, the
management gets a clear direction to move ahead, helping the company to move forward
steadily.
The Critical View of Planning School: Criticality arises when something happens out of plan.
This typically happens when plans are made years in advance, and changes takes place
either in the industry or in the organization. When an internal or external variable changes,
then the complete plan gets affected. Hence, proper prediction is most essential when using
the planning school of thought.
3. The Positioning school: Here the entire focus is on strategy content. The management of
firms decides that they want to position the product at the top of the mind and make
decisions accordingly. In this case firms need to determine the competition already present
in the market, and how the firm is positioned. Here the Five Force Model, Value chain and
BCG matrix are few strategic tools which can be used under the positioning school. Once the
market is analyzed, the right strategy can be applied to improve the positioning of firm’s
product.
The Critical View of Positioning School: in the positioning school of thought, the strategy
assumes that the market will remain as it is, and it does not take into consideration new
entrants or change in business environment. Like the planning strategy, the positioning
school of thought can also fail if there are major changes in the business environment.
4. The Entrepreneurial School: This school of thought considers strategy formation as
visionary process. The entrepreneurial school focuses on the CEO’s vision as the key
determinant of strategy. The leader promotes the vision by maintaining close personal
control of the implementation in order to be able to reformulate specific aspects as and
when necessary. The organization responds to leader’s directives. The best examples
Entrepreneurial school are examples in small businesses which want to make it large, or
even large corporations which trust their leaders such as Apple Inc employees trusted Steve
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jobs, and the trust enjoyed by Mark Zuckerberg from his employees is explicit. The
entrepreneurial school organizations follow whatever the CEO says.
The Critical View of Entrepreneurial School: The problem with this management school of
thought is only one question: Where to find a mature, experienced, talented and honest
leader? If organization designs its strategies based on the recommendations by the leader of
the company, the leader has to be a visionary and the one who takes responsibilities of
success as well as failure of strategies.
5. The Cognitive school: Under this school of thought, organizations give lot of importance
to people’s perception and their behavior. Organizations can do better business by
understanding of their employees, suppliers and customers. Customer’s perceptions matter
and therefore, their information processing should be given a thought. This is where
corporate communication plays an important role. Once the organization knows what their
customers demand and want sending the right signals becomes easy for them.
The Critical View of Cognitive School: The problem with the cognitive model is that it is not
practical beyond a certain point. A top company cannot rely on surveys and marketing
research reports alone to find new ideas or to make connections with their customers. Fact
is that every day some new products get introduced in the market and keeping a tab on
each movement in market is not possible in the cognitive school of thought.
6. The Learning school: Organizations which follow this thought process, depend a lot on
their experiences and market happenings. Organizations following learning school model
make strategies looking at the past; not necessarily their own past. They take cues from
strategies in market which became successful or failed.
The Critical View of Learning School: More than a strategy, the learning school of thought
looks like steering or guiding the company on the basis of the previous road maps that have
gone by. It is not advisable to depend on decisions of past because change is constant in the
market. This strategy can be used when the firm is stable, and wants to work on auto mode
while it develops something else in the meantime.
7. The Power school: This school of thought is power centered. The people who are in
power take the decisions. The power centers can be customers, suppliers, worker’s unions
or leaders in the organization. The power school views designing strategy as a political
process for negotiating, forming alliances and promoting one’s own interests. Strategy
formation is shaped by using power and politics. Anyone who is known to have power over
the company drives the company forward.
The Critical View of Power School: The problem with the power school happens when the
powerful people stop listening to feedback from others and stop implementing measures of
improvement, and only focus on minor improvements. At such times, the power needs to
change hands so that the company keeps moving forward.
8. The Cultural school: The cultural school of thought says that human capital is most
important in organizations. A positive culture in the firm harnesses innovations and
entrepreneurial culture in organizations. Strategy formation is a process of social interaction
which is based on the beliefs and understandings shared by the members of an
organization. The cultural school believes in involving as many departments possible within
a company.
The Critical View of Cultural School: Especially during any changes taking place in
organization, people resist it because they get used to a typical culture. Politics in
organizations plays an important role. It is difficult to unite people in organizations; there
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are several groups with variety of ideologies. To get the people in organization united,
herculean efforts are required and direction remains unclear. Because culture and especially
ideology do not encourage strategic change; they tend to promote shifts in position within
the organization’s overall strategic perspective. But, this is the only school of thought which
introduces a collectivist dimension of social process in strategy formation.
9. The Environmental school: The environmental school of thought is more of situationally
related. The environmental school gives most importance to the environment. For example
in Information Technology industry expertise of people matters and the knowledge of
people needs regular up gradation. When expert knowledge becomes scares, the strategy
formulation needs a change on the basis of available expertise of people. Under the given
dimension, environment plays a major role. Therefore, situational analysis is the most used
tool in the environmental school. Obviously, this thought process depends on the situation,
and is used when there is total dependence on environmental factors.
The Critical View of Environmental School: Under this school of thought, process entirely
depends on the environment which constantly changes. It is difficult for organizations to
keep changing their strategies constantly.
10. The Configuration school: One of the most preferred amongst the 10 School of thoughts
is the configuration school because the basic premise in this is that the strategy needs to be
configured. As per the configuration school, strategy needs to consider a lot of facts and
cannot be derived from simple statistical data and values. The configuration school attempts
to find a combination of all aspects of the nine other strategy schools. An organization
stands on the basis of a stable configuration of its characteristics.
Organizations undergo cycles of stable phases, disturbed phases and transitional phases.
The key to strategic management is to sustain stability or at least adapt strategic change,
while periodically recognizing the need for transformation and being able to manage the
troublesome process of transformation effectively.
The Critical View of Configuration School: This school of thought tries to attain stability via
various ways, and keeps transforming as long as needed. The configuration school partially
resolves the conflict between emergent and deliberate strategy schools by incorporating
both aspects of strategy formation. The Emergent strategy is formed from within the
organization during periods of stability. Deliberate strategy is formed by management and
consultants during periods of transition. It states that deliberate and emergent strategy
both has their thoughts and ideas which at times are conflicting. The configuration school is
criticized as being too rigid in its distinction between phases of stability and transition
phases.
Strategic Management Process:
The strategic management process means defining the organization’s strategy. It is also
defined as the process by which managers make a choice of a set of strategies for the
organization that will enable it to achieve better performance.
Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises its competitors; and fixes goals to meet all the
present and future competitor’s and then reassesses each strategy.
Strategic management process has following four steps:
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

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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.
These components are steps that are carried, in chronological order, when creating a new
strategic management plan. Present businesses that have already created a strategic
management plan will revert to these steps as per the situation’s requirement, so as to
make essential changes.

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