Template 4: The Lesson Structure

Module no. and Module No. 1 : The Strategic Management Process

Title

Lesson no. and • Lesson 1: What is Strategy?

Title
• Lesson 2: Strategic Management and Strategic Management Process.
Learning • Understand the concepts of strategy and strategic management
Outcomes • Explain the nature strategic management
• Study the key areas in developing a strategy
• Explain why crafting a strategy is complex?
• Describe the need for strategic management
• Explain the benefits and challenges of strategic management
• Describe the strategic management process
Time Frame 2 weeks

Introduction Welcome to the first module of Strategic Business Analysis. This module will
help you understand the key concepts and basic ideas of making strategies in
business as well as Strategic Management. This will also develop yourself to
think critically through self-learning.
Activity Make a public material (poster) about how will you sell a “Used
Toothbrush/Sanitary Napkin”
Analysis How can strategy affect the marketing of a certain product?

Abstraction LESSON 1: WHAT IS STRATEGY?

In simple terms, strategy is a planned or emergent course of action that is

expected to contribute to the achievement of organisational goals. Strategy can
also be an idea or a thought that is viewed to be productive to complete a course
of action. A strategy is defined as, “a unified, comprehensive, and integrated plan
that relates to the strategic advantages of the firm and to the challenges of the
environment. It is designed to ensure that the basic objectives of the enterprise
are achieved through proper execution by the organisation.”

Criteria for Effective Strategy

Although each strategic situation is unique, there are some common criteria that
tend to explain an effective strategy. Criteria for effective strategy include:

(i) Clear, decisive objectives: All efforts should be directed towards clearly
understood, decisive and attainable overall goals. All goals need not be written
down or be chronologically precise but they must be understood and be decisive.
 (ii) Maintaining the initiative: The strategy preserves freedom of action and
enhances commitment. It sets the pace and determines the course of events rather
than reacting to them.

(iii) Concentration: The strategy concentrates superior power at the place and
time likely to be decisive. The strategy must define precisely what will make the
enterprise superior in power, best in critical dimensions in relation to its
competitors. A distinctive competency yields greater success with fewer
resources.

(iv) Flexibility: The strategy must purposely have built in resources, buffers and
dimensions for flexibility and maneuvers. Reserved capabilities, planned
maneuverability and repositioning allows one to use minimum resource while
keeping competitors at a relative disadvantage.

(v) Coordinated and committed leadership: The strategy should provide

responsible, committed leadership for each of its major goals. Care should be
taken in selecting the leaders in such a way that their own interests and values
match with the requirements of their roles. Commitment and not mere acceptance
is the basic requirement.

(vi) Surprise: The strategy should make use of speed, secrecy and intelligence to
attack exposed or unprepared competitors at an unexpected time. Thus, surprise
and correct time are very important.

(vii) Security: The organisation should secure or develop resources required,

securely maintain all vital operating points for the enterprise, an effective
intelligence system to prevent the effects of surprises by the competitors.

The Need for Strategy

It is beyond doubt to state that every organisation necessarily formulate

strategies. To state specifically, strategy is necessary in view of the following
reasons:

(i) To have rules to guide the search for new opportunities both inside and outside
the firm.

(ii) To take high quality project decisions.

(iii) To develop measures to judge whether a particular opportunity is a rare one

or whether much better ones are likely to develop in the future.

(iv) To have an assurance that the firm’s overall resource allocation pattern is
efficient.
 (v) To have and develop internal ability to anticipate change.

(vi) To save time, money and executive talent.

(vii) To identify, develop and exploit potential opportunities.

(viii) To utilise the delay principle, that is, delay the commitment until an
opportunity is on hand.

Key Areas in Developing a Strategy

Managers have to consider the following key areas in developing a strategy:

(i) The type of goods and/or services that the firm will produce and will sell.

(ii) The mode of producing goods and rendering services.

(iii) Who are and will be the firm’s customers.

(iv) The methods of financing the various operations of the firm.

(v) The amount of risk that the firm will take.

(vi) Methods of implementing the strategy.

Application What do you think is the most difficult challenge in making a strategy and why?

Activity Watch this 5 minute video in facebook

https://www.facebook.com/mobilelegendsabsofficial/videos/1064769680537490

Analysis What do you think are the strategic factors that affect the player in winning the
game? Why do players need a strategic management in order to accomplish the
goal of winning the game?

Abstraction LESSON 2: STRATEGIC MANAGEMENT AND STRATEGIC

MANAGEMENT PROCESS.

What is Strategic Management?

Strategic Management is concerned with deciding on strategy and planning how

that strategy is to be put into effect.

Historical Development of Strategic Management

Almost all the disciplines passed through different stages in their evolutionary
process and reached their present stage. Strategic management is not an exception
to this. Though the formulation of a strategy seems to be simple, it is very
difficult to accomplish it. Many organisations develop their strategic management
process over periods of several years, adjusting and tailoring them to meet
specific needs of the organisation.

Phase 1: Basic Financial Planning: The first phase of the strategic development
is fairly a simple routine of basic financial planning. The main concern during
this phase is simply meeting annual budget requirement, operational functions
like production, marketing, finance and human resources and emphasising on the
operational control.

Phase 2: Forecast-based Planning: During this phase, the primary concern is

mainly on effective plans, environmental scanning, plan for the future and
allocation of resources.

Phase 3: Externally-oriented Planning: There is a remarkable shift during this

phase. The notable developments include: increasing response to markets and
competition, complete situational analysis and assessment of competitive
strength, evaluation of strategic alternatives and allocation of resources based on
changing needs from time to time.

Phase 4: Strategic Management: The focus shifts over time from meeting the
budget to planning for the future, to thinking abstractly, to working to create
desired future. To create future decision-makers, orchestrate and integrate all
their organisation’s resources to gain a competitive advantage. They build
flexibility into the organisational planning process, and foster a supportive,
participative climate within the organisation.
 Thus, developing an effective and efficient strategic management process can be
a long and difficult task. It requires sustained effort, enormous patience and sharp
political skills. Strategic management requires efficient leadership.

Why is there a need for Strategic Management

1. Due to Change: Everything, except change is not permanent. It does mean

that only change is permanent.Change makes planning difficult. But, firms may
pro-act to the change rather than just react to it. Strategic management
encourages the top executives to forecast change and provides direction and
control. It will also allow the firm to take advantage of the opportunities provided
by the changes in the environment and avoid the threats or reduce the risk as the
future is anticipated. Thus, strategic management allows an enterprise to base its
decisions on long-range forecasts.

2. To Provide Guidelines: Strategic management provides guidelines to the

employer about the organisation’s expectations from them. This would minimise
conflict between job performance and job demands. Thus, it provides incentive
for employer and helps the organisation in achieving its objectives.

3. Developed Field of Study by Research: Strategic management was just based

on case studies or anecdotal evidence 30 years ago. But recently, there are
methodological problem researches in this field of study. More systematic
knowledge in this area is available at present. Therefore, today it is worthwhile to
study strategic management.

4. Probability for Better Performance: There is no clear research evidence that

strategic management leads to higher performance. But the majority of studies
suggest that there is a relationship between better performance and formal
planning. It is also stated that businesses which plan strategically have a higher
probability of success than those which do not have.

5. Systematise Business Decisions: Strategic management provides data and

information about different business transactions to managers and helps them to
make decisions systematically.

6. Improves Communication: Strategic management provides effective

communication of information from lower level managers to middle level
managers and to top level managers.

7. Improves Coordination: Strategic management improves coordination not

only among the functional areas of management, but also among individual
projects.
8. Improves Allocation of Resources: Strategic planning helps in deciding upon
most feasible and viable projects and thereby improves the allocation of resources
to the viable projects.

9. Helps the Managers to have a Holistic Approach: Strategic management

helps the managers to have complete understanding of the company and to have a
holistic approach towards business problems and proportions.

Benefits of Strategic Management

Several corporations and institutions have been using strategic management.

Organisations reap several benefits from effective strategic management. The
benefits of strategic management include:

(i) Strategic management helps an organisation to be proactive rather than

reactive in shaping its future.

(ii) It helps organisations not only to respond to its relevant environment, but
also to initiate and influence its environment and thereby exert control over its
destiny.

(iii) It helps organisations to make effective strategies through the use of a more
systematic, logical and rational approach to strategic choice.

(iv) It helps the organisations to achieve understanding and commitment from all
managers and employers. Managers and employers become creative and
innovative when they understand and commit to the company’s strategic
management. This process results in employee empowerment. Empowerment is
the act of strengthening an individual’s sense of effectiveness.

(v) It encourages the organisations to decentralise the management process

involving lower level managers and employees.

(vi) A significant number of research studies have suggested that a well-designed

strategic management can boost profits.

(vii) A number of research studies have also indicated that systematic long-run
planning resulted in high performance of the businesses.

(viii) It strengthens the employee commitment to and participation in

formulating long-term goals.

(ix) Organisations foresee the environmental changes. Therefore they reduce the
chance of being affected by the changes in the environment, market place and
actions of competitors.

(x) It helps for increased employee productivity, reduced resistance to change,

clear understanding of performance-reward relationship.

(xi) It enhances problem-prevention capabilities of organisations as it promotes

interaction among managers at all levels. (xii) It often brings order and discipline
to a firm.

(xiii) It allows for identification, prioritisation and exploitation of opportunities.

(xiv) It provides an objective view of management problems. (xv) It represents a

framework for improved control of activities.

(xvi) It minimises the effects of adverse conditions and changes.

(xvii) It allows major decisions and supports established objectives.

(xviii) It allows fewer resources and less time to be devoted for correcting
erroneous or adhoc decisions.

(xix) It helps to integrate the behaviour of individuals into a total effort.

(xx) It provides a basis for the clarification of individual responsibilities.

(xxi) It gives encouragement to forward thinking.

(xxii) It provides cooperative, integrated and enthusiastic approach to tackling

problems and opportunities.

(xxiii) It encourages favourable attitude towards change.

(xxiv) It gives a degree of discipline and formality to the management of

business.

Challenges for Strategic Management

Challenges for Strategic Management Strategic management faces different kinds

of challenges, technological advancement and obsolescence, product or service
innovations and development, etc. The recent additions to the challenges are:
global issues consequent upon economic liberalisation, quality issues consequent
upon the total quality management concept of the Japanese firms and social
issues. We shall discuss these challenges for strategic management.

(i) Technological Advancements and Strategic Management: As necessity is

the mother of invention, competition and a host of other reasons are responsible
for the rapid technological advancements and innovations. These advancements
and innovations of one firm poses challenges for the strategic decision-making of
the competing firms. Further, the continuous technological advancements led to
the obsolescence of the existing technologies. It creates a challenge for the
strategic management of those firms using obsolete technologies. The strategic
managers should be fully aware of technological advances and innovations while
formulating strategies

(ii) Product/Service Innovation and Development and Strategic

Management: Technological advancements and innovations together with
changes in consumer tastes and preferences, needs and conveniences led to the
continuous product/service development and innovation of new products. The
firms with new products/services widely accepted by the customers enjoy
distinctive strategic advantage whereas other firms in the same industry suffer
from strategic disadvantage. This leads to further competition and creates new
challenges for strategic management. Strategic managers are expected to be
aware of these developments and innovations in the industry while formulating
their strategies.

(iii) Global Issues and Strategic Management: With the announcement of

economic liberalisation in India and consequently opening up of the economy to
the rest of the world in 1991, business activities have tended to cross national
boundaries more intensely and frequently. Due to the increase in scale and variety
of operations of multinational and transnational corporations in the country, even
firms with no international operations are experiencing the impact of
globalisation on their markets and operations. Since this trend is expected to
continue, almost all the organisations, irrespective of their size, nature of
operations and markets will have to consider global issues in their strategic
management process. The strategic managers must be fully aware of critical
international variables that might considerably affect their strategic operations,
before they determine how their strategic management process can most
effectively accommodate global environmental factors.

(iv) Quality Issues and Strategic Management: The quality movement,

spearheaded by W. Edwards Dening has had a significant impact on the method
of strategic management process of organisations in the 1990s. Sea changes took
place in the concept of quality. The concept of postproduction quality control
changed into Total Quality Management (TQM). It further changed to feed
forward and zero-defect of the product. Further, quality today does mean an
organisation — wide commitment to enhance the value of goods or services to
the customer at each and every stage — from the stage of product design, raw
material, every stage of production process, to the place of marketing (or selling)
to post sale service. Japanese firms once produced cheap products, presently they
are producing not only low cost but most qualitative products. In fact, today’s
customers feel happy to buy a Japanese-made product in view of its quality.
Hence, Japanese firms enjoy strategic advantage position in this regard Managers
involved in the strategic management process at all levels are expected to
understand the history of this movement and its day-to-day developments in order
to appreciate the crucial role it plays in modern organisational strategy.

(v) Economic Boom and Recession: Both economic booms as well as economic
recession affect the strategic management process. Economic boom provides the
opportunities for the increase in demand as well as business operations and
economic recession in general create threats. Companies should foresee the
trends that result in recession and formulate strategies accordingly. In fact most
of the companies failed to foresee the economic recession of 2008 and beyond.

(vi) Social Issues and Strategic Management: Since the organisation is part and
parcel of the society, most of the organisations are of the view that, social
responsibility is the managerial obligation to act, protect and promote both
organisational interests and welfare of the society. Strategic management process
of an organisation will be affected by recognising this obligation.

The strategic managers should have a clear idea about

(i) the societal constituencies that the organisation will serve us the obligation,

(ii) the areas of the business to be affected by this obligation,

(iii) method of conducting social audit to facilitate the strategic management

process, and

(iv) the areas of strategic advantages that the organisation will be enjoying.

The Strategic Management Process

The basic steps in strategic management process are:

• Identify corporate vision, mission, objectives and goals.

• Analyse the corporate external environment to identify opportunities and

threats.

• Scan the corporate internal environment to identify strengths and

weaknesses of the company.

• Revise the corporate mission, if there is any drastic deviation in the

external environment.

• Craft the strategic alternatives based mostly on the corporate opportunities

and strengths. Also consider strategies for correcting company’s
weaknesses, when the opportunities are significant and distinct. Similarly
consider crafting strategies by correcting the threats, as and when
 possible, and when the company has distinctive strengths or
competencies.

• Select the best corporate strategy. Craft business unit level and functional
level strategies based on corporate strategy.

• Implement the strategy.

• Evaluate and control the strategic implementation process in order to

achieve the best performance.

Application 1. Make a diagram/Picture of strategic management process.

Module ➢ Different organisations having similar opportunities and resources

Summary perform differently.

➢ Strategy is a unified, comprehensive and integrated plan/course of action

that relates to the strategic advantages of the firm and the challenges of
the environment.

➢ Strategy is necessary to have and develop internal ability.

➢ Globalisation and strides in information technology makes strategic

management complex.

➢ Strategic management is concerned with deciding on strategy and

planning how that strategy is to be put into effect.

➢ Strategic management passes through the stages of financial planning,

external oriented planning and to strategic management.

➢ Strategic management is essential due to change and for better

performance.

Module Why do organisations need strategies?

Assessment

References 1. Subba Rao P. (2016) Business Policy and Strategic Management (16th
Ed.) Mumbai India: Himalaya Publishing House Pvt. Ltd.

Closure Congratulations! You are done with the first lesson. I hope that you will be
enticed to know more about the “Strategist and Strategic Decision Making”
Which will be our next lesson for this module.