Introduction to Strategic

Management
Nagapavan Chintalapati
Assistant Professor
Central University of Jharkhand
 What is Strategic Management?
• Strategic management essentially means the
implementation and formulation of various
strategies in order to achieve the goals of the
company.
• Detailed initiative taken by the top management
• Strategic decisions taken on the basis of available
resources
• Take into consideration the effects of the external
and internal environment on their decisions
 What is Strategy?
• Change of Chairman of TATA Sons
• Merger of Associate Banks (SBT, SBM) into SBI
• Reliance Jio – a new competitor in
Telecommunications
• Pantaloons being acquired by Aditya Birla
Group / sold by Future Group
• JLR acquisition by TATA Motors
 What is Strategy?
• A strategy is a business approach to a set of competitive
moves that are designed to generate a successful outcome
• A strategy is management’s game plan for
– Strengthening the organization’s competitive position
– Satisfying customers
– Achieving performance targets
• Three big questions involved in a strategy
– Where are we now?
– Where do we want to go?
– How will we get there?
– How do we know if we got there?
Components of Strategic Management
• Defining business and stating a mission
• Setting measurable objectives
• Crafting a strategy to achieve objectives
• Implementing a strategy
• Evaluating performance of the strategy,
reviewing new developments and taking
corrective action
Levels of Management Plans

Strategic

Tactical

Operational
 Levels of Strategies
Corporate Strategies
Same Value System Multiple Companies
One Company Multiple Businesses (ITC Ltd)
(TATA Group)

Business Strategies
Same Product, Same
New Market New Product Diversification
Market

Functional Strategies
Human Research &
Marketing Finance Operations
Resources Development
 Advantages of Strategic Management
1. Creating a better future
2. Identifying strategic directions
3. Make Better business decisions
4. Business Longevity
5. Increasing market share and profitability
6. Avoiding competitive convergence
7. Financial benefits
8. Non-financial benefits
 Limitations of Strategic Management
1. Complex process
2. Time consuming process
3. Tough implementation
4. Proper planning
Strategic Management Process
 Vision and Mission
• A Vision Statement describes the desired future position of
the company.
• A Mission Statement defines the company's business, its
objectives and its approach to reach those objectives.
• The mission statement supports the vision and serves to
communicate purpose and direction to employees,
customers, vendors and other stakeholders. The mission
can change to reflect a company’s (or department’s)
priorities and methods to accomplish its vision
• Elements of Mission and Vision Statements are often
combined to provide a statement of the company's
purposes, goals and values
Characteristics of Vision Statement
• Understood and shared by stakeholders
• Broad enough to include a diverse variety of
perspectives
• Inspiring and uplifting to everyone involved
• Easy to communicate
 Assignment
• Collect the Vision and Mission Statements of
the NSE NIFTY Companies (50 Companies)
 Formulating Mission Statements
• Establish the basic parameters;
• Collect and assemble possible ideas for inclusion;
• Determine the limits;
• Set the priorities of each statement;
• Carefully express each of the ideas;
• Add explanatory statements;
• Establish the document's apperance;
• Gain final approval.
 Evaluating Mission Statements
• Goodstein, Nolan and Pfeipher - ten criteria:
• The mission statement is clear and understandable to all
personnel, including rank-and-file employees.
• The mission statement is brief enough for most people to keep it
in mind. (100 words or less)
• The mission statement clearly specifies what business the
organization is in. This includes a clear statement about:
– "What" customer or client needs the organization is attempting to fill, not
what products or services are offered;
– "Who" the organization's primary customers or clients are;
– "How" the organization plans to go about its business, that is, what its
primary technologies are; and
– "Why" the organizations exists, that is, the overriding purpose that the
organization is trying to serve and its transcendental goals.
 Evaluating Mission Statements
• The mission statement should identify the forces that drive the
organization's strategic vision.
• The mission statement should reflect the distinctive competence of
the organization.
• The mission statement should be broad enough to allow flexibility
in implementation but not broad enough to permit a lack of focus.
• The mission statement should serve as a template and be the
means by which managers and others in the organization can make
decisions.
• The mission statement must reflect the values, beliefs, and
philosophy of operations of the organization.
• The mission statement should be achievable. It should be realistic
enough for organization members to buy into it.
• The wording of the mission statement should help it serve as an
energy source and rallying point for the organization.
 Environment Analysis

Environment

External Internal Operating

Environment Environment Environment

Opportunities Threats Strength Weakness

 External Environment Analysis
• PESTLE Analysis
– Political
– Economic
– Socio – Cultural
– Technological
– Legal
– Ecological or environmental
 Operating Environment

•competitors, markets,
customers, regulatory
agencies, and
stakeholders
 Internal Environment
• Resources
– Men
– Material
– Machine
– Money
– Managerial Processes
– Information
• Skills and Competencies of the Organization
• Knowledge Management
 Industry Analysis
• Porter’s Forces Model
 Learning Curve and Experience Curve
• The learning curve (also know as an experience curve) can often
play role is determining a firm's long-run success of failure and
therefore also lays an important role in competitive strategy.
• The learning curve was adapted from the historical observation that
individuals performing repetitive tasks exhibit an improvement in
performance as the task is repeated a number times.
• Empirical studies of the phenomenon yielded three conclusions on
which the current theory and practice is based:
– The time required to perform a task reduce as the task is repeated.
Put another way, business organizations, like individuals, learn from
repetition and this learning works to make production more efficient
(Hayes and Wheelwright 1984)
– The amount of improvement decreases as more units are produced.
– The rate of improvements has sufficient consistency to allow its use as
a prediction tool.
 most important factors for a systematic
decrease in cost with accumulated volume
• Learning.
• Specialization and Redesign of Labor Tasks. improved productivity.
• Product and Process Improvements. As volume increases, many opportunities
open up to improve the product and process and thereby achieve higher
productivity and cost reductions.
• Methods and Systems Rationalization. Opportunities increase for improving the
performance of a firm by introducing more up-to-date technology for handling
operation. Also, adopting a policy of standardization allows coordination of
different activities in the various steps of the value-added chain.
• Organizational "tune-up,". A subtle result of experience is the "tune-up" achieved
by the organization after a long history of production, which is reflected in
technological know-how and well developed formal systems that provide
guidelines for smooth relationships among individuals responsible for different
tasks in the production process.
• The learning curve concept is useful for a variety of managerial decisions,
particularly in turn pricing decisions and production strategies. Thus, the learning
curve has significant strategies implication.
 Economies of Scale
• Economies of scale can affect nearly every function, and
many technological factors combine to produce the
downward trend of the cost-curve as volume increases. The
dominant factors are:
– Improved technological processes for high volume production;
– The resources that can be profitability used together only in
large operations;
– The possibility of integrating manufacturing processes for the
various business activities of very large firms operating in stable
environments;
– The sharing of resources, mainly those managed at the
corporate level, that is possible for diversified firms with
businesses in related product markets.
 Vulnerability Analysis
• Vulnerability analysis is a way of assessing a threat
to a firm.
• It assesses the potential damage to the firm of
removing its key strategic underpinnings.
• customer needs and wants served by the firm's
products or services;
• resources and assets – people, capital, facilities,
raw materials, and technology;
• relative cost position compared with that of
competitors;
• consumer base – size, demographics, and trends;
 Vulnerability Analysis
• technologies required;
• special skills – systems, procedures, and structures;
• corporate identity – image, culture, and products;
• institutional barriers to competition – regulations, patents,
and licensing;
• social values – lifestyles, common norms, and ideals;
• sanctions, supports, and incentives to do business;
• customer goodwill, product quality, safety, and corporate
reputation; • complementary products or services in the
stakeholder system.
 Vulnerability Analysis

• The result of a vulnerability analysis arrays

the impact of threat against the ability to
retaliate, resulting in a way of ranking
vulnerability to threat.
• When executives undertake a swot analysis
there is a tendency to play down the
potential impact of threats.
 Steps in Vulnerability Analysis
1. Identify the key underpinnings.
2. Identify the threat caused by their removal.
3. State the most conservative consequence of
each threat.
4. Rank the impacts of the worst consequence
of each threat.
5. Estimate the probability of each threat
occurring
 Corporate Portfolio Analysis Tools
• B C G Matrix

• The GE nine cells planning Grid

• Arthur D. Little Life Cycle Approach

B C G Matrix
Arthur D. Little Life Cycle Approach
• The ADL matrix by Arthur D. Little is a portfolio
management matrix which helps managers
discern their SBUs strategic position
depending upon 2 dimensions-
• SBU’s life cycle and
• Competitive position
• Each of these dimensions can be further split
up:
 Life cycle stages

• Embryonic
• Growth
• Maturity
• Ageing
 Competitive Position Levels
1. Dominant
• The position of a company falls into this category if it is a clear market leader or
has a monopoly position. Example , Intel in microprocessors.
2. Strong
• In this case, the company might not be a monopoly but definitely has a strong
presence and loyal customers.
3. Favorable
• Companies with favorable competitive position usually operate in fragmented
markets and no single one controls all market share.
4. Tenable
• Here each company caters to a niche segment defined by a product variety or
segmented demographically.
5. Weak
• In this scenario, the company financials are too weak to gain a strong hold in the
market and is expected to die out within a short span of time.
Profit Impact of Market Strategies
SWOT Analysis
 Strategic Decision Making
• Rationality and Bounded Rationality
• Politics and Power
• Garbage Can