Strategic Management Introduction

VISION, MISSION AND
OBJECTIVES OF BUSINESS
Dr. S.C.SIVASUNDARAM ANUSHAN, M.B.A, M.Com, M.Phil, PhD.,
sanushan@gmail.com
Dr.S.C.Siva Sundaram An
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STRATEGIC INTENT'
Strategic analysis, strategic choice and strategy
implementation are the three parts of the Strategic Management.
Strategic choice is concerned with decisions about the
organisation's future and the way it needs to respond to the
influences and impacts identified in strategic analysis. Choice
becomes an idle exercise if the strategy is not properly
implemented. These three divisions, therefore, form a closed
loop in which the tail and the head are often indistinguishable.
The leveraging of a firm's internal resources, capabilities and
core competencies to accomplish the firm's vision, mission and
objectives in a competitive environment is Strategic Intent'.
When established effectively, a strategic intent can cause people
to turn out excellent performance. Strategic intent is said to exist
when all employees and levels of a firm are committed to the
pursuit of a specific but significant performance target. The intent
can take the form of a broad vision or mission statement or a
more focused route covering specific objectives and goals. In a
way, thus, strategic intent tries to establish the parameters that
shape the values, motives and actions of people throughout their
organization. ushan
STRATEGIC INTENT
Setting of organizational vision, mission and objectives is the starting
point of strategy formulation. The organizations strive for achieving
the end results which are vision, mission, purpose, objective,
goals, targets etc. The hierarchy of strategicintent lays the
foundation for the strategic management of any organization. The
strategic intent makes clear what an organization stands for. It is
reflected through vision, mission, business definition and objectives.
Vision serves the purpose of stating what an organization wishes to
achieve in long run. The process of assigning a part of a mission to a
particular department and then further sub dividing the assignment
among sections and individuals creates a hierarchy of objectives.
The objectives of the sub unit contribute to the objectives of the
larger unit of which it is a part. From strategy formulation point of
view, an organization must define why it exists, how it justifies that
existence, and when it justifies the reasons for that existence. The
answers to these questions lies in the organizations mission,
business definition, objectives and goals. These terms become the
base for strategic decisions and actions.
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STRATEGIC INTENT
The foundation for the strategic management is laid by the hierarchy of strategic intent. The
concept of strategic intent makes clear WHAT AN ORGANISATION STANDS FOR, Harvard
Business Review, 1989 described the concept in its infancy. Hamel and Prahalad coined
the term strategic intent. A few aspects about strategic intent are as follows:
It is an obsession with an organization.
This obsession may even be out of proportion to their resources and capabilities.
It envisions a derived leadership position and establishes the criterion, the organization will
use to chart its progress.
It involves the following:
Creating and Communicating a vision
Designing a mission statement
Defining the business
Setting objectives
We will discuss these parameters as a hierarchy of strategic intent. The hierarchy of strategic
intent includes the following elements.
1. A broad vision of what the organization should be.
2. The organization's mission
3. The strategic objectives and specific goals to be pursued relentlessly
4. The plans that are developed to accomplish the intentions of management in a concrete
way.
5. Policies
6. Procedures
7. rules
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Vision
1. A vision articulates the position that an organization would like to
attain in the distant future.
2. Vision therefore is future aspirations that lead to an inspiration to be
the best in ones field of activity.
3. Aspirations, expressed as strategic intent, should lead to an end;
otherwise they would just be castles in the air. That end is the vision
of an organization or an individual. It is what the firm or a person
would ultimately like to become. For instance, some of you, say in
10 years, or may be even earlier, would like to become general
managers managing an SBU in a large, diversified multinational
corporation. Or some others among you would like to believe that
you will be an entrepreneur in 10-15 years owning your own
company dealing with IT services and employing cutting-edge
technology to serve a global clientele. A firm thinks like that too.
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VISION STATEMENT:
When visioning the change, ask yourself, "what is our preferred future?" Your vision must be encompassed by
your beliefs.
1. Your beliefs must meet your organizational goals as well as community goals.
2. Your beliefs are a statement of your values.
3. Your beliefs are a public/visible declaration of your expected outcomes.
4. Your beliefs must be precise and practical.
5. Your beliefs will guide the actions of all involved.
6. Your beliefs reflect the knowledge, philosophy, and actions of all.
7. Your beliefs are a key component of strategic planning.
The process and outcomes of visioning is to develop an effective basis for business strategy. The foresight of the
organization is to fit the strengths of the organization with the demands, to make the organization highly
competitive with growth and profits as the rewards. The long-term benefits are substantial, because Visioning:
1. Break you out of boundary thinking.
2. Provides continuity and avoids the stutter effect of planning fit and starts.
3. Identifies direction and purpose.
4. Alerts stakeholders to needed change.
5. Promotes interest and commitment.
6. Promotes laser-like focus.
7. Encourages openness to unique and creative solutions.
8. Encourages and builds confidence.
9. Builds loyalty through involvement (ownership).
10. Results in efficiency and productivity.
Witness what Tata Steel sys about its vision: Tata Steel enters the new millennium with the confidence of a
learning, knowledge-based and happy organization. We will establish ourselves as a supplier of choice by
delighting our customers with our service and our products. In the coming decade, we will become the most
cost competitive steel plant and so serve the community and the nation'. A vision, therefore, articulates the
Dr.S.C.Siva
position that a firm would like to attain in the distant Sundaram An this perspective, the vision
future. Seen from
encapsulates the basic strategic intent.
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BUILDING A VISION:
The vision statement should be build around certain core values. Thus, Sony's
vision rests on the values of encouraging individual creativity and its determination to
be a pioneer. Such core values reflect how you want your future to look, the timeless
principles to be followed while running the show- irrespective of what happens in and
around the organization. Values, thus, are the essential glue of vision. Since a
company's different business may need to operate with different strategies, it's their
shared values that will prevent them from going in different directions. The vision
statement should also spell out the core purpose of an organization very clearly. For
example, we know that 3M's purpose is to solve problems innovatively; Nike wants to
provide the experience and emotion of competition winning and crushing
competitors; Blue Star wants to provide world class engineering products and
services. Unstructured inputs could be taken from everyone developing the corporate
vision. Companies like Larsen & Toubro, Crompton Greaves, Gujarat Heavy
Chemicals typically follow certain steps in this regard:
1. Elicit ideas from employees as to how their dream organization should be like in
terms of characteristics;
2. Combine these with the company's core values and purpose to build the vision
statement.
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Understanding Vision:
A vision is more dreamt of than it is articulated. This is the reason why it is difficult to
say what vision an organization has. Sometimes it is not even evident to the
entrepreneur who usually thinks of the vision. By its nature, it could be as hazy and
vague as a dream that one experienced the previous night and is not recall perfectly
in broad daylight. Yet it is a powerful motivator to action. And it is from the actions that
a vision could often be derived. Henry Ford wished to democratize the automobile
when the visualized that an affordable vehicle could be available for the masses. Walt
Disney probably wanted to make people happy.
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 so that it
can motivate people even when the organization is facing discouraging odds.
The world over, backwards and forwards in history, just one thing has fired the
imaginations of the people: a vision of future that promises to right today's wrongs, a
graphic image of a time when injustice, impoverishment will have disappeared.
Moses used the vision of a land mark of milk and honey to motivate his people to set
off for the promised land. Indian's freedom fighters used the vision of a country free of
its colonial rulers to wrest independence. In the corporate context, vision refers to an
inspirational picture of a future that can be created, offering clarity amidst confusion,
hope against despair, and unity of purpose amidst diversity of personal causes.
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Defining Vision:
Vision has been defined in several different ways.
1. Kotter defines it as a "description of somethings (an
organization, corporate culture, a business, a technology, an
activity) in the future".
2. El-Namaki considers it as a "mental perception of the kind of
environment an individual, or an organization, aspires to
create within a broad time horizon and the underlying
conditions for the actualization of this perception".
3. Miller and Dess view it simply as the "category of intentions
that are broad, all inclusive, and forward thinking".
The common strand of thought evident in these
definitions and several others available in strategic
management literature relates to vision' being future
aspirations that lead to an inspiration to be the best in one's
field of activity. Dr.S.C.Siva Sundaram An
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What vision communicates
The mission statement communicates the firm's core ideology and
visionary goals, generally consisting of the following three
components:
Core values to which the firm is committed
Core purpose of the firm
Visionary goals the firm will pursue to fulfill its mission
The firm's core values and purpose constitute its core ideology and
remain relatively constant. They are independent of industry
structure and the product life cycle.
The core ideology is not created in a mission statement; rather, the
mission statement is simply an expression of what already exists.
The specific phrasing of the ideology may change with the times, but
the underlying ideology remains constant.
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Core Values
1. The core values are a few values (no more than five or so) that are central to the firm.
Core values reflect the deeply held values of the organization and are independent of
the current industry environment and management fads.
2. One way to determine whether a value is a core value to ask whether it would
continue to be supported if circumstances changed and caused it to be seen as a
liability. If the answer is that it would be kept, then it is core value. Another way to
determine which values are core is to imagine the firm moving into a totally different
industry. The values that would be carried with it into the new industry are the core
values of the firm.
3. Core values will not change even if the industry in which the company operates
changes. If the industry changes such that the core values are not appreciated, then
the firm should seek new markets where its core values are viewed as an asset.
For example, if innovation is a core value but then 10 years down the road innovation is
no longer valued by the current customers, rather than change its values the firm
should seek new markets where innovation is advantageous.
The following are a few examples of values that some firms has chosen to be in their
core:
1. excellent customer service
2. pioneering technology
3. creativity
4. integrity
5. social responsibility
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Core Purpose
The core purpose is the reason that the firm exists. This core purpose is expressed in a
carefully formulated mission statement. Like the core values, the core purpose is
relatively unchanging and for many firms endures for decades or even centuries. This
purpose sets the firm apart from other firms in its industry and sets the direction in
which the firm will proceed.
The core purpose is an idealistic reason for being. While firms exist to earn a profit, the
profit motive should not be highlighted in the mission statement since it provides little
direction to the firm's employees. What is more important is how the firm will earn its
profit since the "how" is what defines the firm.
Initial attempts at stating a core purpose often result in too specific of a statement that
focuses on a product or service. To isolate the core purpose, it is useful to ask "why"
in response to first-pass, product-oriented mission statements. For example, if a
market research firm initially states that its purpose is to provide market research data
to its customers, asking "why" leads to the fact that the data is to help customers
better understand their markets. Continuing to ask "why" may lead to the revelation
that the firm's core purpose is to assist its clients in reaching their objectives by
helping them to better understand their markets.
The core purpose and values of the firm are not selected - they are discovered. The
stated ideology should not be a goal or aspiration but rather, it should portray the firm
as it really is. Any attempt to state a value that is not already held by the firm's
employees is likely to not be taken seriously.
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Visionary Goals
The visionary goals are the lofty objectives that the firm's management decides to pursue. This vision
describes some milestone that the firm will reach in the future and may require a decade or more
to achieve. In contrast to the core ideology that the firm discovers, visionary goals are selected.
These visionary goals are longer term and more challenging than strategic or tactical goals. There
may be only a 50% chance of realizing the vision, but the firm must believe that it can do so.
Collins and Porras describe these lofty objectives as "Big, Hairy, Audacious Goals." These goals
should be challenging enough so that people nearly gasp when they learn of them and realize the
effort that will be required to reach them.
Most visionary goals fall into one of the following categories:
1. Target - quantitative or qualitative goals such as a sales target or Ford's goal to "democratize the
automobile."
2. Common enemy - centered on overtaking a specific firm such as the 1950's goal of Philip-Morris
to displace RJR.
3. Role model - to become like another firm in a different industry or market. For example, a cycling
accessories firm might strive to become "the Nike of the cycling industry."
4. Internal transformation - especially appropriate for very large corporations. For example, GE set
the goal of becoming number one or number two in every market it serves.
While visionary goals may require significant stretching to achieve, many visionary companies have
succeeded in reaching them. Once such a goal is reached, it needs to be replaced; otherwise, it
is unlikely that the organization will continue to be successful. For example, Ford succeeded in
placing the automobile within the reach of everyday people, but did not replace this goal with a
better one and General Motors overtook Ford in the 1930's.
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CHARACTERISTICS OF VISION:
Vision is developed through sharing across an
organization: Famous stories of successful vision
involve visions that have been widely shared across
entire organizations. Of course, an individual leader,
often a founder has a powerful impact on the others.
Methods of convincing the others about
vision: The leaders by working hard along with others
convince the others in the organizations rather than
simply by delivering speeches.
Change Agents: Leaders must recognize the
complexity of changing an outmoded vision to reflect
new realities. Organizations must redefine themselves
through updated visions of the future through new
objectives and strategies.
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THE BENEFITS OF HAVING A
VISION:
Parikh and Neubauer point out that several benefits accruing to an
organization having a vision. Here is what they say:
Good visions are inspiring and exhilarating.
Visions represent a discontinuity, a step function and a jump ahead
so that the company knows what it is to be.
Good visions help in the creation of a common identity and a shared
sense of purpose.
Good visions are competitive, original and unique. They make sense
in the marketplace as they are practical.
Good visions foster risk-taking and experimentation.
Good visions foster long-term thinking.
Good visions represent integrity, they are truly genuine and can be
used for the benefit of people.
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Why should organizations have a
Vision
Good visions are inspiring and
exhilarating.
It creates a common identity and a shared
sense of purpose.
They are competitive, unique and simple.
Good visions foster risk-taking and
experimentation.
They represent integrity.
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MISSION:
Mission is what an organization is and why
it exists.
Mission is defined as Essential purpose
of the organization, concerning
philosophical question s like What is
our business, the nature of business it
is in, who are our customers it looks to
satisfy.
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CHARACTERISTICS OF A
MISSION:
1. Feasible: The mission should be realistic and achievable. For instance, UTI
declared its mission as "to encourage saving and investment habits among common
man". By providing tax relief under Sec 88c, the investment upto 1lakh in UTI is
exampled from income tax. Hereby common man's savings habit is encouraged by
UTI.
2. Precise: A mission statement should not be narrow or too broad.
3. Clear: A mission statement should lead to action. BSNL'S mission of connecting
India' leads it to a variety of service with varied tariff structure so as to cater to the
preferences of mobile phone users.
4. Motivating: The mission should be motivating for the employees to be inspired for
action. For example India Post's mission is to expectations of the customer' with
dedication, devotion and enthusiasm. So customer service has become a value and
it is inspiring and motivating the postal employees.
5. Distinctive: A mission statement will indicate the major components of the strategy
to be adopted. The mission should be unique. When HCL defines its mission as to
be a world class competitor' it creates a unique place in the minds of Indian personal
computer users who across personal computers of MNCs on most of the occasions.
6. Indicates major components of strategy: "The mission statement of IOC
emphasizes petroleum refining, marketing and transportation with international
standards and modern technology. It indicates that IOC is going to adopt
diversification strategy in future.
The mission provides direction to insiders and outsiders on what the firm stands for.
It is the guiding star for any firm.
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Definitions:
1. Company mission can be defined as the fundamental, unique
purpose that sets a business apart from other firms of its type and
identifies the scope of its operations in product and market term. It
embodies the business philosophy of strategic decision-makers;
implies the image the company seeks to project; reflects the firm's
self-concept; indicates the principal product or service areas and
primary customer needs the company will attempt to satisfy. In
short, the mission describes the product, market and technological
areas of emphasis for the business.
2. Thompson defines mission as the "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."
3. Hunger and Wheelen say that mission is the "purpose or reason for
the organization's existence".
4. According to John Pearce "mission is an enduring statement of
purpose that distinguishes one firm from other similar firms".
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NEED FOR AN EXPLICIT
MISSION:
1. To ensure unanimity of purpose within the organisation;
2. To provide a basis for motivating the use of the
organisations resources;
3. To develop a basis, or standard, for allocating
organisational resources;
4. To establish a general tone or organisational climate;
5. To serve as a focal point for those who can identify with
the organisation's purpose and direction;
6. To facilitate the translation of objectives and goals into a
work structure involving the assignment of tasks; and
7. To specify organisational purposes and the translation of
these purposes into goals.
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FORMULATING A MISSION:
The sense of mission is usually based on several fundamental
elements.
1. Belief that the product or service can provide benefits at least equal
to its price.
2. Belief that the product or service can satisfy a customer need
currently not met adequately for specific market segments.
3. Belief that the technology to be used will provide a product that its
cost and quality competitive.
4. Belief that hard-work and the support of others, the business can
grow and be profitable.
5. Belief that the management philosophy of the business will result in
a favorable public image.
6. Belief that the entrepreneur's self concept can be communicated
and adopted by employees and shareholders.
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MISSION STATEMENTS:
Your mission statement draws on your belief
statements.
Your mission statement must be orientated and
portray your organization as it will be, as it will
be, as if it already exists.
Your mission statement must focus on one
common purpose.
Your mission statement must be specific to the
organization, not generic.
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Apples Mission Statement
Apple ignited the personal computer revolution in

the 1970s with the Apple II and reinvented the
personal computer in the 1980s with the
Macintosh. Today, Apple continues to lead the
industry in innovation with its award-winning
computers, OS X operating system and iLife and
professional applications. Apple is also
spearheading the digital media revolution with its
iPod portable music and video players and
iTunes online store, and has entered the mobile
phone market this year with its revolutionary
iPhone.
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OBJECTIVES:
Here are some common definitions of Objectives;
1. Objectives are performance targets which organisations wants as result or
outcomes in the specified periods
2. Objectives achievements are used as benchmark of organisation performance and
success
3. Objectives are formed from visions and mission statement of organisations
4. Objectives are interchangeably used with goals but goals are defined as more
precise and specific with closed ended attribute (in precise quantity form) whereas
objectives are open ended for future states or outcome not as precise as goals.
Objectives are for long term whereas goals are for short term
The accomplishment of purpose or mission of an organization requires the formulation
of a number of objectives. Achievement of the organizational objectives, in turn,
requires the formulation and fulfillment of departmental and unit goals. Long-range
objectives specify the results that are desired in pursuing the organisation's mission
and normally extended beyond the current financial year of the organization. Lon-
range objectives are notably speculative for distant years. short-range objective are
performance targets, normally of less than one-year duration, that are used by
management to achieve the organisation's long-range objectives. The selections of
short-range objectives are from an evaluation of priorities relating to long-range
objectives. Departmental objectives, both long-range and short-range are
formulated based on the respective long-range and short-range objectives of the
organization. Unit objectives are generally specific and are draw from the
departmental objectives.
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CHARACTERISTICS OF
OBJECTIVES:
1. Objectives Form a Hierarchy: In many organizations
objectives are structured in a hierarchy of importance.
There are objectives within objectives. They all require
painstaking definitions and close analysis if they are to
be useful separately and profitable as a whole. The
hierarchy of objectives is a graded series in which an
organisation's goals are supported by each succeeding
managerial level down to the level of the individual.
The objectives of each unit contribute to the objectives
of the next higher unit. Each operation has a simple
objective which must fit in and add to the final
objective. Hence no work should be undertaken unless
it contributes to the overall goal.
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CHARACTERISTICS OF
OBJECTIVES:
2. Objectives Form a Network: Objectives interlock in a
network fashion. They interrelated and inter-dependent. The
concept of network of objectives implies that once objectives are
established for every department and every individual in an
organization, these subsidiary objectives should contribute to
meet the objectives of the total organization. If the various
objectives in an organization do not support one another, people
may pursue goals that may be good for their own function but
may be detrimental to the company as a whole. Managers have to
trade off among the conflicting objectives and see that the
components of the network fit one another. Because, as rightly
pointed out by Koontz , "It is bad enough when goals do not
support and interlock with one another. It may be catastrophic".
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CHARACTERISTICS OF
OBJECTIVES:
3. Multiplicity of Objectives: Organisations pursue multifarious
objectives. At every level in the hierarchy, goals are likely to be multiple.
For example, the marketing division may have the objective of sale and
distribution of produicts. This objective can be broken down into a group
of objectives for the product, advertising, reach, promotion managers.
The advertising manager's goals may include: designing product
messages carefully, create a favourable image of the product in the
market, etc. Similarly goals can be set for other marketing managers. To
describe a single, specific goal of an organization is to say very little
about it. It turns out that there are several goals involved. This may be
due to the fact that the enterprise has to meet internal as well as external
challenges effectively. Internal problems may hover around profitability,
survival, growth, an so on. External problems may be posed by
government, society, stockholders, customers etc. In order to meet the
conflicting from various internal and external groups, organizations
generally pursue multiple objectives. Moreover, no single objective would
place the organization on a path of prosperity and progress in the long
run.
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CHARACTERISTICS OF
OBJECTIVES:
4. Long and Short-range Objectives: organizational objectives
are usually related to time. Long-range objectives extending over
five or more years are the ultimate or dream objectives for
organization. They are abstractions of the entire hierarchy of
objectives of the organization. For example, planning in India has
got objectives like eradication of poverty, checking population
growth through birth control etc. which reflect certain ideals' the
government wishes to accomplish in the long run. Short-range
objectives (one-year goals) and medium-range objectives (two to
five year period goals), reflect immediate, attainable goals. The
short-range and medium-range objectives are the means for
achieving long-term goals and the long-term goals supply a
framework within which the lower level goals are designed. Thus,
all these goals reinforce each other in such a way that the total
result is greater than the sum of the efforts taken individually. That
is why goal setting is called a "synergistic process". In order to
remain viable, every organization needs to set goals in all three
time periods.
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AREAS OF OBJECTIVES:
The following are the areas of objectives.
Markets: Objectives are expressed in terms of the market or total rupee sales or total quantity of sales. For example, to
increase freight traffic (commercial) to 85 % in 1997-98 and reduce the freight traffic (military) to 15% in 1997-98 from 60% and
40% respectively in 1996-97 financial year of Railways.
Productivity: The level of goods and/or services produced by an organization relative to the resources used in the production
process, organizations those use fewer resources to produce specified levels of products are said to be more productive than
organizations those require more resources to produce at the same level.
Innovation: Any change made to improve methods of conducting organizational business. Organizational objectives should
indicate innovations the organization desires to implement.
Product: These objectives are expressed in terms of sales and profitability by product line or product, target dates for
development of new products and others.
Profitability: profitability objectives are expressed in terms of profits, return on investment, earning per share, profit to sales
etc. For example, to increase return on investment by 10 % in 1997-98 over 1996-97 financial year.
Financial Resources: These objectives are expressed in terms of the capital structure, new issues of common stock, cash
flow, working capital, dividend payments and collection periods.
Physical Facilities: These objectives are expressed in terms of machinery and equipment, square feet, fixed costs, units of
production and other measures.
Organisation Structure and Activities: These objectives are stated in term of changes to be made in the policies of
organization structure or projects to be undertaken.
Manager Performance and Development: these objectives are related to the quality and rate of development of managerial
skills, knowledge and performance. Development of managerial performance is very important from the view point of the long-
run success of the company and achievement of the other objectives of the company.
10. Employee Performance and Attitude: These objectives are related to the development of skills, knowledge and
performance of non-managerial employees of the company. This area is also related to the development of favourable attitude
of the employees towards the organization. The significance of these considerations should be stressed through the
formulation of organizational objectives.
11. Customer Service: These objectives are related to the quality of the product, pre-sales and post-sales service, delivery
times, promptly attending to the customer complaints, price, package and the like.
12. Social Responsibility: These objectives are related to the obligation of business towards the society with a view to
contribute to its welfare. Today, these objectives have become common to all the companies. For example, to contribute to the
medical facilities of the community where the company is located.
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IMPORTANCE OF OBJECTIVES:
Objectives help to define the organization in its

environment: The organizations justify their existence to their
stakeholders in the environment like customers, government,
creditors and society at large.
Objectives help in coordinating decisions and decision-
maker: Stated objectives impose some constraints on the
employees and modify it towards the desirable direction. It
coordinates decision-making process by different employees.
Objectives help in formulating strategies: Mission statements
are translated into objectives and objectives are the basis for
formulating strategies.
Objectives provide standards for assessing organizational
performance: Objectives provide not only the direction to move to
the organization but also provide the ultimate goals and targets that
the organization is expected to achieve. These targets and goals
become the standards to judge the organizational performance.
Organizations, without clear objectives will not have basis for
evaluating their performance or success.
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Setting Goals
Concise statements that provide direction
employees and set standards for
achieving the companys strategic plan
Established in many areas (see handout)
Goals must be reevaluated as the
environment and opportunities change
Multiple goals are used to reflect the
desired performance
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Strategy:
Strategy is very popular word used in military related to war, as used means or methods to defy or defeat
enemy. Strategy is now as popular word in business as in military, but in businesses, strategy is
related to methods or means adopted to achieve businesss objectives.
In business, Strategy is considered as:
a game plan by management to take position, conduct operation, attract customers and compete
successfully;
a comprehensive, unified or integrated plan and actions to achieve the desired business goals and
objectives;
a long term plan or blue print to achieve desired image, direction and destination for organisation;
an analysis, planning and implementation of actions or activities to take successfully organisation out
from any adverse scenario and put organisation in the league of winners; and
a plan adopted for survival, stability and growth of business
Followings are some general characteristics of a Corporate Strategy
Formulated by Top Management
Long Term or Long Range: It is meant for long term future growth and profits
Integrated: Consider all elements of business
Flexible: Can be modified as per changed Environment
Action Oriented: It should not be planning only, it should be action oriented planning
Goal Oriented: It is for achieving organisation long term objectives of growth, profitability and
sustainability
Purposeful: It is for making organisation ready to cope-up to a competitive and complex business
environment successfully
Efficient: it does not include unnecessary activities and elements
Synchronised: All activities of strategy are well coordinated
Business Strategy: Business strategy consists of the decisions made by top management and the
resulting actions taken to achieve the objectives set for the business. The major strategy components
and several key issues related to each component. The issues highlight important questions that
management must answer in Dr.S.C.Siva
charting the course of the enterprise.
Sundaram An Managements skills and vision in
addressing these issues are critical to the performance of the corporation. Essential to corporate success is matching
ushan with opportunities to achieve long-term customer satisfaction.
the competitive advantage of the organisation
Strategic Management:
The term strategic management refers to the process of forming a vision, setting objectives, building a
strategy, implementing and executing the strategy and then initiating whatever corrective adjustments
required in the vision, objectives and strategy, etc to achieve the objectives. The term strategic
management is combination of strategy + management. This term refers to the forming a strategic
vision, setting objectives, developing a strategy, implementing and executing the strategy, and then
overtimes initiating whatever adjustments are required in the vision and objectives then implementing
these adjustments.
Strategic management initiate with setting a mission, objectives and goals. Thereafter building a business portfolio
(business model/product mix) accordingly and carrying the functional activities to achieve the set mission, objectives and
goals.
Strategy and Strategic management are concepts that evolve over time. These ideas defy universally accepted
definitions because scholars develop them and managers practice them in diverse ways. This lack of consensus,
however, does not keep most contemporary organisations from trying to reap the benefits of strategic management by
developing innovative strategies to out-maneuver their competitors.
Strategic management is a continuous, iterative, cross-functional process aimed at keeping an organisation as a whole
appropriately matched to its environment. This definition emphasises the series of steps that a manager must take.
These steps, which we will discuss individually in the following pages, include performing an environmental analysis,
establishing organisational direction, formulating organisational strategy, implementing organisational strategy, and
exercising strategic control. Additional information on each of these steps will appear throughout this text.
The definition also suggests that the strategic management process is continuous; the organisation never finishes its
strategic work. Although different strategic management activities may receive more or less emphasis and require effort
of varying intensity at different times, managers should virtually always be focusing or reflecting on some aspect of
strategic management. The term iterative in the definition reinforces this idea. The process of strategic management
starts with the first step, carries on to the last step, and then begins again with the first step. Strategic management
consists of a series of steps repeated cyclically.
The term cross-functional signifies that the strategic management process integrates organisational human resources
and expertise from critical functions such as marketing, operations, and finance in a comprehensive effort. This helps the
process, and the plan it generates, to deal more effectively with potential conflicts in recommendations of individual
functions operating in isolation.
The last part of the definition of strategic management identifies its purpose as ensuring that an organisation as a whole
appropriately matches its environment, that is, its competitive surroundings. Business environments change constantly,
and organisations must modify their strategies accordingly to achieve organisational goals. New legislation may affect the
organisation, its labour supply may change, and competitors may launch new initiatives. These are examples of changes
within the organisations environment thatDr.S.C.Siva
often require theSundaram
attention of topAn
managers.
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Benefits of Strategic Management:
An organisation can reap several benefits from effective strategic
management. Perhaps the most important benefit is higher profit.
Although past studies have concluded that strategic management does
not always increase profitability, a significant number of recent
investigations have suggested that a well-designed strategic
management system can boost profits.
In addition to financial benefits, organisations may gain other advantages
by implementing strategic management programs. For example, strategic
management can strengthen organisation members commitment to
attaining long-term goals. Increased commitment normally accompanies
participation in setting goals and strategies for reaching those goals. In
addition, when strategic managers emphasise assessing the
organisations environment, the organisation reduces the chance of being
surprised by movements within the marketplace or by actions of
competitors that could put the organisation at a sudden disadvantage.
These potential benefits also explain the increased popularity of strategic
management with not-for-profit and public sector organisations.
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Strategic Management
Framework:
The basic framework of strategic management involves five stages:
Stage 1: In this stage, organisation analyse about their present situation
in terms of their Strengths, Weaknesses, Opportunities and Threats.
Stage 2: In this stage, organisations setup their missions, goals and
objectives by analysing where they want to go in future.
Stage 3: In this stage organisation analyses various strategic
alternatives to achieve their goals and objectives. The alternatives are
analysed in terms of what business portfolio/product mix to adopt,
expansion, merger, acquisition and divestment options etc are analysed
to achieve the goals.
Stage 4: In this organisations select the best suitable alternatives in line
with their SWOT analysis.
Stage 5: This is implementation stage in which organisation implement
and execute the selected alternatives to achieve their strategic goals
and objectives.
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Importance of Strategic
Management:
Discover organisation strengths and weaknesses
Identify the available opportunities and possible threats
Discover the objectives and goals in line with organisations
strengths and available opportunities
Implement changes to overcome weaknesses and
manage the threats.
Provide vision/mission or direction to future of
organisations
Build a dynamic and strong organisation
Help to achieve growing and stable organisation
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Strategic Management Process:
1. Introduction
Strategic management is a process or series of steps.
The basic steps of the strategic management process are (presented in
figure)
a. identifying or defining business mission, purpose and objectives,
b. environmental (including global) analysis to identity present and
future opportunities and threats,
c. organisational analysis to assess the strengths and weaknesses of
the firm,
d. developing alternative strategies and choosing the best strategy,
e. strategy implementation, and
f. strategic evaluation and control.
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Strategic Management Process:
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Steps of Strategic
Management Process:
Step 1: Identifying Defining Business Mission, Purpose and
Objectives: Identifying or defining an organisations existing mission,
purpose and objectives is the logical starting point as they lay
foundation for strategic management. Every organisation has a
mission, purpose and objectives, even if these elements are not
consciously designed, written & communicated. These elements relate
the organisation with the society and states that it has to achieve for
itself and to the society.
Step 2: Environmental Analysis: Environmental factors both internal
environment and external environment are analysed to:
i. identify changes in the environment,
ii. identify present and future threats and opportunities, and
iii. assess critically its own strengths and weaknesses.
Organisational environment encompasses all factors both inside and
outside the organisation that can influence the organisation positively
and negatively. Environmental factors may help in building a
sustainable competitive advantage.
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Steps of Strategic
Management Process:
Step 3: Revise Organisational Direction: A thorough analysis of organisations environment
pinpoints its strengths, weaknesses, opportunities and threats (SWOT). This can often help
management to reaffirm or revise its organisational direction.
Step 4: Strategic alternatives and Choice: Many alternative strategies are formulated based
on possible options and in the light of organisational analysis and environmental appraisal.
Alternative strategies will be ranked based on the SWOT analysis. The best strategy out of
the alternatives will be chosen.
The steps from identification of business mission, purpose and objectives of alternative
strategies and choice can be grouped into the broad step of strategy formulation.
Step 5: Strategy Implementation: The fifth step of strategic management process is the
implementation of strategy. The logically developed strategy is to be put into action. The
organisation can not reap the benefits of strategic management, unless the strategy is
effectively implemented.
The managers should have clear vision and idea about the competitors strategy,
organisations culture, handling change, skills of the managers-in-charge of implementation
and the like. The progress from the stage of identification of business mission, purpose and
objectives to the stage of achieving desired performance must overcome many obstacles.
Step 6: Strategic Evaluation and Control: The final step of strategic management process is
strategic evaluation and control. It focuses on monitoring and evaluating the strategic
management process in order to improve it and ensure that it functions properly. The
managers must understand the process of strategic control and the role of strategic audit to
perform the task of control successfully.
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Policies, Procedures, and Rules
Policies are broad general guides to action that
establish boundaries within which employees must
operate
Policies provide the broad framework within which decisions are to be
made. In the absence of appropriate policies, managerial decision-
making may be analogous to Reinventing the Wheel every time.
Sound policies thus save lot of time in decision-making and avoid
confusion.
Since policies specify the boundary conditions of decisions, it goes
without saying that when decisions are actually made, they conform
to the policy relevant to the decision. Thus, decisions relating to a
particular operational area of the business tend to be consistent. If
the policy of an organisation is to face competition with quality
products, the emphasis naturally will be on issues relating to
improving the quality of the product. All the decisions that affect the
product quality are normally taken in the light of the explicit policy.
Policies developed carefully and understood perfectly result in
consistency in planning. As a result, organisational resources would
be deployed in those areas where they find a better use.
answering all written customer complaints in writing within
10 days
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Types of Policies
Policies come about in any organisation in different ways. Based on their source, Koontz and Odonnel have
classified policies under the following types.
Originated policies: Originated policies are the result of top management decisions. To guide the actions of the
subordinates, top management formulates policies for the important functional areas of business such as
Production, Marketing, Finance, Personnel and so on. These policies basically stem form the organisational
objectives. They may be broad or specific depending on the centralisation or decentralisation of authority. If they
are broad, they allow the subordinates some operational freedom. On the other hand if they are specific they are
implemented as they are.
Appealed Policies: At times a manager may be in dilemma whether he has the authority to take a decision on a
particular problem. There may not be precedents to guide him. In such a case, he appeals the matter to his
superiors for their thinking. Thus, appeals are taken upwards till they reach the appropriate level in the hierarchy
for a decision. The decision taken by the higher-ups, thus becomes a ruling. For example, during festival
seasons, the manager at the branch level may be in a dilemma to offer discount to the customers. There may not
be any explicit policy to guide him. But to meet competition in a particular market situation where competitors offer
discounts, top management, on the basis of an appeal made by the branch manager may allow him to offer
discount. Unless otherwise stated, it becomes an unwritten policy and guides the managers decision-making in
all such future situations.
Implied Policies: As in the above case, there may not be specific policies for all the contingencies. Managers draw
meanings from the actions and behaviour of their superiors. In a particular situation, a manager may go all out to
help a customer who is in a difficult situation. If customer service is on top of the agenda of the organisation, there
may not be any objection from the top management to the stand taken by the lower level manager in support of
the customer. Though there is no explicit policy, managers may assume it in a particular way and go about in their
day-to-day operations.
Externally Imposed Policies: These are the policies imposed by the agencies in the external environment like
government, trade unions, industry associations, consumer councils, etc. These agencies, to protect the interests
of the respective groups may lay down certain policies to be followed by the business. As the interaction of the
business with external environment is increasing, one can find many policies thus coming into being in any
modern business. For instance, the recruitment policy of the organisation is influenced by the governments policy
towards reservations to weaker sections. Anti pollution measures, concern for the quality of the product and
customer service also falls in this category.
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Principles of Policy Making:
Policies help to ensure that all units of an organisation operate under the same ground rules. They facilitate
co-ordination and communication between various organisational units. This is possible because policies
make consistency in action possible. In view of the importance of policies in guiding executive behaviour,
they have to be formulated carefully. In fact, policy formulation is one of the important executive
responsibilities. Effectiveness of policies, therefore, lies in understanding the following principles underlying
policy formulation.
1. Define the Business: Correct definition of the business provides clarity to the policies. Two questions
have to be asked in this regard, what is our business? What kind of business are we in? Many businesses
have failed because they did not attempt to seek answers to these simple and basic questions.
Gramophone record companies for long did not realise that they are in the entertainment business. Hence
they are now here in the corporate history. To define the business, a company must take a close look at its
basic operations and analyse its major strengths and weaknesses in all the functional areas like marketing,
product development, finance, and public relations. Such an exercise enables the enterprise to correct it
weaknesses, if any, and to capitalise on its strengths.
2. Assess Future Environment: Future environment of the business has to be forecasted. A realistic
estimate of the future trends in matters relating to technology, economic and market conditions, political
stability, etc. is essential for policy formulation. As many people would agree, forecasting is a difficult task.
Instances are not rare, where the best of the forecasts turned out to be just intentions. It is interesting to
note that sometimes products which were predicted to be instant failures by the so called market surveys
proved to be run-away successes. The Syntax water tank is a classic example where the product defied
the gloom predicted by the market research. However, examples of this sort are few and far between.
3. Ensure availability of Resources: Formulating policies in an ambitious way without regard to the
ground realities lands you in trouble. You would encounter too many problems while implementing the
policies. As a result, policies do not serve the intended purpose. For example, if the policy of the
organisation is to cash in on the new opportunities, it does not mean that you can enter any Held thrown
open by the government. You have to assess yourself as to how strong you are in terms of resources
required. Otherwise it amounts to overstretching.
4. Communicate the policies: The chief objective of many policies is to help managers in decision-making
and to ensure consistency in action. As such, policies have to be communicated to all those who are to take
decisions. The policy of the organisation towards competition, for instance has to be communicated to the
people in the marketing department. Dr.S.C.Siva Sundaram
Otherwise there will not beAn
proper synchronisation between the policy
and action.
ushan
Procedures are detailed series of related
steps/tasks written to implement a policy
Define methods through which policies are achieved
the customer service representative must note the
complaint of Form 622 and forward the yellow copy of
the form
Rules detail specific and definite corporate
actions that employees must follow
Leave little doubt about what is to be done
no smoking in the conference room
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Strategic Levels in Organisation
There are primarily three levels of strategies in the organisation.
1. Corporate Level
2. Business Level
3. Functional Level or departmental level.
1. Corporate Level:
The corporate level of management consists of the chief executive officer (CEO), other senior executives,
the board of directors, and corporate staff. These individuals occupy the top-committee of decision
making within the organisation. The CEO is the principal general manager. In consultation with other
senior executives, the role of corporate-level managers is to oversee the development of strategies for
the whole organisation. This role includes defining the mission and goals of the organisation,
determining what businesses it should be in, allocating resources among the different businesses,
formulating and implementing strategies that span individual businesses, and providing leadership for
the organisation. For example, strategies formed for Unilever Limited would be at corporate level.
Corporate level strategy is concerned with:
1. Reach - defining the issues that are corporate responsibilities; these might include identifying the
overall goals of the corporation, the types of businesses in which the corporation should be involved,
and the way in which businesses will be integrated and managed.
2. Competitive Contact - defining where in the corporation competition is to be localized. Take the case of
insurance: In the mid-1990's, Aetna as a corporation was clearly identified with its commercial and
property casualty insurance products. The conglomerate Textron was not. For Textron, competition in
the insurance markets took place specifically at the business unit level, through its subsidiary, Paul
Revere. (Textron divested itself of The Paul Revere Corporation in 1997.)
3. Managing Activities and Business Interrelationships - Corporate strategy seeks to develop synergies
by sharing and coordinating staff and other resources across business units, investing financial
resources across business units, and using business units to complement other corporate business
activities. Igor Ansoff introduced the concept of synergy to corporate strategy.
4. Management Practices - Corporations decide how business units are to be governed: through direct
corporate intervention (centralization) or through more or less autonomous government
(decentralization) that relies on persuasion and rewards.
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Business Unit Level Strategy
2. Business Level: A business unit is a self-contained division (with its own
functions-for example, finance, purchasing, production, and marketing
departments) that provides a product or service for a particular market.
The principal general manager at the business level, or the business-level
manager, is the head of the division. The strategic role of these managers
is to translate the general statements of direction and intent that come
from the corporate level into concrete strategies for individual businesses.
Thus, whereas corporate-level general managers are concerned with
strategies that span individual businesses, business-level general
managers are concerned with strategies that are specific to a particular
business. At GE, a major corporate goal is to be first or second in every
business in which the corporation competes. Then the general managers
in each division work out for their business the details of a strategy that is
consistent with this objective. For example, strategies formed for Kwality
Walls, a subsidiary of Unilever Limited would be at business level.
ushan
FUNCTIONAL LEVEL:
3. Functional Level: Functional-level managers are responsible for the specific
business functions or operations (human resources, purchasing, product
development, customer service, and so on) that constitute a company or one of
its divisions. Thus, a functional managers sphere of responsibility is generally
confined to one organisational activity, whereas general managers oversee the
operation of a whole company or division. Although they are not responsible for
the overall performance of the organisation, functional managers nevertheless
have a major strategic role: to develop functional strategies in their area that
help fulfill the strategic objectives set by business & corporate-level general
managers. Moreover, functional managers provide most of the information that
makes it possible for business & corporate-level general managers to, formulate
realistic and attainable strategies. Indeed, because they are closer to the
customer than the typical general manager is, functional managers themselves
may generate important ideas that subsequently may become major strategies
for the company. Thus, it is important for general managers to listen closely to
the ideas of their functional managers. An equally great responsibility for
managers at the operational level is strategy implementation: the execution of
corporate and business-level plans. For example, strategies formed for
employee retention by HR manager at Kwality Walls would be at functional level.
ushan
PROCESS OF STRATEGY
The process of strategy does not have the same steps as stated by
different authors. According to C.K. Prahalad, the process comprises of
five steps. They are:
1. Strategic Intent
2. Environmental Analysis
3. Evaluation of strategic alternatives and choice
4. Strategy Implementation
5. Strategy Evaluation and Control
For our understanding, the process has been divided into the following
steps:
1. Strategic Intent
2. Environmental and Organizational Analysis
3. Identification of Strategic Alternatives
4. Choice of Strategy
5. Implementation of Strategy
6. Evaluation and Control
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Strategists and their role in
Strategic Management.
Strategists are individuals or groups who
are primarily involved in the formulation,
implementation and evaluation of strategy.
So all managers are strategists in a limited
sense.
Persons outside the organization are also
involved in strategic management. They
are also strategists.
ushan
Various strategists
Board of Directors: Is responsible for the
governance of the organization.
As directors, the members of the board
are responsible for providing guidance and
establishing the directives according to
which the managers of the organization
can operate.
ushan
Various strategists.
The Chief Executive Officer: Is the most
important strategist who is responsible for
all the aspects of strategic management,
right from formulation to the evaluation of
strategy.
He plays a very important role in strategic
decision making.
ushan
Various strategists
Entrepreneurs: are persons who always
searches for change, responds to it and
exploits it as an opportunity.
They play a very important and a proactive
role in strategic management. They
provide a sense of direction to the
organization and set objectives and
formulate strategies to achieve them.
ushan
Various strategists
Senior Management: When assigned with
specific responsibilities senior managers look
after modernization, technology up gradation,
diversification and expansion, plan
implementation and new product development.
Senior managers perform a variety of roles by
assisting the board and the CEO in formulation,
implementation and evaluation of strategies.
ushan
Various strategists
SBU level executives: The idea for
organizing to SBU is to manage a
diversified company as a portfolio of
businesses.
SBU level heads are also known as profit
center heads are considered as ceos of a
defined business unit for the purpose of
strategic management.
ushan
Various strategists
Corporate planning staff: It plays a
supporting role in strategic management.
They not only assist in whole planning
process but also are responsible for the
communication of strategic plans. They
also conduct special studies and research
related to strategic management.
ushan
Various strategists
Consultants: The main advantage of hiring
consultants is getting unbiased and
objective opinion from a knowledgeable
outsider and availability of specialists
skills.
Some Consulting cos are, Mc Kinsey and
company, Accenture, AF Ferguson,
KPMG, Boston consulting, S B Billimoria
etc.
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Characteristics Crucial for
Strategists
1. Education
2. Ability
3. Experience
4. Personality
5. Temperament
6. Leadership
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