unit-6: strategic management

Definition: The term ‘strategic management’ is used to denote a branch of management that is concerned with the development of strategic vision, setting out objectives, formulating and implementing strategies and introducing corrective measures for the deviations (if any) to reach the organization’s strategic intent.  It has two-fold objectives:

  • to gain competitive advantage, with an aim of outperforming the competitors, to achieve dominance over the market.
  • To act as a guide to the organization to help in surviving the changes in the business environment.

Here, changes refer to changes in the internal environment, i.e. within the organization, introduced by the managers such as the change in business policies, procedures etc. and changes in the external environment as in changes in the government rules that can affect business, competitors move, change in customer’s tastes and preferences and so forth.

process of strategy management

Strategic Management Process
  1. Defining the levels of strategic intent of the business:
    • Establishing vision
    • Designing mission
    • Setting objectives
  2. Formulation of strategy
    • Performing environmental and organizational appraisal
    • Considering strategies
    • Carrying out strategic analysis
    • Making strategies
    • Preparing strategic plan
  3. Implementation of strategy
    • Putting strategies into practice
    • Developing structures and systems
    • Managing behavioural and functional implementation
  4. Strategic Evaluation and Control
    • Performing evaluation
    • Exercising control
    • Recreating strategies

levels of decisions

The management decisions are classified into three levels or categories:

  1. starategic level
  2. tactical level
  3. operational decisions
Image result for levels of decision

Decisions are made at different levels in an organisation’s hierarchy:

  • Strategic decisions are long-term in their impact. They affect and shape the direction of the whole business. They are generally made by senior managers. The managers of the bakery need to take a strategic decision about whether to remain in the cafe business. Long-term forecasts of business turnover set against likely market conditions will help to determine if it should close the cafe business.
  • Tactical decisions help to implement the strategy. They are usually made by middle management. For the cafe, a tactical decision would be whether to open earlier in the morning or on Saturday to attract new customers. Managers would want research data on likely customer numbers to help them decide if opening hours should be extended.
  • Operational decisions relate to the day-to-day running of the business. They are mainly routine and may be taken by middle or junior managers. For example, a simple operational decision for the cafe would be whether to order more coffee for next week. Stock and sales data will show when it needs to order more supplies.


The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and “ago” (meaning leading/moving).

Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment so as to meet the present objectives. While planning a strategy it is essential to consider that decisions are not taken in a vaccum and that any act taken by a firm is likely to be met by a reaction from those affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large.

Features of Strategy

  1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment.
  2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future.
  3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior.

Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organization’s strengths and to minimize the strengths of the competitors.

Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

Role of strategists

Strategists are individuals or groups who are primarily involved in the formulation, implementation, and evaluation of strategy. In a lim-ited sense, all managers are strategists. There are persons outside the organization who are also involved in various aspects of strategic man-agement. They too are referred to as strategists. We can identify nine strategists who, as individuals or in groups, are concerned with and play a role in strategic management.
1. Consultants

2. Entrepreneurs

3. Board of Directors

4. Chief Executive Officer

5. Senior management

6. Corporate planning staff
7. Strategic business unit (SBU) level executives
  8. Middle level managers

9. Executive Assistant

(1) Role of board of directors –

  1. To establish and update the company mission.
  2. To elect the company’s top officers, the formost of whom is the CEO.
  3. To establish the compensation level of the top officers, including their salaries and bonuses.
  4. To determine the amount and timing of the dividends paid to stockholders.
  5. To set broad company policy on such matters as labour – management relations, product or service lines of business and employee benefit packages.
  6. To set company objectives and to authorize managers to implement the long-term strategies that the top officers and the board have found agreeable.
  7. To mandate company compliance with legal and ethical dictates.

(2) Role of Chief Executives

a CE performs the strategic tasks; actions which are necessary to provide a direction to the organisation so that it achieves its purpose. He plays a pivotal role in setting the mission of the organisation, deciding the objectives and goals, formulating and implementing the strategy and, in general, seeing to it that the organisation does not deviate from its predetermined path designed to move it from the position it is in to where it wants to be.

(3) Role of entrepreneurs

Entrepreneurs play a proactive role in strategic management. As initiators, they provide a sense of direction to the organisation, set objectives and formulate strategies .Strategic decision-making is quick and the entrepreneurs generate a sense of purpose among their subordinates.

(4) Role of Senior Manager
When assigned specific responsibilities, senior managers look after modernization, technology upgradation, diversification and expansion, plan implementation, and new product development. On the whole, senior managers perform a variety of roles by assisting the board and the chief executive in the formulation, implementation and evaluation of strategy.

(5) Role of SBU-level Executive.

With regard to strategic management, the SBU-level strategy formulation and implementation are the primary responsibilities of the SBU-level executives. Many public and private sector companies have adopted the SBU concept in some or the other form.

(6) Role of Corporate Planning Staff
The corporate planning staff play a supporting role in strategic management. They assist the management in all aspects of strategy formulation, implementation and evaluation. Besides these, they are responsible for the preparation and communication of strategic plans, and for conducting special studies and research pertaining to strategic management. The corporate planning department is not
responsible for strategic management and, usually, does not initiate the process on its own. By providing administrative support, it fulfills its functions of assisting the introduction, working and maintenance of the strategic management system

(7) Role of Consultants
Many organizations which do not have a corporate planning department owing to reasons of small size, infrequent requirements, financial constraints, etc. take the help of external consultants in strategic management. These consultants may be individuals, academicians or consultancy companies specializing in strategic management activities.

(9) Role of Executive Assistant
These ways could be to assist the chief executive in data collection and analysis, suggesting alternatives where decisions are required, preparing briefs of various proposals, projects and reports, help in public relations and liaison functions, coordinating activities with the internal staff and outsiders and acting as filters for information coming from different sources.

Relevance of strategic management

Setting Direction

An organization needs direction so that it has a plan for arranging its core activities. If you don’t set goals through a strategic management process, your organization operates in a reactive mode. Use strategic management planning principles to set the course for the company and to spend business resources in ways that will help you achieve this course. Focusing on your direction also helps to avoid wasting resources along the way.

Situational Analysis

Strategic management is based on many concepts, and an important concept in this management style is called situational analysis. You want the organization you work for to evaluate its current position in the business market. And, you want the organization to define where it wants to be, in one year and in five years, such as acquiring a larger share of the market. This type of situational analysis and the strategic planning that follows it encourages managers to direct resources so that the desired business position is attained in a specific time frame.

Strategic Alliances

If you have a goal for the organization you work for to grow rapidly, then you look around for strategic market alliances, which is related to situational analysis. For example, private companies can use the acquisition of smaller companies to expand their market base and then introduce the products of those companies in their existing stores. Tie the growth of the organization to the strategic plan by stating precisely what growth will look like so everyone in the organization can visualize it.


Strategic management also encourages organizations to look everywhere for new ideas, which is truly the essence of entrepreneurial-ism. For example, a U.S. chain store that expands into global markets can share ideas that work for managing a retail operation in another country with store managers in its home country. Managers are encouraged to test foreign ideas in their home market. This retailer realizes that goals can be achieved, even surpassed, by putting ideas into the hands of people who can use them. The entrepreneurial testing of new ideas is something that you want to be a part of in a strategically-managed company.

The Advantages of Strategic Management

Discharges Board Responsibility

The first reason that most organizations state for having a strategic management process is that it discharges the responsibility of the Board of Directors.

Forces An Objective Assessment

Strategic management provides a discipline that enables the board and senior management to actually take a step back from the day-to-day business to think about the future of the organization. Without this discipline, the organization can become solely consumed with working through the next issue or problem without consideration of the larger picture.

Provides a Framework For Decision-Making

Strategy provides a framework within which all staff can make day-to-day operational decisions and understand that those decisions are all moving the organization in a single direction. It is not possible (nor realistic or appropriate) for the board to know all the decisions the executive director will have to make, nor is it possible (nor realistic or practical) for the executive director to know all the decisions the staff will make. Strategy provides a vision of the future, confirms the purpose and values of an organization, sets objectives, clarifies threats and opportunities, determines methods to leverage strengths, and mitigate weaknesses (at a minimum). As such, it sets a framework and clear boundaries within which decisions can be made. The cumulative effect of these decisions (which can add up to thousands over the year) can have a significant impact on the success of the organization. Providing a framework within which the executive director and staff can make these decisions helps them better focus their efforts on those things that will best support the organization’s success.

Supports Understanding & Buy-In

Allowing the board and staff participation in the strategic discussion enables them to better understand the direction, why that direction was chosen, and the associated benefits. For some people simply knowing is enough; for many people, to gain their full support requires them to understand.

Enables Measurement of Progress

A strategic management process forces an organization to set objectives and measures of success. The setting of measures of success requires that the organization first determine what is critical to its ongoing success and then forces the establishment of objectives and keeps these critical measures in front of the board and senior management.

Provides an Organizational Perspective

Addressing operational issues rarely looks at the whole organization and the interrelatedness of its varying components. Strategic management takes an organizational perspective and looks at all the components and the interrelationship between those components in order to develop a strategy that is optimal for the whole organization and not a single component.

Strategic management in india

Strategic management is the development and implementation of all the goals and objectives of an organization. It involves the details of the method that a company will employ to achieve its goals. It represents the initiatives that a company plans to take on behalf of its board of directors, its employees, its owners and other relevant stakeholders. A strategic manager is involved in the team that accomplishes the goals set out in the strategic plan. A strategic manager is professionally trained in strategy formulation by getting certified from a strategic management course commonly available in business schools or online educational portals.

Strategic management provides direction to the company and its employees. It helps layout the strategic objectives of the organization in an easy to understand way. The strategic goals of an organization are long term in nature and may take years. However, a company keeps itself on track by ensuring that all their plans are in accordance with its strategic plan.

Because of the obvious benefits that strategic management possesses, it is gaining relevance among Indian corporates. These benefits are as follows –

  1. Strategic management is helping Indian corporates in giving their businesses a direction

India’s booming economy is home to a variety of start-ups. These start-ups are new and need to stay focused. A good strategy allows them to keep their eyes on the goal. It helps them set clear goals on what business they want to be in and what kind of customers they want to serve. With the plethora of market segments available in a vibrant economy, it is easy to get confused. A clear-cut strategy helps organizations stay out of the confused state.

  1. Strategic management allows situational analysis through management tools

One of the management styles in strategic management is called situational analysis. It helps a business evaluate itself in its current market. By doing this they can define where they want to be, their future course of action and the time frame that they want to define for reaching their goals. They can clearly fine-tune their working to achieve their goals by knowing how far they need to go from where they currently are. It helps them know how much resources they need to direct to achieve the desired result in the stipulated time frame.

  1. Strategic management helps look around for strategic alliances

Once a company has a set of goals and a time frame to achieve those goals, they can find out means that can help them speed up their process of achievement of the decided goals. One of those means is a strategic alliance. A strategic alliance can happen between two organizations which have similar or complementing strategic objectives. They can have a partnership, or a bigger firm can acquire a smaller one. This provides both the sides access to each other’s resources and customer base. They can place each other’s products in their stores. In this manner, by tying the growth of the organization with the strategic alliances, one can fasten the goal completion.

  1. Strategic management encourages innovation

Innovation is one of the key criteria for keeping a business relevant in the eyes of the customers. It keeps the company on its toes and encourages employees to create new products and processes which are better than the previous ones.

However, a recent study by the IBM Institute for Business Value and Oxford Economics claims that 90% of Indian start-ups fail due to lack of innovation. 77% of the venture capitalists who were interviewed for this study said that Indian start-ups lacked new technologies and fresh business models. In 2016, Asian Paints was the only Indian company in Forbes magazine’s list of 25 most innovative companies. Most Indian start-ups in fact are known to emulate western business models. Lack of innovation is evident in the way they fail to sustain themselves. Since 2015, more than 1500 Indian start-ups have closed down in India.

This shows that a very critical aspect that Indian companies need to look at is innovation. Strategic management allows a company to innovate and sustain itself in the long run.