Strategic Management Unit 1 2023

Unit 1
By
Dr. Anand Vyas
Meaning, Nature, Scope, and Importance 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”.
Nature of Strategy
• Strategy is a major course of action through which an organization relates
itself to its environment particularly the external factors to facilitate all
actions involved in meeting the objectives of the organization.
• Strategy is the blend of internal and external factors. To meet the
opportunities and threats provided by the external factors, internal factors
are matched with them.
• Strategy is the combination of actions aimed to meet a particular
condition, to solve certain problems or to achieve a desirable end. The
actions are different for different situations.
• Due to its dependence on environmental variables, strategy may involve a
contradictory action. An organization may take contradictory actions either
simultaneously or with a gap of time. For example, a firm is engaged in
closing down of some of its business and at the same time expanding
some.
The Importance of Strategy
• Provides Direction and Action Plans
• Prioritizes and Aligns Activities
• Defines Accountabilities
• Enhances Communication and Commitment
• Provides a Framework for Ongoing Decision Making
David Model of Strategic Management Process
• Three-Stage Strategic Management Process
1. Strategy Formulation
2. Strategy Implementation
3. Strategy Evaluation
• Steps in strategic management process
1. Develop Vision and Mission Statements
2. Perform External Audit
3. Perform Internal Audit
4. Establish Long-Term Objectives
5. Generate, Evaluate, and Select Strategies
6. Implement Strategies; Management, Marketing, Finance, R&D Issues
7. Measure and Evaluate Performance
Important Features of Strategic Decision-Making:
• Strategy vs. Marketing Decisions:
• Long-term focus vs. short-term and technology-driven.
• Emphasis on continuous development.
• High Risk Involved:
• Outcomes appear after several years.
• No guarantee of success; costly failures possible.
• Complex Decision-Making Process:
• Involves numerous factors and contingencies.
• Considers various scenarios, both positive and negative.
• Timelines are Critical:
• Precise planning and scheduling are vital for success.
• Neglecting timelines can lead to failures.
• Preparation for Competitive Responses:
• Changing market dynamics provoke competitors.
• Companies must anticipate and adapt to responses.
• Implementation Challenges:
• Execution while maintaining the original vision is critical.
• Short-term pressures may lead to deviations from the plan.
Corporate Governance
• Corporate Governance refers to the system of rules, practices, and

processes by which a company is directed and controlled. It involves
balancing the interests of a company's many stakeholders, such as
shareholders, management, customers, suppliers, financiers,
government, and the community. The primary goals of corporate
governance are to ensure transparency, fairness, accountability, and
responsible decision-making within an organization
Companies Directors: Appointment, Power
• Appointment of Directors:
• Shareholder Appointment: Directors are typically appointed by the
shareholders of a company. Shareholders often vote to elect
individuals to the board of directors during annual general meetings
(AGMs).
• Initial Directors: In the case of a newly formed company, initial
directors are often named in the company's articles of incorporation
or association. These individuals may be the company's founders or
those who have invested in the business.
• Appointment by Board: In some cases, the existing board of directors
may have the authority to appoint additional directors, subject to the
company's bylaws or articles of incorporation.
Powers of Directors:
• Management: Directors have the authority to manage the company's operations and make decisions on behalf
of the company. They oversee the company's strategic direction and ensure that it operates in accordance with
its stated mission and goals.
• Policy Decisions: Directors are responsible for making policy decisions that guide the company's activities. They
may set financial, operational, and ethical policies, among others.
• Hiring and Firing of Executives: Directors often have the power to hire and, if necessary, terminate top-level
executives, including the CEO and other officers.
• Financial Decisions: Directors have control over the company's finances. They may approve budgets,
investments, and major financial transactions.
• Legal and Regulatory Compliance: Directors are responsible for ensuring the company complies with all
relevant laws and regulations. They must act in the best interests of the company and its shareholders.
• Dividend Declarations: Directors may declare dividends to be paid to shareholders, subject to the company's
financial health and applicable laws.
• Strategic Planning: Directors participate in strategic planning processes, including decisions related to mergers
and acquisitions, expansion, and diversification.
• Accountability: Directors are accountable to the company's shareholders and must act in good faith and with
due diligence. They can be held legally liable for breaches of their fiduciary duties.
Corporate Social Reporting
• India is the first country in the world to make corporate social
responsibility (CSR) mandatory, following an amendment to The
Company Act, 2013 in April 2014. Businesses can invest their profits
in areas such as education, poverty, gender equality, and hunger.
• Customers;
• Suppliers;
• Environment;
• Communities; and,
• Employees.
Business Policy
1. Specific: Policies should be clear and specific to avoid confusion during
implementation.
2. Clear: Policies must be written in plain language without ambiguity or jargon to
prevent misunderstandings.
3. Reliable/Uniform: Policies should provide consistent guidelines that can be
easily followed by subordinates.
4. Appropriate: Policies should align with the organization's current goals and
objectives.
5. Simple: Policies should be straightforward and easily understood by all
members of the organization.
6. Inclusive/Comprehensive: Policies should cover a wide range of relevant issues
to have a broad scope of application.
7. Flexible: Policies should allow for some degree of flexibility in their application
to accommodate different situations without frequent changes.
Process of Strategic Management and Levels
at which Strategy Operates
Strategic intent: Vision, Mission, Business
definition, Goals and Objectives
1. Vision – Vision implies the blueprint of the company’s future position. It
describes where the organization wants to land. It is the dream of the business
and an inspiration, base for the planning process. It depicts the company’s
aspirations for the business and provides a peep of what the organization
would like to become in future. Every single component of the organization is
required to follow its vision.
2. Mission – Mission delineates the firm’s business, its goals and ways to reach
the goals. It explains the reason for the existence of business. It is designed to
help potential shareholders and investors understand the purpose of the
company. A mission statement helps to identify, ‘what business the company
undertakes.’ It defines the present capabilities, activities, customer focus and
business makeup.
3. Business Definition – It seeks to explain the business undertaken by the firm,
with respect to the customer needs, target audience, and alternative
technologies. With the help of business definition, one can ascertain the
strategic business choices. The corporate restructuring also depends upon the
business definition.
4. Business Model – Business model, as the name implies is a strategy for the
effective operation of the business, ascertaining sources of income, desired
customer base, and financing details. Rival firms, operating in the same
industry relies on the different business model due to their strategic choice.
5. Goals and Objectives – These are the base of measurement. Goals are the end
results, that the organization attempts to achieve. On the other hand,
objectives are time-based measurable actions, which help in the
accomplishment of goals. These are the end results which are to be attained
with the help of an overall plan, over the particular period.

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Unit 1

• Corporate Governance refers to the system of rules, practices, and

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