UNIT-1

SUBJECT CODE: KMBN301

SUBJECT NAME: Strategic Management

Introduction
Meaning of Strategy:
Strategy refers to a comprehensive plan or course of action designed to achieve a specific
objective or set of objectives. It involves making choices about how to allocate resources,
time, and effort in a way that maximizes the chances of success. Strategies are developed to
address complex situations where various factors and variables are involved.
Nature of Strategy:
1. Long-term Orientation: Strategy is typically a long-term plan. It’s not about short-
term gains, but about sustained success and competitive advantage over time.
2. Proactive Approach: It involves being proactive rather than reactive. Instead of
simply responding to external forces, a strategic approach involves shaping and
influencing those forces.
3. Involves Choices: Strategy requires making choices. You can’t pursue every
opportunity, so you need to decide which ones are most important and how to allocate
resources.
4. Involves Uncertainty: Strategies are developed in an environment of uncertainty. You
can’t predict the future, but you can plan for different scenarios.
5. Adaptability: Good strategies are adaptable. They need to be flexible enough to
adjust to changing circumstances.
Scope of Strategy:
1. Business Strategy: Concerned with how a firm competes within a specific industry or
market.
2. Corporate Strategy: Focuses on the overall direction and scope of an entire
organization. It involves decisions about which businesses to enter, divest, or merge.
3. Functional Strategy: Pertains to a specific function or department within an
organization, such as marketing, finance, or operations.
4. Competitive Strategy: Involves choosing a unique and sustainable position within an
industry or market to gain a competitive advantage.
5. Global Strategy: Deals with how a company expands its operations internationally,
considering factors like market selection, entry modes, and resource allocation.
Importance of Strategy:
1. Provides Direction: It gives a clear sense of direction for an organization, helping to
prioritize efforts and resources towards common goals.
2. Enhances Efficiency: A well-defined strategy ensures that resources are utilized
efficiently, avoiding wastage and duplication of efforts.
3. Fosters Innovation: It encourages creative thinking and innovation as organizations
seek new and better ways to achieve their objectives.
4. Facilitates Adaptation: Strategy enables organizations to respond effectively to
changes in the external environment, whether they be opportunities or threats.
5. Increases Competitive Advantage: A good strategy allows an organization to
differentiate itself from competitors, gaining a competitive edge in the market.
6. Improves Organizational Performance: When implemented effectively, a well-
crafted strategy can lead to improved financial performance and overall success.
Meaning of Strategic Management:
Strategic management refers to the process of formulating, implementing, and evaluating
decisions and actions that enable an organization to achieve its long-term objectives. It
involves setting goals, assessing internal and external factors, and allocating resources to
implement strategies.
Nature of Strategic Management:
1. Comprehensive Approach: It involves considering the organization as a whole and
aligning all aspects of the organization towards a common purpose.
2. Long-term Perspective: It focuses on achieving long-term goals and sustainable
competitive advantage rather than short-term gains.
3. Dynamic Process: Strategic management is not a one-time event but an ongoing,
dynamic process that adapts to changes in the internal and external environment.
4. Involves Decision Making: It requires making crucial decisions about resource
allocation, competitive positioning, and organizational direction.
5. Incorporates Feedback and Evaluation: Continuous monitoring and evaluation of
performance are integral parts of strategic management to ensure that strategies are
effective.
Scope of Strategic Management:
1. Environmental Analysis: This involves assessing the external factors that can affect
an organization, including industry trends, competition, regulatory changes, and
economic conditions.
2. Internal Analysis: This focuses on evaluating the organization’s strengths,
weaknesses, resources, and capabilities.
 3. Formulation of Strategy: It encompasses the process of developing a clear and
feasible strategy based on the analysis of internal and external factors.
4. Implementation of Strategy: This involves executing the chosen strategy through the
allocation of resources, structuring of operations, and setting up mechanisms for
monitoring progress.
5. Evaluation and Control: Continuous assessment of performance against strategic
goals to identify any necessary adjustments or changes.

Importance of Strategic Management:

1. Provides Direction: It sets a clear path and purpose for the organization, ensuring that
all efforts are aligned with long-term goals.
2. Enhances Adaptability: It helps organizations proactively adapt to changing market
conditions, technology, and customer preferences.
3. Optimizes Resource Allocation: Strategic management ensures that resources are
allocated efficiently to areas that will have the most significant impact on achieving
objectives.
4. Fosters Innovation and Creativity: It encourages a culture of innovation by
constantly seeking new and better ways to achieve organizational goals.
5. Improves Organizational Performance: Effective strategic management can lead to
improved financial performance, increased market share, and enhanced competitive
advantage.
6. Facilitates Risk Management: It enables organizations to identify and mitigate risks
by anticipating potential challenges and developing contingency plans.
Model of Strategic Management:
Strategic management involves a structured approach to formulating, implementing, and
evaluating strategies to achieve organizational goals. One commonly used model in strategic
management is the Strategic Management Process, which typically consists of the
following stages:
1. Environmental Analysis:
 External Analysis: This involves assessing the external environment,
including industry trends, market conditions, competition, regulatory factors,
and technological advancements. This is often done through tools like
PESTLE analysis (examining Political, Economic, Social, Technological,
Legal, and Environmental factors).
 Internal Analysis: This step involves evaluating the organization’s internal
strengths and weaknesses, including resources, capabilities, culture, and
structure. Techniques like SWOT analysis (examining Strengths, Weaknesses,
Opportunities, and Threats) are commonly used.
 2. Strategy Formulation:
 Based on the insights gained from environmental and internal analysis, this
stage involves developing a clear and achievable strategy. This may involve
setting specific objectives, choosing competitive positioning (e.g., cost
leadership, differentiation), and identifying target markets.
3. Strategy Implementation:
 This phase involves executing the chosen strategy. It includes allocating
resources, designing organizational structures, setting up performance
management systems, and ensuring that day-to-day activities are aligned with
the strategic direction.
4. Strategy Evaluation and Control:
 Continuous monitoring of performance against strategic goals is crucial. This
involves comparing actual results with planned outcomes, identifying
variances, and taking corrective actions when necessary. Key performance
indicators (KPIs) are often used in this stage.
5. Feedback and Adaptation:
 This is a dynamic and iterative process. Feedback from the evaluation and
control stage informs any necessary adjustments to the strategy or its
implementation. It’s important to remain adaptable in response to changing
internal and external conditions.
Strategic Decision Making:
Strategic decision-making involves making choices that shape the long-term direction and
competitive advantage of an organization. Here are some important aspects of strategic
decision-making:
1. Complexity and Uncertainty:
 Strategic decisions are typically characterized by a high degree of complexity
and uncertainty. This is because they often involve predicting future trends and
outcomes.
2. Involvement of Top Management:
 Strategic decisions are usually made by top-level management, such as CEOs,
board members, and senior executives. These decisions have a broad impact
on the organization as a whole.
3. Long-term Focus:
 Strategic decisions are oriented towards achieving long-term goals and
sustaining competitive advantage, rather than focusing solely on short-term
gains.
4. Risk and Reward Evaluation:
  Strategic decisions often involve a careful evaluation of potential risks and
rewards. This may include financial risks, market risks, regulatory risks, etc.
5. Incorporation of Data and Analysis:
 Data-driven analysis, including market research, financial analysis, and
scenario planning, plays a critical role in making informed strategic decisions.
6. Alignment with Organizational Goals:
 Strategic decisions should align with the overall mission, vision, and
objectives of the organization.
Corporate Governance:
Corporate Governance refers to the system of rules, practices, and processes by which a
company is directed and controlled. It involves balancing the interests of a company’s many
stakeholders, such as shareholders, management, customers, suppliers, financiers,
government, and the community. The primary objectives of corporate governance are to
ensure transparency, accountability, and fairness in the management of an organization.
Key components of corporate governance include:
1. Shareholder Rights: Ensuring that shareholders have rights and opportunities to
participate in key decisions and to access information about the company.
2. Board of Directors: Establishing a competent and independent board that oversees
the company’s management and ensures that it acts in the best interests of
shareholders.
3. Ethical Behavior and Business Integrity: Promoting ethical conduct and integrity in
all business activities.
4. Transparency and Disclosure: Providing accurate and timely information to
shareholders and stakeholders about the financial and operational performance of the
company.
5. Risk Management and Internal Controls: Implementing systems to identify, assess,
and manage risks, as well as establishing internal controls to safeguard assets and
ensure the reliability of financial reporting.
6. Responsibilities to Stakeholders: Recognizing the interests of stakeholders beyond
shareholders, including employees, customers, suppliers, and the broader community.
7. Compliance and Accountability: Ensuring compliance with laws, regulations, and
ethical standards, and holding individuals and the organization accountable for their
actions.
Composition of the Boards:
The board of directors is a crucial component of corporate governance. It is responsible for
providing oversight, guidance, and strategic direction to the company’s management. The
composition of the board can significantly impact the effectiveness of corporate governance.
Here are some important aspects of board composition:
 1. Independent Directors:
 Independent directors are not employees of the company and do not have any
material relationship with it. They provide an objective perspective and act as
a check on management.
2. Executive Directors:
 Executive directors are typically senior executives of the company, including
the CEO. They bring operational expertise and play a direct role in day-to-day
management.
3. Non-Executive Directors:
 Non-executive directors do not have a managerial role in the company. They
can be independent or have other affiliations (e.g., representatives of major
shareholders).
4. Chairperson:
 The chairperson leads the board and is responsible for ensuring effective
communication and collaboration among directors. In some cases, the
chairperson may be independent, while in others, they may be an executive
director (often the CEO).
5. Diversity:
 Board diversity, including gender, ethnicity, age, and professional
backgrounds, can bring a broader range of perspectives and expertise to board
discussions.
6. Skills and Expertise:
 A balanced board should have a mix of skills and expertise relevant to the
company’s industry, such as finance, marketing, legal, technology, and
international business.
7. Size of the Board:
 The size of the board can vary depending on the company’s complexity and
needs. Too large a board can be unwieldy, while too small a board may lack
diversity of perspectives.
8. Term Limits and Succession Planning:
 Establishing term limits for directors and having a robust succession plan
ensures fresh perspectives and continuity in board leadership.
A well-composed board can contribute significantly to effective corporate governance by
providing strategic guidance, overseeing management, and safeguarding the interests of
stakeholders. It’s essential for boards to maintain a balance between independence, expertise,
diversity, and accountability.
The Board of Directors plays a critical role in the governance and strategic direction of a
company. Their responsibilities encompass a wide range of duties, which can be outlined as
follows:
1. Setting Company Strategy and Objectives:
 The board is responsible for establishing the company’s strategic direction,
including long-term goals, business plans, and objectives.
2. Appointing and Overseeing Senior Management:
 The board appoints, evaluates, and, if necessary, replaces top executives (such
as the CEO) and ensures that they are capable of effectively leading the
company.
3. Financial Oversight:
 The board monitors the financial performance of the company, approves
budgets, financial statements, and ensures the integrity of financial reporting.
4. Risk Management:
 It identifies and assesses risks associated with the company’s operations and
ensures that appropriate measures are in place to mitigate those risks.
5. Compliance and Ethics:
 The board ensures that the company is in compliance with all applicable laws
and regulations. It also establishes a code of ethics and oversees its
implementation.
6. Governance Structure and Policies:
 The board establishes and reviews the company’s corporate governance
framework, including policies related to executive compensation, conflicts of
interest, and other governance matters.
7. Stakeholder Relations:
 The board represents the interests of shareholders and other stakeholders. It
ensures that their concerns are addressed and their rights are protected.
8. Strategic Alliances and Partnerships:
 The board evaluates and approves significant alliances, partnerships, mergers,
acquisitions, or divestitures that can impact the company’s strategic position.
9. Legal and Regulatory Compliance:
 The board ensures that the company operates within the legal framework and
meets its regulatory obligations.
10. Safeguarding Corporate Assets and Integrity:
 It ensures that the company’s assets are adequately protected and that there are
systems in place to prevent fraud or mismanagement.
 11. Crisis Management:
 In times of crisis or unforeseen events, the board may play a pivotal role in
providing guidance, making critical decisions, and communicating with
stakeholders.
12. Board Development and Succession Planning:
 The board is responsible for its own composition, ensuring that it has the right
mix of skills, expertise, and diversity. It also plans for the succession of key
board positions.
13. Communication with Shareholders:
 The board communicates effectively with shareholders, providing them with
relevant and timely information about the company’s performance and
strategic direction.
14. Continuous Learning and Improvement:
 Board members should engage in ongoing education to stay informed about
industry trends, governance best practices, and emerging risks.
15. Ethical Leadership:
 The board sets the tone for ethical conduct within the company and holds itself
to the highest standards of integrity and transparency.
These responsibilities collectively help the board fulfill its fiduciary duty to the shareholders
and ensure the long-term success and sustainability of the company. It’s important for board
members to exercise independent judgment, act in the best interests of the company, and
uphold the principles of good corporate governance.
Business Policy:
Business Policy refers to a set of guidelines, rules, and practices established by an
organization to guide its actions and decisions. It provides a framework for making consistent
and coherent choices that align with the organization’s overall objectives. Business policies
serve as a foundation for day-to-day operations and contribute to the achievement of long-
term goals.
Process of Strategic Management:
Strategic Management is the process of formulating, implementing, and evaluating
strategies to achieve organizational objectives. It involves a series of interconnected steps:
1. Environmental Analysis:
 Assess the external environment, including industry trends, market conditions,
competition, regulatory factors, and technological advancements.
2. Internal Analysis:
  Evaluate the organization’s internal strengths, weaknesses, resources, and
capabilities. This includes assessing the company’s culture, structure, and
operational efficiency.
3. Strategy Formulation:
 Based on the insights from the environmental and internal analyses, develop a
clear and feasible strategy. This may involve setting specific objectives,
choosing competitive positioning, and identifying target markets.
4. Strategy Implementation:
 Execute the chosen strategy by allocating resources, structuring operations,
and setting up mechanisms for monitoring progress. This phase involves the
actual execution of the plans.
5. Strategy Evaluation and Control:
 Continuously monitor performance against strategic goals, compare actual
results with planned outcomes, identify variances, and take corrective actions
when necessary.
6. Feedback and Adaptation:
 Incorporate feedback from the evaluation and control stage to make any
necessary adjustments to the strategy or its implementation. This ensures that
the strategy remains relevant and effective.
Levels at Which Strategy Operates:
Strategy operates at three primary levels within an organization:
1. Corporate Level:
 At the highest level, corporate strategy focuses on the overall direction and
scope of the entire organization. It involves decisions about which businesses
to enter, divest, or merge. Corporate strategy defines the portfolio of
businesses that the company will engage in.
2. Business Level:
 Business-level strategy deals with how a company competes within a specific
business or industry. It focuses on gaining a competitive advantage within a
particular market segment. This level involves decisions regarding product
offerings, target markets, and competitive positioning.
3. Functional Level:
 Functional-level strategy pertains to specific functions or departments within
an organization, such as marketing, finance, operations, and human resources.
It outlines how each function contributes to achieving the broader business
and corporate-level objectives.
These three levels of strategy are interconnected and must align with each other to ensure that
the organization as a whole is working towards its overall mission and objectives. Each level
of strategy plays a crucial role in contributing to the success and competitiveness of the
organization.
Strategic Intent:
Strategic Intent refers to a high-level, aspirational statement that articulates the long-term
direction and ambition of an organization. It goes beyond a simple mission statement by
setting forth a bold and audacious goal that guides the company’s efforts. Strategic Intent
provides a clear sense of purpose and inspires the organization to pursue extraordinary
achievements.
Vision:
Vision is a forward-looking statement that describes what an organization aspires to become
in the future. It provides a clear and inspiring picture of the desired future state, serving as a
guiding beacon for the organization. A well-crafted vision statement is motivational,
ambitious, and aligns with the organization’s values and purpose.
Mission:
Mission is a concise statement that outlines the fundamental purpose of an organization. It
defines what the organization does, who it serves, and why it exists. A mission statement
provides clarity to stakeholders, including employees, customers, and investors, about the
core reason for the organization’s existence.
Business Definition:
Business Definition succinctly describes the nature of the business an organization is
engaged in. It outlines the industry or market the organization operates in, the products or
services it offers, and the target customer base. This definition helps in providing a clear
understanding of the organization’s scope and focus.
Goals:
Goals are broad, overarching statements of what an organization aims to achieve in the long
term. They are often qualitative and serve as a framework for setting more specific
objectives. Goals provide strategic direction and serve as a basis for formulating actionable
plans.
Objectives:
Objectives are specific, measurable, achievable, relevant, and time-bound (SMART) targets
that support the attainment of goals. They provide clear, tangible targets that enable the
organization to track progress and measure success. Objectives are the actionable steps that
contribute to achieving the broader goals of the organization.
 Strategic Intent: “To revolutionize the transportation industry by pioneering
sustainable and efficient modes of urban mobility.”
 Vision: “To create a world where cities are connected seamlessly, and transportation
is clean, convenient, and accessible to all.”
 Mission: “We develop and deploy innovative, eco-friendly transportation solutions to
transform urban mobility, ensuring a cleaner, more connected future for our
communities.”
 Business Definition: “We operate in the electric urban transportation sector,
providing electric scooters, bikes, and shuttle services to urban commuters.”
 Goals:
 “Establish a presence in 50 major cities within the next five years.”
 “Reduce carbon emissions associated with urban commuting by 30% in the
next decade.”
 Objectives:
 “Launch in 10 new cities by the end of next year.”
 “Increase ridership by 50% in the next two years through targeted marketing
and user experience improvements.”