BHARATHIAR UNIVERSITY

MBA (HR)

COURSE 2.9

STRATEGIC MANAGEMENT
(Notes For Examination)

Prepared By
Dr Abbas T. P
drtpabbas@gmail.com

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 2.9. Strategic Management
Unit I
Q1. Corporate Strategic Planning & Management
Corporate strategy is the pattern of decisions in a company that
 Determines and reveals its objectives,
 Produces the principal policies and plans for achieving those goals
 Defines the range of business the company is to pursue
 Define the kind of economic and human organization it intends to be
 Defines the nature of economic and non-economic contribution it intends
to make to its shareholders, customers and communities.
Strategic Management is necessary for organizations facing major strategic
decisions that involve high task complexity, change, uncertainty and
inefficient markets. Strategic Management is most relevant when all four of
these conditions hold.
An organization cannot operate effectively without a strategy. The strategy
may have been developed explicitly through a planning process or it may
have evolved implicitly through the operations of the various functional
departments.
Phases in the Development of Strategic Management
Strategic Management and Planning in an organization evolves through
four sequential phases
Phase I – Financial Planning (Annual Budgeting): Companies in
Phase I have sound business strategies reflected in its budgeting procedure.
Procedures are developed to forecast revenue, costs and capital needs.
Budget identifies limits for expenses on an annual basis.
Phase II – Forecast Planning (Long Range Planning): Phase II is the
traditional long-range planning with the objective of providing answers to
the questions:
 Where is the organization now?
 Where is it going?
 Where does it want to go?
 What does it has to do to get to where it wants to go?
In its most elementary form, traditional long-range planning identifies four
key activities:

2.9 – Strategic Management 2|Page

  Monitoring
 Forecasting
 Goal setting and
 Implementing policies and actions to facilitate the goals.
Phase III – Externally Oriented Planning (Environmental Scanning)
Environmental Scanning is the monitoring, evaluating and disseminating
of information from the external and internal environments to key people
within the corporation. Environment scanning is an advanced forecasting
method used to:
 Identify new and potentially crucial information.
 Identify possible developments that must be used to adjust the
forecasts of the internal issues derived from forecasting.
Phase IV - Strategic Management: The Strategic Management helps:
 an organization in setting up goals and objectives
 the analysis of the environment and the resources of the organization
 the generation of strategic options and their evaluation and
 the planning, design and implementation of monitoring mechanisms.
Mission-Vision of the Firm: The first task of Strategic Management is
formulating the organization's vision and mission statements. They have
the greatest impact on the identity and the future of the organization and
reflect the strategic intent of the organization.
Vision: Vision is what keeps the organization moving forward. Vision is the
motivator in an organization. It needs to be meaningful with a long term
perspective.
Successful organizations have a vision that is executable.
A well communicated vision statement will bring the workforce together and
stimulates people to act. It will cause people to live in the business rather
than live with the business.
A well-crafted Vision Statement should be:
 realistic and credible
 well-articulated and easily understood
 appropriate, ambitious and responsive to change

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 Given below is the vision statement of Hindustan Lever Ltd: Our
vision is to meet the everyday needs of people everywhere.
Mission: A mission statement is a statement of purpose and function. The
mission statement should have clear answers to the following questions of
purpose:
 Why does the organization exist?
 What is its value addition?
 What is its function?
 How does it want to be positioned in the market?
 What business is it in?
A well-crafted mission statement must be narrow enough to specify the real
area of interest of the firm. A mission statement must have three distinct
and identifiable components:
 The key market
 Contribution
 Distinction
Given below is the mission statement of Hindustan Lever Ltd:
Our purpose in Unilever is to meet the everyday needs of people
everywhere - to anticipate the aspirations of our consumers and
customers and to respond creatively and competitively with branded
products and services which raise the quality of life.
Unlike a vision statement, the mission statement may undergo changes
from time to time. In the dynamic environment of today, vision must be re-
examined and refreshed periodically to keep track of changes in the
environment.

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Q.2. MISSION-VISION OF THE FIRM
The first task of Strategic Management is formulating the organization's
vision and mission statements. They have the greatest impact on the
identity and the future of the organization and reflect the strategic intent of
the organization.
Vision
Vision is what keeps the organization moving forward. Vision statement
provides direction and inspiration for organizational goal setting. Vision is
a single statement dream or aspiration.
Vision is a symbol and a cause to which the organization want to bond the
stakeholders. People work best, when they are working for a cause, than for
a goal. Vision provides them that cause.
Vision is long-term statement and typically generic & grand. Therefore a
vision statement does not change unless the company is getting into a totally
different kind of business.
Vision should never carry the ’how’ part. For example,
'To be the most admired brand in Aviation Industry'
is a fine vision statement, which can be spoiled by extending it to
‘To be the most admired brand in the Aviation Industry by providing world-
class in-flight services'.
The reason for not including 'how' is that 'how' may keep on changing with
time.
Vision is the motivator in an organization. It needs to be meaningful with a
long term perspective. Successful organizations have a vision that is
executable.
A well communicated vision statement will bring the workforce together and
stimulates people to act. It will cause people to live in the business rather
than live with the business.
A well-crafted Vision Statement should be:
 realistic and credible
 well-articulated and easily understood
 appropriate, ambitious and responsive to change
 Easy to read and understand.
 Compact and crisp to leave something to people's imagination.

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  Gives the destination and not the road-map.
 Is meaningful and not too open ended and far-fetched.
 Excite people.
 Provides a motivating force, even in hard times.
 Is perceived as achievable and at the same time is challenging and
compelling, stretching us beyond what is comfortable.
Challenges related to Vision Statement:
Putting-up a vision is not a challenge. The problem is to make employees
engaged with it. Many a time, terms like vision, mission and strategy
become more a subject of contempt than being looked up-to. This is primarily
because leaders may not be able to make a connect between the
vision/mission and people's every day work. Too often, employees see a gap
between the vision, mission and their goals & priorities.
Mission
Mission of an organization is the purpose for which the organization is. A
mission statement is a statement of purpose and function. The mission
statement should have clear answers to the following questions of purpose:
 Why does the organization exist?
 What is its value addition?
 What is its function?
 How does it want to be positioned in the market?
 What business is it in?
Mission statement is again a single statement, and carries the statement in
verb. Mission in one way is the road to achieve the vision.
For example, for a luxury products company, the vision could be
'To be among most admired luxury brands in the world'
and mission could be
‘To add style to the lives'
A good mission statement will be:
 The mission should be Clear and Crisp such that it should only provide
what, and not 'how and when'. A mission statement without 'how &
when' element leaves a creative space with the organization to enable
them take-up wider strategic choices.

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 Visible linkage to the business goals and strategy
 Should not be same as the mission of a competing organization.
A well-crafted mission statement must be narrow enough to specify the real
area of interest of the firm. A mission statement must have three distinct
and identifiable components:
 The key market
 Contribution
 Distinction
Unlike a vision statement, the mission statement may undergo changes
from time to time. In the dynamic environment of today, vision must be re-
examined and refreshed periodically to keep track of changes in the
environment.
Examples of Vision and Mission of some of the organizations are given
below:
Toyota
Vision: Toyota aims to achieve long-term, stable growth economy, the local
communities it serves, and its stakeholders.
Mission: Toyota seeks to create a more prosperous society through
automotive manufacturing.
Hindustan Lever Ltd
Vision: Our vision is to meet the everyday needs of people everywhere.
Mission: Our purpose in Unilever is to meet the everyday needs of people
everywhere - to anticipate the aspirations of our consumers and customers
and to respond creatively and competitively with branded products and
services which raise the quality of life

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Q.3. STRATEGIC MANAGEMENT PRACTICES IN INDIA

Strategic management is the formulation and implementation of the major

goals and initiatives taken by a company's top management on behalf of
owners, based on consideration of resources and an assessment of the
internal and external environments in which the organization competes.
Strategic management provides overall direction to the enterprise and
involves specifying the organization's objectives, developing policies and
plans designed to achieve these objectives, and then allocating resources to
implement the plans.
Process of Strategic Management
Strategic management consists of four basic elements.
1. Environmental scanning: Environmental Scanning is the
monitoring, evaluating, and disseminating of information from the
external and internal environments to key people within the
corporation. Its purpose is to identity strategic factors – those external
and internal elements that will determine the future of the corporation.
2. Strategy formulation: Strategy formulation is the development of
long-range plans for the effective management of environmental
opportunities and threats, in light of corporate strengths and
weaknesses. It includes defining the corporate mission, specifying
achievable objectives, developing strategies and setting policy
guidelines.
3. Strategy implementation: Strategy Implementation is the process by
which strategies and polices are put into action through the
development of programs, budgets and procedures. This process might
involve changes within the overall culture, structure, and/or
management system of the entire organization. Most of the times
strategy implementation is carried out by middle and lower level
managers with top management’s review.
4. Evaluation and control: Evaluation and control is the process in
which corporate activities and performance results are monitored so
that actual performance can be compared with desired performance.
Managers at all levels use the resulting information to take corrective
action and resolve problems. Although evaluation and control is the
final major element of strategic management, it also can pinpoint
weaknesses in previously implemented strategic plans and thus
stimulate the entire process to begin again.

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Strategic management in India
After the economic liberalization announced in India in 1991, strategic
management has gained greater relevance. In fact it is a major thrust area
after the WTO meet of December 2005 held in Hong Kong.
To make strategic management effective, in view of the environmental
changes that have increased the relevance of strategic management,
organizations in India are showing some new initiatives described below.
1. The abolition of public sector monopoly or dominance in a number of
industries has enormously increased business opportunities. Many of
them are high-tech and heavy investment sectors which make strategic
management all the more relevant.
2. The delicensing has removed not only an important entry and growth
barrier but also a consumption (and, therefore, demand) barrier. In the
past, because of non-production/limited production and import
restrictions, many goods were non-available or had limited availability
(in quantity and /or variety).
3. The scrapping of most of the MRTP Act restrictions on entry, growth
and Mergers &Acquisitions, along with the dereservation and
delicensing of industries, have opened up floodgates of business
opportunities for large enterprises.
4. The liberalization in policy towards foreign capital and technology,
imports and accessing foreign capital markets provides companies
opportunities for enhancing their strengths to exploit the opportunities.
5. The liberalization in other countries, the expanding foreign markets, the
growing competition in India, the new policy environment, etc., increase
the importance of foreign markets and strategic management.
6. The grant of more autonomy to the public sector enterprises increases
the scope of strategic management.
Major objectives of Strategic Management in India
The major objectives of Strategic Management in India include:
1. Innovation as Strategy and Strategy as Innovation Understanding
'game-changing' disruptive innovations, including:
 How are Indian companies approaching the innovation challenge as
they emerge as new multinationals?
 Do Indian companies approach the innovation challenge differently
from their Western counterparts?

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  What are the implications of the 'frugal innovation' model on global
value chains?
2. Globalization of Indian Firms - Challenges and Opportunities
Another major objectives of Strategic Management in India is to run
with the race of globalization, and to keep a vigil at:
 What is new and innovative about the internationalization moves of
these Indian firms?
 How do they overcome the liability of foreignness?
 What are the challenges facing Indian companies as they
internationalize?
 What are some implications for established models of strategic
management?
3. India as Innovation Source - MNE Perspectives Yet another
purpose of strategic management in India remains to mark out:
 What are some lessons learned from the successes and challenges of
multinationals that have opened up new markets in India?
 How is the competition from India-based companies different?
 What has been the experience of multinationals that have set up
R&D labs in India?
 What is the nature of the R&D mandate from Indian subsidiaries?

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UNIT II
Q.4. INTERNAL & ENVIRONMENTAL ANALYSIS (SWOT AUDIT)
The very first process in the Strategic Management is the Environmental
Scanning. It is the process of monitoring, evaluating and disseminating of
information from the external and internal environments to key people
within the corporation. Its purpose is to identity strategic factors that will
determine the future of the corporation.
The simplest way to conduct environmental scanning is through SWOT
(Strengths, Weaknesses, Opportunities and Threats) analysis. The SWOT
analysis provides information that is helpful in matching the firm's
resources and capabilities to the competitive environment in which it
operates. It can be used in strategy formulation and selection.
Identify Opportunities and Threat: Competitive & Environment
Analysis
Coping with change is one of the most persistent problems facing a firm.
Forecasting provides the firm with the information necessary to identify the
opportunities and threats it may face in pursuing its corporate goals.
Important forecasting tools are:
1) Competitiveness Profiling
Competitiveness Profiling identifies the firm’s internal performance and
benchmarks the firm’s product with the best competitor by creating a simple
profile of how far a firm’s product matches with:
(a) the market wants and
(b) what the firm’s best competitors can offer.
The Competitiveness Profiling identifies the market requirements for
performance of the product being examined. The following concepts can be
used as qualifiers:
 Order Qualifiers: Defining the factors that have to be present simply
to be able to remain in the market (such as price, quality, etc.)
 Order Winners: Defining the factors that are required for winning
customers (such as levels of customization, design, delivery, etc.)
2) Strategic Group Analysis
The Strategic Group Analysis identifies the groupings within the industry
that have similar strategic characteristics for plotting it on a matrix or
showing graphically using mapping techniques.

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Strategic Group Analysis are useful in the following ways:
 helps identify the most direct competitors
 indicates the degree of ease with which a firm can move from one
strategic group to another
 results in identifying strategic opportunities
 significant strategic problems, if any, are brought
3) Five Forces Model
The 'Five Forces Model' represents the competitive universe of the firm
consisting of the following 5 components:
(a) Threat of New Entrants: New entrants bring in new capacity, the
desire to gain market share and often substantial resources. They may
offer products or services at lower prices or with some advantage.
(b) Bargaining Power of Suppliers: Suppliers can exert bargaining
power in an industry by raising prices or by change in the quality of
their goods and services.
(c) Bargaining Power of Buyers: Customers can lower the profitability
of the firm by forcing down prices, playing competitors against each
other or demand better quality, service and design
(d) Existence of Substitute Products: Substitute products limit the
potential of an industry by placing a ceiling on the prices it can charge.
(e) Intensity of Rivalry: There is competitive rivalry between firms on a
continuing basis
Identify Strength & Weaknesses: Value Chain Analysis
Michael Porter suggested that there must be a ‘fit’ between a strategy and
the elements of the internal environment of an organization. He
distinguishes between two types of activities
1) Primary Activities
Primary activities are directly concerned wi0th the creation or delivery of a
product or service. They can be grouped into five main areas:
a) Inbound logistics: These are inputs required by the organization in
order to produce the goods and services that it offers.
b) Operations: These are the primary activities involved in converting the
inputs into outputs.
c) Outbound logistics: These are the primary activities involved in taking

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the service or product to the end user.
d) Marketing and Sales: These are activities linked to bring the product
or service to the attention of the consumer and induce them to consume it.
e) Service: These are activities designed to enhance or maintain a product
or service's value.
2) Support Activities
Each of the above primary activities is linked to the following four main
areas of support activities which help to improve their effectiveness or
efficiency:
a) Procurement: This refers to the activities involved in acquiring the
various resource inputs needed to produce the product or the service.
b) Technology Development: This focuses on improving the processes in
primary value-adding activity.
c) Human Resource Management: This is concerned with all activities
involved in recruiting, training, developing and rewarding people in the
organization.
d) Infrastructure: The systems for planning, finance, legal, quality,
information management, etc., are included under this head.
SWOT Matrix
The relationships in a SWOT analysis are generally represented by a 2 × 2
matrix. The matrix identifies the Strengths, Weaknesses, Opportunities
and Threats of a firm.
This information can be used by the company in many ways in evolving its
options for the future. In general, the company should attempt to:
 Build its strength
 Reverse its weakness
 Maximize its response to opportunities
 Overcome its threat

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UNIT III
Q.5. STRATEGY FORMULATION
Strategy formulation is the development of long-range plans for the effective
management of environmental opportunities and threats, in light of
corporate strengths and weaknesses.
Strategy formulation requires continuous observation and understanding of
environmental variables and classifying them as opportunities and threats.
It also involves knowing whether the threats are serious or casual and
opportunities are worthy or marginal.
Levels of Strategy Formulation
Strategy formulation has the following 4 levels.
1. Corporate Level Strategy: In this level, the focus is on the overall
scope, direction and goals of the entire organization.
The Corporate Level Strategy formulation has the following
components:
(a) Growth strategy: It is concerned with the direction that the business
is taking.
(b) Portfolio strategy: It is all about taking stock of the organization’s
operational structure.
(c) Parenting strategy: It is concerned with the allocation of resources
and capabilities across the organization.
2. Business Level Strategy: Large companies usually have multiple
Strategic Business Units (SBUs), responsible for its own budgeting, new
product decisions, hiring decisions and price setting. The business
strategies are basically competitive strategies.
3. Functional Level Strategy: The broad corporate strategy will be
reinforced by more detailed functional strategies. Functional strategies
generally emphasize on short and medium term plans and limit their
domain to the department's functional responsibility.
4. Operational Strategy: The "lowest" level of strategy is operational
strategy. It has a very narrow focus and deals with day-to-day
operational activities such as scheduling, production and dispatch, etc.
Steps in Strategy Formulation Process
The process of strategy formulation involves six main steps.
1. Define the organization and its environment, in terms of target

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 market, customers, offerings and its adaptability to changes and
challenges
2. Define the strategic mission to provide a clear picture of the
organization’s long-range outlook and to provide an overview of what
the business wants to achieve.
3. Define and set the strategic objectives that represent what the
organization must achieve in order for it to become competitive or to
remain competitive and ensure sustainability of the business over the
long term.
4. Define the competitive strategy for identifying and coming up with
its long-term plan to gain advantage over the competition.
5. Implementation of strategies by prioritizing the strategies and
identify which ones to implement
6. Evaluate progress and effectiveness to track the progress of the
implementation of the strategies.
Generic Strategies
The objective of any organization is to yield a superior rate of return on the
investment. The principle to meet this objective is that organizations
achieve competitive advantage by providing their customers with what they
want, more effectively than competitors and in ways the competitors find
difficult to imitate.
There are two basic types of competitive advantage a firm can possess:
 Low cost or
 Differentiation.
The two basic types of competitive advantage combined with the scope of
activities by which a firm seeks to achieve them, lead to the following three
generic competitive strategies:
(a) Cost Leadership: A firm pursuing a cost-leadership strategy attempts
to gain a competitive advantage primarily by reducing its economic costs
below its competitors. This policy once achieved provides high margins and
a superior return on investments.
The cost-leadership strategy requires tight cost control. In order to remain
a cost leader, the firm attempts to avoid those factors that can cause the
economies of scale to be affected.
The most serious risk to cost leadership is technological change that nullifies
past investment or learning of the organization.

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The organization's advantage can also be neutralized if there is low cost
learning by industry newcomers or inflation in costs of supplies or processes
that provide the organization a competitive advantage
(b) Differentiation Strategy
In a differentiation strategy, a firm seeks to be unique in its industry along
some dimensions that are widely valued by buyers. It selects one or more
attributes that many buyers in an industry perceive as important and
uniquely positions itself to meet those needs.
Differentiation will cause buyers to prefer the company's product/service
over the brands of rivals.
The challenge is finding ways to differentiate that create value for buyers
and that are not easily copied or matched by rivals.
There are risks in this strategy when the cost of differentiation becomes too
great or when buyers become more sophisticated and need for
differentiation falls.
(3) Focus and Niche Strategies
The focus strategy selects a segment or group of segments in the industry or
buyer groups or a geographical market and tailors its strategy to serving
them to the exclusion of others.
There are two aspects to this strategy:
 the cost focus and
 the differentiation focus.
In cost focus a firm seeks a cost advantage in its target market. The objective
is to achieve lower costs than competitors in serving the market.
Differentiation focus offers niche buyers something different from other
competitors. The firm seeks product differentiation in its target market.

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UNIT IV
Q.6. TOOLS OF STRATEGIC PLANNING & EVALUATION
The following are the commonly used tools of strategic planning and
evaluation:
(1) Competitive Cost Dynamics
This strategy emphasizes efficiency. By producing high volumes of
standardized products, the firm can take advantage of economies of scale
and experience curve effects. Maintaining this strategy requires a
continuous search for cost reductions in all aspects of the business.
To be successful, this strategy usually requires a considerable market share
advantage or preferential access to raw materials, components, labour or
some other important input.
(2) Learning Curve
Learning curve theory states that as the quantity of items produced doubles,
costs decrease at a predictable rate. This predictable rate is described by the
following equations:

where
 K is the number of direct labour hours to produce the first unit
 Yx is the number of direct labour hours to produce the xth unit
 x is the unit number
 b is the learning percentage
Key Features
Figure 1 This linear scale shows direct labour per piece as a function of total
pieces produced
Figure 2 log-log scale makes the data appear as a straight line. The slope
of this line reflects the amount of "learning" that takes place
The example of figures 1 & 2 is typical of many situations. Direct labor hours
for each unit of production drops rapidly during production startup. The
improvement from one unit to the next becomes smaller and smaller but it
does continue, often for decades.
When plotted on a log-log scale, the data approximates a straight line as in
figure 2. The slope of this line indicates the intensity of "learning" or
improvement. Hence the phrase "steep learning curve" indicates a situation

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where improvement is coming quickly
Performance gains from the learning curve effect are common but not
universal. There is no physical law that requires individuals, work groups,
companies or industries to learn from their experience. Performance gains
come from a variety of mechanisms like
 Management Styles & Actions
 Corporate Culture
 Organization Structure
 Technology
 Engineering
The major factors of learning are
 willingness to learn,
 ability to learn and
 an investment in learning.
Individuals, work groups, companies and industries that do not have the
willingness, ability or investment may find their costs declining very little
or, even increasing.

(3) Experience Curve

Experience Curves are an expansion of the Learning Curve idea from

individual and group learning to factories, companies or entire industry
sectors.
Companies can use Experience Curves to develop marketing and
manufacturing strategy.
Experience Curves are usually established over longer time periods than

2.9 – Strategic Management 18 | P a g e

Learning Curves. In addition, market price is often used as a substitute for
actual cost since costs for such a wide-ranging study are often unavailable.
Experience curves are similar in behaviour and are often represented by the
same formula as Learning Curves.
There are however, some differences.
 Experience curves relate to entire factories, companies or industries
rather than individuals or work teams.
 They cover longer periods—years or decades rather than a few
weeks or months.
 The cost improvements are often the result of macro-level changes
in systems, technologies and culture rather than individual or group
experience.
These differences between Learning and Experience curves result in
differences in their use and application.
Experience curves apply to Manufacturing, Marketing and Business
strategy. This contrasts with Learning Curves which are most useful for
tactical applications such as evaluating work group performance or
estimating product cost.
(4) BCG’s Growth – Share Matrix Approach
The basic idea underlying BCG’s Growth–Share Matrix approach is that a
firm should have a balanced portfolio of businesses such that some generate
more cash than they use and can thus support other businesses that need
cash to develop and become profitable.
The growth-share matrix places businesses in four cells, which reflect the
four possible combinations of high and low growth with high and low market
share. The cells are labelled Question Marks, Stars, Cash Cows and Dogs
BCG Growth-Share Matrix
High Market Share Low Market Share
High Industry Growth Rate * Stars ? Question Marks
Low Industry Growth Rate $ Cash Cows X Dogs

 Question marks: Company business that operate in a high-growth

market but have low relative market share. Most businesses start off as
question marks.
 Stars: These are successful businesses. A star is the market leader in a
high growth market, but it does not necessarily provide much cash.
 Cash cows: Businesses in markets whose annual growth rate is less

19 | P a g e 2.9 – Strategic Management

 than 10 percent but that still have the largest relative market share. A
cash cow is so called because it produces a lot of cash for the
organizations.
 Dogs: Businesses that have weak market shares in low-growth
markets. They typically generate low profits or losses.
(5) The IA-BS Matrix
In this approach, each of a company's SBU's is plotted in a two-dimensional
matrix of industry attractiveness and business strength, as shown below.
High Industry Medium Industry Low Industry
Attractiveness Attractiveness Attractiveness
High Business Selective Grow or
Invest
Strength Growth Let Go
Medium Business Grow or
Selective Growth Harvest
Strength Let Go
Low Business Grow or
Harvest Divest
Strength Let Go

(6) Life Cycle-Competitive Strength Matrix

The underlying assumption of the Life Cycle-Competitive Strength Matrix
is that industries will move through the life-cycle stages from introduction
to growth to maturity and then to the decline stage.
Introduction Decline
Growth Stage Maturity Stage
Stage Stage
High Caution: Caution:
Push: Invest Push: Invest
Competitive Grow or Invest Invest
Aggressively Aggressively
Strength selectively selectively
Medium Push/Caution: Caution: Caution:
Push: Invest
Competitive Selective Invest Invest
Aggressively
Strength Growth selectively selectively
Caution:
Low Caution:
Grow Danger:
Competitive Invest Danger: Harvest
Invest Harvest
Strength selectively
selectively

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UNIT V
Q.7. STRATEGY IMPLEMENTATION
Strategy implementation is the process of allocating resources to support
the chosen strategies. This process includes the various management
activities that are necessary to put strategy in motion, institute strategic
controls that monitor progress and ultimately achieve organizational goals.
Approaches for implementation of business strategy
1. Commander approach – Once best strategy is decided the top
management passes on to subordinates for execution
2. Organizational change approach – Adopted to implement more
difficult strategies because of behavioural science techniques involved
in change management
3. Collaborative approach – takes collective participation by considering
the views of the senior managers in the organisation
4. Cultural Approach – strategic manager plays role of a mentor in
giving general direction, but encourages individual decision making
5. Cursive approach – strategic manager encourages subordinates to
develop, champion and implement sound strategies on their own
A General Framework for Strategy Implementation
There are six principal administrative tasks for implementing strategy.
1. Building an organization capable of executing the strategy. The
organization must have the structure necessary to turn the strategy
into reality. Furthermore, the firm's personnel must possess the skill
needed to execute the strategy successfully.
2. Establishing a strategy-supportive budget. If the firm is to accomplish
strategic objectives, top management must provide the people,
equipment, facilities and other resources to carry out the strategic
plan.
3. Installing internal administrative support systems. Internal systems
are policies and procedures to establish desired types of behaviour,
information systems to provide strategy-critical information on a
timely basis and whatever inventory, materials management,
customer service, cost accounting and other administrative systems
are needed to give the organization important strategy-executing
capability.
4. Devising rewards and incentives that are tightly linked to objectives

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 and strategy. People and departments of the firm must be influenced,
through incentives, constraints, control, standards and rewards, to
accomplish the strategy.
5. Shaping the corporate culture to fit the strategy. A strategy-supportive
corporate culture causes the organization to work hard and
intelligently toward the accomplishment of the strategy.
6. Exercising strategic leadership. Strategic leadership consists of
obtaining commitment to the strategy and its accomplishment.
The 7-s's Framework
McKinsey and Company have developed a model know as, "the seven
elements of strategic fit," or the "7-S's."
7-S's include:
1. Strategy – The broad framework for the allocation of a firm's scarce
resources to reach identified goals;
2. Structure – The way the organization's units relate to each other in
accomplishing the successful implementation of strategies:
centralized, functional divisions, decentralized, matrix, network,
holding, etc.;
3. Systems – The procedures, rules and regulations and routines that
characterize how important work is to be done: financial systems;
hiring, promotion and performance appraisal systems; information
systems.
4. Style – Cultural style of the organization and how key managers
behave in achieving the organization's goals;
5. Staff – Selection, placement, training and development of
appropriately qualified personnel within the organization, both in
terms of numbers and type;
6. Shared-values – Values shared by all in the organization; and
7. Skills – Distinctive capabilities of personnel or of the organization as
a whole.
These seven elements are distinguished in so called hard S's and soft S's.
The hard elements – strategy, structure and systems – are easy to identify.
They can be found in strategy statements, corporate plans organizational
charts and other documentations. Management has some control over the
hard elements and can exercise influence over them.
The four soft S's – shared values, style, staff and skills – are difficult to

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describe since capabilities, values and elements of corporate culture are
continuously developing and changing. They are determined by the people
at work in the organization. Therefore, it is much more difficult to plan or
to influence the characteristics of the soft elements.
The successful implementation of a strategy depends on the right alignment
of all the seven elements.

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Q.8. STRATEGIC CONTROL PROCESS
Different types of Strategic Control Systems are required to effectively
exercise control.
Standard systems of controls are generally classified into the following four
types:
1. Premise Control
Strategy is built around certain premises about future events. It highlights
and identifies these and checks if these are still valid as future events
unfold. The sooner these invalid premises are detected, better are the
chances of devising an acceptable shift in the strategy.
These premises include:
 Rate of inflation
 Interest rates
 Legislations and regulations by government
 Demographic changes
 Social changes
 Competitors
 New entrants
 Suppliers
 Substitutes, etc
Since tracking all premises is time consuming, short lists of premises that
have a significant effect on the implementation of strategy are identified,
recorded and their monitoring responsibility is fixed. If these premises are
not in line with the assumptions made at the beginning, adjustments to
strategy, either operational or functional, may become necessary.
2. Implementation Control
Implementation control serves the purpose of assessing whether the overall
strategy needs modification/changes in the light of events unfolding and
results accomplished.
It is of two types:
 Assessing Strategic Thrust and
 Milestone Reviews
Information on the thrust of the strategy is used to point out changes that
may have to be incorporated in the strategy.
Milestone review is a full-scale reassessment of the overall strategy. These
reviews may determine the need to continue or reinforce strategy
implementation

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3. Strategic Surveillance
Strategic surveillance is intended to monitor a very broad range of events
inside and outside the firm. The choice of the events is not pre-selected or
pre-planned. It is a general system of monitoring different sources of
information to uncover important but unanticipated information that can
have major impact on the strategy.
4. Special Alert Control
This control is a subset of the other types of controls. This is a rapid but
thorough review of the entire strategy in the light of sudden and unexpected
events. These reviews often lead to contingency plans.
DU PONT’S CONTROL MODEL
Du Pont analysis is a model widely used in financial ratio analysis to
designate the ability of a company to increase its return on equity ratio
(ROE).
The model breaks down ROE ratio into three components: profit margin,
asset turnover and financial leverage.
The DuPont model is expressed as follows:

or

DuPont analysis breaks down return on equity into three major components
to determine the impact of each of them.
1. Profit margin. This ratio reflects a company’s strength in
generating profit from each dollar of sales.
2. Asset turnover. This ratio measures how efficiently a company
uses its assets to generate sales.
3. Financial leverage or equity multiplier. This ratio shows the
extent to which a company uses debt financing.
Advantages of DuPont Analysis
DuPont analysis is an excellent technique to determine the strengths and
weaknesses of a company. Each weak financial ratio used in the model can
be decomposed to get deeper insight into the source of weakness. When
sources of weakness are identified, management can take some actions to
improve the return on equity ratio.
Disadvantages of DuPont Analysis: The main drawback of DuPont

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analysis is that it uses accounting data disclosed in financial statements,
which can be manipulated by management to hide some weaknesses. Thus,
to get correct results, accurate accounting data must be inputted.
Another disadvantage is that, being a financial ratio analysis, it works best
to compare companies of the same size working in the same industry.
BALANCED SCORE CARD
The Balanced Scorecard (BSC) moves beyond the traditional goals of
income, cash flow and financial ratios. It adds process performance
measurements around issues like continuous improvement, supply chain
management and customer satisfaction
BSC identifies the four related core processes that are critical to nearly all
organizations and all levels within organizations:
 Learning and growth capability
 Efficiency of internal processes
 Customer value
 Financial returns
BSC introduces four new management processes that contribute in linking
long term strategic objectives with short term activities. The processes are:
 Translating the vision,
 Communication and linking,
 Business planning and
 Feedback and learning
The BSC seeks to link these measures into a model that accurately reflects
cause and effect relations among categories and individual measures.

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