Recent Trends in Strategic

Management
 STRATEGIC MANAGEMENT
Definition
Systematic analysis of the factors associated with customers and
competitors (the external environment) and the organization itself
(the internal environment) to provide the basis for rethinking the
current management practices. Its objective is to achieve better
alignment of corporate policies and strategic priorities.

Strategic management is the conduct of drafting, implementing and

evaluating cross-functional decisions that will enable an organization
to achieve its long-term objectives. It is the process of specifying the
organization's mission, vision and objectives, developing policies and
plans, often in terms of projects and programs, which are designed to
achieve these objectives, and then allocating resources to implement
the policies and plans, projects and programs. A balanced scorecard
is often used to evaluate the overall performance of the business and
its progress towards objectives.

Strategic management is a level of managerial activity under setting

goals and over Tactics. Strategic management provides overall
direction to the enterprise and is closely related to the field of
Organization Studies. Strategic management is an ongoing process
that evaluates and controls the business and the industries in which
the company is involved; assesses its competitors and sets goals and
strategies to meet all existing and potential competitors; and then
reassesses each strategy annually or quarterly [i.e. regularly] to
determine how it has been implemented and whether it has
succeeded or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new economic
environment., or a new social, financial, or political environment.

Strategic management hinges upon answering three key questions:

1. What are my business’s objectives?
2. What are the best ways to achieve those objectives?
3. What resources are required to make that happen?
Answering this question requires serious thought about what your
ultimate goals are for the business. What are you trying to make
happen? What are you attempting to facilitate or enable? What is the
best possible outcome your company can aspire to?
 PROCESS OF STRATEGIC
MANAGEMENT
The primary purpose of the strategic management process is to
enable companies to achieve strategic competitiveness and earn
above-average returns. Research indicates that companies that
engage in strategic management generally outperform those that do
not.

Strategic Management is mainly combination of three processes:

Strategy formulation:
Formulation, in the strategic management process, produces a
clear set of recommendations, with supporting justification, that
revise as necessary the mission and objectives of the
organization, and supply the strategies for accomplishing them.
In formulation, we are trying to modify the current objectives
and strategies in ways to make the organization more
successful.
Performing a situation analysis, self-evaluation and competitor
analysis: both internal and external; both micro-environmental
and macro-environmental.
Concurrent with this assessment, objectives are set. These
objectives should be parallel to a timeline; some are in the
short-term and others on the long-term. This involves crafting
vision statements (long term view of a possible future), mission
statements (the role that the organization gives itself in
society), overall corporate objectives (both financial and
 strategic), strategic business unit objectives (both financial and
strategic), and tactical objectives.
These objectives should, in the light of the situation analysis,
suggest a strategic plan. The plan provides the details of how to
achieve these objectives.

Strategy implementation:
Allocation and management of sufficient resources -financial,
personnel, operational support, time, technology support
Establishing a chain of command or some alternative structure
(such as cross functional teams)
Assigning responsibility of specific tasks or processes to specific
individuals or groups
It also involves managing the process. This includes monitoring
results, comparing to benchmarks and best practices,
evaluating the efficacy and efficiency of the process, controlling
for variances, and making adjustments to the process as
necessary.
When implementing specific programs, this involves acquiring
the requisite resources, developing the process, training,
process testing, documentation, and integration with legacy
processes.

Thus, when the strategy implementation processes, there have been

many problems arising such as human relations and/or the employee-
communication. At this stage, the greatest implementation problem
usually involves marketing strategy, with emphasis on the
appropriate timing of new products. An organization, with an effective
management, should try to implement its plans without signaling the
fact to its competitors. In order for a policy to work, there must be a
level of consistency from every person in an organization, including
from the management. This is what needs to occur on the tactical
level of management as well as strategic.

Strategy evaluation:
Measuring the effectiveness of the organizational strategy, it's
extremely important to conduct a SWOT analysis to figure out the
strengths, weaknesses, opportunities and threats (both internal
and external) of the entity in question. This may require to take
certain precautionary measures or even to change the entire
strategy.
SWOT Analysis is a strategic planning method used to evaluate the
Strengths, Weaknesses, Opportunities, and Threats involved in a
project or in a business venture. It involves specifying the objective of
the business venture or project and identifying the internal and
external factors that are favourable and unfavourable to achieving
that objective. A SWOT analysis must first start with defining a
desired end state or objective. A SWOT analysis may be incorporated
into the strategic planning model.

Strengths: attributes of the person or company those are

helpful to achieving the objective.
Weaknesses: attributes of the person or company those are
harmful to achieving the objective.
Opportunities: external conditions those are helpful to
achieving the objective.
Threats: external conditions which could do damage to the
business's performance.
Identification of SWOTs is essential because subsequent steps in the
process of planning for achievement of the selected objective may be
derived from the SWOTs. First, the decision makers have to
determine whether the objective is attainable, given the SWOTs. If
the objective is NOT attainable a different objective must be selected
and the process repeated.
The SWOTs are used as inputs to the creative generation of possible
strategies, by asking and answering each of the following four
questions, many times:
How can we Use and capitalize on each Strength?
How can we improve each Weakness?
How can we Exploit and Benefit from each Opportunity?
How can we mitigate each Threat?
The aim of any SWOT analysis is to identify the key internal and
external factors that are important to achieving the objective. These
come from within the company's unique value chain. SWOT analysis
groups key pieces of information into two main categories:
Internal factors – The strengths and weaknesses internal to
the organization.
External factors – The opportunities and threats presented by
the external environment to the organization. - Use a PEST or
PESTLE analysis to help identify factors
The internal factors may be viewed as strengths or weaknesses
depending upon their impact on the organization's objectives. What
may represent strengths with respect to one objective may be
weaknesses for another objective. The factors may include all of the
4P's; as well as personnel, finance, manufacturing capabilities, and so
on. The external factors may include macroeconomic matters,
technological change, legislation, and socio-cultural changes, as well
as changes in the marketplace or competitive position. The results
are often presented in the form of a matrix
 EVOLUTION OF STRATEGIC
MANAGEMENT
In the previous days, talking about the 1920’s till 1930’s, the
managers used to work out the day-to-day planning method. Till this
time they do not concentrate about the future work. However after
this period, managers have tried to anticipate and predict about the
future happenings. They started using tools like preparation of
Budgets and control system like capital budgeting. However these
techniques and tools also failed to emphasize the role of future
adequately.

Then long-range planning came into picture, giving the idea of

planning for the long-term future. But it was soon replaced by
Strategic planning and later by Strategic management-a term that is
currently being used to describe the process of Strategic decision-
making.

The first phase of the planning can be tracked in the mid of 1930’s.
The planning at that period was done on the premises of Ad Hoc
policy making. The reason why the need for planning arose at that
period was that, many businesses had just about started operations
and were mostly in a single product line and the ranges of operation
were in a limited area. As these companies grew they expanded their
products and also increased their geographical coverage. The method
of using informal control and coordination was not enough and
became irrelevant as these companies expanded. Thus arose a need
to integrate functional areas. Framing policies to guide managerial
actions covered this task of integration. Policies helped to have
predefined set of actions, which helped the manager to make
decisions. Policy-making became the way owners managed their
business and it was considered their prime responsibility.

Thus, the increasing environment changes in the 1930’s and 1940’s

planned policy formation replaced Ad Hoc policy making, which led to
the shifting of emphasis to the integration of the functional areas in a
policy changing environment, showing an indication of the evolution
of Strategic management.

Strategic management as a discipline originated in the 1950s and

60s. The most influential pioneers were Alfred D. Chandler, Philip
Selznick, Igor Ansoff, and Peter Drucker.
Alfred Chandler recognized the importance of coordinating the
various aspects of management under one all-encompassing
strategy. In 1962 groundbreaking work Strategy and Structure,
Chandler showed that a long-term coordinated strategy was
necessary to give a company structure, direction, and focus. He says
it concisely, “structure follows strategy.”

In 1957, Philip Selznick introduced the idea of matching the

organization's internal factors with external environmental
circumstances. This core idea was developed into what we now call
SWOT analysis.

Igor Ansoff built on Chandler's work by adding a range of strategic

concepts and inventing a whole new vocabulary. He developed a
strategy grid that compared market penetration strategies, product
development strategies, market development strategies and
horizontal and vertical integration and diversification strategies. In
1965 classic Corporate Strategy, he developed the gap analysis still
used today in which we must understand the gap between where we
are currently and where we would like to be, then develop what he
called “gap reducing actions”.

Peter Drucker contributions to strategic management were many

but two of them are most important. Firstly, he stressed the
importance of objectives. An organization without clear objectives is
like a ship without a rudder. As early as 1954 he was developing a
theory of management based on objectives. This evolved into his
theory of management by objectives (MBO). His other seminal
contribution was in predicting the importance of what today we would
call intellectual capital. He predicted the rise of what he called the
“knowledge worker” and explained the consequences of this for
management. He said that knowledge work is non-hierarchical. Work
would be carried out in teams with the person most knowledgeable in
the task at hand being the temporary leader.
 RECENT TRENDS IN STRATEGIC
MANAGEMENT
The competitive environment in today’s industries is without
precedent. The only perceivable common denominator in a
challenging, globalized and highly technical corporate arena is
“change”. Fast transitions from closed economies to open markets,
from complex hierarchical organizational structures to lean horizontal
ones, and the introduction of disruptive technologies, generate
consequences of moral and ethical dilemmas. These have a direct
impact on our personal lives and on society as a whole, specifically
with the recent scandals perpetrated by the likes of WorldCom, Enron
and a distinguished world class auditing firm that purposely
transgressed the most transparent and sophisticated accounting
standards of the Western hemisphere.

In recent years, certain trends are emerging in strategic management

. Some of the recent trends include:

Core Competence:
A core competency is a specific factor that a business sees as being
central to the way it or its employees work. It fulfils three key criteria:
1. It provides consumer benefits
2. It is not easy for competitors to imitate
3. It can be leveraged widely too many products and markets.

A core competency can take various forms, including

technical/subject matter know-how, a reliable process and/or close
relationships with customers and suppliers. It may also include
product development or culture, such as employee dedication. Core
competencies are the collective learning in organizations, and involve
how to coordinate diverse production skills and integrate multiple
streams of technologies. It is communication, an involvement and a
deep commitment to working across organizational boundaries. Few
companies are likely to build world leadership in more than five or six
fundamental competencies.

Business firms are concentrating on core competition. For instance,

the pharmaceutical companies are divesting non-core businesses to
concentrate on drugs & pharmaceutical products. Concentration on
core products or areas provides competitive advantage in the market.
 Emphasis on Research & Development:
Research and development management has moved from the back
office to center stage to leading edge, becoming a key driver of
business success. Large firms are spending a good deal of money on
R&D. R&D helps:
Improve quality.
Improve speed of production.
Reduces costs.
Introduce new and modified products.

Research and development is nowadays of great importance in

business as the level of competition, production processes and
methods are rapidly increasing. It is of special importance in the field
of marketing where companies keep an eagle eye on competitors and
customers in order to keep pace with modern trends and analyze the
needs, demands and desires of their customers.
Some of the important businesses that focus on R&D include
pharmaceuticals, automobiles, software, electronic goods, and so on.
 Mergers & Acquisitions:
There is increasing trend in respect of mergers & acquisitions. There
are large mergers such as Tata & Cours Steel, Mittal & Arcelor. The
main reason for mergers & acquisitions:

Economy of scale: This refers to the fact that the combined

company can often reduce its fixed costs by removing duplicate
departments or operations, lowering the costs of the company
relative to the same revenue stream, thus increasing profit
margins.

Increased revenue or market share: This assumes that the

buyer will be absorbing a major competitor and thus increase its
market power (by capturing increased market share) to set
prices.

Cross-selling: For example, a bank buying a stock broker could

then sell its banking products to the stock broker's customers,
while the broker can sign up the bank's customers for brokerage
accounts. Or, a manufacturer can acquire and sell
complementary products.

Synergy: For example, managerial economies such as the

increased opportunity of managerial specialization. Another
example are purchasing economies due to increased order size
and associated bulk-buying discounts.

Taxation: A profitable company can buy a loss maker to use

the target's loss as their advantage by reducing their tax
liability. In the United States and many other countries, rules
 are in place to limit the ability of profitable companies to "shop"
for loss making companies, limiting the tax motive of an
acquiring company.

Diversification: While this may hedge a company against a

downturn in an individual industry it fails to deliver value, since
it is possible for individual shareholders to achieve the same
hedge by diversifying their portfolios at a much lower cost than
those associated with a merger.

Empire-building: Managers have larger companies to manage

and hence more power.

After-Sales Services:
Firms are giving increasing importance to after-sales service,
especially in the case of consumer durables, office equipment, &
capital goods. Since the technology is standardized, it is the after-sale
service that can provide competitive advantage in the market.

However, in India, most of the firms, including MNC’s take the

customer granted & do not bother to provide effective after-sales
service. They only undertake publicity campaigns to provide
replacement of parts,-for instance replacement of batteries in cell
phones, & so on. But in reality, they do not bother to implement their
promises.

International Financing:
International finance is the branch of economics that studies the
dynamics of exchange rates, foreign investment, and how these
affect international trade. It also studies international projects,
international investments and capital flows, and trade deficits. It
includes the study of futures, options and currency swaps. Together
with international trade theory, international finance is also a branch
of international economics.
The global financial system (GFS) is a financial system consisting of
institutions and regulators that act on the international level, as
opposed to those that act on a national or regional level. The main
players are the global institutions, such as International Monetary
Fund and Bank for International Settlements, national agencies and
government departments, e.g., central banks and finance ministries,
and private institutions acting on the global scale, e.g., banks and
hedge funds.

Indian firms are resorting to borrowings from global markets. The

FEMA Act, 1999 has made easier the raising of funds by Indian firms
from abroad. Therefore, Indian firms are raising funds from American
and European markets at lower costs. Also, there is increasing trend
in FDI in India due to liberalisation of foreign investment in India.

TRAINING & DEVELOPMENT:

Training is the act of increasing the knowledge and skills of an
employee for performing the job assigned to him. It is a short-term
process. After an employee is selected, placed and introduced in an
organization he must be provided with training facilities so that he
can perform his job efficiently and effectively.

Development is a long-term educational process utilizing an

organized and systematic procedure by which managerial personnel
learn conceptual and theoretical knowledge for general purpose. It
covers not only those activities which improve job performance but
also those activities which improves the personality of an employee.

Objectives of training & development

Individual Objectives – help employees in achieving their

personal goals, which in turn, enhances the individual
contribution to an organization.
Organizational Objectives – assist the organization with
its primary objective by bringing individual effectiveness.
Functional Objectives – maintain the department’s
contribution at a level suitable to the organization’s needs.
Societal Objectives – ensure that an organization is
ethically and socially responsible to the needs and
challenges of the society.

Firms are placing lot of emphasis on training & development

which helps to improve Knowledge, attitudes, skills, & social
behaviour. Training helps to improve efficiency of the employees,
which in turn enables a firm to complete effectively at the market
place. Therefore, firms are spending large sums of money on
training & development of their employees on regular basis.
 Performance Appraisal:
Performance appraisal, also known as employee appraisal, is a
method by which the job performance of an employee is evaluated
(generally in terms of quality, quantity, cost and time). Performance
appraisal is a part of career development.

Performance appraisals are regular reviews of employee performance

within organizations. Generally, the aims of a performance appraisal
are to:
Give feedback on performance to employees.
Identify employee training needs.
Document criteria used to allocate organizational rewards.
Form a basis for personnel decisions: salary increases,
promotions, disciplinary actions, etc.
Provide the opportunity for organizational diagnosis and
development.
Facilitate communication between employee and
administration.
Validate selection techniques and human resource policies to
meet federal Equal Employment Opportunity requirements.

A common approach to assessing performance is to use a numerical

or scalar rating system whereby managers are asked to score an
individual against a number of objectives/attributes. In some
companies, employees receive assessments from their manager,
peers, subordinates and customers while also performing a self
assessment. This is known as 360° appraisal. Forms good
communication patterns. Indian companies such as Maruti, Wipro,
Raymond, Godrej, Hindustan Unilever, etc., have resorted to 360o
appraisal as a feedback tool, which allows a multi-tier assessment of
an executive, not just for his boss but also from his peer group &
subordinates.
 Customer relationship management:
One of the ongoing challenges successful businesses face is in
optimizing customer satisfaction and developing Customer
Relationship Management. Professional firms realize that the
customer is the most important factor in the business. Therefore,
attempts are made to maintain excellent relations with the
customers, especially, the company-loyal customer. A company uses
to track and organize its contacts with its current and prospective
customers.

The objectives of a CRM strategy must consider a company’s specific

situation and its customers' needs and expectations. Information
gained through CRM initiatives can support the development of
marketing strategy by developing the organization's knowledge in
areas such as identifying customer segments, improving customer
retention, improving product offerings (by better understanding
customer needs), and by identifying the organization's most
profitable customers.

CRM strategies can vary in size, complexity, and scope. Some

companies consider a CRM strategy only to focus on the management
of a team of salespeople. However, other CRM strategies can cover
customer interaction across the entire organization. Many commercial
CRM software packages provide features that serve the sales,
marketing, event management, project management, and finance
industries.

Role of the Managers

Managers need to be in control and therefore begin by gaining an
understanding of the business environment. They can become more
receptive to the ideas of the senior managements. Keeping in mind
today’s scenario, the following roles that are always expected from a
manager:

Managing and understanding Information Technology, which is

changing the face of the business.

Mangers need to be oriented towards shareholder value, as

public and common investors own more and more companies.
Managers would need to acquire skills to maximize shareholder
value.

It is essential for today’s manager to foresee the future and track

changes in customer expectations thus take a Strategic
perspective.

Managers should have the capability of initiating and managing

change through leadership and personal qualities of patience,
commitment and perseverance.

Managers would have to provide speedy responses to

environmental changes through information systems and
organizational processes, because this responsiveness is very
important due to the rapid changes in the environment and
scenarios that the business faces.

They should be capable enough to deal with the chaotic

situations and the complex relationship between decision
variables.

Managers will need courage in decision making as the situation

become complex and uncertain. They would have to develop
courage to make unconventional decision.
 Managers would have to maintain high ethical standards in
business and focus on social responsibility.
 CASE STUDY

INTRODUCTION
In the 2000s, telecommunications
(telecom) company Bharti Airtel
Limited (BAL) was the market
leader in the Indian telecom market.
It had established itself as the
leader in the market by
differentiating itself with its focus
on building a strong brand through
innovation in sales, marketing, and
customer service, and an innovative
cost effective business model.
Analysts also credited BAL with
negotiating the regulatory hurdles
in this emerging market and
competition very effectively. This
enabled it to become profitable
despite the Indian telecom market
having the lowest tariffs in the
world.
Some analysts opined that BAL’s unique business model had become
the benchmark for emerging markets. Mobile telephony in India was
experiencing the fastest growth in the world and India was already
one of the leading markets in terms of mobile subscriber base.
Despite Average Revenue per User (ARPU) figures in the country
being quite low compared to many other markets, it was viewed as
an attractive market as mobile penetration of the market, particularly
in the huge rural areas in India, was still low. With the developing
market in the West reaching high levels of saturation (70% in US and
100% in some European markets), many global telecom operators
were looking at emerging markets for their growth and this made
India a prime target market for these firms. The market in India was
also expected to witness many changes with the introduction of new
technologies and mobile number portability.

Since 2007, BAL had been facing serious threats to its leadership
position. On the one hand, there was the onslaught from global
players such as Vodafone and Virgin Mobile, and on the other, the
threat from established Indian companies such as Reliance
Communications Ltd., Tata Teleservices Ltd., and the state-owned
Bharat Sanchar Nigam Ltd (BSNL). Moreover, the market was
expected to witness the entry of some more Indian and foreign
companies. BAL had responded to investing heavily in expanding its
network, technology, and marketing. It was trying to cover all
segments of the population – from the tech-savvy youth population
who coveted the latest value-added services (VAS) to the Bottom of
the Pyramid (BoP) segment who would be satisfied with a low-cost
offering. In early 2008, BAL, which still dominated the Indian telecom
market and was the world’s tenth largest telecom company, was also
readying itself to replicate its success story in some other emerging
markets.

ISSUES
Understand how Bharti Airtel Ltd. tapped the opportunities in
the Indian telecom sector and established itself as the market
leader.

Analyze the booming telecom sector in India that was

experiencing high growth rates, with special emphasis on the
competitive landscape in the sector.

Understand the opportunities that emerging markets such as

India offer to global business enterprises.

Understand the issues and challenges faced by organizations

operating in emerging markets.

EMERGING MARKET CHAMPION

On February 13, 2008, Bharti Airtel Limited (BAL), the leading
telecommunications (telecom) company in India, crossed the 60-
million customer mark.

BAL had crossed the crucial 50 million subscriber mark in the fourth
quarter of 2007 and had become the tenth largest telecom company
in the world in terms of subscriber base. (Refer to Exhibit I for the
world’s top 10 wireless telecom operators) The wireless segment
constituted 96% of BAL’s total customer base.
BAL was the only small initial entrant in the Indian telecom market
which managed to survive consolidation in the sector. Despite tough
competition from other private companies such as Hutchison Essar
Ltd (Hutch), Reliance Communications Ltd (Reliance), Tata
Teleservices Ltd (Tata), and the state-owned Bharat Sanchar Nigam
Ltd (BSNL), it emerged as the undisputed leader in the Indian mobile
telecom market...

According to the Cellular Operators’

Association of India (COAI), BAL
retained its leadership position in
the Indian telecom market with a
market share of 31.88% in 2007.
The valuation of BAL stood at US$
40 billion as of February 2008.
BAL’s spectacular growth matched
the growth in the Indian telecom
sector, which was the fastest in the
world. The Indian telecom sector
was adding 8 million customers per
month as of early 2008.On
becoming the tenth largest telecom
company in the world, the CEO of
BAL Manoj Kohli (Kohli), said, “The
last journey for first 50 million
(customers) was completed within
12 years of starting operations in
November 1995.
This puts Bharti Airtel among the top telecom companies in the world.
Our next target is to reach 100 million mark by 2010.”

BACKGROUND NOTE
Mobile Telephony in India
The mobile telephony revolution started in India when the
government decided to allow private sector participation in the Indian
telecom sector. In 1994, the Department of Telecommunications
(DoT), Government of India (GoI), issued licenses to private operators
to start mobile services in the four Metropolitan cities of Delhi,
Mumbai, Chennai, and Calcutta (now Kolkata)...

Bharti Airtel Ltd.

The foundations of the Bharti

Enterprises
(Bharti) were laid when its
Chairman and
Managing Director (CMD) Sunil
Bharti Mittal (Mittal) started a
bicycle-parts business in 1976 in
his home state Punjab...

The Czar of Indian Telecom

BAL had focused on differentiating itself in the Indian telecom market
by ensuring customer delight and a cost-effective business model – a
business model of being profitable despite having the lowest tariff in
the world...

Results
BAL’s various initiatives helped it attain a dominant position in the
market (Refer to Table II for the top mobile telecom operators in
India) As of March 2008, its ARPU was US$ 10, higher than that of
other operators in India...

New Challenges and Competitors

When Vodafone acquired Hutch, BAL faced the first major threat to its
supremacy in the Indian mobile market since the entry of Reliance
into this market. Reliance was not able to overtake BAL as the CDMA
technology it had adopted did not do too well in the Indian telecom
market...
Countering the Threats
Network Expansion
BAL focused on expanding its network coverage all over the country
before other players could expand on a big scale. In February 2008, it
announced an annual investment plan of US $ 2 billion to expand its
network over the next 3 years. This was substantially higher than its
average annual investment plans of US$ 1.5 billion. BAL planned to
add an additional 30,000 base stations to its existing 40,000 base
stations for the fiscal year 2007 and thereby cover 70% of the
country. Nearly 50 to 60% of the future expansion was to be in the
rural areas...

Ready to Tap Other Emerging Markets?

By early 2008, BAL was not only the dominant player in the Indian
market but also had an international presence in Seychelles through
its subsidiary Telecom Seychelles Ltd., and Europe (Channel Islands)
through its subsidiaries Jersey Airtel Limited (JAL) and Guernsey Airtel
Limited (GAL)...

Outlook
Analysts felt that its success notwithstanding, BAL faced some
challenges to its leadership position in the Indian telecom market. It
had to focus on devising aggressive strategies to continue its
dominance and grow at the same rate at which it had been growing...

Exhibits
Exhibit I: The World’s Top 10 Wireless Telecom Operators
Exhibit II(A): BAL’s Consolidated Balance Sheets
Exhibit II(B): BAL’s Consolidated Statements of Operations
Exhibit III: The Top Ten: Most Innovative Infotech Companies