Strategic Management

Q (1) The concept of Strategy & Basic Elements of Strategic Intent:

Introduction – The top management of an organization is concerned with the selection of a course of action
from among different alternatives to meet the organizational objectives. The process by which objectives are
formulated and achieved is known as strategic management and strategy acts as the means to achieve the
objective. Strategy is the grand design or an overall ‘plan’ which an organization chooses in order to move
or react towards the set of objectives by using its resources. Strategies most often devote a general
programme of action and an implied deployed of emphasis and resources to attain comprehensive
objectives. An organization is considered efficient and operationally effective if it is characterized by
coordination between objectives and strategies. There has to be integration of the parts into a complete
structure. Strategy helps the organization to meet its uncertain situations with due diligence. Without a
strategy, the organization is like a ship without a rudder. It is like a tramp, which has no particular
destination to go to. Without an appropriate strategy effectively implemented, the future is always dark and
hence, more are the chances of business failure.

Meaning of strategy – The word ‘strategy’ has entered in the field of management from the military
services where it refers to apply the forces against an enemy to win a war. Originally, the word strategy has
been derived from Greek, ‘strategos’ which means generalship. The word as used for the first time in around
400 BC. The word strategy means the art of the general to fight in war.
The dictionary meaning of strategy is “the art of so moving or disposing the instrument of warfare as to
impose upon enemy, the place time and conditions for fighting by one self”
In management, the concept of strategy is taken in more broader terms. According to Glueck, “Strategy is
the unified, comprehensive and integrated plan that relates the strategic advantage of the firm to the
challenges of the environment and is designed to ensure that basic objectives of the enterprise are
achieved through proper implementation process”

This definition of strategy lays stress on the following –

a) Unified comprehensive and integrated plan
b) Strategic advantage related to challenges of environment
c) Proper implementation ensuring achievement of basic objectives

Another definition of strategy is given below which also relates

Strategy to its environment. “Strategy is organization’s pattern of response to its environment over a period
of time to achieve its goals and mission”
This definition lays stress on the following –
a) It is organization’s pattern of response to its environment
b) The objective is to achieve its goals and missions
In 1960’s, Chandler made an attempt to define strategy as “the determination of basic long term goals and
objective of an enterprise and the adoption of the courses of action and the allocation of resources necessary
for carrying out these goals”
This definition provides for three types of actions involved in strategy :
a) Determination of long term goals and objectives
b) Adoption of courses of action
c) Allocation of resources
Elements of Strategic Intent:
a) Vision –
Defination by Kotler “description of something (an organization, corporate culture, a business, a
technology, an activity) in the future”
Defination by Miller and Dess “category of intentions that are broad, all inclusive and forward thinking”
Advantages of having a vision –
· They foster experimentation
· Vision promotes long term thinking
· Visions foster risk taking
· They can be used for the benefit of people
· They make organizations competitive, original and unique
· Good vision represent integrity
· They are inspiring and motivating to people working in an organization
b) Mission –
Defination by Hynger and Wheelen – “purpose or reason for the organization’s existence”
Defination by David F.Harvey – “A mission provides the basis of awareness of a sense of purpose, the
competitive environment, degree to which the firm’s mission fits its capabilities and the opportunities which
the government offers”
Defination by Thompson “essential purpose of the organization, concerning particularly why it is in
existence, the nature of the business it is in, and the customers it seeks to serve and satisfy”
Examples of mission statement –
India Today – The complete new magazine
Bajaj Auto – Value for money for years
HCL – To be a world class competitor
HMT – Timekeepers of the nation
Mission vs Purpose –
A few major points of distinction –
1. Mission is the societal reasoning while the purpose is the overall reason
2. Mission is external reasoning and relates to external environment. Purpose is internal reasoning and
relates to internal environment
3. Mission is for outsiders while purpose is for its own employees
C) Objectives and Goals –
Objectives refer to the ultimate end results which are to be accomplished by the overall plan over a specified
period of time.
Meaning –
· Objective are open ended attributes denoting a future state or outcome and are stated in general terms
· When the objectives are stated in specific terms, they become goals to be attained
· Goals denote a broad category of financial and non-financial issues that a firm sets for itself
· Objectives are the ends that state specifically how the goals shall be achieved
· It is to be noted that objectives are the manifestation of goals whether specifically stated or not

Difference between objectives and goals –

· The goals are broad while objectives are specific
· The goals are set for a relatively longer period of time
· Goals are more influenced by external environment
· Goals are not quantified while objectives are quantified
Importance of establishing objectives –
1. Objectives provide yardstick to measure performance of a department or SBU or organization
2. Objectives serve as a motivating force. All people work to achieve the objectives
3. Objectives help the organization to pursue its vision and mission
4. Objectives define the relationship of organization with internal and external environment
5. Objectives provide a basis for decision-making.

Areas for setting objectives –

1. Profit objective – or performance objectives
2. Market objective - increase in market share
3. Productivity objective – cost per unit of production
4. Product objective – product development, product
diversification, branding, etc
5. Social objective – tree plantation, provision for drinking water, setting up of community center, etc
6. Financial objective – relates to cash flow, debt equity ratio,
working capital, new issues, debt instruments, etc
7. Human resource objective – described in terms of absenteeism, turnover, number of grievances, strikes
and lockouts, etc

Q) ( 2. )CORPORTE PLANNING PROCESS (or) STRATEGIC MANAGEMENT PROCESS

Definition

Corporate planning can be defined as the process of formulating the corporate mission, scanning the
business environment, evolving strategies, creating necessary infrastructure, and assigning resources to
achieve the given mission. Corporate planning has a company-wide and comprehensive perspective. It is
not just a long term planning where, usually, there is a selective focus like that on a department or product
of the organization. Strategic planning, if done for the entire organization, can also be called corporate
planning.

Elements of Corporate Planning Process

The elements of the corporate planning process can be described as below:

a) Identifying corporate mission

b) Formulating strategic objectives
c) Appraising internal and external environment
d) Developing and evaluating alternative strategies
e) Selecting the best strategy
f) Fixing key targets to strategic business units (SBUs)
g) Allot resources to each SBU
h) Developing operating plans
i) Monitoring the performance
j) Revising the plans

(a) Identify corporate mission Identify what the organization wants to achieve, to start with. For
this purpose, it is necessary that all concerned parties understand the overall purpose of the
organization and the methods of attaining them. It is also desirable that they agree on the corporate
policies of the organization.
 Corporate Mission

Formulate Strategic Objectives

Appraise Internal and External

Environment

Develop and Evaluate Alternative Strategies

Select the Best Strategy

Fix Key Targets and Allot Resources to

Strategic Business Units (SBUs)

Develop Operating Plans

Monitor the Performance

Revise, Where Necessary

An Outline of the corporate planning process

(b) Formulate strategic objectives By preparing statements of mission, policy, strategy, and goals, the
top management establishes the framework within which its divisions or departments prepare their plans. It
is essential that the members of the organization agree on these given strategic objectives. The goals should
be very specific in terms of profits, market share, employee retention and so on. The strategic objectives
thus formulated reinforce the commitment of the members of the organization to achieve the corporate
goals.
(c) Appraise internal and external environment To evolve alternative strategies to achieve these goals, a
detailed appraisal of both the internal and external environment is carried out. The appraisal of internal
environment reveals the strengths and weaknesses of the firm. The appraisal of the external environment
reveals the opportunities and threats for the firm. An analysis of strengths, weaknesses, opportunities, and
threats, popularly called SWOT analysis, is an essential exercise every firm has to carry out to evolve an
appropriate strategy to achieve the given goal.

(d) Develop and Evaluate alternative strategies There could be some alternative strategies to pursue a
given goal. If the goal is to expand the business, the following could be the three alternatives:

 Adding new products to the existing product line

 Finding new markets, apart from the present market territories
 Manufacturing within the organization, the components, which were earlier procured from outside

(e) Select the best strategy For the firm to be more successful, it is necessary to focus its strategies
around its strengths and opportunities. It is a prerequisite that the members of the team or organization
agree on a strategic plan. Such a plan, which has been generally agreed upon, is normally considered as the
best strategy. Such strategies ensure a better degree of participation and involvement of its members in the
process of achieving the goals.

(f) Establish strategic business units: It is more strategic to define a business unit in terms of customer
groups, needs, and/or technology and set up the business unit accordingly. A business must be viewed as a
customer-satisfying process, not as a goods-producing process. Hence, the focus of marketing definition for
the one’s products and services should be more on satisfying the customer needs. Defining business units in
comprehensive terms comes handy here.

Each strategic business unit (SBU) is managed by a person responsible for strategic planning and
performance. It is a single business, planned separately from the rest of the company. It has its own set of
competitors.

(g) Fix targets and allot resources to each SBU The purpose of identifying the company’s strategic
business units is to develop separate strategies and assign appropriate funding. The top management knows
that its portfolio has certain old, established, relatively new, and brand new products. It cannot rely just on
opinions; it needs to classify its business by profit potential by using analytical tools. The major factors
indicating market attraction are : overall market size, rate of annual increase in the market size, profit
margin, degree of competition, technological standards, rate of inflation, energy needs, impact on
environmental issues, socio-political and legal implications, and others. These factors affect the decision-
making at the macro level. Judging the business strength at the enterprise level also is equally important.
The strength of a business proposal is affected by varied factors such as market share, percentage of annual
growth in the market share, quality parameters, brand reputation and loyalty, promotion campaigns and
distribution network, operating capacity, per unit costs, material and inventory management, research and
development strength, need for key managerial professionals, and so on.

(h) Developing operating plans The operating or tactical plans explain how the long-term goals of the
organization can be met. The corporate plans reveal how much the projected sales and revenues are. Most
often, the management would like to have performed better than these projections. Where the top
management finds a significant gap between the targeted sales and actual sales, it can either develop the
existing business or acquire a new one to fill the gap.
(i) Monitor performance The results of the operating plans should be well monitored from time to time.
In the case of poor or low performance, check up with the members of the team to find out their practical
problems and sort these out. Also, it is essential to verify whether there are any gaps in formulating the
operating-tactical plans.

(j) Revise the operating plans, where necessary It is necessary to revise the operational plans particularly
when the firm does not perform as well as expected. The operating plans can be initiated to the organization
structure itself. This would ensure adequate authority or freedom for the members of the team and enable
them to achieve the targets.
Q).( 3) ENVIRONMENTAL SCANNING

The process of environment scanning has been far from being systematic except with regard to
information relating to current developments. Environmental scanning requires information inputs which
can be devised from different strategies like:

 Verbal information from audio-visual media, suppliers, sales people, etc.,

 Written and documenting information from newspaper, journal and reports,
 Information from management information system
 Industrial spying
 Forecasting reports.

1. Key Sources of Information for Environmental Scanning:

Once strategists have selected key environmental variables, the next step is to select key sources of
environmental information for scanning. The sources of information include:

i. The economic and business daily newspapers like The Economic Times, Business Standard,
Business Line and Financial Express.
ii. Journals and periodicals like Business India, Business World, Business Today, Update, Fortune
India, Main Stream, Long Range Planning Journal, Economist, IMF World Economic Outlook,
Harvard Business Review, Foreign Trade, Finance and Development, Environmental Trends &
Scenarios, etc.
iii. Institutional publications like Mumbai Stock Exchange Directory, the Centre for Monitoring
Indian Economy, Kothari Industrial Directory of India, Publications of Market Research,
Agencies like Operations Research Group, the National Council for Applied Economic
Research, etc.,annual reports of various companies, publications of professional organizations
like Federation of Indian Chamber of Commerce and Industry.
iv. Government publications like Economic Survey, Guidelines to India Bulletins, ICICI Portfolio
Studies, Business Intelligence and Data, The State of Nation Report, Quarterly Survey of
Industries, Indian Trade Journal, Yojana, etc.
v. Other publications include: United Publications, World Economic Survey, International
Financial Statistics, Economic Survey of Asia and the Far East, Commodity Trade Statistics,
Year Book of International Trade Statistics, etc.

2. Approaches to Environmental Scanning:

The experiences of various pioneering companies reflect the emergence of four basic
principles regarding effective implementation of environmental scanning function.

1. Environmental analysis must be linked, conceptually and practically to current planning and
operations.
2. Environmental analysis serves a number of separate purposes, different analytic structures
and systems may be required in order to achieve those different purposes.
3. Systems for environmental analysis must fit the culture and decision-making styles of the
organization and areas they serve.
4. Continuing support in spite of internal changes is required to sustain environmental analysis
in an organization over time.
3. Factors Affecting the Environmental Scanning:
Several factors affect the environmental scanning. These factors are classified as (i) Strategist
related factors. (ii) Organization related factors and (iii) Environmental related factors.
(i) Strategist related factors include: age, family background, educational background, experience, socio-
cultural background, motivational level, perception and cognitive styles, ability to face challenges, ability to
cope up with stress, ability to motivate and lead people, ability to adopt to different cultures and problem
situations, ability to form and lead team work, ability to forecast, judgement, analytical and interpretation
skills etc.
(ii) Organisation related factors include the nature of the business, product or services and markets, age,
size and complexity of the organization, organization structure and its nature etc.
(iii) Environmental factors include: complexity, volatility or turbulence, hostility and diversity of the
environment.
The strategist may face the problem of comprehending massive information and a number of environmental
factors. Hence, the strategist should select priority based environmental factors to forecast the future or
scanning the environment.
4. Scanning Systems:
There are three types of scanning systems. They are:
(i) Irregular Scanning Systems: These consist of ad hoc studies in response to environmental crises.
(ii) Regular Scanning Systems: These consist of regular reviews of the environment of selected strategic
environmental components. These reviews include annual planning exercises.
(iii) Continuous Scanning Systems: This is an ongoing activity. Established boundary, scanning offices
often coordinate this activity. This is more future oriented system. Exhibit 4.6 compares these three
scanning systems along several dimensions.
Techniques of Environmental Scanning:
1. Expert opinion: Knowledgeable people are selected and asked to assign importance and probability
ratings to various possible future developments. The most refined version, the Delphi method, puts experts
through several rounds of event assessment, where they keep refining their assumptions and judgements.
2. Trend Extrapolation: Researchers fit curves (linear, quadriatic, or S-shaped growth curves) Through
past time series to serve as a basis for extrapolation. This method can be very unreliable if new
developments alter the expected direction of movement.
3. Trend correlation: Researchers correlate various time series in the hope of identifying system. The
coefficients in the equations are fitted through statistical means. Econometric models of more than 300
equations, for example, are used to forecast changes in the U.S. economy.
5. Cross-impact analysis: Researchers identify a set of key trends (those high in importance and/or
probability) and ask, “If event A occurs, what will be the impact on all other trends?” The results are then
used to build sets of “domino chains,” with one event triggering others.
6. Multiple scenarios: Researchers build pictures of alternative futures, each internally consistent and with
a certain probability of happening. The major purpose of the scenarios is to stimulate contingency planning.
7. Demand/hazard forecasting: Researchers identify major events that would greatly affect the firm.
Each event is rated for its convergence with several major trends taking place in society and for its appeal to
each major public group in the society. A higher convergence and appeal increases the probability that the
event will occur. The highest-scoring events are then researched further.
Q).(4). SWOT ANALYSIS

Definition:

SWOT analysis is defined as the rational and overall evaluation of a company’s strengths,
weaknesses, opportunities, and threats which are likely to affect the strategic choices significantly.

In every business organization, the top management carries out this evaluation. However, the
companies with a participatory approach involve their managers in such an evaluation process. Individual
managers and their advisers in such organizations consider the situation, separately and then jointly, to
discuss about

(a) the nature of the organizational issues such as increasing competition, eroding resources,
changing technology, and so on
(b) the importance of each of these issues as likely determinants of future strategy

External Environment Analysis (Opportunity and Threat analysis)

The external environment has a profound impact on the business operations irrespective of the nature and
size of the business. The business has to monitor its key macro-environment forces and microeconomic
parties. The key forces both in the macroeconomic and microeconomic environment are very dynamic.
With the result, these forces affect the business operations, both in the short run and the long run.

Opportunities It is necessary that the company should identify what opportunities are available to it to
focus upon. The latest technology, deregulated or free markets, liberalized rules and regulations, and others,
may make a lot of difference for a business organization provided it can envision how to avail these.
Visionaries identify opportunities from threats. To illustrate, during times of increasing competition, some
entrepreneurs are very happy that they can perform better their competitors.

Threats Some developments in the external environment represent threats. A threat is a challenge posed
by an unfavorable trend or a development that results in the loss of sales or profit till a defensive marketing
action is initiated. A few examples of threat could be outlined as change in government policy such as
liberalization, privatization and globalization, changing technologies, changing value systems,
environmental constraints, deteriorating law and order, and so on.
One of the strategies to protect oneself from this threat may be to prepare contingency plans spelling
out the changes the company can make much before or during the threat. Threat is a common factor for
every business irrespective of its nature and size. Technology-based companies are more threat-prone. The
unrealistic expectations of shareholders also can pose a threat to the company

Internal Environment Analysis (Strength/Weakness Analysis)

It is necessary to analyse one’s own strengths and weaknesses periodically to sustain the degree of its
competitive strength. Generally top management or an outside consultant reviews competencies pertaining
to marketing, financial, manufacturing, and organizational systems and rates each factor as a major strength,
minor strength, neutral factor, minor weakness, or a major weakness.
Strengths It is not necessary that a business organization has to correct all its weaknesses, nor that it
propagate its strengths. The big question is whether the business should limit itself to those opportunities
where it possesses the required strengths or should it consider better opportunities where it might have to
develop certain strengths.
 The success of the company depends on whether its business strengths not only match the key
success requirements for operating in the target market but also excel when compared to those of its
competitors, Mere competence does not constitute a competitive advantage. The best-performing company
is one, which can generate the greatest customer value and sustain it over a given period of time.
Weaknesses Sometimes the company may not do well, not because its departments lack the required
motivation but because they do not work together as a team. For example, consider the case of an
electronics company, which employs engineers, sales, and service staff for its operations. It is not adequate
if they keep on doing their work. The organization becomes more effective only when they work as a team.
It is, therefore, critically important to build effective teams and assess the effectiveness of these teams. This
is a part of the internal environmental audit. Progressive companies adopt this strategy.

Internal Environment
Strengths (S): Weaknesses (W):
 Strong presence in the local market Insular and inflexible organizational culture
 Well established customer base Worn-out plant and equipment
 Good financial performance Inadequate systems and controls
 Availability of skilled workforce Dependence on automotive end-users
 Backing from financial institutions Inadequate knowledge of appropriate technology
External Environment
Opportunities (O): Threats (T):
Large potential for exports Dominance of the small sector
India’s emergence as a source-base Customer’s emphasis on just-in-timedelivery
Access to new manufacturing process and technology Absence of entry barriers into industry
Realignment in the auto-supplier industry Demand fluctuations in the domestic market
Encouragement from the Government in terms of High rate of labour turnover
subsidies, Lower txes, and others
Summary of strengths, weaknesses, opportunities, and threats

SWOT Analysis: Significance

SWOT analysis provides four alternative strategies to deal with the factors in the external and the internal
environment. They are:
a) The Threat-Weakness (TW) strategy This attempts to minimize both weaknesses and threats. As a
part of this strategy, the firm may have to add to the product base or the range of services by taking
over the competitor’s business. The Government of India has been disinvesting from most of the
public sector units in recent years following this strategy. By disinvestment, the Government
considers that both weaknesses and threats for the public sector are minimized.
b) The Opportunity-weakness (OW) Strategy Here, the weaknesses are minimized while the
opportunities are maximized. As a part of this strategy, the firm can overcome its weaknesses by
developing the necessary competencies among the workforce by investing moderately in the latest
 technology, and thus, offering products of the best quality to its customers. Thus, the market
segment for technologically-superior products can also be successfully covered.
c) The Strength-Threat (ST) Strategy This strategy enables the firm to address the threats through its
strengths. The focus is to maximize the strengths and minimize the weaknesses. As a part of this
strategy, the firm can seek long-term and low-interest loans to minimize the cost of its operations.
d) The Strength-Opportunity (SO) Strategy This is the most preferred strategy. Here, the firm can
take advantage of the available opportunities through its present strengths. As a part of this strategy,
the firm can consider expanding into new markets with the existing products and services. Every
firm tries to optimize its resources to make use of its strengths and opportunities. An intelligent and
progressive firm converts, over a period of time, its weaknesses into strengths and the threats in
opportunities, by careful planning and implementation.
 Generic Strategy Alternatives

Generic strategy alternatives refer to the strategy alternatives in broader terms. After the nature of business
of the firm is defined, the next task is to focus on the type of strategic alternative, in general, the firm should
pursue. The strategist seeks to identify the right alternative through questions such as:
 Should we get out of this business entirely?
 Should we try to expand?
There are four strategic alternatives for any business. They are: (a) to expand, (b) to wind up or retrench,
(c) to stabilize, (d) to combine its operations pertaining to its products, markets, or functions. These are
explained below:

a) Expansion strategy can be adopted in the case of highly competitive and volatile industries,
particularly, if they are in the introduction stage of product/service life cycle.
b) Stability strategy is a better choice when the firm is doing well, the environment is relatively less
volatile, and the product/service has reached the stability or maturity stage of the life cycle.
c) Retrenchment strategy is the obvious choice when the firm is not doing well in terms of sales and
revenue and finds greater returns elsewhere, or the product/service is in the finishing stage of the
product life cycle.
d) Combination strategy is not a new strategy as it combines the other strategies. It is best suitable for
multiple SBU firms in times of economic transition and also when changes occur in the
product/service life cycle. If a firm realizes that some of its main product lines have outlived their
lives, it may not be any more profitable to continue investment with the same product. The firm may
choose to withdraw its resources from this area (this strategy is here called retrenchment) and follow
an expansion strategy in a new product area. Combination strategy is the best strategy when the firm
finds that its product-wise performance is not even, or all its products differ in their future potential.

Exhibit 19.1: Generic strategy alternatives1

Expand Retrench Stabilize Combination

Business Business Business Definition of
Definition Pace Definition Pace Definition Pace pace

Products Add new Find new Drop old Decrease Maintain Make Drop old
Products uses products product package while
Development changes, adding new
Quality products
improve-
ments

Markets Find new Penetrate Drop dis- Reduce Maintain Protect Drop old
Territories markets tribution market market customers
Channels share shares, while
Focus on finding
Market new ones
Functions Forward, Increase Become Decrease maintain improve increase
Vertical capacity captive process production capacity
Integration company R and D efficiency and
improve
efficiency
Q). (5). STEPS IN STRATEGY FORMULATION AND IMPLEMENTATION:

Strategy formulation refers to the process of choosing the most appropriate course of action for the
realization of organizational goals and objectives and thereby achieving the organizational vision. The
process of strategy formulation basically involves six main steps. Though these steps do not follow a
rigid chronological order, however they are very rational and can be easily followed in this order.
1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-
term objectives of the organization. It is known that strategy is generally a medium for realization of
organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon
the process of reaching there. Strategy includes both the fixation of objectives as well the medium to
be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of
deployment of resources so as to achieve the objectives.
2. Evaluating the Organizational Environment - The next step is to evaluate the general economic
and industrial environment in which the organization operates. This includes a review of the
organizations competitive position. It is essential to conduct a qualitative and quantitative review of
an organizations existing product line. The purpose of such a review is to make sure that the factors
important for competitive success in the market can be discovered so that the management can
identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of competitors’
moves and actions so as to discover probable opportunities of threats to its market or supply sources.
3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with long
term customers, so as to evaluate the contribution that might be made by various product zones or
operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between
the planned or desired performance. A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality and the long-term
aspirations of the organization. An attempt is made by the organization to estimate its probable
future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is
actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.
Strategy implementation is the translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives. Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational structure, control systems, and culture
to follow strategies that lead to competitive advantage and a better performance. Organizational structure
allocates special value developing tasks and roles to the employees and states how these tasks and roles can
be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive
advantage. But, organizational structure is not sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational performance.
Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by
organizational members and groups.

Follwoing are the main steps in implementing a strategy:

Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note
that strategy implementation is not possible unless there is stability between strategy and each
organizational dimension such as organizational structure, reward structure, resource-allocation process, etc.

Strategy implementation poses a threat to many managers and employees in an organization. New power
relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values,
attitudes, beliefs and concerns may not be known. With the change in power and status roles, the managers
and employees may employ confrontation behaviour.

Following are the main differences between Strategy Formulation and Strategy Implementation-

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making involved in developing related to executing the strategic plans.
organization’s strategic goals and plans.
In short, Strategy Formulation is placing the Forces In short, Strategy Implementation is managing
before the action. forces during the action.
Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly an
Activity based on strategic decision-making. Administrative Task based on strategic and
operational decisions.
Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.
Strategy Formulation is a rational process. Strategy Implementation is basically an operational
process.
Strategy Formulation requires co-ordination among Strategy Implementation requires co-ordination
few individuals. among many individuals.
Strategy Formulation requires a great deal of Strategy Implementation requires specific
initiative and logical skills. motivational and leadership traits.
Strategic Formulation precedes Strategy Strategy Implementation follows Strategy
Implementation. Formulation.