UNIT -1

Introduction:
Strategy is a term that comes from the Greek work "strategia" means "generalship". In military,
strategy refers to the development of troops once the enemy has been engaged, attention shift
to tactics. Here the development of troops is important. By substituting “resources” for troops
the concept can transfer to business world.
In business as in military, strategy bridges the gap between policy and tactics. Together
strategy and tactics bridge the gap between ends and means. In a border sense strategy is
defined as the determination of the basic long-term objective and goals of an enterprise and
formulation of plans and acquisitions, allocation and utilization of resources necessary to
accomplish these goals.

Definition:
“Strategy is a unified, comprehensive and integrated plan designed to assure that the basic
objectives of the enterprise are achieved” -William.F.Glueck.
“Strategy in the determination of the basic long-term purpose and objectives of an enterprise
the adoption of courses of action and allocation of resources necessary for carrying out there
goals” -Alfred.D.Chandler.

Nature of strategy
1. Provides overall framework: It provides overall framework for guiding enterprise
thing and action. The purpose of strategy is to determine and communicate a picture of
enterprise to a system of major objectives and policies.
2. Unified Direction: It is concerned with a unified direction and efficient allocation of
an organization’s resources.
3. Contradictory actions: Due to its dependence on environmental variables, strategy
may involve a contradictory action.
4. Major course of action: It is a major course of action by facilitating all actions
involved in meeting the objectives of the organization.
5. Combination of actions: It is combination of actions, the actions are different for
different situations.
6. Blend of internal and external factors: To meet the opportunities and threads
provided by external factors, internal factors are matched with them.
7. Future oriented: Strategic action are required for new situations which have not arisen
before in the past.
8. Dependent on system: Strategy requires some systems and norms for its efficient
adoption in any organization.
Elements of strategy
Any strategy contains four important elements.
1. Goals: A strategy indicates the long-term goals towards which all efforts are directed.
Such goals help employees to give their bent and enable the firm to specify its
competitive position very clearly to its rivals.
2. Scope: Strategy defines the scope of the firm, the kind of products that the firm offers,
the board activities it will undertake. At the same time, throw light on activity that firm
will not undertake.
3. Competitive advantage: A strategy contains a clear statement of what competitive
advantage the firm will pursue and sustain.
4. Logic : It is defined as the tools for distinguish between true and false. For example, If
a organization strategy is too dominant in market by providing low cost, mass-market
produces. The answer to question ”Why?”(Why the organization strategy will work?)
is the logic of the strategy.
Approaches to strategy making
1. Autocratic approach: Strategy making under autocratic approach in highly
centralized in decision making process in operationalized at the top of the organization.
Strategy analysis and setting alternative courses of action are sole responsibilities of
the strong autocratic leader.
2. Transformational approach: It involves creation of vision and set of organizational
goals or missions. The transformational leader’s emphasis on the framework to get
employees to adopt and pursue organizational goals.
3. Rational approach: It focuses on the thoroughness od analysis and evaluation of all
possible courses of action,
4. Learning approach: It involves continual learning and interaction with heavy reliance
on flexibility and adoption.
5. Political approach: It depends on independent behaviour of organizational members.
Strategy is selected according to the political interplay among the various internal and
external alliances of the organization.

Importance of Strategy
1. It gives direction.
2. Facilitates overall effectiveness.
3. Coordinate activities.
4. Facilitate optimal resource allocation.
5. Helps in comparing courses of action.
6. Programme all organizational activities.
7. Defines accountabilities.
8. Enhances communication and commitment.
9. Provides a framework for ongoing decision making.
1.Strategic management:-
The term strategic mgt is combination of strategy & management. This term
refers to the forming a strategic vision, setting objectives, developing a strategy, implementing
and executing the strategy. strategic mgt initiate with setting a mission, objectives a goals.
there after building a business portfolio according and carrying the functional activities to
achieve the set mission, objectives & goals.
Def:- “ strategic mgt is a stream of decision & actions, which leads to the development of an
efficient strategy or strategies to help achieve corporate objectives” -- Willing. F. Glueck.
“Strategic mgt is concerned with making decision about organization’s future direction &
implementation those decision”.
Characteristics of Strategic management:-.
1. Long-term issues:- S.M deals with primarily with long-term issues that may not have an
immediate effect.
2. Competitive Advantage:- S.M helps managers find new source of sustainable competitive
advantage.
3. Effect on operations:- S.M always has a grate effect on operational issues.
4. Uncertain:- S.M deals with future – oriented non-routine situation they create uncertainty.
5. Complex:- Uncertainty brings complex to S.M
6. Organization-wide:- S.M has organization wide implication.
7. Fundamental :- S.M is fundamental for improving the long-term performance of the
organization.
8. Long-term implication:- S.M is not concerned with day-to-day operations. It has long term
implications. It deals with vision, mission,& objectives.
Importance of Strategic Management:-
1. Discharges board responsibility
2. Force on objective Assessment
3. Provides a framework for decision making
4. Supports understanding
5. Enable measurement of program
6. Improve stability
7. Decrease risks
8. Strong labour supply
9. Strengthens brand management
Limitations of Strategic management:-
1. Time consuming
2. Difficulty
3. Lack of short-term results
4. Unanticipated results
5. Poor adoptability
6. Limited to set of rules
 Strategic Management as a process:-
The process of strategy making is explained through a model which consists of
different phases. each phase having a number of elements. The S.M process contains 4 phases
consisting of 20 elements. The S.M model is as follows:-

Strategic Intent strategic Strategic Strategic

Formulation Implementation Evaluation

Environment Organization
•Vision •Project
al Appraisal al Appraisal
•Mission •Procedural
•Business •Resource
•SWOT Analysis
Definition allocation
•Corporate level
•Business •Structural
strategies
model •Behavioural
•Business level
•Objectives •Functionals
strategies
•Choice •operational
•Strategic plan

Strategic control

1. Strategic Intent:- It refers to the purpose of the organization and the ends it wishes to pursue.
It represents the organizations belief about its state of the future, the purpose or ends in the
organizations wishes to pursue vary from being broad and long-term [mission & vision],to
being narrow, with a focus on the short-term[objectives or goals].
“Strategic intent is long-term goal that reflect the preferred future position of the firm, as
articulated by its top management”.

Most
Integrative Vision Fewest in number

Mission

Business
Definition

Goals

Objectives
Greatest in number
Most Specific
The strategic intent makes clear what the organization stands for
1. The elements of vision serves the purpose of stating what the organization wishes to
achieve in the long run.
2. The mission relates the organization to the society
3. The business definition explains the business of the organization in term of customer
needs, customer groups, etc.
4. the business model clarify how the organizations create revenue.
5. Objects state what is to be achieved in a given time period.

2. Strategic Formulation:-
 Environmental & organizational appraisal deal with identifying the opportunities and
threats in the environment and strength and weakness of the organization in order to
create a match between them.
 Corporate level strategies relate to the strategic decision regarding the management of
a portfolio business.
 Business strategy aim at developing a competitive advantage in the individual
businesses .
 Strategic alternatives and choice one required for evolving alternative strategies and
choosing the best strategy from the alternative strategies.

3. Strategy implementation:-
Strategy implementation in the translation of chooses strategy into organizational actions of as
to achieve strategic goals and objectives. it is defined as the manner in which the organization
should develop, utilize and amalgamate organizational structure, control systems, and culture
to flow strategies. The emphasis in this phase of strategic mgt is on action.
4. Strategic evaluation and control:-
In this phase the strategic implementation of strategic are evaluated and measures
organizational performance. the feedback from strategic evaluation in meant to exercise the
strategic control over the strategic implementation process.
2. Vision:-
Vision is future aspirations that lead to an inspiration to be the best in one’s field of activity.
the vision statement set out a company’s long-term goals and aspirations clearly and concisely.
It is intended to inspire and motivate the employee of organization by providing where
organization in heading.
“ Vision is a description of something [an organization, corporate culture, a business , a
technology, an activity]in the future.” -PHILIP KOTLER.
Features of vision:
1. Mental exercise: It is an exercise in thinking carefully about where a company needs to
lead to be successful.
2. Selects the target market: It selects target market to participate, putting the company on
the strategic path and making commitment to follow that path.
3. It constitutes organizations objectives and focus.
4. Realistic: It must be based on reality to be meaningful for an organization.
5. Credible: A vision must be believable to be relevant.
6. Attractive: To inspire and motivate vision must be attractive.
7. It reflects future plans.
8. Dynamic and flexible: It changes according to changes in environment.
9. Time-Bound: Strategic vison should have a time horizon of five years or more.
10. Future: A vision is not in present, it is in the future.

Developing a strategic vision:

The seven step process for formulating strategic vision for a company are
1. Understand the organization: The strategic leader should understand about the
organization. Essential questions should be answered such as hat is the purpose?, what
value it provides to society, What is organizational position, who are stakeholders etc.
2. Conduct a vision audit: This step involves assessing the current direction and
momentum of the organization. Key questions to be answered are
 What is organizations current direction?
 Do the organizations structure, processes, personnel support the current
direction?
 Does the key leaders knows the current directions agreed on it?
3. Target the vision: This step involves starting to narrow in the vision. Key questions
included are
 What are boundaries to vision?
 What must be vision accomplish?
 What critical issued must be addressed in the vision?
4. Set the vision context: In this step strategic leader categorize future development and
list expectations for future in each category. Then he must determine these expectations
mostly to occur and assign a probability to each expectation.
5. Develop future scenarios: After assigning the probabilities to each expectations, leader
should combine those expectation into a few scenarios to include range of possible
futures. The scenarios should represent in the aggregate, alternative futures the
organizations likely to operate.
6. Generate alternative visions: There may be several directions the organization might
take in the future. So, the strategic leader should generate visions reflecting those
different directions.
7. Choose the final vision: A best vision is selected by comparing the visions with
alternative scenarios. The final vision should be the one which best meets the criteria
of a good vision.
Significance of vision:
 Establishing standard of excellence.
 Bridging the gap between the present and future.
 Providing strength to the organization.
 Outlying the future.
 Helping employees in goal setting.
 Helping in strategy framing.
 Giving meaning to work.
 Creating effectiveness.
 Giving meaning to organization.
Limitations of vision:
 Vague or incomplete.
 Not forward looking
 Too broad
 Uninspiring

3. Mission:
Mission is what an organization is and why it exists. A mission statement defines a role that
an organization plays in a society. Mission does not state on outcome. It contains no time
limit or measurement. It provides basis for decision on resource allocation and appropriate
objectives.
“Mission is the purpose or reason for the organizations existence”.
“A mission provides the basis of awareness of a sense of purpose, the competitive
environment, degree to which the firm’s mission fits its capabilities and the opportunities
which the government offers”.
Characteristics of mission statements:
1. Feasible: A mission should always aim high but it should not be impossible statement.
2. Precise: It should be so narrow or should it be too broad.
3. Clear: It should be clear enough to lead to action.
4. Motivating: It should motivate the members of organizations.
5. Distinctive: It should be distinctive.
6. Reflection of major strategy.
7. Helps in objective accomplishment.
Developing a mission:
1. Key decision-makers policy: The mission statement is based on the assumptions and
beliefs of those who create an organizations (owners) and who manages it(managers).
2. Visionary long-term concept: The visionary of the organization creates projection about
where it should go ang what major changes lies ahead. It has long-term orientation.
 Key decision- Visionary long- Organizational
maker's policy term concept mission

3. Organizational mission: The key decision makers philosophy and visionary long-term
concept of the organizations taken together define organizations mission in the form
desires, beliefs and assumptions.
Benefits of mission:
1. Inspiring employees.
2. Improving performance.
3. Guiding corporate decision-making
4. Promoting the company
5. Defines the basic goal
6. Business plans.
7. Company direction.
8. Advertising.

4. Objectives:
The term objectives refers to an organizations articulated aims or responses to address major
change or improvement, competitiveness or social issues and business advantages broadly
stated objectives are what an organization must achieve to remain or become competitive and
ensure long-term sustainability.
“Objectives may be defined as the targets people seek to achieve over various time periods.”
“Objectives are decision rules which enable management to guide and measure the firms
performance towards its purpose”.

Objectives can be classified as follows:

1.Primary objectives: These have direct relation with primary beneficiaries and fulfillment of
consumers needs.
2.Secondary objectives: These objectives make a direct contribution to the primary objectives.
3. Short-term objectives:- these objectives differ from the long-term objectives .If the business
is in poor financial performance then these short term objectives are formed.
4. Medium-term objectives:- these are generally relate to a period of 18 months to3 yrs.
5. Long-term objectives:- these are aspirational in nature and relate to a period of 5yrs plus
6. Financial objectives:- these objectives are related to increasing profitability for a specific
period.
7. Non-financial objectives:- these have a greater impact on measuring non-tangible business
approaches.
Process of setting objectives:-

Step-1 Classifying objectives:- objectives should be classified in major and derivative goals,
long range and short range. after this, these objectives should be broken down in departmental,
sectional and individual objectives.
Step-2 Reasonableness & inconsistency:- the selected objective must represent hopes
responsible & attainable. they must be consistent.
Step-3 Areas of objectives:- these are 8 areas where objectives or performed- they are market
standing, innovation, productivity, physical& financial resources, profitability ,manager
performance an workers performance and public responsibility.
Step-4 Realistic and practical:- Objectives should be set in realistic rather than idealistic term.
Step-5 Balancing of short range and long range objectives:- By balancing the various objective
remove their conflicts.
Step-6 Change of adjustment:-Dynamic business environment makes the company objectives
dynamic in nature and it changes along with change in time & situations.
Importance of objectives:-
1. Defines relationship with environment
2. Help to pursue vision and mission
3. Provides the standards for performance appraisal
4. Helps In defining legitimacy
5. Provides direction
6. Helps in coordination
7. Bench marks for success
8. Gives motivation.
5. Policies:-
Policies guides to thinking and action of those who have to make decisions in
the course of accomplishment of the enterprise objectives. They provide ready answers to all
questions faced in the running the organization.
“ Policies are general statement or understanding which guide or channel thinking in decision
making or subordinates”.

Characteristics of policy:-

Consistent

Sound and Objective

praticable related

Policy
Image of
Broad
the
outlines
company

Adequate
Flexible
number

1. Broad outlines:- A policy should provide only a broad outline, leaving it to the managers to
decide within its frame work.
2. Consistent:- Policy should not be mutually contradictory.
3. Adequate number:- The policies should be adequate in number to guide thinking and actions
in different fields of activity. Ex:- in sales, production, personal, etc.
4. Sound & Practicable :- The policies should be sound and practicable in every respect.
5. Flexible:- Policies should be kept flexible enough to be adjusted to quit the needs of
changing time.
6. Objective related:- Policy should be related to the objectives of the company.
7. Represents desired image of the company:- Policies are indicators of the conduct and
philosophy of the company and about what the company stands for. These are communicated
to the members of the organization & as well as the outside public.

Types of policies:
1. On basis of broadness:
 Organizational policies: These are applied to the entire organization and are
formulated by top level managers.
  Functional or departmental policies: These are formed for the special functions
of business or departments. These are related to only that function or department
but not to entire organization.
2. On basis of origin:
 Basic policies: these are formed by top level managers for guiding the functions
of their subordinates.
 Appealed policies: These are formed on the appeals made by subordinates.
 Imposed policies: These are formed under pressure from external forces likes
government, business association etc.
3. On the basis of freedom:
 General policies: Under these the subordinates have greater freedom to take
decisions. For example, Sales officer has freedom to supply goods on credit.
 Specific policies: These policies limit the freedom of subordinates. For example,
Sales officers have the limit of supply goods on credit not greater than Rs.5000/-
.
4. On the basis of clarity:
 Written policies: Policies which are clarified in writing.
 Oral policies: Policies are conveyed through orally.
 Implied polices: Policies are neither writer or conveyed orally but are present in
the organization are called as implied policies.
Developing a policy:-
1. Defining the policy area:- Manager has to define the policy area. the area for which a
policy is to be framed.
2. Identification of alternatives:- The alternatives should be decided on the basis of
analysis of external & internal environment.
3. Evaluation of alternatives:- While evaluating the policies, factors likes cost, benefits,
resources, strategy etc. should be assessed.
4. Selection of alternatives:- Appropriate alternatives should be selected. the selection of
policy is the long-term commitment.
5. Implementation:- Policy should be implemented on trail basis. care should be taken
during test run. If policy is finally all right, it should explain to those who all to
implement it.
Significance of policy:-
1. Guide to thinking and action
2. Consistency
3. Broader applicability
4. Confidence building
6 . Crafting a strategy:-
There is a process for crafting a strategy
1. Setting organization objectives:- The first step is to set long-term objectives of the
organization. while setting the organizational objectives, the factors which influence the
selection of objectives must be analyzed.
2. Evaluating the organizational environment:- Evaluate the general economics & industrial
environment in which the organization operates. It includes a review of the organizations
competitive position.
3. Setting quantitative targets:- In this step an organization must practically fix the quantitative
target values for sum of the objectives.
4. Aiming in content with the divisional plans:- The contribution of each department or
division all identified and strategic planning should done for each sub- unit.
5. Performance analysis:- Performance analysis includes discovering & analyzing the gap
between the planned or decided performance. An evaluation of organization past performance,
present condition and the desired condition must be done.
6. Choice of strategy: - The best course of action is chosen after considering organizational
goals, organizational strengths limitations and opportunities.

Factors that shape the company’s strategy

Business environment refers to all those aspects of the surrounding of business enterprise
which have influence on the functioning of the business. There are two broad components or
factors that determine business environment are (1) Internal Environment factors and
(2) External Environment factors.
1. Internal Environment factors:
Internal environment includes internal factors of the business. It includes plans and policies
human resource, financial resources, corporate image, plant and machinery, labour-
management relationship, promoter’s vision etc. The components of the internal environment
are controllable.
The following are the factors of internal environment:
1. Plans and policies: The plans and policies of the firm should be properly framed taking
into consideration the objectives and resources of the firm. Proper plans and policies help
the firm to accomplish its objectives.
2. Human resources: The survival and success of the firm largely depends on the quality of
human resources. The social behaviour of the employees greatly affects the working of
the business. The characteristics of human resource like skill, quality, morale,
commitment can contribute to the success of the organization.
3. Financial resources: Capital is the lifeblood of every business. Finance relates to money.
A firm needs adequate funds to meet its working capital and fixed capital requirements.
There is a need to have proper management of working capital and fixed capital.
Financial factors like financial policies, financial status(position) and capital structure
 influence the internal environment of a firm affecting its performance – If the firm enjoys
sufficient financial resource, it can spend on research and promotional activities.
4. Corporate Image: A firm should develop, maintain and enhance a good corporate image
in the minds of employees, investors, customers etc. Poor corporate image is a weakness
of the firm.
5. Plant and machinery: Plant and machinery is the internal part of the business firm. If the
machines are obsolete or outdated, they should be replaced by a new one, or that
adversely affects the business firm.
6. Labour and management relationship: There should be smooth labour and management
relationship. The management should understand the problems of their workers and gain
confidence in them. The labours should be motivated by providing the monetary and non-
monetary incentives(benefits).
7. Promoters vision: The promoters should have far sight vision to forecast the
opportunities and threats in the business so that the opportunities are properly grabbed
and threats are diffused off in time.
2.External environment factors:
The environment, which lies outside the organization, is known as external environment.
External factors are unpredictable and uncontrollable. They are beyond the control of the
company. “In environment there are several factors which constantly bring opportunities and
threats to the business firm. It includes social, economic, technological and political
conditions”.
External environment is further classified as:
(I).Micro environment (II). Macro environment
(I). Micro Environment:
Micro Environment is also known as operating environment. It consists of company’s
intermediate environment that affect its performance. It includes customers, suppliers,
intermediaries, competitors etc. The micro environment consists the elements that directly
affects the company.
1. The Customers: Customer is the king of the market. They are the centers of the business.
They are one of the most important factors in the external environment. Customer
satisfaction has become more challenging due to globalization.
2. The competitors: The company has to identify its competitors activities. The information
must be corrected about competitors in respective of their prices, products, promotion
and distribution strategy. World is becoming a global market. Business firm has to face
tremendous competition not only from India business firm but also from foreign business
firm. To achieve grow and success they have to monitor various activities of their
competitors.
3. The suppliers: Suppliers supply raw material, machine, equipment’s and other supplies.
The company has to keep a watch over prices and quality of materials and machines
supplied. It also has to maintain good relations with the suppliers.
 4. Society: Society affects company’s decision. The expectation of society from the
business is increasing. Therefore, the business firm maintains public relations department
to handle complaints, grievances and suggestions from general public.
(II). Macro environment:
The macro environment consists of the larger societal factors that affect the working of a firm.
Macro environment is also known as general environment. The macro factors are generally
uncontrollable.
1. Demographic factors: Demographic environment relates to the human population with
reference to its size, education, sex ratio, age, occupation, income, status, etc. Business
deals with people so they have to study in detail the various components of
demographic environment.
2. Economic factors: Economic environment consists of economic factors that influence
the functioning of a business unit. These factors include economic system, economic
policies, trade cycle, economic resources, GNP, corporate profits, inflation rate,
employment, balance of payments, interest rates, consumer income, etc. Economic
environment is dynamic and complex in nature.
3. Technological factors: Technology has brought about forereaching changes in the
methods of production quality of goods, productivity and packaging. There is a constant
technological development taking place. The business firm must constant monitor the
changes in technological development, which may have a considerable impact on the
working of a business.
4. Cultural factors: Culture involves knowledge, values, beliefs, morals, laws, customs,
traditions, etc. Culture passes from one generation to other generation like family,
schools and colleges. Business is an integral part of the social system.
5. Political factors: The political environment in a country influences the legislations and
government rules and regulations under which a firm operators.
6. Natural factors: Resource availability like land, water, mineral is the fundamental factor
in the development of business organization. It includes natural resources, weather,
climatic condition, port facilities, topographical factors such as soil, see, rivers, rainfall
etc.
7. Legal factors: The state sets the formal rules, laws and regulations for the country’s
operational system. It creates a framework of rules and regulations within which a
business has to operate. The business should have complete knowledge of laws and
policies to run the business effectively.