CONTENTS

Strategy and its components

 Features of strategy
 Process of strategy formulation
 Types of strategies
Strategic management
 Process of strategic management
 Features of strategic management
 Benefits of strategic management
 Importance of strategic management
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 STRATEGY
Strategic Management

 The term strategy has been adopted in the field of management more recently.

 At first, the word was used in ‘Military Science’ to mean what a manager does to offset
actions of competitors.

 Originally, the word was derived from Greek ‘Strategos’, which means generalship. The word
strategy, therefore, means the art of the general.

 Strategy is defined as plans of actions of organizations. How the organization will perform in
respective business to compete successfully,

 What actions are being taken by an organizations to attract and satisfy customers in order to
achieve its goals (Thomson et al., 2005).
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 STRATEGY & ITS
Strategic COMPONENTS
Management

Four Components of Strategy:

1. Clear set of long term goals.

2. Define the scope of the firm i.e., the types of products the firm will serve
etc.

3. A clear statement of competitive advantage it will achieve and sustain.

4. Firms’ internal competition, to achieve a competitive advantage in

the environment in which it has chosen to compete.

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 FEATURES OF STRATEGY
Strategic Management

 Strategy is a systematic phenomenon (a unified, comprehensive and integrated plan of action)

 Strategy takes a holistic view (multidisciplinary as a new strategy influences all the functional areas, i.e.,
marketing, financial, human resource, and operations)

 Multi-dimensional in nature.

 By its structure, it is hierarchical: On the top come corporate strategies, then business unit strategies,
and finally functional strategies. Corporate strategies are decided by the top management, business unit level
strategies by the top people of individual strategic business units, and the functional strategies are decided by
the functional heads.

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 FEATURES OF STRATEGY
Strategic Management(contd…)

 Dynamic in nature Strategy is to create a fit between the environment and the organization's actions. As
environment itself is subject to fast change, the strategy too has to be dynamic to move in accordance to the
environment.

 Create competence (things firm does better than competitors), synergy (between different parts of the
organization and their activities) and value creation so as to attain vision and mission.

 Result of collective decision-making process.

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 PROCESS OF STRATEGY
Strategic FORMULATION
Management
The process of strategy formulation consists of five steps:

 Strategic intent: It provides Vision – what the organization wants to become, Mission – what business the firm is in,
Values – a common set of beliefs guiding the behaviour of organizational members, and Objectives — Qualitative goals.

 Situational analysis: The three kinds of environments need to be scanned – External (to know of Opportunities and Threats),
Internal (to know of strengths and weaknesses), and Industry (to determine competitive scenario).

 Setting long-term quantitative objectives or goals: The results expected from pursuing certain strategies. The objectives
should be quantitative, understandable, challenging, hierarchical, obtainable, and in harmony among organizational units. The
time horizon of objectives and strategies should be consistent.

 Formulation of strategic alternatives: In its journey towards its destination the strategy formulation has to find and
evaluate different strategic alternatives.

 Selection of strategy: To create a fit between the environment and the strategic intent of the organization, a suitable strategy
has to be selected for implementation.

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TYPES OFofSTRATEGIES
Types Strategies

TYPES OF STRATEGIES
CORPORATE
STRATEGY
COMPETITIVE
STRATEGY
FUNCTIONAL
STRATEGY

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 CORPORATE STRATEGY
Types of Strategies
 Corporate strategy defines the markets and businesses in which a company will operate.

 Corporate strategy is formulated by the top management. Senior executives, board members, CEO’s are
actively engaged in corporate level strategy.

 Such a strategy describes the company’s overall direction in terms of its various businesses and product
lines.

 Corporate strategy defines the long-term objectives and generally affects all the business-units.

 The corporate-level strategy is the set of strategic alternatives from which an organization chooses as it
manages its operations simultaneously across several industries and several markets.

 There are three types of corporate strategy: growth, stability, and renewal.

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 TYPES OF CORPORATE
Types of StrategiesSTRATEGY

•Organization expands the number of markets served or products offered, either through its current business(es) or through new
business.
•Organizations grow by using concentration (increase the number of products or markets served in primary business), vertical
integration (backward (organization become its own supplier) or forward (organization become its own distributor)),
GROWTH horizontal integration (combining with competitors), or diversification (can be related or unrelated).

•Organization continues to do what it is currently doing.

•Examples: continuing to serve the same clients by offering the same product or service, maintaining market share, and
sustaining the organization’s current business operations.
STABILITY

• Address declining performance of organization.

• Two types of renewal strategies are: retrenchment (used for minor performance problems) and turnaround
RENEWAL (more extensive measures for serious problems).

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 MANAGINGTypes
CORPORATE
of Strategies STRATEGY
 Managers can manage the collection of businesses using a tool
called a corporate portfolio matrix.

 Corporate portfolio matrix provides a framework for

understanding diverse businesses and helps managers establish
priorities for allocating resources.

 BCG (Boston Consulting Group) matrix introduced the idea

that an organization’s various businesses could be evaluated and
plotted using a 2*2 matrix to identify which ones offered high
potential and which were a drain on organizational resources.

Source: Robbins, S.P. and Coulter, M. (2012), Management, Prentice Hall, New Jersey, USA.

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 COMPETITIVE STRATEGY
Types of Strategies

 Competitive strategy consists of plans of action to use a company’s resources and distinctive

competencies to gain a competitive advantage over its rivals in a market. It defines the basis on which

firm will compete.

 It is a business-unit level strategy, formulated by the senior managers of the unit.

 Formulated in line with the corporate strategy. The main focus of the business strategy is on product

development, innovation, market development, and diversification.

 Concerned with actions that managers undertake to improve the market position of the company

through satisfying the customers.

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