CHAPTER ONE

The basics of strategic management

1.1. Meaning and definition of strategic management

Strategy is defined as a unified, comprehensive and integrated plan relating the strategic
advantages of the firm to the challenges of the environment. It is designed to ensure that the basic
objectives of the organization are achieved.
The above definition indicates that:
 A strategy is unified - it ties all parts of an organization together.
 A strategy is comprehensive - it covers all major aspects of the organization.
 A strategy is integrated - all parts of the plan are compatible and complementary to each
other.
Strategic management is the process of identifying and pursuing an organization's mission by
aligning the organization's internal capabilities with the external demands.
Strategic management is also defined as the set of decisions and actions resulting in formulation
& implementation of strategies designed to achieve the objectives of an organization.
 The term strategic management in this text is used synonymously with the term strategic
planning. The latter term is more often used in the business world, whereas the former is often
used in academia. Sometimes the term strategic management is used to refer to strategy
formulation, implementation, and evaluation, with strategic planning referring only to strategy
formulation. The purpose of strategic management is to exploit and create new and different
opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow
the trends of today. The term strategic planning originated in the 1950s and was very popular
between the mid-1960s and the mid-1970s. During these years, strategic planning was widely
believed to be the answer for all problems. At the time, much of corporate America was
“obsessed” with strategic planning. Following that “boom,” however, strategic planning was
cast aside during the 1980s as various planning models did not yield higher returns. The 1990s,
however, brought the revival of strategic planning, and the process is widely practiced today
in the business world. A strategic plan is, in essence, a company’s game plan. Just as a football
team needs a good game plan to have a chance for success, a company must have a good
strategic plan to compete successfully. Profit margins among firms in most industries have

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 been so reduced by the global economic recession that there is little room for error in the overall
strategic plan.
 A strategic plan results from tough managerial choices among numerous good alternatives, and
it signals commitment to specific markets, policies, procedures, and operations in lieu of other,
“less desirable” courses of action. The term strategic management is used at many colleges and
universities as the subtitle for the capstone course in business administration. This course
integrates material from all business courses. The Strategic Management Club Online at
www.strategyclub.com offers many benefits for business policy and strategic management
students. Professor Hansen at Stetson University provides a strategic management slide show
for this entire text (www.stetson.edu/~rhansen/strategy).
Further definitions of Strategic Management
The term strategic management/ Business Policy and Strategy is defined in many ways by different
writers. Some of the definitions include:
1. Strategic management is the process of systematically analyzing various opportunities and
threats vis-à-vis organizational strengths and weaknesses, formulating, and arriving at
strategic choices through critical evaluation of alternatives and implementing them to meet
the set objectives of the organization.
2. Strategic management (SM) can be also defined as the set of decisions and actions
resulting in formulation and implementation of strategies designed to achieve the
objectives of an organization
3. Strategic Management can be defined as the art and science of formulating, implementing,
and evaluating cross-functional decisions that enable an organization to achieve its
objectives. As this definition implies, strategic management focuses on integrating
management, marketing, finance/accounting, production/operations, research and
development, and computer information systems to achieve organizational success. The
purpose of strategic management is to exploit and create new and different opportunities
for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends
of today. Strategic management is all about gaining and maintaining competitive
advantage- what rival firms can not do. Strategists helps an organization in gathering,
analyzing and organizing information and responsible for the success or failure of an

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 organization. They may differ in their approach from organization to organization
(philosophies, attitudes, values).
From the above definitions of strategic management one can identify that at least:
 Strategic management is an art and a science of choosing the alternatives from the
designed and available courses
 Strategic management involves set of decisions and actions
 Strategic management enable an organization to achieve its objectives
 Strategic management is concerned with gaining and maintaining competitive
advantage- what rival firms cannot do.
 Strategists helps an organization in gathering, analyzing and organizing
information and responsible for the success o[n failure of an organization. They
may differ in their approach from organization to organization (philosophies,
attitudes, values).
According to Robinson and Pearce (2005), strategic management involves attention to no less
than nine critical areas:
1. Determining the mission of the company, including broad statements about its
purpose, philosophy, and goals.
2. Developing a company profile that reflects internal conditions and capabilities.
3. Assessment of the company’s external environment, in terms of both competitive and
general contextual factors.
4. Analysis of possible options uncovered in the matching of the company profile with
the external environment.
5. Identifying the desired options uncovered when possibilities are considered in light
of the company mission.
6. Strategic choice of a particular set of long-term objectives and grand strategies
needed to achieve the desired options.
7. Development of annual objectives and short-term strategies compatible with long-
term objectives and grand strategies.
8. Implementing strategic choice decisions based on budgeted resource allocations and
emphasizing the matching of tasks, people, structures, technologies, and reward
systems.

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 9. Review and evaluation of the success of the strategic process to serve as a basis for
control and as an input for future decision making.
These nine areas indicate, strategic management involves the planning, directing, organizing, and
controlling of the strategy-related decisions and actions of the business. By strategy, managers
mean their large-scale, future- oriented plans for interacting with the competitive environment to
optimize achievement of organization objectives. Thus, a strategy represents a firm’s “game plan”.
Although it does not precisely detail all future deployments (people, financial, and material), it
does provide a framework for managerial decisions. A strategy reflects a company’s awareness of
how to compete, against whom, when, where, and for what.
1.2. Nature and Feature of Strategy
1.7.1. Definition of Strategy
The term strategy has entered the management literature comparatively much later than its use in
Military Science. It is derived from Greek term “Strategos” meaning a “general”. When the term
strategy is used in military sense, it refers to actions that can be taken in the light of action taken
by opposite party. It is literally means the art and science of directing military forces to win and
hold territory.

In management, the concept of strategy is mostly taken in a slightly different form rather than in
military form; it is taken more broadly. However, even in this form, various experts of the field do
not agree about the precise scope of strategy. Chan-dler, 1962 has defined the term strategy as
“the determination of the basic long-term goals and objectives of an enterprise and the adoption of
the course of action and the allocation of resources necessary for carrying out these goals.”
Andrews has defined strategy as “the pattern of objectives, purpose or goals and major policies
and plans for achieving these goals, stated in such a way, so as to define what business the company
is in or is to be and the kind of company it is or is to be. These two definitions of strategy are quite
comprehensive and include objective setting as part of strategy. As against this, Stanford Research
Institute, USA takes a different view when it states that strategy is a way in which the firm, reacting
to its environment, deploys its principal resources and marshals its main efforts in pursuit of its
purpose. Almost similar view is held by Glueck who defines strategy as follows: “A strategy is a
unified, comprehensive, and integrated plan relating the strategic advantages of the firm to the

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challenges of the environment. It is designed to ensure that the basic objectives of the enterprise
are achieved.

Two approaches of defining strategy, particularly in terms of the actions included in strategy, are
different with former approach including objective setting as part of the strategy while latter
excluding it.

In business strategy may be defined as:

 Long term direction and scope of the organization

 That aims at gaining a competitive advantage for the organization
 In the competitive setting
 In the light of origination resources & constants
 To generate and former delight and to meet and exceed stakeholder needs
A strategy is a coherent, comprehensive, long-term plan that creates strategic advantage for the
firm and relates the same to environmental opportunities and pleasure of threats. It ensures the
achievement of basic organizational objectives through proper execution. Strategies are means by
which long-term objectives of organization will be achieved. They do require top management
decision and large amount of the firm’s resources. It:

 Enable to fulfill organization’s purpose

 Is combination of means and ends
 Helps to guide organizational behavior
 Has pervasive or continuing importance to organization as a whole
 Helps to determine, shape and reveals objectives, purpose and goals of organization
 Continues process
 Integrate organizational action in to cohesive whole
1.3. Key Terms in Strategic Management
Before we further discuss strategic management, we should define nine key terms: competitive
advantage, strategists, vision and mission statements, external opportunities and threats, internal
strengths and weaknesses, long-term objectives, strategies, annual objectives, and policies.
a. Competitive Advantage

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Strategic management is all about gaining and maintaining competitive advantage. This term can
be defined as “anything that a firm does especially well compared to rival firms.” When a firm can
do something that rival firms cannot do, or owns something that rival firm’s desire, that can
represent a competitive advantage. Normally, a firm can sustain a competitive advantage for only
a certain period due to rival firms imitating and undermining that advantage. Thus it is not adequate
to simply obtain competitive advantage. A firm must strive to achieve sustained competitive
advantage by:
1. Continually adapting to changes in external trends and events and internal capabilities,
competencies, and resources;
2. Effectively formulating, implementing, and evaluating strategies that capitalize upon those
factors.
For example, newspaper circulation in the United States is steadily declining. Most national
newspapers are rapidly losing market share to the Internet, and other media that consumers use to
stay informed. Daily newspaper circulation in the United States totals about 55 million copies
annually, which is about the same as it was in 1954. Strategists ponder whether the newspaper
circulation slide can be halted in the digital age. The six broadcast networks—ABC, CBS, Fox,
NBC, UPN, and WB—are being assaulted by cable channels, video games, broadband, wireless
technologies, satellite radio, high-definition TV, and digital video recorders. An increasing number
of companies are gaining a competitive advantage by using the Internet for direct selling and for
communication with suppliers, customers, creditors, partners, shareholders, clients, and
competitors who may be dispersed globally. E-commerce allows firms to sell products, advertise,
purchase supplies, bypass intermediaries, track inventory, eliminate paperwork, and share
information. In total, e-commerce is minimizing the expense and cumbersomeness of time,
distance, and space in doing business, thus yielding better customer service, greater efficiency,
improved products, and higher profitability.
b. Strategists
Strategists are the individuals who are most responsible for the success or failure of an
organization. Strategists have various job titles, such as chief executive officer, president, owner,
chair of the board, executive director, chancellor, dean, or entrepreneur. Jay Conger, professor of
organizational behavior at the London Business School and author of Building Leaders, says, “All
strategists have to be chief learning officers. We are in an extended period of change. If our leaders

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aren’t highly adaptive and great models during this period, then our companies won’t adapt either,
because ultimately leadership is about being a role model.”

Strategists help an organization gather, analyze, and organize information. They track industry and
competitive trends, develop forecasting models and scenario analyses, evaluate corporate and
divisional performance, spot emerging market opportunities, identify business threats, and develop
creative action plans. Strategic planners usually serve in a support or staff role. Usually found in
higher levels of management, they typically have considerable authority for decision making in
the firm. The CEO is the most visible and critical strategic manager. Any manager who has
responsibility for a unit or division, responsibility for profit and loss outcomes, or direct authority
over a major piece of the business is a strategic manager (strategist). Strategists differ as much as
organizations themselves, and these differences must be considered in the formulation,
implementation, and evaluation of strategies. Some strategists will not consider some types of
strategies because of their personal philosophies. Strategists differ in their attitudes, values, ethics,
willingness to take risks, concern for social responsibility, concern for profitability, concern for
short-run versus long-run aims, and management style.

c. Vision and Mission Statements

Many organizations today develop a vision statement that answers the question “What do we want
to become?” Developing a vision statement is often considered the first step in strategic planning,
preceding even development of a mission statement. Many vision statements are a single sentence.
For example, the vision statement of Stokes Eye Clinic in Florence, South Carolina, is “Our vision
is to take care of your vision.” Mission statements are “enduring statements of purpose that
distinguish one business from other similar firms. A mission statement identifies the scope of a
firm’s operations in product and market terms. It addresses the basic question that faces all
strategists: “What is our business?” A clear mission statement describes the values and priorities
of an organization. Developing a mission statement compels strategists to think about the nature
and scope of present operations and to assess the potential attractiveness of future markets and
activities. A mission statement broadly charts the future direction of an organization. A mission
statement is a constant reminder to its employees of why the organization exists and what the
founders envisioned when they put their fame and fortune at risk to breathe life into their dreams.

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d. External Opportunities and threats

Threats External opportunities and external threats refer to economic, social, cultural,
demographic, environmental, political, legal, governmental, technological, and competitive trends
and events that could significantly benefit or harm an organization in the future. Opportunities and
threats are largely beyond the control of a single organization—thus the word external. In a global
economic recession, a few opportunities and threats that face many firms are listed here:

• Availability of capital can no longer be taken for granted.

• Consumers expect green operations and products.

• Marketing has moving rapidly to the Internet.

• Consumers must see value in all that they consume.

• Global markets offer the highest growth in revenues.

• Too much debt can crush even the best firms.

• The housing market is depressed

 The types of changes mentioned above are creating a different type of consumer and
consequently a need for different types of products, services, and strategies. Many companies
in many industries face the severe external threat of online sales capturing increasing market
share in their industry. Other opportunities and threats may include the passage of a law, the
introduction of a new product by a competitor, a national catastrophe, or the declining value
of the dollar. A competitor’s strength could be a threat. Unrest in the Middle East, rising energy
costs, or the war against terrorism could represent an opportunity or a threat. A basic tenet of
strategic management is that firms need to formulate strategies to take advantage of external
opportunities and to avoid or reduce the impact of external threats. For this reason, identifying,
monitoring, and evaluating external opportunities and threats are essential for success. This
process of conducting research and gathering and assimilating external information is
sometimes called environmental scanning or industry analysis. Lobbying is one activity that
some organizations utilize to influence external opportunities and threats.

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 e. Internal Strengths and Weaknesses

Internal strengths and internal weaknesses are an organization’s controllable activities that are
performed especially well or poorly. They arise in the management, marketing,
finance/accounting, production/operations, research and development, and management
information systems activities of a business. Identifying and evaluating organizational strengths
and weaknesses in the functional areas of a business is an essential strategic management activity.
Organizations strive to pursue strategies that capitalize on internal strengths and eliminate internal
weaknesses. Strengths and weaknesses are determined relative to competitors. Relative deficiency
or superiority is important information. Also, strengths and weaknesses can be determined by
elements of being rather than performance.

f. Long-Term Objectives

Objectives can be defined as specific results that an organization seeks to achieve in pursuing its
basic mission. Long-term means more than one year. Objectives are essential for organizational
success because they state direction; aid in evaluation; create synergy; reveal priorities; focus
coordination; and provide a basis for effective planning, organizing, motivating, and controlling
activities. Objectives should be challenging, measurable, consistent, reasonable, and clear. In a
multidimensional firm, objectives should be established for the overall company and for each
division.

h. Strategies

Strategies are the means by which long-term objectives will be achieved. Business strategies may
include geographic expansion, diversification, acquisition, product development, market
penetration, retrenchment, divestiture, liquidation, and joint ventures.

Strategies are potential actions that require top management decisions and large amounts of the
firm’s resources. In addition, strategies affect an organization’s long-term prosperity, typically for
at least five years, and thus are future-oriented. Strategies have multifunctional or multidivisional
consequences and require consideration of both the external and internal factors facing the firm.

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i. Annual Objectives

Annual objectives are short-term milestones that organizations must achieve to reach long-term
objectives. Like long-term objectives, annual objectives should be measurable, quantitative,
challenging, realistic, consistent, and prioritized. They should be established at the corporate,
divisional, and functional levels in a large organization. Annual objectives should be stated in
terms of management, marketing, finance/accounting, production/operations, research and
development, and management information systems (MIS) accomplishments. A set of annual
objectives is needed for each long-term objective. Annual objectives are especially important in
strategy implementation, whereas long-term objectives are particularly important in strategy
formulation. Annual objectives represent the basis for allocating resources.

j. Policies

Policies are the means by which annual objectives will be achieved. Policies include guidelines,
rules, and procedures established to support efforts to achieve stated objectives. Policies are guides
to decision making and address repetitive or recurring situations. Policies are most often stated in
terms of management, marketing, finance/accounting, production/operations, research and
development, and computer information systems activities.

Policies can be established at the corporate level and apply to an entire organization at the
divisional level and apply to a single division, or at the functional level and apply to particular
operational activities or departments. Policies, like annual objectives, are especially important in
strategy implementation because they outline an organization’s expectations of its employees and
managers. Policies allow consistency and coordination within and between organizational
departments. Substantial research suggests that a healthier workforce can more effectively and
efficiently implement strategies. Smoking has become a heavy burden for Europe’s state-run social
welfare systems, with smoking-related diseases costing well over $100 billion a year. Smoking
also is a huge burden on companies worldwide, so firms are continually implementing policies to
curtail smoking.

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1.4. Benefits of Strategic Management

Strategic management allows an organization to be more proactive than reactive in shaping its own
future; it allows an organization to initiate and influence (rather than just respond to) activities-
and thus to exert control over its own destiny. Historically, the principal benefit of strategic
management has been to help organizations formulate better strategies through the use of a more
systematic, logical, and rational approach to strategic choice. This certainly continues to be a major
benefit of strategic management, but research studies now indicate that the process, rather than the
decision or document, is the more important contribution of strategic management. The strategic
management approach emphasizes interaction by managers at all levels of the organizational
hierarchy in planning and implementation. A major aim of the process is to achieve the
understanding of and commitment from all managers and employees. When managers and
employees understand what the organization is doing and why, they often feel that they are a part
of the firm and become committed to assisting it, and become creative and innovative as the
process provides an opportunity to empower individuals. Although making good strategic
decisions is the major responsibility of an organization’s owner or chief executive officer, both
managers and employees must also be involved in strategy formulation, implementation, and
evaluation activities. Participation is a key to gaining commitment for needed changes. An
increasing number of corporations and institutions are using strategic management to make
effective decisions. But strategic management is not a guarantee for success; it can be
dysfunctional if conducted haphazardly.

Financial Benefits

Research indicates that organizations using strategic-management concepts are more profitable
and successful than those that do not. Businesses using strategic-management concepts show
significant improvement in sales, profitability, and productivity compared to firms without
systematic planning activities. High-performing firms tend to do systematic planning to prepare
for future fluctuations in their external and internal environments. Firms with planning systems
more closely resembling strategic-management theory generally exhibit superior long-term
financial performance relative to their industry. High-performing firms seem to make more
informed decisions with good anticipation of both short- and long-term consequences. In contrast,
firms that perform poorly often engage in activities that are shortsighted and do not reflect good

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forecasting of future conditions. Strategists of low-performing organizations are often preoccupied
with solving internal problems and meeting paperwork deadlines. They typically underestimate
their competitors’ strengths and overestimate their own firm’s strengths. They often attribute weak
performance to uncontrollable factors such as a poor economy, technological change, or foreign
competition.

Nonfinancial Benefits

Besides helping firms avoid financial demise, strategic management offers other tangible benefits,
such as an enhanced awareness of external threats, an improved understanding of competitors’
strategies, increased employee productivity, reduced resistance to change, and a clearer
understanding of performance–reward relationships. Strategic management enhances the problem-
prevention capabilities of organizations because it promotes interaction among manager’s at all
divisional and functional levels. Firms that have nurtured their managers and employees, shared
organizational objectives with them, empowered them to help improve the product or service, and
recognized their contributions can turn to them for help in a pinch because of this interaction. In
addition to empowering managers and employees, strategic management often brings order and
discipline to an otherwise floundering firm. It can be the beginning of an efficient and effective
managerial system. Strategic management may renew confidence in the current business strategy
or point to the need for corrective actions. The strategic-management process provides a basis for
identifying and rationalizing the need for change to all managers and employees of a firm; it helps
them view change as an opportunity rather than as a threat

The benefits of strategic management according to Robinson and Pearce (2005) include:

1. Strategy formulation activities should enhance the problem prevention capabilities of the
firm. As a consequence of encouraging and rewarding subordinate attention to planning
considerations, managers are aided in their monitoring and forecasting responsibilities by
workers who are alerted to needs of strategic planning.
2. Group-based strategic decisions are most likely to reflect the best available alternatives.
Better decisions are probable outcomes of the process for two reasons: first, generating
alternative strategies is facilitated by group interaction; second, screening of options is
improved because group members offer forecasts based on their specialized perspectives.

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 3. Employee motivation should improve as employees better appreciate the productivity –
reward relationships inherent in every strategic plan. When employees or their
representatives participate in the strategy formulation process, a better understanding of
the priorities and operations of the organization’s reward system is achieved, thus adding
incentives for goal-directed behavior.
4. Gaps and overlaps in activities among diverse individuals and groups should be reduced as
participation in strategy formulation leads to a clarification of role differentiations. The
group meeting format which is characteristic of several stages of a strategy formulation
process, promotes an understanding of the delineations of individual and subgroup
responsibilities.
5. Resistance to change should be reduced. Although making good strategic decisions is the
major responsibility of an organization’s owner or chief executive officer, both managers
and employees must also be involved in strategy formulation, implementation, and
evaluation activities. Participation is a key to gaining commitment for needed changes. The
required participation helps eliminate the uncertainty associated with change, which is at
the root of most resistance. While participants may be no more pleased with their own
choices then they would be with authoritarian decisions, their acceptance of new plans is
more likely if employees are aware of the parameters that limit the available options.
According to Greenley( cited in David 2005) strategic management offers the following
benefits:

1. It allows for identification, prioritization, and exploitation of opportunities.

2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to identified opportunities.
7. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc
decisions.
8. It creates a framework for internal communication among personnel.
9. It helps integrate the behavior of individuals into a total effort.
10. It provides a basis for clarifying individual responsibilities.

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 11. It encourages forward thinking
12. It provides a cooperative, integrated, and enthusiastic approach to tackling problems and
opportunities.
13. It encourages a favorable attitude toward change.
14. It gives a degree of discipline and formality to the management of a business.
1.5. Why study Strategic Management / Business Policy and Strategy

The study of Business Policy and Strategy is important for all students a spring to be manager, all
practicing managers and employees of an organization. This is because knowledge of Business
Policy and Strategy helps this individuals/ groups:

 To know the direction in which organization is heading

 To understand the broader picture, and how his /her own job fits into the entire
organizational plan
 To understand impact of environmental change ( eg impact on career)
 To provide the values, strategies and objectives of an enterprise thereby helps in
managerial decision
 To anticipate changing conditions and make the firm to become proactive
 To make informed decision
 To promote effective communication
1.6. Risks of Strategic Management/ Why Some Firms Do No Strategic Planning

While involvement in strategy formulation generates behavior-based benefits for participants and
for the firm, managers must be trained to guard against three types of unintended negative
consequences. First, while it is readily recognized that the strategic management process is costly
in terms of hours invested by participants, the negative effects of managers spending time away
from work is considered less often. Managers must be trained to schedule their duties to provide
the necessary time for strategic activities while minimizing any negative impact on operational
responsibilities.

Second, if the formulators of strategy are not intimately involved in implementation, individual
responsibility for input to the decision process and subsequent conclusions can be shirked. Thus,

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strategic managers must be trained to limit their promises to performance that can be delivered by
the decision makers and their subordinates.

Third, strategic managers must be trained to anticipate, minimize, or constructively respond when
participating subordinates become disappointed or frustrated over unattained expectations.
Frequently, subordinates perceive an implicit guarantee that their involvement in even minor
phases of total strategy formulation will result in both acceptance of their preferred plan and an
increase in clearly associated rewards. Alternatively, they may erroneously conclude that a
strategic manager’s solicitation of their input on selected issues will extend to other areas of
decision making. Sensitizing mangers to these issues and preparing them with effective means of
negating or minimizing such negative consequences will greatly enhance the overall potential of
any strategic plan.

Because of the aforementioned risks and other factors, some firms do not engage in strategic
management, and some firms do strategic management but receive no support from managers and
employees. Some reasons for poor or no strategic planning are as follows.

 Poor Reward Structures – When an organization assumes success, it often fails to reward
success. When failure occurs, then the firm may punish. In this situation, it is better for an
individual to do noting (and not draw attention) than to risk trying to achieve something,
fail, and be punished.
 Fire – Fighting – An organization can be so deeply involved in crisis management and
fire-fighting that it does not have time to plan.
 Waste of Time- Some firms see planning as a waste of time since no marketable product
is produced. Time spent on planning is an investment.
 Too Expensive – some organizations are culturally opposed to spending resources.
 Laziness – People may not want to put forth the effort needed to formulate a plan.
 Content with Success – Particularly if a firm is successful, individuals may feel there is
no need to plan because things are fine as they stand. But success today does not guarantee
success tomorrow.

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  Fear of failure – By not taking action, there is little risk of failure unless a problem is
urgent and pressing. Whenever something worthwhile is attempted, there is some risk of
failure.
 Overconfidence – As individuals a mass experience, they may rely less on formalized
planning. Rarely, however, is this appropriate. Being overconfident or overestimating
experience can bring demise. Forethought is rarely wasted and is often the mark of
professionalism.
 Prior Bad Experience – People may have had a previous bad experience with planning,
that is, cases in which plans have been long, cumbersome, impractical, or inflexible.
Planning, like anything else, can be done badly.
 Self – Interest – when someone has achieved status, privilege, or self – esteem through
effectively using an old system, he or she often sees a new plan as a threat.
 Fear of the Unknown – People may be uncertain of their abilities to learn new skills, of
their aptitude with new systems, or of their ability to take on new roles.
 Honest Difference of Opinion – People may sincerely believe the plan is wrong. They
may view the situation from a different viewpoint, or they may have aspirations for
themselves or the organization that are different from the plan. Different people in different
jobs have different perceptions of a situation.
 Suspicion – Employees may not trust management.
Thus, organizations should identify the risks and aware of the reasons for poor or no strategic
management and take calculated risk and overcome unjustifiable reasons for failure to practice
strategic management. Furthermore, strategists should understand that strategic management is a
complex process that takes an organization into un-chartered territory. It does not provide a ready
–to-use prescription for success; instead, it takes the organization through a journey and offers a
framework for addressing questions and solving problems. In other wards, they have to aware of
potential pitfalls and address them to be successful.

Some pitfalls/drawbacks to watch for and avoid in strategic management are:

 Using strategic planning to gain control over decisions and resources

 Doing strategic planning only to satisfy accreditation or regulatory requirements
 Too hastily moving from mission development to strategy formulation

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  Failing to communicate the plan to employees, who continue working in the dark
 Top managers making many intuitive decisions that conflict with the formal plan
 Top managers not actively supporting the strategic-planning process
 Failing to use plans as a standard for measuring performance
 Delegating planning to a “planner” rather than involving all managers
 Failing to involve key employees in all phases of planning
 Failing to create a collaborative climate supportive of change
 Viewing planning to be unnecessary or unimportant
 Becoming so engrossed in current problems that insufficient or no planning is done
 Being so formal in planning that flexibility and creativity are stifled.
1.6. The Strategic Management Process

The strategic management process consists of three stages: strategy formulation, strategy
implementation, and strategy evaluation. Strategy formulation includes developing a vision and
mission, identifying an organization’s external opportunities and threats, determining internal
strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and
choosing particular strategies to pursue. Strategy implementation often is called the action stage
of strategic management requires a firm to establish annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be executed. Strategy
implementation includes developing a strategy – supportive culture, creating an effective
organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing
information systems, and linking employee compensation to organizational performance.
Performing these functions is not easy and thus this stage is often considered to be the most
difficult stage in strategic management. It requires personal discipline, commitment, and sacrifice
and interpersonal skills. Successful strategy implementation hinges upon managers ability to
motivate employees, which is more an art than a science. Strategies formulated but not
implemented serve no useful purpose.

Strategy evaluation is the final stage in strategic management. Managers desperately need to know
when particular strategies are not working well; strategy evaluation is the primary means for
obtaining this information. All strategies are subject to future modification because external and
internal factors are constantly changing. Three fundamental strategy-evaluation activities are (1)

17
reviewing external and internal factors that are the ads for current strategies, (2) measuring
performance, and (3) taking corrective actions. Strategy evaluation is needed because success
today is no guarantee of success tomorrow! Success always creates new and different problems;
complacent organizations experience demise.

The strategic-management process can best be studied and applied using a model. And there are
many frameworks to study strategic management / business policy and strategy. Every model
represents some kind of process. The framework illustrated in Figure 1-1 is a widely accepted,
comprehensive model of the strategic-management process.

18
 FIGURE 1-1 A Comprehensive Strategic – Management Model

Perform
External Audit

Establish Long- Generate, Implement Implement Strategies Measure and

Develop Vision and Strategies – Marketing, Finance, Evaluate
Term Objectives Evaluate, and
Mission statement Management Issues Accounting, R&D, and Performance
Select Strategies MIS Issues

Perform

Internal Audit

Strategy Formulation Strategy Implementation Strategy Evaluation

19
The model shows many important concepts. It states that identifying an organization’s existing
vision, mission, objectives, and strategies is the logical starting point for strategic management.

The model also shows that the strategic-management process is dynamic and continuous. A
change in any one of the major components in the model can necessitate a change in any or all of
the other components. For instance, a shift in the economy could represent a major opportunity
and require a change in long-term objectives and strategies; a failure to accomplish annual
objectives could require a change in policy; or a major competitor’s change in strategy could
require a change in the firm’s mission. Therefore, strategy formulation, implementation, and
evaluation activities should be performed on a continual basis, not just at the end of the year or
semi-annually. The strategic management process never really ends and thus good communication
and feedback are needed throughout the strategic-management process.

Here it is very important to note that the strategic- management process is not as cleanly divided
and neatly performed in practice as the strategic-management model suggests. Some of the
indicated steps do overlap and can be done simultaneously. Moreover, strategists use both formal
(the process is typically more formal in larger and well-established organizations while smaller
businesses tend to be less formal) and informal approaches. .

1.7. The Characteristics of strategy

Strategy has many features. These include:

1. Strategy is concerned with directing and guiding the inception and growth of
organizations, and the changes that occur as they conduct their activities. Strategy is
concerned with reconciling the need for organizational stability and continuity in an
increasingly tumultuous market. Strategy provides the central purpose and direction to
organizational activities. Strategy is about decision making and actions, which determine
whether an enterprise excels, survives or dies. It is intimately concerned with the optimum
use of resources in a changing environment.
2. Strategy demands an integrated approach to management, a sound understanding of
the dynamics of the marketplace, intuition, inspiration, creativity, enthusiasm,
commitment, energy, vitality, drive, rationality and ingenuity. In today’s highly
competitive markets, a highly integrated and harmonized approach towards managing is

20
 required. Strategy orchestrates the contributions of various functions, various units and
various organizational levels. Strategy is a combination of continuous evolution with
commitment and determination.
3. Strategy involves strategic positions: Strategic competition can be thought of as the
process of perceiving new positions that customers from established positions or draw new
customers into the market. Strategic positions can be based on customer needs, customer
accessibility, or the variety of company’s products and services. Whatever the basis,
positioning requires a customized set of activities because it is always a function of
differences on the supply side. If there were only one ideal position, there would be no
need for strategy. The essence of strategic positioning is to choose a set of activities that is
different from rivals.
Michael Porter’s Strategic positions emerge from three, distinct sources, which are not
mutual exclusive and often overlap.

(a) Variety based positioning - based on producing a subset of an industry’s products and
services. It makes economic sense when a company can best produce particular products
or services using distinctive set of activities. It can serve a wide array of customers, but for
most it will meet only a subset of their needs.
(b) Need based Positioning – based on serving all or a part of the needs of a group of customers.
A variant of this occurs when the same customer has a different set of needs on various
occasions. Differences in needs will not translate into meaningful positions unless the best
set of activities required to fulfill them also differs.
(c) Access based positioning – based on the segmentation of customers who are accessible in
different ways. They may have the same needs as the other set of customers have but often
the best configuration of activities to reach them may be different.
4. Strategy is choosing what not to do – Strategy involves trade-offs: A strategic position is
not sustainable, over the long term, unless there are tradeoffs with other positions, which
means that more of one thing necessitates less of another. In this sense, the essence of
strategy is choosing what not to do. Without trade-offs, there would be no need for choice
and thus no need for strategy. Trade-offs creates the need for choice and protect against
reposition and straddlers.

21
5. Strategic considerations involve deciding what a company is to be (strategic thinking) and
how it is to become what it is to be (strategic planning)? Peter Drucker remarks “ the failure
to ask and answer these questions is the single most critical reason for business failure"
6. Strategy is intimately concerned with the long-term success (or failure) of the firm. It
impinges on all components of the organization. Strategy is about range, scale and scope
of the organization’s activities. Strategy is often used as an all –encompassing term for the
entire hierarchy of objectives, except for the relatively short-term objectives.
7. Strategy operates in a competitive setting, and is concerned about gaining a differential
advantage vis-à-vis the competition – both present and potential. It deals with the effective
positioning of the organization in the competitive environment. Competitive advantage
results when a firm enjoys superiority in terms of differentiation, low cost and/or quick
response.
8. Strategic decisions must have internal consistency, external fit, resource fit, effective
communication and implementation. One of the prime responsibilities of top management
is to lead the organization in developing a unified hierarchy of strategic intent that
incorporates a consistent and mutually supporting set of vision, mission, goals, and
objectives. Strategy has to help devise a suitable culture, style and way of working that
both reflects and harmonizes the nature of the staff, the nature of the market, the necessary
ways of working and the nature of actual offerings.
9. Strategy is the domain of top management; Strategy formulation and implementation
are responsibilities of the top management.
10. Strategy determines the organization’s scope of activities or businesses, and influences
policy, procedures, plans, budgets etc. It lays down effective boundaries for all the
organizational endeavors. Strategy is essentially concerned with the conception of a board
formula that outlines the future course of action.
11. Strategy affects and is affected by the external environment. The process of strategic
management deals with effective matching of organizational strengths to take advantage
of environmental opportunities, and minimize weaknesses to overcome threats. This is also
known as the concept of ‘strategic fit’
12. Proactive strategy calls for stretching organizational resources to make the
impossible, possible. It builds effectively on organization’s strengths to create

22
 competencies that outpace the competition. This is also known as the conce4pt of ‘strategic
stretch’
13. Strategy involves behavioral, ethical and operational considerations. Strategy is
concerned with creating direction and understanding for all involved, so that each activity
is positive and effective.
14. Strategies may require a change in the resources mix and their applications. It may
also necessitate a major change in the organization’s culture, values, etc.
15. Strategy acts as a guide to the operational level decisions. Strategy must also be
implemented effectively. The coach may have an excellent game plan, but the game is
played on the field. For successful performance, managers have to take care that the
operational level activities are in line with the strategic direction f the firm. The real
implementation of strategic decisions is done at the operational level, which can make or
mar the prospects of even the best-conceived strategies.
16. Strategy of an organization has to take care of all stakeholders, and at times it may be
a hostage to the history of the organization, i.e. the past strategy, the policies, the values,
the culture, the style, the past market standing, etc.
17. Strategic decisions are complex in nature. The process is imperfect and is carried out in
an imperfect and changing world, by imperfect people.
18. Strategy is deliberate & unique: Competitive Strategy is about being different. It means
deliberately choosing a different set of activities to deliver unique mix of value.
19. Strategic decisions may entail multiplicity of time horizons. Strategy can focus on the
short, medium, and long term.
20. Strategic decisions have to aim at efficiency as well as effectiveness. Efficiency is doing
things right, effectiveness is doing the right things. Strategic decisions must have elements
of both. The short-term view is likely to lead to efficiency, but managers may end up doing
in a right fashion the wrong task. Effectiveness is derived from the strategic direction.
Strategic decisions must emphasize to balance both the perspectives.
21. Strategic decisions can and do involve a high degree of uncertainty. They are concerned
with the long-term success, but always necessitate keeping an eye on the short-term
ramifications of any action.
Levels of Strategy

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Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels
in a large organization: corporate, divisional or strategic business unit, and functional.
Alternatively, strategy may operate at different levels of an organization corporate level, business
level, and functional level.

1. Corporate Level

Corporate Level Strategy occupies the highest level of strategic decision-making and covers
actions dealing with the objective of the firm, acquisition and allocation of resources and
coordination of strategies of various SBUs for optimal performance. Such decisions are made by
top management of the organization. Top management of the organization is responsibility to
achieve the planned financial performance of the company in addition to meeting the non-financial
goals viz. social responsibility and the organizational image. Corporate strategy defines the
business in which a company will compete preferably in a way that focuses resources to convert
distinctive competence into competitive advantage.’ Corporate strategy is not the sum total of
business strategies of the corporation but it deals with different subject-matter. The corporate level
strategies translate the orientation of the stakeholders and the society into the forms of strategies
for functional or business levels. Corporate Level Strategies is the level where vision statement of
the companies emerges.

2. Business Level

Business-level strategy is - applicable in those organizations which have different businesses-and

each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to
identify the discrete independent product/market segments served by an organization. Since each
product/market segment has a distinct environment, a SBU is created for each such segment. For
each product group, the nature of market in terms of customers, competition, and marketing
channel differs. Therefore, it requires different strategies for its different product groups. Thus,
where SBU concept is applied, each SBU sets its own strategies to make the best use of its
resources (its strategic advantages) given the environment it faces. At such a level, strategy is a

24
comprehensive plan providing objectives for SBUs, allocation of resources among functional areas
and coordination between them for making optimal contribution to the achievement of corporate-
level objectives.

Such strategies operate within the overall strategies of the organization. The corporate strategy sets
the long-term objectives of the firm and the broad constraints and policies within which a SBU
operates. The corporate level will help the SBU define its scope of operations and also limit or
enhance the SBU’s operations by the resources the corporate level assigns to it. There is a
difference between corporate-level and business level strategies. For example, Andrews says that
in an organization of any size or diversity, corporate strategy usually applies to the whole
enterprise, while business strategy, less comprehensive, defines the choice of product or service
and market of individual business within the firm. In other words, business strategy relates to the
‘how’ and corporate strategy to the ‘what’.

This level consists of primarily the business managers or managers of Strategic Business units
(middle level managers). Here strategies are about how to meet the competition in a particular
product market and strategies have to be related to a unit within an organization. The managers at
this level translate the general statements of direction and intent churned out at corporate level.
The managers identify the most profitable market segment, where they can excel, keeping in focus
the vision of the company. The corporate values, managerial capabilities, organizational
responsibilities, and administrative systems that link strategic and operational decision making
level at all the levels of hierarchy, encompassing all business and functional lines of authority in a
company are dealt with at this level of strategy formulation. The managerial style, beliefs, values,
ethics, and accepted forms of behavior must be congruent with the organizational culture and at
this level, these aspects are diligently taken care of by strategic managers.

3. Operational Level/ Functional-level Strategy

Functional strategy, as is suggested by the title, relates to a single functional operation and the
activities involved therein. Decisions at this level within the organization are often described as
tactical. Such decisions are guided and constrained by some overall strategic considerations.
Functional strategy deals with relatively restricted plan providing objectives for specific function,
allocation of resources among different operations within that functional area and coordination

25
between them for optimal contribution to the achievement of the SBU and corporate-level
objectives. Below the functional level strategy, there may be sub-operations-level strategies as
each function may be divided into several sub functions. For example, marketing strategy, a
functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with
each sub function strategy contributing to functional strategy. The following diagram shows the
hierarchy of the three levels of strategy

Corporate level
Strategy

SBU Level (Business) Strategy

Functional (Operational) Level Strategy

Note that strategies at all the three levels are interlinked. Business level strategies are derived from
corporate level strategy and functional level strategies from business level strategies. Higher
level strategy generates a lower-level strategy and a lower-level strategy contributes to the
achievement of the objectives of higher-level strategy.
CHAPTER TWO
2. Setting Strategic Direction
2.1 The Process of Strategic Management
Strategic direction refers to the plans that need to be implemented for an organization to progress
towards its vision and fulfil its goals. It ensures owners and management can communicate the
importance of employees work and their contribution to achieving business objectives.
Strategic direction refers to the overall direction and scope of an organization's actions and decisions. It is
a long-term plan that outlines the organization's goals and objectives, and the means by which it intends to
achieve them. It is typically developed by senior management and is used to guide the organization in
making decisions and allocating resources. The strategic direction should align with the organization's
mission and vision, and be adaptable to changes in the external environment.

The strategic management process is made up of four elements: situation analysis, strategy
formulation, strategy implementation, and strategy evaluation. These elements are steps that are
performed, in order, when developing a new strategic management plan. Existing businesses that

26
have already developed a strategic management plan will revisit these steps as the need arises, in
order to make necessary changes and improvements.

Situation analysis is the first step in the strategic management process. The situation analysis
provides the information necessary to create a company mission statement. Situation analysis
involves scanning and evaluating the organizational context, the external environment, and the
organizational environment. This analysis can be performed using several techniques. Observation
and communication are two very effective methods.

To begin this process, organizations should observe the internal company environment. This
includes employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with shareholders. In
addition, discussions, interviews, and surveys can be used to analyze the internal environment.
Organizations also need to analyze the external environment. This would include customers,
suppliers, creditors, and competitors.
Several questions can be asked which may help analyze the external environment.
 What is the relationship between the company and its customers?
 What is the relationship between the company and its suppliers?
 Does the company have a good rapport with its creditors?
 Is the company actively trying to increase the value of the business for its shareholders?
 Who is the competition?
 What advantages do competitors have over the company.
The strategic management process is made up of the following elements:
1: Strategic Vision, Mission and Objectives
First a company must determine what directional path the company should take and what changes
in the company’s product – market – customer – technology – focus would improve its current
market position and its future prospect. Deciding to commit the company to one path versus
another pushes managers to draw some carefully reasoned conclusions about how to try to modify
the company’s business makeup and the market position it should carve out. Top management’s
views and conclusions about the company’s direction and the product-customer-market-
technology focus constitute a strategic vision for the company. A strategic vision delineates
management’s aspirations for the organization and highlights a particular direction, or strategic

27
path for it to follow in preparing for the future, and moulds its identity. A clearly articulated
strategic vision communicates management’s aspirations to stakeholders and helps steer the
energies of company personnel in a common direction. Mission and Strategic Intent: Managers
need to be clear about what they see as the role of their organization, and this is often expressed in
terms of a statement of mission. This is important because both external stakeholders and other
managers in the organization need to be clear about what the organization is seeking to achieve
and, in broad terms, how it expects to do so. At this level, strategy is not concerned with the details
of SBU competitive strategy or the directions and methods the businesses might take to achieve
competitive advantage Rather, the concern here is overall strategic direction. Corporate goals and
objectives flow from the mission and growth ambition of the corporation. Basically, they represent
the quantum of growth the firm seeks to achieve in the given time frame. They also endow the firm
with characteristics that ensure the projected growth. Through the objective setting process, the
firm is tackling the environment and deciding the locus it should have in the environment. The
objective provides the basis for it major decisions of the firm and also said the organizational
performance to be realised at each level. The managerial purpose of setting objectives is to convert
the strategic vision into specific performance targets results and outcomes the management wants
achieve - and then use these objectives as yardsticks for tracking the company’s progress and
performance.
Objectives are needed at all organizational levels. Objective setting should not stop with top
management’s establishing of companywide performance targets. Company objectives need to be
broken down into performance targets for each separate business, product line, functional
department, and individual work unit. Company performance can’t reach full potential unless each
area of the organization does its part and contributes directly to the desired companywide outcomes
and results. This means setting performance targets for each organization unit that support-rather
than conflict with or negate-the achievement of companywide strategic and financial objectives.
2: Environmental and Organizational Analysis

This stage is the diagnostic phase of strategic analysis. It entails two types ofanalysis:

1. Environmental scanning

2. Organizational analysis

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External environment of a firm consists of economic, social, technological, market and other forces
which affect its functioning. The firm’s external environment is dynamic and uncertain. So, the
management must systematically be analyzed various elements of environment to determine
opportunities and threats for the firm in future. Organizational analysis involved a review of
financial resources, technological resources, productive capacity, marketing and distribution
effectiveness, research and development, human resource skills and so on. This would reveal
organizational strengths and weaknesses which could be matched with the threats and
opportunities in the external environment. This would provide us a framework for SWOT analysis
(Strength, Weakness, opportunity and threat) which could be in the form of a table highlighting
various strengths and weaknesses of the firm and opportunities and threats which the environment
we create for the firm.

 Strength: Strength (internal) is a resource, skill, or other advantages relative to

competitors. It is distinctive competence that gives the organization a comparative
advantage in the market place. Market leadership, public image, experience, financial and
human resources, organization network and alliances, etc., is examples of organizational
strength.
 Weakness: A weakness (internal) is a limitation or deficiency in resources, skills, and
capabilities that seriously affect performance. Lack of facilities, resources, management
capabilities, marketing skills, etc. are sources of weakness.
 Opportunities: An opportunity (external) is a major favorable situation in the
organization’s environment. The example of an opportunity could be new market,
reduction in compaction, higher economic growth rate, technological changes, and so on.
 Threats: A threat (external) is a major unfavorable situation in the organization’s
environment. The entry of a new competitor, increased bargaining power of the suppliers
and buyers, major changes in technology and government regulations, slow market growth,
etc are some examples of organizational threats.
3: Formulating Strategy
The first step in strategy formulation is developing strategic alternatives in the light of organization
strengths and weaknesses and opportunities and threats in the environment. The second step is the

29
deep analysis of various strategic alternatives or the purpose of choosing the most appropriate
alternative which will serve as strategy of the firm.
A company may be confronted with several alternatives such as:
i. Should the company continue in the same business carrying on the same volume of activities?
ii. If it should continue in the same business, should it grow by expanding the existing units or by
establishing new units or by acquiring other units in the industry?
iii. If it should diversify, should it diversify into related areas or unrelated areas?
iv. Should it get out of an existing business fully or partially?
Strategy formulation is generally broken down into three organizational
levels: operational, competitive, and corporate.

Operational strategies: are short-term and are associated with the various operational
departments of the company, such as human resources, finance, marketing, and production. These
strategies are department specific. For example, human resource strategies would be concerned
with the act of hiring and training employees with the goal of increasing human capital.

Competitive strategies: are those associated with methods of competing in a certain business or
industry. Knowledge of competitors is required in order to formulate a competitive strategy. The
company must learn who its competitors are and how they operate, as well as identify the strengths
and weaknesses of the competition. With this information, the company can develop a strategy to
gain a competitive advantage over these competitors.

Corporate strategies: are long-term and are associated with deciding the optimal mix of
businesses and the overall direction of the organization. Operating as a sole business or operating
as a business with several divisions are both part of the corporate strategy.

4: Implementation of Strategy

Implementation and execution is an operations-oriented, activity aimed at shaping the performance

of core business activities in a strategy-supportive manner. It is the most demanding and time-
consuming part of the strategy-management process. To convert strategic plans into actions and
results, a manager must be able to direct organizational change, motivate people, build and

30
strengthen company competencies and competitive capabilities, create a strategy-supportive work
climate, and meet or beat performance targets.

In most situations, strategy-execution process includes the following principal aspects:

 Developing budgets that steer ample resources into those activities critical to strategic success.
 Staffing the organization with the needed skills and expertise, consciously building and
strengthening strategy-supportive competencies and competitive capabilities, and organizing
the work effort.
 Ensuring that policies and operating procedures facilitate rather than impede effective
execution.
 Using the best-known practices to perform core business activities and pushing for continuous
improvement.
 Installing information and operating systems that enable company personnel to better carry
out their strategic roles day in and day out.
 Motivating people to pursue the target objectives energetically.
 Creating a company culture and work climate conducive to successful strategy
implementation and execution.
 Exerting the internal leadership needed to drive implementation forward and keep improving
strategy execution. When the organization encounters stumbling blocks or weaknesses,
management has to see that they are addressed and rectified quickly.

Good strategy execution involves creating strong “fits” between strategy and organizational
capabilities, between strategy and the reward structure, between strategy and internal operating
systems, and between strategy and the organization’s work climate and culture.

5 : Strategic Evaluation and Control

The final stage of strategic management process – evaluating the company’s progress, assessing
the impact of new external developments, and making corrective adjustments – is the trigger point
for deciding whether to continue or change the company’s vision, objectives, strategy, and/or
strategy-execution methods. So long as the company’s direction and strategy seem well matched

31
to industry and competitive conditions and performance targets are being met, company executives
may decide to stay the course. Simply fine-tuning the strategic plan and continuing with ongoing
efforts to improve strategy execution are sufficient. But whenever a company encounters
disruptive changes in its external environment, questions need to be raised about the
appropriateness of its direction and strategy. If a company experiences a downturn in its market
position or shortfalls in performance, then company managers are obligated to ferret out whether
the causes relate to poor strategy, poor execution, or both and then to take timely corrective action.
A company’s direction, objectives, and strategy have to be revisited anytime external or internal
conditions warrant. It is to be expected that a company will modify its strategic vision, direction,
objectives, and strategy over time.

Proficient strategy execution is always the product of much organizational learning. It is achieved
unevenly coming quickly in some areas and proving nettlesome and problematic in others.
Periodically assessing what aspects of strategy execution are working well and what needs
improving is normal and desirable. Successful strategy execution entails vigilantly searching for
ways or continuously improve and then making corrective adjustments whenever and wherever it
is useful to do so.
To conclude, the strategic management process is a continuous process. As performance results or
outcomes are realized – at any level of the organization – organizational members assess the
implications and adjust the strategies as needed. In addition, as the company grows and changes,
so will the various strategies. Existing strategies will change and new strategies will be developed.
This is all part of the continuous process of improving the business in an effort to succeed and
reach company goals.
2.2. Leading Strategically: Vision, Mission and Goal/Objective
leading strategically looks like understanding how personal/teamwork supports the organizational
vision and communicating this to others, creating long-term plans for the service or organizational
area that are future-focused, or considering the impact of decisions across an entire service and/or
organization.
When you are leading strategically, you…
 Think strategically
 Move current thinking forward

32
  Develop and implement strategy
 Engage people in the vision of our health system
 Meet with people who have put together and implemented a successful strategic direction
to understand what was done.
 List the sources you must consult with before developing alternative strategies and plans.
 Consider many alternatives before deciding on strategy or direction.
 Take the time to consider possible threats and risks to your plans/strategies and how to
overcome or prevent them.
 Test your plans against the vision. If these strategies or actions are successful, how will
they contribute to improve, promote, and protect the health and wellbeing of our
community?
 Provide people purpose through communicating how work contributes to the vision for our
health system.
Management of companies is essential for the systematic growth and development of the company.
The management strategies are formulated on the basis of company mission and vision. In line
with them, the goals and objectives are set for the company. The vision and mission statements
play a significant role in the development of strategies by providing a basis for screening the
strategic options. Thus, understanding the concept of mission, vision, goals, objectives and related
concepts is essential for implementing successful strategic management.
Vision
A vision articulates the position that an organization would like to attain in the distant future. It
helps in creating a common identity and a shared sense purpose.
The vision of an organization must possess the following characteristics:
 It is created by consensus.
 It forms a company’s future mental image.
 It forms the basis for formulating the mission statement.
A good vision possesses the following features:
 It should be inspiring.
 It should foster long term thinking.
 It should be original and unique.
 It should be competitive.

33
  It should be realistic

Mission refers to the purpose of an organization. Mission states the business reason for the
organization's existence. It relates the organization to the society. The mission of an organization
should aim high and at the same time it must be realistic. It should provide a strategic direction for
the organization. Mission is the fundamental work given by the society to an organization”.
In order to be effective, a mission statement should possess the following characteristics:
I. A mission statement should be realistic and achievable. Impossible statements do not
motivate people.
II. It should neither be too broad not be too narrow. If it is broad, it will become meaningless.
A narrower mission statement restricts the activities of organization. The mission statement
should be precise.
III. A mission statement should not be ambiguous. It must be clear for action. Highly
philosophical statements do not give clarity.
IV. A mission statement should be distinct. If it is not distinct, it will not have any impact.
Copied mission statements do not create any impression.
V. It should have societal linkage. Linking the organization to society will build long term
perspective in a better way.
VI. It should not be static. To cope up with ever changing environment, dynamic aspects
should be considered.
VII. It should be motivating for members of the organization and of society. The employees of
the organization may enthuse themselves with mission statement.
VIII. The mission statement should indicate the process of accomplishing objectives. The clues
to achieve the mission will be the motivating factor.
There are diverse issues which need to be covered while framing the mission statement of a
company. The various components of a well framed mission statement are stated as follows:
 Product or service
 Customers
 Technology
 Survival, growth and profitability
 Company philosophy

34
  Public image
Objective
Objectives are the end results of a planned activity. They are stated in quantifiable terms.
Objectives are stated differently at various levels of management. Objectives play a very important
role in enhancing the efficiency and effectiveness of an organization. The following characteristics
must be present in fairly framed objectives:
 They should be specific and unambiguous.
 They should have a particular time horizon within which it is expected to be achieved.
 They should be flexible enough so that if changes are required, they may be incorporated
easily.
 They should be attainable.
 They should be measurable.
 They should be understandable
 They should help in the achievement of the organization’s mission and vision.
 They should be challenging
There are many factors which have an impact on the formulation of objectives in an organization.
These factors are kept in mind before making objectives. These factors are mentioned as below:
 Size of the organization.
 Level of management
 Organization culture
 Social responsiveness
Objectives may be of various types. Some of these are explained as below:
Profit Objective – It is the most important objective for any business enterprise. In order to earn
a profit, an enterprise has to set multiple objectives in key result areas such as market share, new
product development, quality of service etc. These may also be termed as performance objectives.
Marketing Objective may be expressed in terms of percentage increase or decrease in market
share. They are related to a functional area.
Productivity Objective may be expressed in terms of ratio of input to output. This objective may
also be stated in terms of cost per unit of production.
Product Objective may be expressed in terms of product development, product diversification,
branding etc.

35
Social Objective may be described in terms of social orientation. It may be tree plantation or
provision of drinking water or development of parks.
Financial Objective relate to cash flow, debt equity ratio, working capital, new issues, stock
exchange operations, collection periods, debt instruments etc.
Human resources objective may be described in terms of absenteeism, turnover, number
of grievances, strikes and lockouts etc. For example: the objective may be to decrease the rate of
absenteeism.
Goal
Goals are an intermediate result which is expected to be achieved by a certain span of time. It is a
target which an organization wishes to achieve in long term. It provides the basis for judging the
performance of the organization. Goals may be classified into two categories:
 Financial goals: They are related to the return on investment or growth in revenues.
 Strategic goals: They focus on the achievement of the competitive advantage in the
industry

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