UNIT – V

Syllabus: Strategic Management: Vision, Mission, Goals, Strategy – Elements of

Corporate Planning Process – Environmental Scanning – SWOT analysis- Steps in Strategy
Formulation and Implementation, Generic Strategy alternatives

Q (1) THE CONCEPT OF STRATEGY & BASIC ELEMENTS OF STRATEGIC INTENT:

Meaning of strategy – The word ‘strategy’ has entered in the field of management from the military
services where it refers to apply the forces against an enemy to win a war. Originally, the word strategy has
been derived from Greek, ‘strategos’ which means generalship. The word as used for the first time in around
400 BC. The word strategy means the art of the general to fight in war.
The dictionary meaning of strategy is “the art of so moving or disposing the instrument of warfare as to
impose upon enemy, the place time and conditions for fighting by one self”

In management, the concept of strategy is taken in broader terms. According to Glueck, “Strategy is
the unified, comprehensive and integrated plan that relates the strategic advantage of the firm to the
challenges of the environment and is designed to ensure that basic objectives of the enterprise are
achieved through proper implementation process”

In 1960’s, Chandler made an attempt to define strategy as “the determination of basic long term goals
and objective of an enterprise and the adoption of the courses of action and the allocation of resources
necessary for carrying out these goals”
This definition provides for three types of actions involved in strategy:
a) Determination of long term goals and objectives
b) Adoption of courses of action
c) Allocation of resources

Elements Of Strategic Intent:

A. VISION

It is at the top in the hierarchy of strategic intent. It is what the firm would ultimately like to become. Vision
states what an organization wishes to achieve in the long run.
Miller and Dess have defined vision as the “category of intentions that are broad, all inclusive and
forward thinking”. The definition itself is comprehensive and states clearly the futuristic position.
The definition lays stress on the following:
 Broad and all inclusive intentions.
 Vision is forward thinking process.
It refers to the broad category of long-term intentions that the organization wishes to pursue. As the word
‘vision’ suggests, it is an image of how the organization sees itself. It can be equated to a dream; the
aspirations of the organization for its future. It may seem unreal to actually achieve it even in the long term;
yet, it provides the direction and energy to work towards it.

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If we consider the vision statement of the National Thermal Power Corporation (NTPC), India: ‘To be one
of the world’s largest and best power utilities, powering India’s growth, it can be seen that this statement
clearly specifies the larger purpose of the organization i.e. powering India’s growth, and describes the future
state of the organization i.e. world’s largest and best power utilities. It might not clearly define in what
terms NTPC seeks to be the ‘largest’ or the ‘best’ power utilities in the world, but it definitely provides the
direction to NTPC, needed to work towards becoming ‘big’.
A few more important aspects regarding vision are as follows:
 It is more of a dream than an articulated idea.
 It is an aspiration of an organization, which it has to attempt and exercise to achieve.
 It is a powerful motivator of action.
 Vision articulates the position of an organization, which it may attain in distant future.

A Well-defined and convincing vision statement specifies intentions that are:

 Core to its ideology
 Broad, all-inclusive, forward thinking in nature – envisioned future
 Aspirations for the future—i.e. destination rather than the course to be taken.
 Mental image of the future state.
 A dream that is shared across the entire organization.
 Inspiring, motivating, and challenging.
 Easily communicated to all its stakeholders.

B. MISSION

Mission is what an organization is and why it exists while the essence of vision is a forward-looking
view of what an organization wishes to become.
To satisfying a particular need of the society organizations relate their existence. In terms of their mission
they do this. Mission is a statement which defines the role that an organization plays in a society. It refers to
the particular needs of that society, for example, its information needs. Through different means a book
publisher and a magazine editor are both involved in filling the information needs of society. Magazine
editor may try to present news analysis in a stable and unbiased manner while a book publisher may intent
at producing outstanding reading material. Both have different objectives but an a like mission.

Defining Mission
As the scope of the business activities a firm pursues was earlier considered a mission. The definition of
mission has progressively extended to signify a concept that exemplifies the purpose behind the existence of
an organization. The “important purpose of the organization, concerning particularly why it is in existence,
the nature of the business it is in, and the customers it seeks to serve and satisfy” is
what is defined as mission by Thompson (1997).
Mission is the “purpose or reason for the organization’s existence” is said by Hunger and Wheelen (1999

How is Mission Statement Formulated ?

In the light of their individual, national or global priorities most organizations originate their mission
statements from a particular set to tasks they are called upon to perform. Several organizations, set up, owe
their existence to their prime movers. Whether derived from set priorities or not, Mission statements could
be formulated either formally or informally. Usually, in strategic and operational activities entrepreneurs lay
down the corporate philosophy which an organization follows. Due to the entrepreneur’s actions such a
philosophy may not be consciously and formally stated but may gradually evolve. Generally, an
entrepreneur has an observation of the type of organisation that he wants his company to be. In the early

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stages of an organization’s growth mission statements could be formulated on the basis of the vision that an
entrepreneur decides.
To the development of a mission statement major strategists could also contribute. By lending a hand
in the creation of a particular corporate identity or formally through discussions and the writing down of a
mission statement they do this informally. Both formally and informally chief executives pan a major role in
formulating a mission statement. On a mission statement they may set up executive committees to formally
discuss and agree or for strategic management enunciate a corporate philosophy to be followed. To
recommend a suitable mission statement consultants may also be called upon to make an in-depth analysis
of the organization.

In deciding his company’s mission and purpose B.N.Sinha, (managing director of the Scientific
Instrument Company Limited) who took the help of a management consultant, describes the process of
formulating a mission: “….as a starting point, we (i.e., the company managers, consultant and the chief
executive) spent quite a bit of time on identifying our ‘mission’ of business… After a lot of discussion, we
identified our mission as follows: to be a vibrant organization set on contributing to the scientific and
technical progress of the country; in terms of service and work
reward keeping its customers and employees satisfied; giving satisfactory return on investment to the
shareholders”.
Once formulated, a mission statement, should serve an organization for many years. But as the
organization grows and increases new products, markets and technologies to its activities a mission may
become unclear. Then the mission has to be reassessed and reexamined to either change or discard it, and
evolve a fresh statement of organizational mission.

Characteristics of a Mission Statement

In order to be effective, a mission statement should possess the following seven characteristics:
1. It should be feasible. It should not be an impossible statement but a mission should always aim high. It
should be genuine and attainable – its supporters must find it to be trust worthy. But feasibility depends on
the resources available to work towards a mission.
2. It should be precise. A mission statement should neither be too broad to make it meaningless nor should
not be so narrow as to restrict the organization’s activities.
3. It should be clear. To lead to action a mission should be clear enough. It should not be a high-sounding
set of platitudes meant for publicity purposes. For emphasizing their identity and character many
organizations do adopt such statements. A mission statement should be a clear enough to lead to action, to
be useful.
4. It should be motivating. They should feel it worthwhile working for such an organization or being its
customers a mission statement should be motivating for members of the organization and of society. To
serve its customers well and to attract clients a bank which lays great emphasis on customer service is likely
to motivate its employees. For banking institution, customer service, therefore, is an important purpose.
5. It should be distinctive. A mission statement which is indiscriminate is likely to have little impact. There
would not be much of a difference among them if all textile manufacturers defined their mission in a similar
fashion. It will generate an important difference in the public mind if one defines it as providing textiles that
would provide ‘value for money, for years’.
6. It should indicate major components of strategy. A mission statement, along with the organizational
purpose should indicate the major components of the strategy to be adopted. In the future the mission
statement should indicate a amalgamation of stability, GROWTH and diversification strategies.
7. It should indicate how objectives are to be accomplished. A mission statement should also provide clues
regarding the manner in which the objectives are to be accomplished besides indicating the broad strategies
to be adopted. Within a given time period the mission statement should deal with the objectives to be
achieved.

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C. GOALS AND OBJECTIVES
In a future period of time goals signify what an organization hopes to accomplish. They signify a future
state or a result of the determination put in now.
The goals that a firm sets for itself are addressed by a broad category of financial and non-financial issues.
Objectives are the ends that state specifically how the goals shall be achieved. They are real and precise in
contrast to goals which are generalized. Objectives make the goals operational in this manner. Objectives
tend to be mainly quantitative in specification while goals may be qualitative.

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Q) ( 2. )CORPORTE PLANNING PROCESS (or) STRATEGIC MANAGEMENT PROCESS

Definition

Corporate planning can be defined as the process of formulating the corporate mission, scanning the
business environment, evolving strategies, creating necessary infrastructure, and assigning resources to
achieve the given mission. Corporate planning has a company-wide and comprehensive perspective. It is
not just a long term planning where, usually, there is a selective focus like that on a department or product
of the organization. Strategic planning, if done for the entire organization, can also be called corporate
planning.

Elements of Corporate Planning Process

The elements of the corporate planning process can be described as below:
a) Identifying corporate mission
b) Formulating strategic objectives
c) Appraising internal and external environment
d) Developing and evaluating alternative strategies
e) Selecting the best strategy
f) Fixing key targets to strategic business units (SBUs)
g) Allot resources to each SBU
h) Developing operating plans
i) Monitoring the performance
j) Revising the plans

(a) Identify corporate mission Identify what the organization wants to achieve, to start with. For this
purpose, it is necessary that all concerned parties understand the overall purpose of the organization and the
methods of attaining them. It is also desirable that they agree on the corporate policies of the organization.

(b) Formulate strategic objectives By preparing statements of mission, policy, strategy, and goals, the
top management establishes the framework within which its divisions or departments prepare their plans. It
is essential that the members of the organization agree on these given strategic objectives. The goals should
be very specific in terms of profits, market share, employee retention and so on. The strategic objectives
thus formulated reinforce the commitment of the members of the organization to achieve the corporate
goals.

(c) Appraise internal and external environment To evolve alternative strategies to achieve these goals, a
detailed appraisal of both the internal and external environment is carried out. The appraisal of internal
environment reveals the strengths and weaknesses of the firm. The appraisal of the external environment
reveals the opportunities and threats for the firm. An analysis of strengths, weaknesses, opportunities, and
threats, popularly called SWOT analysis, is an essential exercise every firm has to carry out to evolve an
appropriate strategy to achieve the given goal.

(d) Develop and Evaluate alternative strategies There could be some alternative strategies to pursue a
given goal. If the goal is to expand the business, the following could be the three alternatives:

 Adding new products to the existing product line

 Finding new markets, apart from the present market territories
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 Manufacturing within the organization, the components, which were earlier procured from outside

Corporate Mission

Formulate Strategic Objectives

Appraise Internal and External

Environment

Develop and Evaluate Alternative Strategies

Select the Best Strategy

Fix Key Targets and Allot Resources to

Strategic Business Units (SBUs)

Develop Operating Plans

Monitor the Performance

Revise, Where Necessary

An Outline of the corporate planning process

(e) Select the best strategy For the firm to be more successful, it is necessary to focus its strategies
around its strengths and opportunities. It is a prerequisite that the members of the team or organization
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agree on a strategic plan. Such a plan, which has been generally agreed upon, is normally considered as the
best strategy. Such strategies ensure a better degree of participation and involvement of its members in the
process of achieving the goals.

(f) Establish strategic business units: It is more strategic to define a business unit in terms of customer
groups, needs, and/or technology and set up the business unit accordingly. A business must be viewed as a
customer-satisfying process, not as a goods-producing process. Hence, the focus of marketing definition for
the one’s products and services should be more on satisfying the customer needs. Defining business units in
comprehensive terms comes handy here.

Each strategic business unit (SBU) is managed by a person responsible for strategic planning and
performance. It is a single business, planned separately from the rest of the company. It has its own set of
competitors.

(g) Fix targets and allot resources to each SBU The purpose of identifying the company’s strategic
business units is to develop separate strategies and assign appropriate funding. The top management knows
that its portfolio has certain old, established, relatively new, and brand new products. The strength of a
business proposal is affected by varied factors such as market share, percentage of annual growth in the
market share, quality parameters, brand reputation and loyalty, promotion campaigns and distribution
network, operating capacity, per unit costs, material and inventory management, research and development
strength, need for key managerial professionals, and so on.

(h) Developing operating plans The operating or tactical plans explain how the long-term goals of the
organization can be met. The corporate plans reveal how much the projected sales and revenues are. Most
often, the management would like to have performed better than these projections. Where the top
management finds a significant gap between the targeted sales and actual sales, it can either develop the
existing business or acquire a new one to fill the gap.

(i) Monitor performance The results of the operating plans should be well monitored from time to time.
In the case of poor or low performance, check up with the members of the team to find out their practical
problems and sort these out. Also, it is essential to verify whether there are any gaps in formulating the
operating-tactical plans.

(j) Revise the operating plans, where necessary It is necessary to revise the operational plans particularly
when the firm does not perform as well as expected. The operating plans can be initiated to the organization
structure itself. This would ensure adequate authority or freedom for the members of the team and enable
them to achieve the targets.

Q).(3). ENVIRONMENTAL SCANNING & SWOT ANALYSIS

Environmental scanning is the monitoring, evaluating, and disseminating of information from the
external and internal environments to key people within the corporation. Its purpose is to identity strategic
factors – those external and internal elements that will determine the future of the corporation.

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The external environment consists of variables (Opportunities and Threats) that are outside the organization
and not typically within the short-run control of top management. These variables form the context within
which the corporation exists.
The internal environment of a corporation consist of variables (Strengths and Weakness) that are
within the organization itself and are not usually within the short run control of top management. These
variables form the context in which work is done. They include the corporation’s structure, culture, and
resources.
The simplest way to conduct environmental scanning is through SWOT analysis . SWOT is an
acronym used to describe those particular Strengths, Weakness, Opportunities, and Threats that are strategic
factors for a specific company

SWOT ANALYSIS

Definition:
SWOT analysis is defined as the rational and overall evaluation of a company’s strengths,
weaknesses, opportunities, and threats which are likely to affect the strategic choices significantly.
In every business organization, the top management carries out this evaluation. However, the
companies with a participatory approach involve their managers in such an evaluation process. Individual
managers and their advisers in such organizations consider the situation, separately and then jointly, to
discuss about
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 (a) the nature of the organizational issues such as increasing competition, eroding resources,
changing technology, and so on
(b) the importance of each of these issues as likely determinants of future strategy

External Environment Analysis (Opportunity and Threat analysis)

The external environment has a profound impact on the business operations irrespective of the nature and
size of the business. The business has to monitor its key macro-environment forces and microeconomic
parties. The key forces both in the macroeconomic and microeconomic environment are very dynamic.
With the result, these forces affect the business operations, both in the short run and the long run.

Opportunities It is necessary that the company should identify what opportunities are available to it
to focus upon. The latest technology, deregulated or free markets, liberalized rules and regulations,
and others, may make a lot of difference for a business organization provided it can envision how to
avail these. Visionaries identify opportunities from threats. To illustrate, during times of increasing
competition, some entrepreneurs are very happy that they can perform better their competitors.

Threats Some developments in the external environment represent threats. A threat is a challenge
posed by an unfavorable trend or a development that results in the loss of sales or profit till a
defensive marketing action is initiated. A few examples of threat could be outlined as change in
government policy such as liberalization, privatization and globalization, changing technologies,
changing value systems, environmental constraints, deteriorating law and order, and so on.

One of the strategies to protect oneself from this threat may be to prepare contingency plans spelling
out the changes the company can make much before or during the threat. Threat is a common factor for
every business irrespective of its nature and size. Technology-based companies are more threat-prone. The
unrealistic expectations of shareholders also can pose a threat to the company

Internal Environment Analysis (Strength/Weakness Analysis)

It is necessary to analyse one’s own strengths and weaknesses periodically to sustain the degree of its
competitive strength. Generally top management or an outside consultant reviews competencies pertaining
to marketing, financial, manufacturing, and organizational systems and rates each factor as a major strength,
minor strength, neutral factor, minor weakness, or a major weakness.

Strengths It is not necessary that a business organization has to correct all its weaknesses, nor that
propagate its strengths. The big question is whether the business should limit itself to those
opportunities where it possesses the required strengths or should it consider better opportunities
where it might have to develop certain strengths.
The success of the company depends on whether its business strengths not only match the key
success requirements for operating in the target market but also excel when compared to those of its
competitors, Mere competence does not constitute a competitive advantage. The best-performing
company is one, which can generate the greatest customer value and sustain it over a given period of
time.

Weaknesses Sometimes the company may not do well, not because its departments lack the
required motivation but because they do not work together as a team. For example, consider the
case of an electronics company, which employs engineers, sales, and service staff for its operations.
It is not adequate if they keep on doing their work. The organization becomes more effective only
when they work as a team. It is, therefore, critically important to build effective teams and assess

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 the effectiveness of these teams. This is a part of the internal environmental audit. Progressive
companies adopt this strategy.

Internal Environment
Strengths (S): Weaknesses (W):
 Strong presence in the local market Insular and inflexible organizational culture
 Well established customer base Worn-out plant and equipment
 Good financial performance Inadequate systems and controls
 Availability of skilled workforce Dependence on automotive end-users
 Backing from financial institutions Inadequate knowledge of appropriate technology
External Environment
Opportunities (O): Threats (T):
Large potential for exports Dominance of the small sector
India’s emergence as a source-base Customer’s emphasis on just-in-timedelivery
Access to new manufacturing process and technology Absence of entry barriers into industry
Realignment in the auto-supplier industry Demand fluctuations in the domestic market
Encouragement from the Government in terms of High rate of labour turnover
subsidies, Lower txes, and others
Summary of strengths, weaknesses, opportunities, and threats
Generic Strategy Alternatives

Generic strategy alternatives refer to the strategy alternatives in broader terms. After the nature of business
of the firm is defined, the next task is to focus on the type of strategic alternative, in general, the firm should
pursue. The strategist seeks to identify the right alternative through questions such as:
 Should we get out of this business entirely?
 Should we try to expand?
There are four strategic alternatives for any business. They are: (a) to expand, (b) to wind up or retrench,
(c) to stabilize, (d) to combine its operations pertaining to its products, markets, or functions. These are
explained below:

a) Expansion strategy can be adopted in the case of highly competitive and volatile industries,
particularly, if they are in the introduction stage of product/service life cycle.
b) Stability strategy is a better choice when the firm is doing well, the environment is relatively less
volatile, and the product/service has reached the stability or maturity stage of the life cycle.
c) Retrenchment strategy is the obvious choice when the firm is not doing well in terms of sales and
revenue and finds greater returns elsewhere, or the product/service is in the finishing stage of the
product life cycle.
d) Combination strategy is not a new strategy as it combines the other strategies. It is best suitable for
multiple SBU firms in times of economic transition and also when changes occur in the
product/service life cycle. If a firm realizes that some of its main product lines have outlived their
lives, it may not be any more profitable to continue investment with the same product. The firm may
choose to withdraw its resources from this area (this strategy is here called retrenchment) and follow
an expansion strategy in a new product area. Combination strategy is the best strategy when the firm
finds that its product-wise performance is not even, or all its products differ in their future potential.

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Exhibit 19.1: Generic strategy alternatives1

Expand Retrench Stabilize Combination

Business Business Business Definition of
Definition Pace Definition Pace Definition Pace pace

Products Add new Find new Drop old Decrease Maintain Make Drop old
Products uses products product package while
Development changes, adding new
Quality products
improve-
ments

Markets Find new Penetrate Drop dis- Reduce Maintain Protect Drop old
Territories markets tribution market market customers
Channels share shares, while
Focus on finding
Market new ones
Functions Forward, Increase Become Decrease maintain improve increase
Vertical capacity captive process production capacity
Integration company R and D efficiency and
improve
efficiency

Q). (5). STEPS IN STRATEGY FORMULATION AND IMPLEMENTATION:

Strategy formulation refers to the process of choosing the most appropriate course of action for the
realization of organizational goals and objectives and thereby achieving the organizational vision. The
process of strategy formulation basically involves six main steps. Though these steps do not follow a
rigid chronological order, however they are very rational and can be easily followed in this order.
1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-
term objectives of the organization. It is known that strategy is generally a medium for realization of
organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon
the process of reaching there. Strategy includes both the fixation of objectives as well the medium to
be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of
deployment of resources so as to achieve the objectives.
2. Evaluating the Organizational Environment - The next step is to evaluate the general economic
and industrial environment in which the organization operates. This includes a review of the
organizations competitive position. It is essential to conduct a qualitative and quantitative review of
an organizations existing product line. The purpose of such a review is to make sure that the factors
important for competitive success in the market can be discovered so that the management can
identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of competitors’
moves and actions so as to discover probable opportunities of threats to its market or supply sources.

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 3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with long
term customers, so as to evaluate the contribution that might be made by various product zones or
operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between
the planned or desired performance. A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality and the long-term
aspirations of the organization. An attempt is made by the organization to estimate its probable
future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is
actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.

Strategy implementation is the translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives. Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational structure, control systems, and culture
to follow strategies that lead to competitive advantage and a better performance. Organizational structure
allocates special value developing tasks and roles to the employees and states how these tasks and roles can
be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive
advantage. But, organizational structure is not sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational performance.
Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by
organizational members and groups.
Follwoing are the main steps in implementing a strategy:
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note
that strategy implementation is not possible unless there is stability between strategy and each
organizational dimension such as organizational structure, reward structure, resource-allocation process, etc.

Strategy implementation poses a threat to many managers and employees in an organization. New power
relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values,

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attitudes, beliefs and concerns may not be known. With the change in power and status roles, the managers
and employees may employ confrontation behaviour.

Following are the main differences between Strategy Formulation and Strategy Implementation-

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making involved in developing related to executing the strategic plans.
organization’s strategic goals and plans.
In short, Strategy Formulation is placing the Forces In short, Strategy Implementation is managing
before the action. forces during the action.
Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly an
Activity based on strategic decision-making. Administrative Task based on strategic and
operational decisions.
Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.
Strategy Formulation is a rational process. Strategy Implementation is basically an operational
process.
Strategy Formulation requires co-ordination among Strategy Implementation requires co-ordination
few individuals. among many individuals.
Strategy Formulation requires a great deal of Strategy Implementation requires specific
initiative and logical skills. motivational and leadership traits.
Strategic Formulation precedes Strategy Strategy Implementation follows Strategy
Implementation. Formulation.

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