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UNIT:I

LESSON 1: STRATEGIC PLANNING


INTRODUCTION TO STRATEGIC CHAPTER :I
MANAGEMENT STRATEGIC CONTEXT AND TERMINOLOGY

STRATEGIC MANAGEMENT
Learning Objective means generalship. The word strategy, therefore, means the art of
On completion of this chapter you should be able to: the general.
• You should be able to understand the nature, need, When the term strategy is used in military sense, it refers to action
benefits and terminology of the processes for producing that can be taken in the light of action taken by opposite party.
and implementing major plans directing business activity. According to Oxford Dictionary, ‘military strategy is the art of so
• You will come to know about the nature and value of moving or disposing the instruments of warfare (troops, ships,
strategic management, emphasizes the practical value of a aircrafts, missiles, etc.) as to impose upon the enemy, the place,
strategic management approach for a business time and conditions for fighting by oneself. Strategy ends, or
organization. yields to tactics when actual contact with enemy is made’.
• You will understand that strategic management activities In management, the concept of strategy is taken in slightly
are undertaken at three levels: corporate, business and different form as compared to its usage in military form; it is
functional. taken more broadly. However, in this form, various experts do
not agree about the precise scope of strategy. Lack of unanimity
• You will understand that business strategy is a set of
has resulted into two broad categories of definitions: strategy as
decisions and actions resulting in the formulation and
action inclusive of objective setting and strategy as action exclusive
implementation of strategies designed to achieve the
of objective setting. Let us see some definitions in these two
objectives of an organization.
categories in order to conceptualize strategy properly.
Dear Student,
You must have heard about the term strategy, let us discuss what
As an entrepreneur, one is expected to connect oneself with
does it mean:
the external environment such that requisite strategies are
First of all you need to look at the different views and opinions
formulated & implementated for achieving organizational
expressed by leading thinkers in the field of business strategy.
goals. Lets now look at what is this ‘strategy’ is all about?
Tomorrow always arrives. It is always different. And even the
Definition of Strategy mightiest company is in trouble if it has not worked on the
There is considerable confusion in management literature future. Being surprised by what happens is a risk that even the
regarding the various terms used in strategic management. A largest and richest company cannot afford, and even the smallest
recent survey by the American Management Association business need not run. -Peter Drucker
revealed that respondents found it difficult to define policy,
and differentiate between strategy, policy and objectives, If we know where we are and something about how we got
further compounding the difficulty. According to Andrews, there, we might see where we are treading and if the outcomes
strategy, policy and objectives embrace a range of statements which lie naturally in our course are unacceptable, to make timely
from the “broad” and “important” to “narrow” and change. -Abraham Lincoln
“unimportant”. Policies get merged into procedures and Without a strategy, a company is like a ship without a rudder,
procedures into rules. Strategies get blended into tactics, going around in circles. It’s like a tramp; it has no place to go.
resulting in an “end-means continuum”. This can be -Hoel Ross and Michael Kami
illustrated by the following example. Suppose a company If a man takes no thought about what is distant, he will find
decides upon a sales growth of 35 per cent and desires to sorrow near at hand. He who will not worry about what is far off
achieve this by acquiring other companies, instead of intro- will soon find something worse that worry. -Confucius
ducing new products. Acquisition in this case can be
considered as a strategy chosen by the company. The company It is human nature to make decisions based on emotion, rather
will then have to decide on the size of the firm to be acquired. than fact. But nothing could be more illogical.
If it decides on acquiring a small company, this becomes the -Toshiba Corporation
objective. No business can do everything. Even if it has the money, it will
Strategy never have enough good people. It has to set priorities. The
The word strategy has entered the field of management more worse thing to do is a little bit of everything. This makes sure
recently. At first, the word was used in terms of Military that nothing is being accomplished. It is better to pick the wrong
Science to mean what a manager does to offset actual or priority than none at all. -Peter Drucker
potential actions of competitors. The word is still being used So, Tell me what do you mean by strategy?
in the same sense, though by few only. Originally, the word
strategy has been derived from Greek ‘Strategos’, which

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markets… that defines the essential nature of business that the
STRATEGIC MANAGEMENT

organization was or planned to be in future”.


Ansoff has stressed on the commonality of approach that
exists in diverse organizational activities including the products
and markets that define the current and planned nature of
business.
William F Glueck (1972)
Another well-known author in the area of strategic manage-
ment was Glueck, who was a Distinguished Professor of
Further, Management at the University of Georgia till his death in 1980.
Based on various thinkers point of view we need to define He defined strategy precisely as: “A unified, comprehensive and
strategy: integrated plan designed to assure that the basic objectives of
Management is an art as well as science. Many of the concepts the enterprise are achieved”. The three adjectives, which Glueck
used in building management theory have been derived from has used to define a plan, make the definition quite adequate.
practice. Unlike the pure sciences, which have their foundation ‘Unified’ means that the plan joins all the parts of an enterprise
in experimental research, management studies draw upon the together; ‘comprehensive’ means it covers all the major aspects
practical experiences of managers in defining concepts. Business of the enterprise, and ‘integrated’ means that all parts of the
policy is rooted in the practice of management and has passed plan are compatible with each other.
through different phases before taking its shape in the present Henry Mintzbeg (1987)
form of strategic management. One of the earliest contributors Mintzberg of McGill University is a noted management thinker
to this young subject was Alfred D Chandler. and prolific writer on strategy. He advocates the idea that
Alfred D Chandler (1962) strategies are not always the outcome of rational planning. They
Chandler made a comprehensive analysis of interrelationships can emerge from what an organization does without any formal
among environment, strategy, and organizational structure. He plan. He defines strategy as: “a pattern in a stream of decisions
analyzed the history of organizational change in 70 manufactur- and actions”. Mintzberg distinguishes between intended
ing firms in the US. While doing so, Chandler defined strategy strategies and emergent strategies. Intended strategies refer to
as: “The determination of the basic long-term goals and the plans that managers develop, while emergent strategies are
objectives of an enterprise and the adoption of the courses of the actions that actually take place over a period of time. In this
action and the allocation of resources necessary for carrying out manner, an organization may start with a deliberate design of
these goals.” Note that Chandler refers to three aspects: strategy and end up with another form of strategy that is
actually realized.
• Determination of basic long-term goals and objectives,
• Adoption of courses of action to achieve these objectives,
Michael E Porter (1996)
and Michael Porter of the Harvard Business School has made
• Allocation of resources necessary for adopting the courses of
invaluable contributions to the development of the concept of
action. strategy. His ideas on competitive advantage, the five-forces
model, generic strategies, and value chain (you will get to learn
Kenneth Andrews (1965) about all these later at appropriate places in this book) are quite
Andrews belongs to the group of professors at Harvard popular. He opines that the core of general management is
Business School who were responsible for developing the strategy, which he elaborates as: “… developing and communi-
subject of business policy and its dissemination through the cating the company’s unique position, making trade-offs, and
case study method. Andrew defines strategy as: “The pattern forging fit among activities”.
of objectives, purpose, goals, and the major policies and plans So, you can see how strategy got evolved.
for achieving these goals stated in such a way so as to define
what business the company is in or is to be and the kind of Write down five names associated with business strategy and
company it is or is to be”. This definition refers to the ‘busi- their area of contribution?
ness definition’, which is a way of stating the current and
desired future position of company, and the objectives,
purposes, goals, major policies and plans required to take the
company from where it is to where it wants to be.
Igor Ansoff (1965)
Professor Ansoff is a well-known authority in the field of
strategic management and has been a prolific writer for the last
three decades. I n one of his earlier books, Corporate Strategy
(1965), he explained the concept of strategy as: “The common
thread among the organization’s activities and product-

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So what exactly business strategy is all about? Is Strategy Static in Nature or Dynamic?

STRATEGIC MANAGEMENT
Strategic position is based on customers’ needs, customers’ Because the firm’s internal and external environment change
accessibility, or the variety of a company’s products and services. over time, the Strategy also changes consequently, the idea that
A company’s unique position relates to choosing activities that strategy is dynamic is inherent in our conception of strategic
are different from those of the rivals, or to performing similar management.
activities in different ways. However, a sustainable strategic Strategy has Four Components
position requires a trade-off when the activities that a firm
First, strategy should include a clear set of long term goals.
performs are incompatible. Creation of fit among the different
activities is done to ensure that they relate to each other. Second components are that it should define the scope of the
firm i.e. the types of products the firm will serve etc.
It must be noted that the different approaches referred to above
to define strategy cover nearly a quarter of a century. This is an Thirdly, a strategy should have a clear statement of what
indication of what a complex concept strategy is and how competitive advantage it will achieve and sustain.
various authors have attempted to define it. To put it in Finally, the strategy must represent the firms’ internal contest
another way, there are as many definitions as there are experts. that will allow it to achieve a competitive advantage in the
The same authors may change the approach they have earlier environment in which it has chosen to compete.
adopted. Witness what Ansoff said 19 years later in 1984 (his Thus, you may say,
earlier definition is of 1965): “Basically, a strategy is a set of
‘Goals’ are ‘What’ of the strategy
decision-making rules for the guidance of organizational
behavior”. ‘Competitive Advantage; is how of the strategy and the; logic is
the ‘Way’ of the strategy.
I have tried to give you an assortment of definitions out of the
many available. Rather than an assortment, it may be more Examples: -
appropriate to call this section a bouquet of definitions and Goals—————’ Where’—————— Where does the
explanations of strategy. Each flower (definition) is resplendent management of the firm want it to be?
by itself yet contributes synergistically to the overall beauty of Scope—————’ What’—————— What kinds of
the bouquet. products will the firm produce? Or
The field of strategy is indeed fascinating, prompting an author What Markets will the Firm Target?
to give the title-: What is Strategy and does it matter?”- to his Competitive Advantage——’How’—How the firm intends to
thought-provoking book. Drucker goes to the extent of have the cost leadership?
terming the strategy of an organization as its “theory of the
business”. How the Firm Intends to Achieve its
Long-Term Goals?
By means of the deeper insight that developed through years
of experience and thinking, they have attempted to define the Logic————————’Why’——————Sree Leathers,
concept of strategy with greater clarity and precision. the shoe manufacture’s strategy is to attract more and more of
middle class and lower middle class customers by offering low
So, you can see that this discipline is in the process of evolution
priced durable leather shoes.
and a uniform terminology is still evolving.
Similarly, you take an example and try to explain how company
By combining the above definitions we do not attempt to
A or company B focuses on its business strategy?
define strategy in a novel way but we shall try to analyze all the
elements that we have come across.
You should note that strategy is:
• A plan or course of action or a set of decision rules forming
a pattern or creating a common thread,
• The pattern or common thread related to the organization’s
activities which are derived from its policies, objectives and
goals,
• Related to pursuing those activities, which move an
organization from its current position to a desired future
state.
You have looked at a few practical illustrations in the previous
section, which were aimed at developing an understanding of Strategic management is a science of choosing the alternatives
strategy and at some representative definitions of strategy, in from the designed and available courses. The managers have to
this section. decide on a process that will be most suitable to their condi-
Lets take an example to focus more on strategy: tions and that would enable them to achieve a desired position
Strategy defines a framework for guiding the choice of action. for their organization.
Some time we may ask, “What is Coca-Cola’s strategy to go on Thus, strategic management can be defined as follows:
to become a market leader?

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STRATEGIC MANAGEMENT

Strategic management is the process of systematically analyzing Thus, you find that Strategic Management is a set of rules
various opportunities and threats vis-à-vis organizational aimed at taking decisions for sustenance and growth of an
strengths and weaknesses, formulating, and arriving at strategic organization in a given environment.
choices through critical evaluation of alternatives and imple- Activity 1
menting them to meet the set objectives of the organization. Now you try to do an activity, which is aimed at giving practical
So, in your opinion, what is the single major benefit of using a exposure about how companies focus on strategic manage-
strategic management approach? Justify your answer ment.
Step1. Choose any company that is listed on the stock exchange
and whose information is freely available e.g. Reliance industries.
Step 2. Identify what you consider to be threats, strengths,
weaknesses & opportunities for the company identified.
Step 3. Through discussion, compare your number of factors
to those developed by other teammates. Further add some
factors to your list from the discussion. Keep this information
for use in later activities.
If you recall what various thinkers contributed to the study: Thus you see, strategy covers the following aspects.
It has been defined by Lloyd L. Byars as-Strategic management i. Exploring and determining the vision of the company in the
is concerned with making decisions about an organizations’ form of a vision statement.
future direction and implementing those decisions. ii. Developing a mission statement of the company that
Alfred D.Chandler (1962) made a detailed analysis of various should include statement of methodology for achieving the
inter-relationships among environment, strategy, and organiza- objectives, purposes, and the philosophy of the
tion structure in 70 manufacturing firms in the US and defined organization adequately reflected in the vision statement.
strategy as, ‘The determination of the basic long term goals and iii. Defining the company profile that includes the internal
objectives of an enterprise and the adoption of the courses of culture, strengths and capabilities of an organization.
action and the allocation of resources necessary for carrying out
iv. Critical study of external environmental factors, threats,
these goals’.
opportunities etc.
It is pertinent to note here what Alfred D. Chandler has made
v. Finding out ways by which a company profile can be-
reference to three basic aspects of strategic process;
matched with its environment to be able to accomplish
i. Determination of basic long-term goals, mission statement.
ii.. Adoption of course of actions to achieve these goals, and vi. Deciding on the most desirable courses of actions for
iii. Allocation of necessary resources for carrying out these goals. accomplishing the mission of an organization.
Kenneth Andrews (1965) outlines business strategy definition vii. Selecting a set of long-term objectives and also the
as a method of describing the future position of a company, its corresponding strategies to be adopted in line with vision
objectives, purposes, goals, policies, and plans that may be statement.
required for guiding the company from its existing position to viii.Evolving short-term and annual objectives and defining the
where it desires to be. corresponding strategies that would be compatible with the
Andrews defines strategy as, ‘The pattern of objectives for mission and vision statements.
achieving these goals and the major policies and plans for ix. Implementing the chosen strategies in a planned way based
achieving these goals stated in such a way so as to define what on budgets and allocation of resource, outlining the action
business the company is in or is to be and the kind of company programs and tasks.
it is or is to be.”
x. Installation of a continuous compatible review system to
Igor Ansoff (1965) in his book Corporate Strategy has defined create a controlling mechanism and also generate data for
strategy as, ‘The common thread among the organizations’ selecting future course of action)
activities and product markets that defines the essential nature
SO, in what ways you as a learner expect to benefit in your
of business that an organization was or plans to be in future.
personal life by studying business strategy?
Professor William F. Glueck (1972) defines strategy as, ‘A
unified, comprehensive, and integrated plan, designed to assure
that the basic objectives of the enterprise are achieved.’
So, by now you have understood how the old rules of business
have become obsolete and there is a paradigm shift in ap-
proaches to business.

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