Strategic Management

CHAPTER ONE
INTRODUCTION TO STRATEGIC MANAGEMENT
After the completion of this chapter you will:
Understand the concept of strategy & strategic management
Understand strategic thinking, strategic planning vs. strategic management
Understand Nature and characteristics of strategic management
Understand the types of strategic decisions for which different managers are responsible
Understand strategic management approaches
Appreciate the importance of strategic management as a process
1.1 Concept of strategy
The concept of strategy in business has been borrowed from military science where it implies
out- maneuvering the opponent. It began to be used in business with increase in competition and
complexity of business operations. Originally, the term ‗strategy‘ is derived from the Greek word
strategos, which means generalship – the actual direction of military force, as directed from the
policy governing its deployment. The term was first used around 360 BC, when the Chinese
military strategist Sun Tzu wrote The Art of War, a work which is said to have influenced the
thinking of many modern Japanese businesses, and has led to a number of thoughts about how the
‗art‘ can be applied to modern business. This is fundamentally about the purpose of the
business, why it exists and what it exists to do. From this point of view, the term strategy is dealt
the activities or projects that the business will adopt in order to achieve the purpose. The projects
that deliver the strategy demand the use of resources. Resources have a cost and so represent an
investment in the business. Critically, a strategy will define how these resources will be used to
compete against the other businesses that are trying to attract customers‘ valuable money.
A strategy gives the firm a competitive advantage. A competitive advantage is the basis for
a relationship with customers, which is beneficial to both customers and supplying company.
A good strategy will make this relationship resistant to competitive attack. It will make it
agreed definition of strategy. Every authority gives his/her own version.
One of the earliest contributors, Alfred D Chandler, defined strategy as: ‗the determination of
the basic long-term goals and objectives of an enterprise and the adoption of the courses of
action and the allocation of resources necessary for carrying out these goals‘.
William F. Glueck (in Business Policy and Strategic Management) defines strategy as: ‗a
unified, comprehensive, integrated plan… designed to ensure that the basic objectives of
the enterprise are achieved‘.
Hill and Jones (in Strategic Management Theory) define strategy as: ‗a specific pattern of
decisions and actions that managers take to achieve superior organizational performance‘.
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Thompson and Strickland (in Strategic Management) defines strategy as: ‗the pattern of actions
and business approaches managers employ to please customers, build an attractive market
position, and achieve organizational objectives; a company‘s actual strategy is partly planned
and partly reactive to changing circumstances‘.
Looking at these definitions we can say that strategy is about:
A game plan or course of action or pattern of actions or competitive moves or business
approaches that manager‘s employ in running a company

A strategy is the means used to achieve the ends (objectives)

Strategy is both proactive (intended) and reactive (adaptive)
Strategies are partly visible and partly hidden to outside view
Traditional view on strategy emphasized that strategy is the outcome of a formal
planning process and that top management plays the most important role. In recent years several
scholars have advocated an alternative view of strategy that has called into question the
traditional planning-centric view. These scholars have two main criticisms; one focuses
upon the unpredictability of the real world, while the other looks at the role lower-level
managers can play in the strategy making.
Intended strategy is the strategy that managers talk about and say they want to see come into
effect (this is the strategy included in formal strategic plans). Some elements of this (but by
all means not all) will become part of the strategy managers attempt to put into effect. This is
the
The unrealized elements of the strategy. The deliberate strategy will become manifest in the final
strategy, the realized strategy, that the organization adopts. However, the realized strategy will also
contain another element, the Emergent strategy. In Minitzberg‘s view, emergent strategies are the
unplanned responses to unforeseen circumstances, and they often arise from autonomous action by
individual employees deep within the organization. They are not the product of formal down
planning mechanisms.
1.2 Strategic thinking Vs. Strategic planning Vs. Strategic Management
Strategic thinking and strategic planning are the two critical components of the strategic
management process. While strategic thinking and planning represent different aspects of
the process, they are interconnected and must work together to achieve organizational
success. Strategic thinking is a skill. You can develop it, leverage it or improve it. Strategic
planning is a process. It has to be conducted or carried out. So while thinking in a certain manner
can be a natural or a nurtured attribute, planning strategically is a process that drives results
or needs tactical actions to be defined within its framework. Strategic thinking is analyzing
complex situations, identifying the underlying problems, and developing a long-term plan of
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action to achieve specific goals. It involves seeing the big picture, understanding how various
factors and variables interact and anticipating future trends and challenges. Whereas strategic
planning is a process that involves defining an organization‘s long-term objectives, identifying
the resources required to achieve those objectives, and developing a plan of action to use those
resources effectively. It is a systematic approach to aligning an organization‘s goals with
its resources, capabilities, and environment.
While both can be done by individuals or in groups, usually strategic thinking is more of
personal or individual competency and attribute. Strategic planning involves multiple people or a
team to come together. A leader or manager can do both – think and plan strategically. But the
former has better results when done alone and the latter yields greater results when done in a
group.
The purpose of strategic thinking is to discover new and imaginative strategies capable of
rewriting the rules of competition. It allows for the envisioning of futures much different than the
present. The process used in strategic thinking incorporates innovative and creative ideation to
develop business strategies that have a greater chance of success and competitive advantage. We
might consider strategic thinking as what and why of the business planning process; that is,
a way of seeing the current big picture. Given that thinking is different from planning, there is a
unique skill set needed to effectively think strategically, namely things like creating, imagining,
ideating, opening, seeing alternatives, problem solving, and leading, among others. In addition,
the tools needed to be an effective strategic thinker include activities like brainstorming,
mediating, scenario planning, feasibility studies, and root cause analyses. These all seem to be
largely right-brain activities.
On the other hand, the purpose of strategic planning is to operationalize the strategies
developed through strategic thinking that support the overall business planning process. This
process also envisions the future, but translates this vision into broadly defined goals, objectives,
and a sequence of steps describing how to achieve them. Strategic planning can be thought of as
the how, when, and who of the business planning process a way of doing and acting periodically
to review, focus, and implement. The skill set needed for effective strategic planning includes
more left-brain activities such as organizing, prioritizing, focusing, detailing, implementing, and
following up. For strategic planning, the tools are quite different from those of strategic thinking;
they are likely to include things such as Gantt charts, timetables, task lists, utilization reports, S-
curves, matrices, and the like. We can certainly see the left-brain influence in these tools.
While the two are clearly different in scope, as noted above, they are highly integrated
and supportive of each other. At the end of the date, strategic thinking without strategic
planning results in a continuing quest for structure and process whereas strategic planning
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without strategic thinking results in a lifeless process of goal setting and measuring objectives
that aren‘t necessarily precursors to achieving real results. Strategic thinking informs strategic
planning, whereas strategic planning gives voice, action, and structure to strategic thinking.
As it is the large version of strategic management, strategic planning steps cover from the
strategic thinking to end. It can be vary depending on the organization‘s size, industry, and
specific needs. However, the following points explain what the steps of strategic planning pass
through:
Establishing the Mission and Vision: The first step in strategic planning is establishing the
organization‘s mission and vision. This involves defining the organization‘s purpose, values,
and goals.
Conducting a SWOT Analysis: The second step is to conduct a SWOT analysis (Strengths,
Weaknesses, Opportunities, and Threats). This helps to identify the organization‘s internal
strengths and weaknesses, as well as external opportunities and threats.
Setting Objectives: Based on the SWOT analysis, the organization can set specific,
measurable, achievable, relevant, and time-bound (SMART) objectives.
Developing Strategies: With the objectives in mind, the organization can develop strategies to
achieve them. This involves identifying and evaluating different options, considering
available resources, and selecting the most appropriate action.
Allocating Resources: Once the strategies are in place, the organization must allocate
resources to implement them effectively. This involves identifying the necessary financial,
human, and physical resources and ensuring they are available.
Developing Implementation Plans: The next step is to create detailed implementation plans for
each strategy. This involves identifying specific tasks, timelines, responsibilities, and
performance measures.
Monitoring and Evaluation: Finally, the organization needs to monitor and evaluate the
implementation of the strategies to ensure they are achieving the desired outcomes. This
involves tracking progress, reviewing performance measures, and adjusting as needed to stay
on track.
1.3 Definition of Strategic Management
We have so far discussed the concepts of strategic thinking, strategic decision-making (planning)
and how they can be linked to each other and, it is hoped, will serve as a background to
understand the nature of strategic management. However, to get a complete understanding
of what goes on in strategic management, it is useful to begin with definitions of strategic
management. Later in the chapter, we introduce the elements and the process of strategic
management and the importance, benefits and limitations of strategic management. As already
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mentioned, the concepts in strategic management have been developed by a number of authors
like Alfred Chandler, Kenneth Andrews, Igor Ansoff, William Glueck, Henry Mintzberg,
Michael
E. Porter, Peter Drucker and a host of others. There are therefore, several definitions of strategic
management. Some of the important definitions are:
1. ―Strategic management is concerned with the determination of the basic long-term goals
and the objectives of an enterprise, and the adoption of courses of action and allocation of
resources necessary for carrying out these goals‖ (– Alfred Chandler, 1962)
2. ―Strategic management is a stream of decisions and actions which lead to the
development of an effective strategy or strategies to help achieve corporate objectives‖. (–
Glueck and Jauch, 1984)
3. ―Strategic management is a process of formulating, implementing and evaluating cross-
functional decisions that enable an organization to achieve its objective‖. (– Fed R David,
1997)
4. ―Strategic management is the set of decisions and actions resulting in the
formulation and implementation of plans designed to achieve a company‘s objectives.‖ (–
Pearce and Robinson, 1988)
5. ―Strategic management includes understanding the strategic position of an
organization, making strategic choices for the future and turning strategy into action.‖ (–
Johnson and Sholes, 2002)
6. ―Strategic management consists of the analysis, decisions, and actions an organization
undertakes in order to create and sustain competitive advantages.‖ (Dess, Lumpkin &
Taylor, 2005)
We observe from the above definitions that different authors have defined strategic management
in different ways. Note that the definition of Chandler that we have quoted above is from the
early 1960s, the period when strategic management was being recognized as a separate
discipline. This definition consists of three basic elements:
Determination of long-term goals
Adoption of courses of action
Allocation of resources to achieve those goals
Though this definition is simple, it does not consist of all the elements and does not capture the
essence of strategic management. The definitions of Fred R. David, Pearce and Robinson,
Johnson and Sholes and Dell, Lumpkin and Taylor are some of the definitions of recent origin.
Taken together, these definitions capture three main elements that go to the heart of
strategic management. The three on-going processes are strategic analysis, strategic
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formulation and strategic implementation. These three components parallel the processes of
analysis, decisions and actions. That is, strategic management is basically concerned with:
l. Analysis of strategic goals (vision, mission and objectives) along with the analysis of
the external and internal environment of the organization.
2. Decisions about two basic questions:
(a) What businesses should we compete in?
(b) How should we compete in those businesses to implement strategies?
3. Actions to implement strategies. This requires leaders to allocate the necessary resources and
to design the organization to bring the intended strategies to reality. This also involves evaluation
and control to ensure that the strategies are effectively implemented.
The real strategic challenge to managers is to decide on strategies that provide competitive
advantage which can be sustained over time. This is the essence of strategic management, and
Dess, Lumpkin and Taylor have rightly captured this element in their definition.
1.4 Nature and Characteristics of Strategic Management
Strategic management is different in nature from other aspects of management. An individual
manager is most often required to deal with problems of operational nature. He generally focuses
on day-today problems such as the efficient production of goods, the management of a
sales force, the monitoring of financial performance or the design of some new system that
will improve the level of customer service. The common characteristics of Strategic Management
are;
A. Top management involvement
Strategic management relates to several areas of a firm‘s operations. So, it requires top
management‘s involvement. Generally, only the top management has the perspective needed to
understand the broad implications of its decisions and the power to authorize the necessary
resource allocations. Top management need to take the formulation of longer–term strategy
seriously and should themselves play a major role in that process. They need to ensure
that the organization has an overall sense of direction, that they have consciously reviewed
those objectives.
B. Requirement of large amounts of resources
Strategic management requires commitment of the firm to actions over an extended
period of time. So they require substantial resources, such as, physical assets, money, manpower
etc.
C. Shared vision
A shared vision implies:
That conclusions are communicated to all those within the organization who take decisions,
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probably everyone.
Involvement in the planning process, both through consultation and through a proper
mixture of top–down and bottom–up
A strategy which is truly corporate, with meaning for everyone in the organization.
Implementation of strategy depends upon actions taken by people throughout the
organization, so a wide understanding of critical factors is essential.
D. Affect the firm’s long-term prosperity
Once a firm has committed itself to a particular strategy, its image and competitive advantage are
tied to that strategy; its prosperity is dependent upon such a strategy for a long time.
E. Future-oriented
Strategic management encompasses forecasts, what is anticipated by the managers. In such
decisions, emphasis is placed on the development of projections thatwill enable the firm to select
the most promising strategic options. In the turbulent environment, a firm will succeed only if it
takes a proactive stance towards change. If the concern is with the longer term, strategies should
not look simply like extrapolation of the past. Serious though needs to be given to 'creating
the future. The strategy should therefore address thoroughly the scope of future activities and
market choices. It should be sensitive to the underlying requirements of customers and to the
wide constituency of stakeholders rather than loyal to what has always been done. There
F. Monitoring need to be strategic
Monitoring must be continuous, but it must also focus on the strategic. The relationship between
the items monitored in–year and the longer–term objective must be clear. Monitoring therefore
needs to embrace items such as customer perceptions, underlying quality, efficiency and
capability as well as immediate financial performance.
G. Continuous decision–making
With strategic management the idea of continuous decision making is emphasized, in contrast to
the potentially stop start decision making process of an annual planning cycle. However, it is
important to guard against continuous decision making which degenerates into erratic decision
making.
H. Clear links from strategy to operations
The underlying thought here is very close to that explained earlier in relation to
monitoring. Action plans, projects and budgets should flow from the strategy; they should
not effectively
determine the strategy. The need for action plans, projects and budgets has to be stressed; long–
term objectives and vision are not sufficient in themselves. People throughout the organization
need to know what is expected of them.
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I. Need support from Structures and processes
If an organization is set up on functional lines, is it capable of an effective customer orientation?
Do management and communication processes ensure that strategic issues are rapidly shared
and resolve, or do such issues tend to submerge and reappear? Is the strategy consistent with
the culture of the organization, the accepted norms of behaviour? Do personal reward,
promotion and recruitment systems support and reinforce the qualities required in the longer
term to deliver the strategy successfully?
J. Non-self-generative decisions
organisation must have the preparedness to make strategic decisions at any point of time. That is
why Ansoffcalls them ―non-self-generative decisions.‖
K. Systematic and rational
Systematic is characterized by the use of orderly planning or by the use of a methodical
approach, whereas rational implies possession of unemotional and logical reasoning ability.
Thus, strategic management is a systematic and rational process because it consists
of systematically processing decision inputs, which lead to rational and expected outputs.
L. Integrated function
Integration encompasses the concept of bringing all the parts together to create a whole, i.e., to
establish ―a set of policies and methods used by management to facilitate communications and
to coordinate the activities of individuals or groups within the company. Thus, the strategic
management process serves as a foundation for the other activities and functions of the
corporation, such as organization, staffing, and control.
I. Means to an end
Strategic management is not an end unto itself. It is a means, or a tool, to be used to achieve
corporate objectives.
1.5. Need and Benefits of Strategic Management
No business firm can afford to travel in a haphazard manner. It has to travel with the support of
some route map. Strategic management provides the route map for the firm. It makes it possible
for the firm to take decisions concerning the future with a greater awareness of
their implications. It provides direction to the company; it indicates how growth could be
achieved. Now, systems are much more open, environment is characterized by increasingly
unstable economic growth, budgets are constantly revised, inputs are thoroughly unpredictable,
and planning in the traditional sense is no longer tenable. Therefore, today‘s enterprises need
strategic management to reap the benefits of business opportunities, overcome the threats
and stay ahead in the race. The purpose of strategic management is to exploit and create new
and different opportunities for tomorrow; while long-term planning, in contrast, tries to optimize
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for tomorrow the trends of today. Today, all top companies are involved in strategic management.
They are finding ways to respond to competitors, cope with difficult environmental changes,
meet changing customer needs and effectively use available resources. An increasing number of
firms are using strategic management for the following reasons:
It helps the firm to be more proactive than reactive in shaping its own future.
provides the roadmap for the firm. It helps the firm utilize its resources in the
It
best possible manner.
allows the firm to anticipate change and be prepared to manage it.
It helps the firm to respond to environmental changes in a better way.
It
minimizes the chances of mistakes and unpleasant surprises.
It
provides clear objectives and direction for employees.
It
At a time when the business environment is changing rapidly, even established firms are paying
more attention to strategy because they may face new competitors who threaten their core
business. Should a firm compete in all areas or concentrate on one area? Should a company try to
extend the brand to even more diverse areas of activity, or would it gain more by building profits
in the existing areas, and achieving more synergies across the group? Should the company
continue the current strategy as it is now, or would it initiate a radical review of its strategy?
These are just a few examples of the strategic part of the management tasks. Strategic
management has thus both financial and non-financial benefits:
1. Financial Benefits: Research indicates that organizations that engage in strategic management
are more profitable and successful than those that do not. Businesses that followed strategic
management concepts have shown significant improvements in sales, profitability and
productivity compared to firms without systematic planning activities.
2. Non-financial benefits: Besides financial benefits, strategic management offers other
intangible benefits to a firm. They are;
Enhanced awareness of external threats
Improved understanding of competitors‘ strategies
Reduced resistance to change
Clearer understanding of performance-reward relationship
Enhanced problem-prevention capabilities of organization
Increased interaction among managers at all divisional and functional
levels Increased order and discipline.
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According to Gordon Greenley, strategic management offers the following benefits:
allows for identification, prioritization and exploitation of opportunities.
It
It provides objective view of management problems.
It provides a framework for improved coordination and control of activities.
It minimizes the effects of adverse conditions and changes.
It allows decision-making to support established objectives.
It allows more effective allocation of time and resources to identified opportunities.
It allows fewer resources and less time to be devoted to correcting erroneous and ad hoc
decisions.
. It creates a framework for internal communication among personnel.
. It helps integrate the behavior of individuals into a total effort.
It provides a basis for clarifying individual responsibilities.
It encourages forward thinking.
It provides a cooperative, integrated enthusiastic approach to tackling problems
and opportunities.
. It encourages a favorable attitude towards change.
It gives a degree of discipline and formality to the management of a business.
1.6. The Strategic Management Approach
Approaches to strategic management can be defined in a general sense (emphasis of the firms in
competition) and the way strategies need to be made.
According to firm’s emphasis:
i. Recourse based approach
This approach is realized when managers consider the resource they have within their business
that makes them competitive than the industrial or organizational nature. It helps the organization
to get absolute competitive advantage because of their resources.
ii. Industrial/organizational approach
This approach is appreciated when managers consider the industrial or organizational nature they
have to be within their business that makes them competitive than the resource uniqueness. It
gives the organization the advantage of blocking new entrant from the market.
According to the way strategies need to be made: Developing a strategy is described most
commonly in literature as being based on the way in which the process of strategy is developed
and the desired outcome of that strategy. The process of strategy development is either deliberate
or emergent (or adaptive) while the desired outcome is to maximize profit or to achieve multiple
purposes (plural). Accordingly, the four approaches to strategic management are Classical,
Evolutionary, Systemic and Processual each of which is described in detail below.
i. Classical Approach

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The classical approach to strategy making is the deliberate process of developing a strategy to
maximize profit. This approach, though described as classical, was mainly developed and
propounded by management strategists in the 1960s such as Igor Ansoff and Alfred Sloan. Sloan,
the former chief of General Motors, was credited with much of the organization‘s early success
predominantly due to his approach of thoughtful examination of the internal and external
environment and then developing a strategy to direct resources to meet the company's long-term
goals. The long-term aim of the classical approach to strategy is precisely to make a profit, and
this is best summed up in Sloan's words from his biography;
The strategic aim of a business is to earn a return on capital, and if in any particular case the
return in the long run is not satisfactory, the deficiency should be corrected or the activity
abandoned. (Richard Whittington, 2001).
This very rational approach has advantages where a change in markets and the industry move
relatively slowly and where reasonable confidence can be achieved in long-term financial
modeling. The classical approach relies on the strategic capability being concentrated in the
organizational leader and his or her ability to suitably commanding the organization. For
this reason, particularly due to cognitive limitations in decision making by individuals, many
organizations are adopting an approach that, while focusing on business profitability,
acknowledges the dynamic processes acting upon and within the organization.
ii. Evolutionary Approach
The evolutionary approach to strategy is based on the view that the organization is operating
within an economic environment that is ever changing. The role of strategy, in this case, is to
respond to the environment for survival and profit. The main reason that this process is known as
evolutionary is that it is similar to Darwinian theory in biology where only those individuals, or
in this case strategies, best equipped to survive environmental or economic pressures do so
(Colin White, 2004). An example of this is the strategy of Sony during the 1980s where they
released well over 100 different versions of their portable cassette player, the Walkman,
and allowed the market to decide which would survive and which would be removed from the
market through failure.
iii. Processual Approach
The processual view is that the business environment is messy and largely unpredictable
(Richard Whittington, 2001). Additionally, with this approach, there is an acknowledgement that
decision-makers cannot act with pure reason and that only a few factors affecting a decision can
be dealt with. This limitation of human cognition is known as bounded rationality (Simon, 1982).
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To make sense of the chaos of the world in which the organization operates, managers develop
models, or processes, to help make decisions. These models are known to be imperfect
representations of the complicated world but the help the strategist to identify and quickly
respond to forces acting upon the organization. The models that are used for decision-making
may be explicit and documented or cognitive.
Ultimately, because there is an acceptance that the world is messy and unpredictable, it is
accepted that maximizing profit is not within the control of the strategist and sufficient
profit becomes the goal. To achieve this, there is also a prevalence of satisficing in environments
which are tolerant of under-performance (Colin White, 2004) where the decision maker
looks for a satisfactory, rather than an optimal, alternative.4
iv. Systemic Approach
The systemic approach is taken by those that understand the need to play by the local
rules (Richard Whittington, 2001). The cultural context is key to the development of the strategy.
This may be a function of the way that a family culture influences a business or may also
be influenced by the local cultures with different levels of uncertainty avoidance, power distance,
collectivism, masculinity (Hofstede, 1983) and long-term vs short-term orientation. The systemic
approach toward strategy is the deliberate development of a strategy to meet cultural and societal
needs while maintaining sufficient profit.
In determining which approach to strategy-making will be taken within an organization, it
is important first to understand who the strategist or strategists are within the organization.
The classical approach commonly has the organizational leader as the source of strategy
development and the driver of strategy implementation. The more modern approach is not only
the acceptance but the goal of engaging everybody in an organization as a strategist.
An organization is not a single entity but is instead made up of numerous individuals that hold
different views of labor, economics, planning and the organization‘s goals. Though it is the role
of the strategists within an organization to align their activities to achieve the organization‘s
goals, even under optimal conditions, this will be incomplete.
It may also be possible that this may not be in the best interests of the organization to have all of
the strategists of one mind. While a managing director or president or chief executive may
propound to deliberately and methodically plan a long-term strategy to deliver profits to
the organization, it is the line managers that will usually develop decision-making models that
will help respond to the changing environment. It may also be the case that a work-group is
operating within a different society or culture and though they do deliberately plan but also
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understand that they need to play by local rules. Throughout this, each strategy that develops
either succeeds or fails and the strategy of the organization evolves.
In summary, it is because an organization has many working within it that opinions and
approaches will differ towards strategy. Co-existence of multiple approaches to strategic
management is inevitable without the development of either a powerful organizational culture, a
human resource monoculture or extremely prescriptive management, such as in the armed forces.
For this reason, it is likely that a single approach will never occur, but within an organization, it
is likely that more than one approach to strategy will be represented.
Regardless of the approach taken, the judgement of the success of a strategy is measured
by whether the desired outcomes have been achieved. In examining and using strategy within the
business, we may consider ourselves fortunate that these outcomes require no bloodshed;
the original reason that strategy was first developed.
1.7 Levels at which strategy operates (overview)
Strategy is at the foundation of every decision that has to be made within an organization. It is
concerned with all levels, but it is helpful to create a classification that can help us to focus our
attention at any one time. If the strategy is poorly chosen and formulated by top management, it
has a major impact on the effectiveness of employees in pretty much every department within the
organization. The three levels of strategy are:
The Corporate Level
The Business Unit Level
The Functional Level
Having a solid understanding of these levels of strategy will help you break your strategy into the
correct levels, so you can align your company-wide goals from the top of your organization (the
corporate level) to the bottom (the functional level). Additionally, if you approach your strategy
using these three levels, leaders across your organization will have a better understanding of how
their strategic activities impact your company‘s high-level strategy.
1. The Corporate Level
The corporate level is the highest and therefore the most broad, level of strategy in business.
Corporate-level strategy should define your organization‘s main purpose. It should also direct all
your downstream decision-making. For example, the objectives (e.g. high-level goals) in the
levels below this one should all have a direct line to the goals defined here.
Creating and understanding your corporate-level strategy is particularly important for
organizations that have multiple lines of business. For example, if one arm of your business
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manufactures a product and another arm sells that product, you‘ll have a separate business unit
strategy for each—but one single corporate-level strategy that describes why those two arms are
important, and how those businesses interact for the good of the organization.
There are a handful of things to do as you work on your corporate-level strategy:
Confirm your overall mission and vision. These two elements define your entire
organization, and so should be done at the corporate level:
Your mission statement describes what your company does and how it is different from
other organizations in your competitive space.
Your vision statement describes the desired future state of your organization at a certain
point in time.
To create these elements, you may want to write out an OAS statement (Objective, Advantage,
Scope) or use a tool known as Strategic Shifts.
Create your corporate objectives. Your objectives describe the high-level goals that will help
you achieve your mission and vision. Take, for example, a bank. This bank used the
Balanced Scorecard to outline objectives across four perspectives (from the top of the
scorecard to the bottom): financial, customer, internal, and learning and growth (L&G). You
can see their objectives written in the sample strategy map below.
2. The Business Unit Level
Your business unit strategy is used for different areas of your business (like services and
products, or multiple departments or divisions, for example). The complexity of this level will
depend on how many businesses you are in, and how your company is structured. It‘s important
to create a strategy for each business unit so that you can see which units are excelling and which
need improvement.
Having a strategy at the business unit level allows you to weigh the costs and benefits of each
business unit and to decide where you should spend your resources. Depending on the progress
towards your goals and your analysis of the market, you may even decide it‘s time to divest or
sell some of your business units so you can focus on the areas that are most important to
achieving your company‘s corporate strategy.
o Differentiate yourself from your competitors. One of the best ways to tell if you‘ve done
this adequately is through a SWOT analysis, which allows you to review your competitive
environment and define a strategy based on what sets your organization—and specifically,
the business unit—apart from the competition.
o Create objectives and initiatives that support your business unit and the corporate
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level. Your goal while creating a business unit strategy is to create objectives and initiatives
that support the unit while simultaneously contributing to the objectives and initiatives of the
organization as a whole. For example, at the corporate level for the learning and growth
perspective, one of the bank‘s main priorities (in the example above) is to ―provide valuable
skills training.‖ With this objective in mind, your business units will be able to determine
what activities they‘ll need to do to support this—like providing customer training services
relevant to its specific function.
3. The Functional Level
The functional level of your strategy involves each department—and what those at the
department level are doing day-to-day to support corporate initiatives. Whereas your business
unit strategy would be defined and evaluated by senior leadership, your functional strategy
is typically produced by department heads (e.g. leaders in marketing, operations, finance, IT,
etc.). These individuals can help ensure that the departments execute the defined strategic
elements, and that the components laid out at the functional level help support both the
department level and corporate level strategies.
There are a few things to consider as you work on your functional strategies:
o Understand that this level has the most detailed measures and projects. Measures help
you answer the question, ―How are we doing toward meeting a particular objective?‖
Projects (or initiatives) help you answer, ―What are the key actions we can take to support
our objectives?‖ While you‘ll have measures and projects at every level of your strategy,
they should be extremely detailed at the functional level. You can leverage a RACI matrix to
ensure everyone knows who is responsible for completing your projects and who they need to
go to for help or direction.
o Make sure the goals in your functional strategy align with the goals at the corporate
level. Corporate goals are set by the most senior members of your organization, and those
goals drive decision making. You‘ll gain support from the top level of executives if your
projects and goals align with their goals. You‘ll also be able to see how the work you are
doing contributes to the overall success of the company.
o Don’t get too “measure happy.” We‘ve seen organizations measure hundreds of data points
at the functional level. But keep in mind what your bigger goals are and measure only the
things that help you determine if you‘re progressing toward those goals. (This blog gives
detailed instructions on selecting the right measures, if you need a hand.)
Going back to our bank example, this organization may decide that, at the functional level,
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measuring the number of service calls responded to and the response time for customer service
calls are the most effective measures for customer service training, which rolls up to support the
skills training corporate-level initiative.
1.8 Strategic Management Process
Developing an organizational strategy involves four main elements – strategic analysis, strategic
choice, strategy implementation and strategy evaluation and control. Each of these contains
further steps, corresponding to a series of decisions and actions that form the basis of strategic
management process.
1. Strategic Analysis: The foundation of strategy is a definition of organizational purpose.
This defines the business of an organization and what type of organization it wants to be. Many
organizations develop broad statements of purpose, in the form of vision and mission statements.
These form the spring – boards for the development of more specific objectives and the choice of
strategies to achieve them.
Environmental analysis – assessing both the external and internal environments is the next step in
the strategy process. Managers need to assess the opportunities and threats of the external
environment in the light of the organization‘s strengths and weaknesses keeping in view
the expectations of the stakeholders. This analysis allows the organization to set more specific
goals or objectives which might specify where people are expected to focus their efforts. With a
more specific set of objectives in hand, managers can then plan how to achieve them.
2. Strategic Choice: The analysis stage provides the basis for strategic choice. It allows
managers to consider what the organization could do given the mission, environment and
capabilities – a choice which also reflects the values of managers and other stakeholders.
(Dobson et al. 2004). These choices are about the overall scope and direction of the business.
Since managers usually face several strategic options, they often need to analyze these in terms of
their feasibility, suitability and acceptability before finally deciding on their direction.
3. Strategy Implementation: Implementation depends on ensuring that the organization has
a suitable structure, the right resources and competencies (skills, finance, technology etc.),
right leadership and culture. Strategy implementation depends on operational factors being
put into place.
4. Strategy Evaluation and Control: Organizations set up appropriate monitoring and control
systems, develop standards and targets to judge performance.

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