Strategic management

Module – 1

Strategic Management
*Definition*
Strategic management is the process of formulating, implementing, and evaluating
strategies to achieve organizational goals and objectives.

It involves analyzing the internal and external environment, identifying opportunities and
threats, and allocating resources to achieve competitive advantage.

*Scope*
1. *Environmental Analysis*: Analyzing the internal and external environment to identify
opportunities and threats.

2. *Goal Setting*: Establishing organizational goals and objectives.

3. *Strategy Formulation*: Developing strategies to achieve organizational goals and

objectives.

4. *Strategy Implementation*: Implementing strategies through allocation of resources

and assignment of tasks.

5. *Strategy Evaluation*: Evaluating the effectiveness of strategies and making

adjustments as needed.

*Importance*
Strategic management is important for several reasons:
1. *Achieving Competitive Advantage*: Strategic management helps organizations to
achieve competitive advantage by identifying and exploiting opportunities in the market.

2. *Improving Performance*: Strategic management helps organizations to improve their

performance by setting clear goals and objectives and allocating resources effectively.

3. *Enhancing Innovation*: Strategic management encourages innovation by identifying

new opportunities and threats and developing strategies to respond to them.

4. *Reducing Risk*: Strategic management helps organizations to reduce risk by identifying

potential threats and developing strategies to mitigate them.

Difference b/w Business policy and Strategic Management

Strategy
1) It is a comprehensive plan which includes various steps
2) It is formulated for solving challenging and unforseen problems
3) Everytime a new strategy is prepared to solve different problems
4) It is temporary in nature
Policy
1) It is single plan
2) It is formulated to carry out routine function
3) Common policy is used for all routine problems
4) It is permanent in nature

Basic Model of Strategic Management (Strategic Intent)

The basic model of strategic management, also known as strategic intent,

consists of three key components: mission, vision, and objectives.
1. Mission Statement
- _Definition_: A statement that defines the purpose, goals, and values of an
organization.

- _Purpose_: To provide a sense of direction and purpose for the organization.

- _Key Components_:
- Purpose: What is our reason for being?
- Goals: What do we want to achieve?
- Values: What principles guide our behavior?
- _Example_: “Our mission is to provide high-quality, affordable healthcare
services to our community.”

2. Vision Statement
- _Definition_: A statement that defines what an organization wants to
become in the future.

- _Purpose_: To provide a sense of direction and inspiration for the

organization.
- _Key Components_:
- Future state: What do we want to become?
- Aspirations: What do we hope to achieve?
- Core values: What principles will guide our behavior?

- _Example_: “Our vision is to be the leading provider of innovative healthcare

solutions in the region.”

3. Objectives
- _Definition_: Specific, measurable, achievable, relevant, and time-bound
(SMART) goals that an organization wants to achieve.
- _Purpose_: To provide a clear direction and focus for the organization.

- _Key Components_:
- Specificity: Clearly defined and easy to understand.
- Measurability: Quantifiable and measurable.
- Achievability: Realistic and attainable.
- Relevance: Aligns with the organization’s mission and vision.
- _Example_: “Our objective is to increase revenue by 15% within the next 12
months.”

Relationship Between Mission, Vision, and Objectives

- The mission statement provides the overall purpose and direction for the
organization.
- The vision statement provides a sense of direction and inspiration for the
organization.
- The objectives provide specific, measurable goals that the organization
wants to achieve.

Importance of Strategic Intent

•- Provides a clear direction and purpose for the organization.

•- Inspires and motivates employees.
•- Guides decision-making and resource allocation.
•- Helps to establish a competitive advantage.

Conceptual Framework: Policy, Strategy, and Tactics

The conceptual framework of strategic management consists of three

interconnected components: policy, strategy, and tactics.

Policy

1. _Definition_: A broad statement that guides decision-making and provides

a framework for strategy development.
2. _Purpose_: To provide overall direction and guidance for the organization.
3. _Key Characteristics_: Broad, general, and enduring.

Strategy
1. _Definition_: A comprehensive plan that outlines how to achieve
organizational goals and objectives.
2. _Purpose_: To provide a roadmap for achieving organizational goals and
objectives.
3. _Key Characteristics_: Comprehensive, integrated, and actionable.

Tactics
1. _Definition_: Specific actions or steps taken to implement a strategy.
2. _Purpose_: To execute the strategy and achieve organizational goals and
objectives.
3. _Key Characteristics_: Specific, short-term, and actionable.

Strategic Decision Making: Dimensions and Levels

Strategic decision making involves analyzing various dimensions and levels to

develop effective strategies.

Dimensions of Strategic Decision Making

1. _Internal Dimension_: Focuses on an organization’s internal environment,
including its strengths, weaknesses, and capabilities.
2. _External Dimension_: Focuses on an organization’s external environment,
including its opportunities and threats.
3. _Time Dimension_: Focuses on the short-term and long-term implications
of strategic decisions.

Levels of Strategic Decision Making

1. _Corporate Level_: Focuses on the overall strategy of the organization.
2. _Business Level_: Focuses on the strategy of a specific business unit or
division.
3. _Functional Level_: Focuses on the strategy of a specific functional area,
such as marketing or finance.

Interrelationship Between Policy, Strategy, and Tactics

1. _Policy_ provides the overall direction and guidance for the organization.
2. _Strategy_ outlines how to achieve organizational goals and objectives
within the framework provided by policy.
3. _Tactics_ are specific actions taken to implement the strategy and achieve
organizational goals and objectives.

Strategic Budget and Audit

Strategic budgeting and auditing are essential components of strategic

management, ensuring that an organization’s financial resources are allocated
effectively to achieve its strategic objectives.

Strategic Budgeting
1. *Definition*: A budgeting process that aligns financial resources with
strategic objectives.

2. *Purpose*: To allocate financial resources to achieve strategic objectives.

3. *Key Characteristics*:
- Aligns with strategic objectives
- Focuses on value creation
- Emphasizes cost management
- Encourages innovation and experimentation

Strategic Auditing
1. *Definition*: A systematic evaluation of an organization’s strategic
management process.
2. *Purpose*: To assess the effectiveness of an organization’s strategic
management process.
3. *Key Characteristics*:

- Evaluates strategic planning process

- Assesses alignment with strategic objectives
- Identifies areas for improvement
- Provides recommendations for improvement

Strategic Information System (SIS)

A Strategic Information System (SIS) is a computer-based system that

provides information to support strategic decision-making.

Characteristics of SIS

1. *Supports strategic decision-making*: Provides information to support

strategic decisions.
2. *Focuses on external environment*: Provides information about the
external environment, including competitors, customers, and market trends.
3. *Analytical capabilities*: Provides analytical capabilities to support
strategic decision-making.

4. *Integrates with other systems*: Integrates with other systems, including

management information systems (MIS) and decision support systems (DSS).

Impact of Globalization on Strategic Management

Globalization has significantly impacted strategic management, presenting
both opportunities and challenges.

*Opportunities*
1. *New Markets*: Globalization has opened up new markets, allowing
organizations to expand their customer base and increase revenue.
2. *Access to Resources*: Globalization has provided access to new
resources, including talent, technology, and raw materials.
3. *Increased Competition*: Globalization has increased competition,
driving innovation and improvement in products and services.

*Challenges*
1. *Cultural and Language Barriers*: Globalization has created cultural and
language barriers, requiring organizations to adapt to different cultural norms
and languages.
2. *Regulatory Compliance*: Globalization has introduced new regulatory
requirements, requiring organizations to comply with different laws and
regulations.
3. *Supply Chain Complexity*: Globalization has increased supply chain
complexity, requiring organizations to manage global supply chains and
logistics.

Impact of the Internet on Strategic Management

The internet has revolutionized strategic management, transforming the way
organizations operate and interact with customers.
*Opportunities*
1. *New Business Models*: The internet has enabled new business models,
such as e-commerce, online advertising, and digital payments.

2. *Increased Efficiency*: The internet has increased efficiency, enabling

organizations to automate processes, reduce costs, and improve customer
service.
3. *Access to Information*: The internet has provided access to vast
amounts of information, enabling organizations to make informed decisions
and stay ahead of the competition.

*Challenges*
1. *Cybersecurity Risks*: The internet has introduced cybersecurity risks,
requiring organizations to protect themselves against cyber attacks and data
breaches.

2. *Digital Disruption*: The internet has enabled digital disruption, requiring

organizations to adapt to new technologies and business models.
3. *Information Overload*: The internet has created information overload,
requiring organizations to filter and prioritize information to make informed
decisions.

Impact of E-Commerce on Strategic Management

E-commerce has transformed the way organizations operate, requiring
strategic management to adapt to new market realities.

*Opportunities*
1. *New Distribution Channels*: E-commerce has enabled new distribution
channels, allowing organizations to reach customers directly and increase
sales.

2. *Increased Customer Engagement*: E-commerce has increased

customer engagement, enabling organizations to interact with customers and
build brand loyalty.
3. *Access to New Markets*: E-commerce has provided access to new
markets, allowing organizations to expand their customer base and increase
revenue.

*Challenges*
1. *Logistical Challenges*: E-commerce has introduced logistical
challenges, requiring organizations to manage inventory, shipping, and
returns.

2. *Competition*: E-commerce has increased competition, requiring

organizations to differentiate themselves and offer unique value propositions.
3. *Security and Trust*: E-commerce has introduced security and trust
concerns, requiring organizations to protect customer data and ensure secure
transactions.

Module 2nd
Environmental Scanning and Internal Analysis
Environmental Scanning

Environmental scanning is the process of gathering, analyzing, and interpreting information

about an organization’s external environment to identify opportunities and threats.

It involves monitoring and forecasting trends and changes in the environment to support
strategic decision-making.

Factors of Environmental Scanning

There are several factors that organizations need to consider when conducting
environmental scanning. These factors can be categorized into several key areas:

*1. Politico-Legal Environment*

The politico-legal environment refers to the laws, regulations, and government policies that
affect an organization’s operations.

- *Government policies and regulations*: Changes in government policies and

regulations can impact an organization’s operations, such as tax laws, employment laws,
and environmental regulations.

- *Political stability*: Political instability can impact an organization’s operations, such as

changes in government, wars, and terrorism.

*2. Technological Environment*

The technological environment refers to the developments and advancements in

technology that can impact an organization’s operations.

- *New technologies*: New technologies can create opportunities for organizations, such
as the development of new products or services.
- *Technological advancements*: Technological advancements can impact an
organization’s operations, such as changes in communication technologies, transportation
technologies, and manufacturing technologies.

*3. Socio-Cultural Environment*

The socio-cultural environment refers to the social and cultural trends and values that can
impact an organization’s operations.

- *Demographic changes*: Changes in demographics, such as population growth, aging

population, and changes in ethnic composition, can impact an organization’s operations.

- *Social trends*: Social trends, such as changes in consumer behavior, lifestyle, and
values, can impact an organization’s operations.

- *Cultural values*: Cultural values, such as changes in attitudes towards work, leisure,
and consumption, can impact an organization’s operations.

*4. Economic Environment*

The economic environment refers to the economic conditions and trends that can impact
an organization’s operations.

- *Economic growth*: Economic growth can create opportunities for organizations, such
as increased demand for products and services.

- *Inflation*: Inflation can impact an organization’s operations, such as increased costs

and reduced purchasing power.

- *Interest rates*: Changes in interest rates can impact an organization’s operations, such
as increased borrowing costs and reduced investment returns.

*5. Natural Environment*

The natural environment refers to the physical environment and natural resources that can
impact an organization’s operations.
- *Climate change*: Climate change can impact an organization’s operations, such as
increased energy costs, reduced water availability, and increased risk of natural disasters.

- *Natural resources*: Changes in natural resources, such as reduced availability of raw

materials, can impact an organization’s operations.

ETOP Study

An ETOP study is a framework used to analyze the external environment of an organization.

ETOP is an acronym that stands for:

- *E*: Economic factors

- *T*: Technological factors

- *O*: Opportunity factors

- *P*: Political and legal factors

Economic Factors

Economic factors that can impact an organization include:

- Economic growth or recession

- Inflation or deflation

- Interest rates

- Unemployment rates

- Changes in government policies or regulations

Technological Factors
Technological factors that can impact an organization include:

- Advances in technology

- Changes in communication technologies

- Developments in transportation technologies

- Changes in manufacturing technologies

- Emergence of new technologies

Opportunity Factors

Opportunity factors that can impact an organization include:

- Changes in consumer behavior or preferences

- Emergence of new markets or industries

- Changes in demographic trends

- Changes in social or cultural trends

- Availability of new resources or raw materials

Political and Legal Factors

Political and legal factors that can impact an organization include:

- Changes in government policies or regulations

- Changes in laws or legislation

- Changes in international trade agreements or policies

- Changes in tax laws or policies

- Changes in environmental regulations or policies

Industry Analysis

Industry analysis is the process of analyzing the external environment of an organization

within a specific industry. It involves examining the competitive structure of the industry,
including:

1. *Threat of new entrants*: The likelihood of new companies entering the industry.

2. *Bargaining power of suppliers*: The ability of suppliers to negotiate prices or terms.

3. *Bargaining power of buyers*: The ability of buyers to negotiate prices or terms.

4. *Threat of substitute products*: The likelihood of substitute products or services

replacing existing ones.

5. *Competitive rivalry*: The intensity of competition among existing companies in the

Industry.

Competitive Intelligence

Competitive intelligence is the process of gathering and analyzing information about

competitors to gain a competitive advantage. It involves:

1. *Identifying competitors*: Identifying key competitors and their strengths and

weaknesses.

2. *Gathering information*: Gathering information about competitors through various

sources, such as public records, social media, and industry reports.

3. *Analyzing information*: Analyzing the gathered information to identify patterns, trends,

and insights.

4. *Developing strategies*: Developing strategies to counter competitors’ strengths and

exploit their weaknesses.

Organizational Analysis: Concept

Organizational analysis is a systematic process of evaluating an organization’s internal
environment to identify its strengths, weaknesses, opportunities, and threats.

It involves examining the organization’s internal factors, such as its resources, capabilities,
culture, and structure, to understand its current state and potential for future growth.

Internal Analysis

Internal analysis is a critical component of organizational analysis. It involves examining

the organization’s internal factors to identify its strengths and weaknesses. The internal
analysis typically includes:

1. Resource Analysis

Resource analysis involves examining the organization’s resources, including:

- Human resources (e.g., skills, expertise, and experience)

- Physical resources (e.g., equipment, facilities, and technology)

- Financial resources (e.g., funding, investments, and cash flow)

- Intellectual resources (e.g., patents, trademarks, and copyrights)

2. Capability Analysis

Capability analysis involves examining the organization’s capabilities, including:

- Operational capabilities (e.g., production, logistics, and supply chain management)

- Managerial capabilities (e.g., leadership, strategy, and innovation)

- Technical capabilities (e.g., research and development, engineering, and IT)

3. Cultural Analysis

Cultural analysis involves examining the organization’s culture, including:

- Values and norms

- Leadership style and philosophy

- Communication patterns and networks

- Employee engagement and motivation

4. Structural Analysis

Structural analysis involves examining the organization’s structure, including:

- Organizational design (e.g., functional, divisional, or matrix)

- Reporting relationships and authority

- Decision-making processes and protocols

- Communication channels and networks

5. Value Chain Analysis

Value chain analysis involves examining the organization’s value chain, including:

- Primary activities (e.g., production, marketing, and sales)

- Support activities (e.g., human resources, finance, and IT)

- Value chain linkages and relationships

Scanning Functional Resources

Scanning functional resources involves analyzing an organization’s internal resources and

capabilities to identify its strengths and weaknesses. This includes examining the
organization’s:

1. *Human Resources*: skills, expertise, and experience of employees

2. *Physical Resources*: equipment, facilities, and technology

3. *Financial Resources*: funding, investments, and cash flow

4. *Intellectual Resources*: patents, trademarks, and copyrights

OCP (Organizational Capability Profile)

An OCP is a framework used to evaluate an organization’s capabilities and identify areas for
improvement. It typically includes:

1. *Core Competencies*: essential skills and expertise that enable the organization to
deliver its products or services

2. *Supporting Competencies*: skills and expertise that support the core competencies

3. *Non-Core Competencies*: skills and expertise that are not essential to the
organization’s operations

SAP (Strategic Alignment Profile)

A SAP is a framework used to evaluate the alignment between an organization’s strategy

and its capabilities. It typically includes:

1. *Strategic Objectives*: the organization’s overall goals and objectives

2. *Core Competencies*: the essential skills and expertise required to achieve the
strategic objectives

3. *Capability Gaps*: areas where the organization’s capabilities do not align with its
strategic objectives

Scanning Core Competency

Scanning core competency involves evaluating an organization’s essential skills and

expertise to identify areas of strength and weakness. This includes:
1. *Identifying Core Competencies*: determining the essential skills and expertise
required to deliver the organization’s products or services

2. *Evaluating Core Competencies*: assessing the organization’s proficiency in each core

competency

3. *Identifying Capability Gaps*: determining areas where the organization’s capabilities

do not align with its strategic objectives

Competitive Advantage

A competitive advantage is a unique benefit that an organization offers to its customers,

setting it apart from its competitors. This can be achieved through:

1. *Cost Leadership*: offering products or services at a lower cost than competitors

2. *Differentiation*: offering unique products or services that meet specific customer

needs

3. *Focus*: concentrating on a specific market or customer segment

4. *Innovation*: developing new products, services, or processes that create a competitive

advantage.

SWOT Analysis

SWOT analysis is a strategic planning framework used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats of an individual, organization, or project.

1. Strengths (Internal):
Positive attributes and resources that provide an advantage (e.g., strong brand reputation,
skilled team, proprietary technology).

2. Weaknesses (Internal):

Limitations or areas of improvement that hinder performance (e.g., limited resources,

outdated technology, low brand recognition).

3. Opportunities (External):

External factors that could be leveraged for growth or improvement (e.g., market expansion,
emerging trends, regulatory changes).

4. Threats (External):

External challenges or risks that could negatively impact the entity (e.g., competition,
economic downturns, technological changes).
TOWS Matrix

The TOWS matrix builds on the SWOT analysis and helps in strategic planning by linking the
identified factors. It focuses on creating actionable strategies:

1. Strength-Opportunity (SO) Strategies:

Use internal strengths to capitalize on external opportunities.

Example: A company with strong R&D (strength) can develop innovative products to enter
new markets (opportunity).

2. Weakness-Opportunity (WO) Strategies:

Address weaknesses to leverage opportunities.

Example: Upskilling employees (weakness) to take advantage of a growing market demand

for specialized services (opportunity).

3. Strength-Threat (ST) Strategies:

Use strengths to mitigate or neutralize threats.

Example: A robust supply chain (strength) helps counteract supply disruptions due to
geopolitical risks (threat).

4. Weakness-Threat (WT) Strategies:

Minimize weaknesses and avoid threats.

Example: Restructuring operations to reduce costs (weakness) in anticipation of an

economic downturn (threat).