CHAPTER 1

INTRODUCTION TO STRATEGIC MANAGEMENT

1.1 Business Policy
1. Business policy is defined as: Policy
Study of the functions and responsibilities of senior management,
The crucial problems that affect success in the total enterprise, and
Thedecisions that determine the direction of the organization and shape its future.
2. Business policy presents a framevwork for understanding strategic decision-making
1.2 Meaning and the Nature of Management
Perspective 1: Person having control over the affairs of the business:
1. It is used with reference to a key group in an organisation in
charge of its affairs. In relation to an organisation,
management is the chief organ entrusted with the task of
making it a purposeful and productive entity, by undertaking
the task of bringing together and integrating the disorganised
resources of manpower, money, materials, and technology
into a functioning whole.
2. The survival and success of an organisation depend to alarge
extent on the competence and character of its management.
3. Management has to also facilitate organisational change and adaptation.
Perspective 2: Set of Interrelated functions/ Processes:
1. The functions and processes of management are wide-ranging
but closely interrelated.
2. They range all the way from :
Design of the organisation,
Determination of the goals and activities,
Mobilisation and acquisition of resources,
Allocation of tasks and resources among the personnel and activity units.
Installation of communication and control systems to ensure that what is planned is achieved.
3. These functions incude Planning, Organising, directing, Staffing and control
1.3 Corporate Strategy
Q1) Meaning ofword-Strategy:
The word strategy has emerged from Military as; 'means or
methods adopted to defeat enemy'.
Jn business organizational context the term is not much
different.
Businesses have to respond to adverse / hostile environment
with strategy just like military respond to war.
Strategy formed at top level is known as corporate strategY.

CAPraveen Jain Page 1. 1

 # 1-Introdu

Q2) Meaning- of word COLDORate Strategy:

In Business Strategyis defined as:
I. A Corporate strategy consists of combination of idea
PLAN;
Competitive moves and business approaches that CGOAL
managers employ to : BUSINESS
STRATEGY
ooANALYzE

please customers, RISK

compete successfully and MONEY
S MARKETING
achieve organizational objectives. direction and destination
2. The term
for: .
'strategy' is a blueprint of an organization's desired image,
what it wants to be,
what it wants to do and
where it wants to go.
3. Strategv i_ a unified, comprehensive and integrated plan designed to assure that the basic
objectives of the enterprise are achieved -William F. Glueck.
4. The very idea to introduce "Strategy" into business organizations is to unravel remove)
complexity and to reduce uncertainty of the environment.
Q3) Characteristics ofa coporate Strategy
1. Itis generally long termîn nature having considered short-range implications.
2. It is action oriented andmere specific than objectives.
3. Itis flexible, dynamic &integrated.
4. It is formulated at the top management level, however middle and lower level managers are
associated.
5. It is generally formulated in order to face competitive and complexX setting &in building the
relevant competitive adyantages for the firm.
6. It aims at translating Goals &objectives them into realities.
7. While formulating Strategy, SWOT analysis should be considered.
8. It is partly proactive &partly reactive.
9. Sheuld answer the problem of Strategic uncertaintiesthrough Scenario Analvsis.
10. Should lay out a design for filling the firm's strategic planning gap.
Authors Note:
mnanagemovt
V Strategy is no substitute for sound, alert and responsible
Without astrategy the aganzation is like a ship without a rudder
Chvnteaie management is not a box or riekS or a bunale of techniques. it involves analutieal
action
thinkingand commitment of resources to
Strategy can never be
patect, flawless and optimal. However a Sound
unanticipated events" strategy, allows roon for
possible "miscaleulations nd
design of the fir
Corporate Strategy is deined as Growth
Refers to the future trend or event that has
Strategic Uncertainties inherent
It can be understood in Parts
but not in totalitu.
2 or more
unpredictability.
Scenario Analysis : It nfers to developing future Scenarios and
fomulatina
CA Praveen Jain
Page 1.2
 #1-Introduction to SM

convesponding Strategies for each of them which willprovide the business to adopt to different
Changes taking place in the environment and appropriate strategy tosuit that change
Gap Analysis: It is a tool that Gap Analysis

helps a company to compare its DesirGd

actual performance with its

Periormance
potential (desired) performance.
It is atechnique for determining
urret
steps to be taken to attain the PerfOITIanC
ieyei

desired state in case of any

deviation. Tire

4TStategy ispartly proactive and partly reactive, Comment

1. A
company's strategy is typically a blend of
Proactive actions on the part of managers to
improve the company's market position and
financial performance and
Reactions to unanticipated developments and
fresh market conditions.
2. In other words, a company uses both proactive and
reactive strategies to cope up the uncertain business
environment.
3. Proactive strategy is planned strategy whereas
reactive strategvy is adaptive reaction to changing
circumstances.
working
4. The biggest portion of a company's curent strategy flows from past actions that are
well enough to merit continuation and newly launched managerial initiatives to strengthen
the conpany's overall position and performance. This part of management's game plan is
deliberate and proactive helping the business to achieve its objectives. (Proactive response)
When merkt and
5. However, always things do not happen as anticipated or planned for.
Competitive conditions take an unexpected turn or some aspect of a company's strategy hits
Hence, a
a stone wall (deviate), some kind of strategic reaction or adjustment is required.
unforeseen
portion of a company's strategy is always developed as a reasoned response to
developments. (Reactive response]
6. Crafting a strategy thus involves both planned (proactive) and reactive approach.
1.4 Strategic tevels in Organisations: functional levels.
There are three (3) main levels of management namely corporate, business &
different one.
The first two levels are headed by General Manager but their Strategic roles are
Level1: Corporate Level:
1. It is headed by chief general manager or CEO, other senior executives & BOD.
other words, their role
2. They formulate Strategies applicable to the whole organisation levels. In
is to oversee the development of strategies for the whole organisation.

CAPraveen Jain Page 1.3

 #1-Introductíon to SM

Level2 : Business level subject to

1. Business business level strategy but
level general may prepare their own
managers
corporate level strategy limits.
L. They translate corporate level intent into Business level StrategieS
Level3: Functional level
1, The
are
Functional level managers
responsible for specific Level
business functions or operations Managennen
such as
Production, finance, Boardtdirectors,
marketing, HR, Customer Service chief executives &
etc. General Manager
Mddle
2. Functional level Productionmante
managers
provide useful information Purchased man
Sales manag Maragernen
based on which the business and
Marketngnancer
corporate level managers Pubic Relation mane etc
formulate their strategies and in oreman
fact these are the persons who
Supervisors
are responsible in Section Offcer Managemen
Superintendent
implementations of Business &
Corporate level Strategies.
1.5 Strategic Management (SM)
Q1) Mearing of SLategic Management SMProcess / Task of SM
Strategic management refers to the managerial process of -
a) Forming astrategic vision and Mission,
b) Setting objectives,
c) Crafting astrategy
d) Implementing and executing the strategy, and
e) Initiating whatever corrective adjustments in above activities as deemned appropriate.
Q2) ObjectivesofSrategic management:
The objectives of Strategic Management are -
rivals
To create Competitive Advantage over
environment.
To guidethe Company through all changes in the
Management.
03) Importance benefits ofStrategic
Formulation of strategies and their implementation have become essential for all
fortheir survival and growthin the present turbulent business environment. organizations
build its competitive advantage over the
Each organization has to competitors in the business
warfare in order to win.
This can bedone only by following process of strategic management
Major benefitsofSMare:
1. Decision makirg:
It provides the framework for all the major business decisions of an enterprise such as decisions on
and markets, manufacturing facilities,
businesses, products investments
and
organizational
CA PraveenJain
Page 1,4
 #1-Introduction to SM

structure. Hence it serves as a corporate defence mechanism against mistakes and pitfalls. It helps
organisations to avoid costly mistakes in product market choices or investments.
2. Path finder
It seeks to prepare the organisation to face the future and act as pathfinder to various business
opportunities. Organisations are able to identify the available opportunities and identify ways and
means as how to reach them.
3. Goal setting:
It gives a direction to the company to move ahead. It defines the goals and mission. It helps
management to define realistic objectives and goals which are in line with the vision of the
company.
4. Deciding approach:
It helps organisations to be proactive instead of reactive in shaping its future. Organisations are
able to analyse and take actions instead of being mere spectators. Thereby they are able to control
their own destiny in a better manner. It helps them in working within vagaries (unexpected
change) of environment and shaping it, instead of getting carried away by its turbulence or
uncertainties.
5. Core competencies:
It helps the organisation to develop certain core competencies and competitive advantages that
would facilitate assist in its fight for survival and growth.
6. Survival:
Strategic management helps to enhance the longevity of the business. With the state of competition
and dynamicenvironment it inay not be possible for organisations to survive in long run. It helps
the organization to take a clear stand in the related industry and makes sure that it is not just
surviving on luck.
Q4) Limitations ofStrategic Management
The presence of strategic management cannot counter all hindrances and always achieve success.
There are limitations attached to strategic management which can be explained in the following
lines:
Complex and Itis difficult tounderstand the complex environment and exactly pinpoint
turbulent how it willshape-up in future.
environment: The organisational estimate about its future shape may awfully go wrong
and jeopardise all strategic plans.
The environment affects as the organisation has to deal with suppliers,
customers, governments and other external factors.
Time Organisations spend a lot of time in preparing, communicating the strategies
consuming : that mayimpede daily operations and negatively impact the routine business.
Costly process:Expert strategic planners are required to be engaged for analysis of external
and internal environments which involves huge cost. Small and medium
organisations cannot affordsuch cost.
Decision In a competitive scenario, where all organisations are trying to move
making strategically, it is difficult to clearly estimate the competitive responses to a
firm's strategies.
1.6 Strategic Management in Non-Profit and Government Organization
Organizations can be classified as commercial and non-commercial on the basis of the interest
they have.
Anon-commercial organisation may be for social, charitable, or educational purposes for e.g
ICAI, municipal corporations, non-governmental organizations such as Help-age or Child relief

CA Praveenain Page 1.5

 #1-1ntroductionto SM

large.
and you. Their main aim is to provide services to members, beneficiaries or public at
These organizations may not have owners in true sense.
corporatios
t Potandgovernmental organizations outnerform private firms and
innovativeness, motivation, Droductivity, and human relations. Such organisations a
dependent on outside financing.
Especially for these organizations, strategic management provides an excellent vehicle for
developing and justifying requests for needed financial support.
organsations have purpose, vision and mission, They also work within the environmentat
Jces hd need to manage strategically to stay afloat to accomplish their objectives. For the
purpose of continuity and meeting their goals, they also need to have and manage funds and other
resources just like any other for proft organization.
Hence it can be concuded that Strategic management is needed in both profit and non-pront
organisations.
Q1) Examples of strategies being employed at various Non
on profit/ Governnnemtal
organisation
Educational Strategies designed for attracting best students. Launch of
institutions
Institutions joining hands with industries to make
Cloud Campus
graduates employable
To employ online courses, Real time lectures etc Get access to your
classroom on an easyto use
requires utilisation of strategy. caline interactive platform
Medical Better ambulance services. (back ward
organizations integration)
Use of IT Services (Internet)
Pathological laboratories have started
collecting door-to-door samples.
I08
EMERGENCÝ
MECCAL POLICE FIRE

(Customized services)
Governmental Using tax payer's money in most effective manner.
agencies and
departments
Collecting tax payments online than collecting Cheques.

1.7 Appendix :
State with reasoñs which ofthe following Statements are orrect:/ircomh
defined".
1) "Strategies are rigidly
Incorrect: In the dynamic environment it is necessary that the strategies are
flexible enough to take on the changes in the environment In a action oriented and
sound strategy
made for possible miscalculations and unanticipated events. allowances are
3. "Strategies provide an integral framework for management to negotiate its
complex and turbulent external environment". way through a
Correct: Strategies are meant to fill in the need of enterprises for a
coherent functioning. They provide a systematic basis for the
sense of
direction, focus and
enterprise stand
to its
ground in
CA Praveen Jain
Page 1.6
 #1-Introduction to SM

to them. They obviate the occasions for

the face of challenge and change as alsc guickly adjust the
impulsive and crisis decisions, falsestarts, nisdirected moves, wasted resource uses and
like.
oversee the development of strategies for the
4. The role of corporate-level managers is to
whole organization. (RTP - May 13)
development of strategies for
Correct : The role of corporate-level managers is to oversee the
mission and goals of the organization,
the whole organization. This role includes defining the
resources among the different
determining what businesses it should be in, allocating
span individual businesses, and
businesses, formulating and implementing strategies that
providing leadership for the organization
guardians of shareholders. (RTP - M12)
5. Corporate-level managers can be viewed as the
people who oversee the strategic
Correct: Corporate-level managers provide a link between the
Corporate-level managers, and
development of a firm and those who own it (the shareholders).
shareholder welfare. It is their
particularly the CEO, can be viewed as the guardians of
company pursues
responsibility to ensure that the corporate and business strategies that the
they are not, then ultimately the CEOis
are consistent with maximizing shareholder wealth. If
likely to be called to account by the shareholders.
reactive in shaping their future.
6. Strategic management help organizations to be more
(RTP - May 12)
more proactive instead of reactive
o Incorrect: Strategic management helps organisations to be
instead of being mere
in shaping its future. Organisations are able to analyse and take actions
manner. It helps themn
spectators. Thereby they are able tocontrol their own destiny in a better
by its
inworking within vagaries of environment and shaping it, instead of getting carried away
turbulence or uncertainties

7. "Strategy should be partly proactive and partly reactive."

4 Correct: A company's strategy is typicaly a blend of (1) proactive actions on the part of
managers to improve the company's market position and financial performance and (2) as
needed reactions to unanticipate d developments and fresh market conditions. The biggest
portion of a company's current strategy flows from previously initiated actions and business
approaches that are working well enough to merit continuation and newly launched managerial
initiatives to strengthen the company's overallposition and performance.
8. Strategy is a substitute for sound, alert and responsible management.
4 Incorrect: Strategy is not a substitute for sound, alert and responsible management. Straregy can
never be perfect, flawless and optimal. Strategies are goal-directed decision and actions in
which capabilities and resources are matched with the opportunities and threats in the
environnment. A good management at the top can steer the organizations by adjusting its path on
the basis of the changes in the environment.

Vision without action is a day dream,

action without vision is a nightmare"

CA Praveen Jain Page 1.7