What Is "Strategy"?

Introduction to Strategic Management
What is “Strategy”?
•Plan, method or means for achieving organizational goal and thereby
accomplishing organizational purpose
•Consists of competitive moves and business approaches to produce

successful performance
•Plan for
•Running the business
•Strengthening firm’s competitive position
•Satisfying customers
•Achieving performance targets
What is Strategic Management?
•Process of formulating, implementing and evaluating
strategy to achieve organizational goal
•Requires assessment of current situation ( Internal

capabilities, values and external environment etc.) and
determining where you want to go after exploring various
choices
•Long term, requires looking far ahead, using insight and

creativity (Art and Science)
The Strategic Management Process
Formulation Implementation
Step 1 Step 2 Step 3 Step 4
Define the
Business and Set Strategic Formulate Implement
Set a Mission Goals a Strategy the Strategy
Statement
Step 5
Evaluate
and Correct
as Needed
Three stages of Strategic Management Process Evaluation

Five Tasks of Strategic Management Process
1. Defining business, stating a mission, and forming

a strategic vision
2. Setting measurable objectives
3. Crafting strategy to achieve objectives
4. Implementing and executing strategy
5. Evaluating performance, reviewing new
developments, and initiating corrective
adjustments
Basics of Strategic Management
•Interdisciplinary
•External focus
•Internal focus
•Future direction
Why is strategic management important?
•Gives everyone a role
•Makes a difference in performance levels
•Provides systematic approach to uncertainties
•Coordinates and focuses employees
•Gains commitment
Why is strategic management important?
Financial benefits
–Sales
–Profitability
–Productivity
Non financial benefits
–Improved coordination
–Effective Resource Mobilization
–High level of communication
–Positive attitude
–Image
–Discipline etc.
Who does Strategic Management?
•The Role of the Board of Directors
•Elected representatives of the company’s stockholders
•Legally obligated to represent and protect stockholder’s rights
•The Role of Top Management

•Responsible for decisions and action of every employee
•Providing effective leadership
•Other Organizational Employees

•Implement— put the strategies into action and monitor performance
•Evaluate—do the actual evaluations and take necessary actions
Three Strategy Making Tasks
Vision
Where the organization needs to head (Aspirational image of
the future)
Mission
Sets out why the organization exists and what it should be
doing
Goals
Specify what the organization hopes to fulfill in the medium to
long term
Characteristics of a Strategic Vision
•Charts a company’s future strategic course
•Defines the business makeup for future
•Specifies future technology-product-customer

focus
Characteristics of a Strategic Vision
•A sentence or short paragraph consisting of two to four
sentences
•Written for customers and employees
•Words of aspiration and inspiration
•Values and principles
•Timeless
Communicating the Vision
An exciting, inspirational vision
•Challenges and motivates workforce
•Arouses strong sense of organizational purpose
•Induces employee buy-in
•Galvanizes people to live the business

Three Big Strategic Questions
Where are we now?

Where do we want to go? -END
How will we get there? -MEANS
MEANS to get to the END=

Example of Vision Statement
General Motors
“Our vision is to be world leader in transportation
products and related services. We will earn our
customer’s enthusiasm through continuous
improvement driven by the integrity, teamwork, and
innovation of GM people.”
Characteristics of a Mission Statement
•Defines current business activities
•Highlights boundaries of current business
•Conveys
•Who we are,
•What we do, and
•Where we are now
•Company specific, not generic —so as to give a company its
own identity
•A company’s mission is not to make a profit !
•The real mission is always—“What will we do to make a
profit?”
Characteristics of a Mission Statement
•A sentence or a short paragraph reflecting core purpose and
identity of the business
•Important information about the company in a nutshell

–Customers
–Products or services
–Markets
–Technology
–Philosophy
–Image
–Employees
–Financial soundness
Examples of Missions
Otis Elevator
Our mission is to provide any customer a
means of moving people and things up,
down, and sideways over short distances
with higher reliability than any similar
enterprise in the world.
General Motors
“We are a multinational corporation engaged in
socially responsible operations, worldwide. It is
dedicated to provide products and services of such
quality that our customers will receive superior value
while our employees and business partners will share
in our success and our stock-holders will receive a
sustained superior return on their investment.”
Objectives
•Specific results to be achieved in more than one year
•State direction
•Realistic
•Agreed upon
•Measurable
•Clear
•Functional objectives as well as overall company
objectives
Objectives serve two purposes
•Decision making as to accomplish what in a given

period
•Provides benchmark for judging organizational

performance
What kind of objectives to set
FINANCIAL OBJECTIVES
•Relate to firm’s financial performance
•Acceptable financial performance is critical to firm’s
survival
STRATEGIC OBJECTIVES
•Relate to firm’s competitiveness & market position
•Tend to be competitor focused
•Acceptable strategic performance is essential for long-
term competitive success
FINANCIAL OBJECTIVES
•Relate to firm’s financial performance
•Acceptable financial performance is critical to firm’s
survival
STRATEGIC OBJECTIVES
•Relate to firm’s competitiveness & market position
•Tend to be competitor focused
•Acceptable strategic performance is essential for long-
term competitive success
SHORT-RUN OBJECTIVES
Focus on short-term performance
LONG-RUN OBJECTIVES
Focus on long-term performance
Example: Corporate Objective
Rubbermaid
•To increase annual sales from $1 billion to $2 billion in 5
years.
•To enter a new market every 18 to 24 months.
•To have 30% of sales each year come from products not
in the company’s product line five years earlier.
•To achieve a 15% average annual growth in sales, profit,
and earnings per share.
Strategy: Single Business Firm
BUSINESS STRATEGIES
Formulated for the business unit
FUNCTIONAL STRATEGIES
Formulated by functional-area managers within
each business unit
OPERATING STRATEGIES
Formulated by plant managers, geographic unit
managers, & lower-lever managers
Strategy: Diversified Firms
CORPORATE STRATEGY
Formulated for company as a whole
BUSINESS STRATEGIES
Formulated for each separate business unit
FUNCTIONAL STRATEGIES
Formulated by functional-area managers within
each business unit
OPERATING STRATEGIES
Formulated by plant managers, geographic unit
managers, & lower-lever managers
Corporate Strategy
•Overall GAME PLAN for DIVERSIFIED company
•Consists of
•MOVES to establish business positions in different
industries
•APPROACHES to managing group of businesses
company has diversified into
Tasks of Corporate Strategy
•Making moves to achieve DIVERSIFICATION
•Initiating actions to BOOST PERFORMANCE of
businesses company has diversified into
•Finding ways to capture SYNERGY among related
business units
•2 + 2 = 5 effects!
•Establishing INVESTMENT PRIORITIES &
steering corporate resources into most attractive
business units
Business Strategy
•GAME PLAN for ONE LINE OF BUSINESS
•Central thrust is HOW to build & strengthen firm’s
long-term competitive position
•Task separating POWERFUL from WEAK business
strategies is forging a series of moves capable of
producing
•SUSTAINABLE COMPETITIVE ADVANTAGE
What Business Strategy involves?
•Forming responses to changes in
•Industry
•Economy
•Regulatory & political arena
•Crafting competitive moves that lead to sustainable
competitive advantage
•Uniting strategic initiatives of functional areas
•Addressing strategic issues related to firm’s
competitive position & internal situation
Functional Strategies
•GAME PLAN for running a particular function
within a business
•Adds DETAIL to business strategy & governs HOW
key activities will be managed
•A business needs as many functional strategies as it
has major functional activities
•Roles of functional strategies
•Provide SUPPORT for overall business strategy
•Specify HOW functional managers plan to achieve
functional area performance objectives

What Is "Strategy"?

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Introduction to Strategic Management

•Consists of competitive moves and business approaches to produce

•Requires assessment of current situation ( Internal

•Long term, requires looking far ahead, using insight and

Step 1 Step 2 Step 3 Step 4

Three stages of Strategic Management Process Evaluation

1. Defining business, stating a mission, and forming

•Makes a difference in performance levels

•Provides systematic approach to uncertainties

•Coordinates and focuses employees

•The Role of Top Management

•Other Organizational Employees

•Defines the business makeup for future

•Specifies future technology-product-customer

•Written for customers and employees

•Words of aspiration and inspiration

•Values and principles

•Challenges and motivates workforce

•Arouses strong sense of organizational purpose

•Induces employee buy-in

•Galvanizes people to live the business

Where are we now?

MEANS to get to the END=

•Important information about the company in a nutshell

•Decision making as to accomplish what in a given

•Provides benchmark for judging organizational

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