STRATEGIC MANAGEMENT Material No. 1
References:
https://talentedge.com/articles/introduction-strategic-management-meaning-basic-concepts/
https://www.managementstudyguide.com/strategic-management.htm
Introduction
Strategic Management is all about identification and description of the strategies that managers can carry to
achieve better performance and a competitive advantage for their organization.
An organization is said to have competitive advantage if its profitability is higher than the average profitability
for all companies in its industry.
Strategic management is the concept of identification, implementation, and management of the strategies
that managers carry out to achieve the goals and objectives of their organization.
It can also be defined as a bundle of decisions that a manager has to undertake which directly contributes to
the firm’s performance.
The manager responsible for strategic management must have a thorough knowledge of the internal and
external organizational environment to make the right decisions.
Strategic Management – Meaning and Nature
The basic concept of strategic management consists of a continuous process of planning, monitoring,
analyzing, and assessing everything that is necessary for an organization to meet its goals and
objectives.
In simple words, it is a management technique used to prepare the organization for the unforeseeable future.
Strategy management helps create a vision for an organization that helps to identify both predictable as well as
unpredictable contingencies. It involves formulating and implementing appropriate strategies so the
organization can attain sustainable competitive advantage.
Strategic management is a continuous process that evaluates and controls the business and the industries in
which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing
and potential competitors; and then reevaluates strategies on a regular basis to determine how it has been
implemented and whether it was successful or does it need replacement.
Roles of Strategic Management
 One of the major roles of strategic management is to incorporate various functional areas of the
organization completely, as well as, to ensure these functional areas harmonize and get together well.
 Another role of strategic management is to keep a continuous eye on the goals and objectives of the
organization.
Components of Strategic Management
1) Strategic Intent - Strategic Intent of an organization clarifies the purpose of its existence and why it will
continue to exist. It helps paint a picture of what an organization should immediately do to achieve the
company’s vision.
2) Mission - Mission component of strategy management states the role by which an organization intends to
serve its stakeholders. It describes why an organization is operating that helps provide a framework within
which the strategies to achieve its goals are formulated.
Mission statement outlines all the things that the company is doing in the present to reach their desired
goal and objectives. Also, emphasizes the company's business, its objectives, and its approach to reach
those objectives.
3) Vision - The visual component of strategy management helps identify where the organization intends to
be in the future. It describes the stakeholder dreams and aspirations for the organization.
4) Goals and Objectives - Goals help specify what must be done to attain an organization’s mission or
vision. Goals make the mission component of strategy management more prominent.
Functions of Strategic Management
Strategic management is a key area of work for leaders and managers.
They focus on it as a large part of their roles in the organizations that they work for.
There are many good strategic management courses in India which are very comprehensive in their coverage
of what it entails and the kind of skills it needs. In terms of reference strategic management is a very broad
area.
There are sub-areas within it, which are functions that need to be carried out.
1. Development of Company Strategy and Vision - It involves defining the vision and mission of the
organization, which in essence means the purpose of its existence. It also involves the development of the
company’s strategy to chart out its future growth pattern based on some specific actions. Strategic
management identifies what those actions will be and then shares those with the teams that implement.
2. Identification of Products and Markets - Growth for an organization means constant innovation to
maintain its competitive edge as well as market share.
One of the functions of strategic management is to identify the new products and new geographies that the
organization needs to explore. It also means the evaluation of the viability of existing product, service and
market, and assessment of whether to continue or not.
3. Focus on Company’s Brand Positioning - The company has a brand value and position that people
identify it by.
Strategic management means upholding, sustaining, and reinforcing this brand positioning.
This is done by ensuring that the strategy is aligned to the brand, as well as all the internal and external
actions.
4. Alignment Across Businesses or Departments - Strategic management ensures that no business
segment or department in the organization is working in silos.
When planning takes place, the views of all departments and businesses are considered.
The final decisions are shared and discussed to ensure that there is an alignment of organizational
purpose and goals. This is the role of strategic management.
5. Planning and Course Correction - Strategic management is all about planning for the business.
This planning is similar to a SWOT analysis which identifies the new opportunities and threats to existing
business as well.
It also means that one of the functions is to course correct the business performance in case it is not
following the right growth rate.
These are some key responsibilities that the strategic management function in any organization performs.
There are many others as well such as financial planning, budgeting, talent pipeline review, leadership team
performance and so on.
Importance of Strategic Management
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Strategic management determines the roadmap to a company’s success. Hence, formulating a proper
strategy is of utmost importance.
Gives a proper direction for the company to move forward.
Helps to compete better in the market.
Acts as the blueprint for all future decision making
Helps business to be prepared for future obstacles and help it to take the right steps to grow at the right
time.
STRATEGIC MANAGEMENT Material No. 2
References:
https://www.managementstudyguide.com/strategic-management.htm
https://www.basic-concept.com/c/basics-of-strategic-management
Elements of Strategic Management
Strategic management is defined as a process of specifying the objectives of the organization, developing
policies and planning to achieve the objectives, and then allocating resources so that plans can be
implemented.
Strategic management is the highest level of managerial activity that the top management of the organization
performs and the executive team.
Strategic management normally provides the overall direction of the entire organization. Strategic management
is a set of actions and decisions that result to the formulation and implementation of approaches designed to
achieve the objectives of the organization.
This is a continuous process that is normally involved with the attempt of matching the organization with the
changing environment in a manner that is advantageous. Strategic management is extremely critical in the
survival of the organization.
Organizations are supposed to select the directions in which it will move towards.
Strategic management has three major elements, which include strategic analysis, strategic choice, and
strategy implementation.
1. Strategy Analysis
Strategy analysis is usually concerned with understanding the organizations strategic position.
This is an element that is concerned with the changes that are going on in the environment and how the
changes are going to affect the activities of the organization.
Other factors that are considered in this element are the strength of the resources in the organization, in the
context of the changes.
It also focuses on what the associated groups in the organization aspire to and how the changes affect the
present position and the future position of the organization. Strategic analysis usually aims at creating a view of
the factors that can have an impact on the future and present performance of the organization. When strategic
management is performed in the right manner, it helps in selecting the correct strategy.
There are certain factors that should be considered during strategic analysis:
1.The first factor Business Environment. It is hard for organizations to exist without interacting with a
complex, political, commercial, economic, social, cultural, and technological environment.
The environmental changes are sometimes complex for certain organizations than others.
Therefore, when organizations are faced with the environmental changes, they should have a clear
understanding of the impacts so that to be able to formulate a strategic plan.
The central importance of strategic analysis is to understand the environmental effects to the organization.
It is necessary to consider the environmental effects on the business and the present and expected changes in
the environment.
2. The second factor Organization Resources (internal influences).
When thinking about the strategic capability of the organization, it is necessary to consider the weaknesses
and strengths. The weakness and strengths of organizations can be identified by considering the organization
resource areas like its management, physical plant, products, and its financial structure. This aims at forming
an observation of the internal influences and restriction on the strategic choice.
3. The final factor Prospects of the different stakeholders in that the development of the organizations
depends a lot on the expectations of the stakeholders. The assumption and beliefs of the stakeholders greatly
constitute them culture of the organization. A lot of influence in decision making concerning the strategy is
normally influenced by the organization’s stakeholders and degree of the stakeholder’s impact on the strategy
depend on the respective power of every group of stakeholders.
The beliefs and assumptions of the stakeholders are usually influenced by the resource and environmental
implications.
The influence that tends to prevail normally depends on the group that has the greatest power. It is extremely
necessary to understand this as it helps in recognizing why the organization is following a particular strategy.
Consideration of the resources, expectations, environment, and objectives in the political and cultural
framework of the organization provide the foundation for strategic analysis in the organization. To be able to
understand the strategic position that the organization is in, it is essential to examine the extent of the
implication and direction of the current strategy and the objectives the organization is following if they are in
line with and can manage with the strategic analysis implications.
2. Strategic Choice
Defined as the practice of selecting the best possible course of action, and it is usually based on the evaluation
of the available strategic options.
Strategic analysis usually creates a foundation for strategic choice.
After strategic analysis has been done, it is now ready to make a strategic choice.
Strategic choice has three parts that include the generation of strategic options, evaluation of the options,
and selection of the strategy.
1.) During strategic choice, there may be many strategic options; therefore, it is necessary to ensure that
the selected option is the best.
2.) The second part of strategic choice is the evaluation of the strategic options.
Examination of the strategic option can be done in the strategic analysis so that to assess their relative
merits. When the organization is deciding on any of the options, it might decide to ask several
questions.
The first questions that might be considered is the option built upon strengths, one that will take
advantage of opportunities, and overcome weaknesses while it is minimizing threats that the business
is faced with.
By focusing on the following factors, it is referred to as searching for the suitability of the strategy.
There are several questions that the organizations may consider when it is evaluating the strategic
options.
3.) The third part is the selection of the strategy which is the process of selection the options that the
organization is going to pursue. Sometimes the selected choice is usually a matter of the management
judgment.
It is extremely essential to understand that, in the selection process, it cannot always be viewed as a
purely logical, objective act.
During strategic choice, the selected strategy is normally strongly influenced by the managers values
and other groups with an interest in the organization. This at one point reflects the power structure of
the organization.
3. Strategy Implementation
This is the third major element of strategic management that is concerned with strategy translation into action.
This is the stage where the strategy is translated to action.
The implementation of the strategy requires proper deployment of the organization resources, effective change
management, careful handling of the possible changes in the structure of the organization, and careful
planning.
There are several parts that are involved in strategy implementation. The first part is in planning and allocation
of resources. During implementation, it is involved with resource planning that includes the logistic of
implementation. The second part is organization design and structure. During strategy implementation, there
are certain changes in organization structure that should be done. It is also likely for the need to arise for
adapting the system used in managing the organization. The third part is the management of the strategic
change.
When a strategy is being implemented, it also requires that the strategic change to be managed.
Action from the managers is required in the way the change process will be managed and the mechanism that
they are going to use. The mechanisms that the managers use is concerned with the redesign of the
organization, changing daily routines and organization cultural aspects, and the political barriers to change.
To conclude. The three elements of strategic management are interconnected in that for a strategic choice to
be selected, there must be an analysis of options so that to determine the strategy that is going to be effective
and efficient for the organization.
Strategic implementation normally depends on strategic choice. The implementation of a strategy is normally
done after different strategies have been considered so that a conclusion is arrived at on the choice that the
organization will implement. This is a choice that will accomplish the expected goal.
The Core Strategic Management Concept
The central focal point or core of the concept of strategic management procedure is setting goals, developing a
mission statement, organizational values, and objectives.
Organizations or companies chase for strategic opportunities with the direction got from their set goals, the
mission statements, values, and objectives.
Goal setting helps managers make strategic decisions regarding achieving sales targets and generating higher
revenue. Organizations develop plans and implement those plans to keep pace with the increased competition
and globalization of the modern business world through goal setting.
Basic Elements of Strategic Management
The first step in strategic management procedure is goal setting.
After goal setting, strategic management includes four basic elements:
1. Environmental Scanning
Environmental scanning includes the comparison of the threats and opportunities of the organization in the
external business environment. Environmental scanning can be affected by factors like government rules and
regulations, the economy, social changes, changes in customer preferences, technological advancement,
competition and other environmental factors. At this stage, a SWOT (i.e. Strengths, Weaknesses,
Opportunities, and Threats) analysis is performed to contrast the internal assets and flaws of the trade with the
external prospects and dangers.
2. Strategy Formulation
Strategy formulation is the generation of long-term plans for the proper management of environmental
openings and fears considering the fortes and faintness of the business or the company. It consists of defining
the mission, attainable objectives, forming strategies and setting policies.
Mission: An organization’s purpose or the reason for its survival is called mission. It mentions how it is serving
the society. An ideal mission statement specifies the unique purpose that differs the company from other
similar companies and defines the scope of its functions in the form of the products and services served to the
market.
Objectives: The outcomes of the planned functions are called objectives. Objectives mention what is to be
attained by when. The attainment of the objectives should lead to the fulfillment of the company’s mission.
Strategies: A strategy is a broad master plan expressing how a company will accomplish its mission and
objectives, maximizing competitive advantages and minimizing competitive disadvantages. Generally, a
company or business takes into consideration three kinds of strategy: corporate, business, and functional.
Policies: A policy is a comprehensive guideline for making decisions linking the formation and implementation
of a strategy. Companies set policies to ensure that its employees’ decisions and actions support the
company’s mission, its objectives, and strategies.
3. Strategy Implementation
Strategy implementation is taking of action in order to attain the goals of the organization. It requires organizing
all the available and necessary resources to put the strategy into action. The higher management will pass the
strategy to the managers, and they will communicate the roles and responsibilities of their team members to
implement the strategy. There are contributions of different members of different departments in the
implementation of a strategy. A perfect coordination and cooperation between the management and other
departments are necessary to implement a strategy successfully.
4. Evaluation and control
The fourth and final basic element of the strategic management is evaluation and control. It requires an
evaluation of the strategy to ascertain whether the actual outcome matches the expected outcome of the
organizational goals.
At this stage, the organization decides which area of planning should be evaluated and the method of
evaluation to be used and after the evaluation makes a comparison between the expected result and the
existing result. Through this evaluation, the company can decide to take different corrective actions to control
the shortcomings (if any) and help the strategy to meet the desired organizational goals and objectives.
For example, if a company fails to achieve the desired sales target, it can take many corrective actions such as
providing discounts, adding extra attractive features to the product or service, giving attractive gifts with the
product or service, etc.
Managers should have a complete understanding of strategic management to set the organizational goals
properly and develop and implement effective strategies to achieve those goals increasing profitability and
competitive advantage of the business or organization.
Levels of Strategy
Strategy is at the heart of business. All businesses have a competition, and it is strategy that allows one
business to rise above the others to become successful. Even if you have a great idea for a business, and you
have a great product, you are unlikely to go anywhere without strategy.
The following are the three (3) levels of strategy:
1.Corporate Strategy – Outlines general overall strategy, defines market it will operate in and plans how these
markets will be entered.
The first level of strategy in the business world is corporate strategy, which sits at the top of the heap.
Corporate strategy is concerned with deciding which business an entity should be in and setting targets for the
achievement of the entity’s overall objectives.
It is easy to overlook this planning stage when getting started with a new business, but you will pay the price in
the long run for skipping this step. It is crucially important that you have an overall corporate strategy in place,
as that strategy is going to direct all the smaller decisions that you make.
For some companies, outlining a corporate strategy will be a quick and easy process.
For example, smaller businesses who are only going to enter one or two specific markets with their products or
services are going to have an easy time identifying what it is that makes up the overall corporate strategy.
If you know you are running an organization that bake and sells cookies, for instance, you already know
exactly what the corporate strategy is going to look like – you are going to sell as many cookies as possible.
However, for a larger business, things quickly become more complicated.
Carrying that example forward to a larger company, imagine you run an organization that is going to sell
cookies but is also going to sell equipment that is used while making cookies.
Entering into the kitchen equipment market is completely different challenge from selling the cookies
themselves, so the complexity of your corporate strategy will need to rapidly increase. Before you get any
further into the strategic planning of your business, be sure you have corporate strategy clearly defined.
2.Business Strategy. Uses corporate strategy to define specific tactics for each market and relates how each
business unit will deliver these planned tactics.
It is best to think of this level of strategy as a ‘step down’ from corporate strategy level.
In other words, the strategies that you outline at this level are slightly more specific and they usually relate to
the smaller businesses within the larger or organization.
Business strategy, also called competitive strategy, is concerned with how each business activity within
the entity contributes towards the achievement of the corporate strategy.
Carrying over our previous example, your business would be outlining separate strategies for selling cookies
and selling cookie-making equipment at this level. You may be going after convenience stores and the internet
to sell your equipment. Those are dramatically different strategies, so they will be broken out at this level.
Even in smaller businesses, it is a good to pay attention to the business strategy level so you can decide on
how you are going to handle each various parts of your operation.
The strategy that you highlighted at the corporate level should be broad in scope, so now is the time to boil it
down into smaller parts which will enable you to take action.
3.Functional Strategy (bottom-level strategy)
Functional strategy defines day-to-day actions needed to deliver corporate and business strategies.
Relationships needed between business units, department, and teams. How functional goals will be met and
monitored.
This is the day-to-day strategy that is going to keep your organization moving in the right direction.
Functional strategy is also called as operational strategy. These decisions include product pricing,
investment in plant, personnel policy, and so on. It is important that these strategies link to the strategic
business unit strategies and through those strategies, in turn, to the corporate strategy, as the successful
implementation of these is necessary for the fulfillment of both corporate and business objectives.
Just as some businesses fail to plan from a top-level perspective, other businesses fail to plan at this bottomlevel. This level of strategy is perhaps the most important of all, as without a daily plan you are going to be
struct in neutral while your competition continues to drive forward. As you work on putting together your
functional strategies, remember to keep in mind your higher-level goals so that everything is coordinated and
working towards the same end.
It is at this bottom-level strategy where you should start to think about the various departments within your
business and how they will work together to reach goals. Your marketing, finance, operations. IT and other
departments will all have responsibilities to handle, and it is your job as an owner or manager to oversee them
all to ensure satisfactory results in the end. Again, the success or failure of the entire organization will likely
rest on the ability of your business to hit on its functional strategy goals regularly. As the saying goes, a journey
of a million miles starts with a single step-take small steps in strategy on a daily basis and your overall
corporate strategy will quickly become successful.
STRATEGIC MANAGEMENT Material No. 3
Business Strategy
References:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategic-planning/
https://www.techtarget.com/searchcio/definition/resource-allocation
https://businessjargons.com/business-strategy.html
https://emeritus.org/in/learn/what-is-business-strategy/
What is Business Strategy?
A business strategy refers to all the decisions taken, and actions undertaken by a business for achieving the
larger vision. Knowing what business strategy is and how to execute it properly can help businesses become
the market leaders in their domain.
Precisely, a business strategy is the backbone of every business, and any shortcomings could mean that the
business goals get lost midway.
It is nothing but a master plan that the management of a company implements to secure a competitive
position in the market, carry on its operations, please customers and achieve the desired ends of the business.
In business, it is the long-range sketch of the desired image, direction, and destination of the organization.
It is a scheme of corporate intent and action, which is carefully planned and flexibly designed with the purpose
of:
 Achieving effectiveness,
 Perceiving and utilizing opportunities,
 Mobilizing resources,
 Securing an advantageous position,
 Meeting challenges and threats,
 Directing efforts and behavior and
 Gaining command over the situation.
A business strategy is a set of competitive moves and actions that a business uses to attract customers,
compete successfully, strengthening performance, and achieve organizational goals.
It outlines how business should be carried out to reach the desired ends.
Business strategy equips the top management with an integrated framework, to discover, analyze and exploit
beneficial opportunities, to sense and meet potential threats, to make optimum use of resources and strengths,
to counterbalance weakness.
Importance of Devising a Business Strategy
Once you commence a business, the importance of business strategy cannot be ignored. Any leader who is
unaware of the importance cannot ensure the long-term sustainability of their organization.
As the business environment, today is becoming increasingly competitive, the importance of business strategy
cannot be underplayed.
We’ve put together some reasons why devising should be your priority.
 In the initial phase of a business, a lot of planning is required.
While a plan clarifies the goals, it is the strategy that helps in executing and reaching the vision.
 When leaders formulate a strategy, it helps them understand their strengths and weaknesses.
This way, they can capitalize on what they are good at and improve on their weaker aspects.
 It ensures that every aspect of a business is planned. This means more efficiency and better and more
effective plans. Everyone in the team is aware of what they need to do, and the capital is allocated
properly.
 It can help businesses gain competitive advantage over others in the segment.
It also makes them unique in the eyes of their customers.
 It ensures that leaders have control over the processes. This means they will also go as planned.
Key Aspects of a Business Strategy
A business strategy is the answer to what, how, why, where, and how.
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The first component is – the mission, vision, and objectives. This will have clear instructions on
what is to be done, when it to be done, and how it is to be done.
The second component is – the core values of a business, which should be clear right at the
outset.
The third component is – a SWOT analysis. SWOT refers to strengths, weaknesses,
opportunities, and threats. This will give an idea on the business’ current standing.
The fourth component is – operational tactics which refer to how the company will achieve the
defined objectives efficiently and effectively.
The fifth component is – resource procurement and allocation. It will provide answers around
how many resources are needed, how will they be distributed, etc.
The sixth component is – measurement, which refers to how every activity of the business will be
kept on track and measured against milestones that have been set.
Nature of Business Strategy
A business strategy is a combination of proactive actions on the part of management, for the purpose of
enhancing the company’s market position and overall performance and reactions to unexpected developments
and new market conditions. The maximum part of the company’s present strategy is a result of formerly
initiated actions and business approaches, but when market conditions take an unanticipated turn, the
company requires a strategic reaction to cope with contingencies. Hence, for unforeseen development, a part
of the business strategy is formulated as a reasoned response.
Main Purpose of Business Strategy
The main purpose of strategy lies in creating a vision for an organization that provides direction and guidance.
All members need to have a clear picture of organizational goals and objectives to carry out their
responsibilities. Business strategies help people stay focused on the big picture.
Competitive Advantage
Competitive advantage refers to factors that allow a company to produce goods or services better or more
cheaply than its rivals.
These factors allow the productive entity to generate more sales or superior margins compared to its market
rivals.
Competitive advantages are attributed to a variety of factors including cost structure, branding, the quality of
product offerings, the distribution network, intellectual property, and customer service.
Competitive advantage is what makes a customer choose your business over another one.
By understanding, and promoting such advantage, companies can win a greater amount of market share.
A competitive advantage may stem from the user experience — that is, a better, more affordable, or more
enjoyable product — or it may be another tangible or intangible asset, such as the intellectual property or the
customer service team.
What is Corporate Strategy?
Corporate Strategy takes a portfolio approach to strategic decision making by looking across all a firm’s
businesses to determine how to create the most value.
In order to develop a corporate strategy, firms must look at how the various business they own fit together, how
they impact each other, and how the parent company is structured, in order to optimize human capital,
processes, and governance.
Corporate Strategy builds on top of business strategy, which is concerned with the strategic decision making
for an individual business.
Components of Corporate Strategy
There are several important components of corporate strategy that leaders of organizations focus on.
The main tasks of corporate strategy are:
1. Allocation of resources
2. Organizational design
3. Portfolio management
4. Strategic tradeoffs
The four main components outlined above:
1. Allocation of Resources
Resource allocation is the process of assigning and managing assets in a manner that supports an
organization's strategic planning goals.
Resource allocation includes managing tangible assets such as hardware to make the best use of softer
assets such as human capital.
Resource allocation involves balancing competing needs and priorities and determining the best course of
action to maximize the use of limited resources and get the best return on investment.
In practicing resource allocation, organizations must first establish their desired goal, such as increased
revenue, improved productivity, or better brand recognition.
They then must assess what resources will be needed to reach that goal.
The allocation of resources at a firm focuses mostly on two resources: people and capital.
To maximize the value of the entire firm, leaders must determine how to allocate these resources to the
various businesses or business units to make the whole greater than the sum of the parts.
Key factors related to the allocation of resources are:
People
 Identifying core competencies and ensuring they are well distributed across the firm.
 Moving leaders to the places they are needed most and add the most value (changes over time, based
on priorities)
 Ensuring an appropriate supply of talent is available to all businesses
Capital
 Allocating capital across businesses, so it earns the highest risk-adjusted return
 Analyzing external opportunities (mergers and acquisitions) and allocating capital between internal
(projects) and external opportunities.
2. Organizational Design
Organizational design is a step-by-step methodology which identifies dysfunctional aspects of workflow,
procedures, structures, and systems, realigns them to fit current business realities/goals and then develops
plans to implement the new changes.
The process focuses on improving both the technical and people side of the business.
For most companies, the design process leads to a more effective organization design, significantly improved
results (profitability, customer service, internal operations), and employees who are empowered and committed
to the business.
The hallmark of the design process is a comprehensive and holistic approach to organizational improvement
that touches all aspects of organizational life, so you can achieve:
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Excellent customer service
Increased profitability
Reduced operating costs
Improved efficiency and cycle time
A culture of committed and engaged employees
A clear strategy for managing and growing your business
By design we are talking about the integration of people with core business processes, technology and
systems. A well-designed organization ensures that the form of the organization matches its purpose or
strategy, meets the challenges posed by business realities and significantly increases the likelihood that the
collective efforts of people will be successful.
Organizational design involves ensuring the firm has the necessary corporate structure and related systems in
place to create the maximum amount of value. Factors that leaders must consider are the role of the corporate
head office (centralized vs decentralized approach) and the reporting structure of individuals and business
units, vertical hierarchy, matrix reporting, etc.
Key factors related to organizational design are:
Head office (centralized vs decentralized)
o Determining how much autonomy to give business units
o Deciding whether decisions are made top-down or bottom-up
o Influence on the strategy of business units
Organizational structure (reporting)
o Determine how large initiatives and commitments will be divided into smaller projects
o Integrating business units and business functions such that there are no redundancies
o Allowing for the balance between risk and return to exist by separating responsibilities
o Developing centers of excellence
o Determining the appropriate delegation of authority
o Setting governance structures
o Setting reporting structures (military / top-down, matrix reporting)
3. Portfolio Management
Portfolio management is the selection, prioritization and control of an organization’s programs and projects,
in line with its strategic objectives and capacity to deliver.
The goal is to balance the implementation of change initiatives and the maintenance of business-as-usual,
while optimizing return on investment.
Portfolio management looks at the way business units complement each other, their correlations, and decides
where the firm will “play” (i.e., what businesses it will or won’t enter).
Corporate Strategy related to portfolio management includes:
 Deciding what business to be in or to be out of
 Determining the extent of vertical integration, the firm should have • Managing risk through diversification
and reducing the correlation of results across businesses
 Creating strategic options by seeding new opportunities that could be heavily invested in if appropriate
 Monitoring the competitive landscape and ensuring the portfolio is well balanced relative to trends in the
market
4. Strategic Tradeoffs
Strategic trade-off is the process of replacing a particular strategic priority for a different one.
Unlike a tactical tradeoff that operates with short-term goals, a strategic one deals with long-term priorities
instead.
Companies are recommended to regularly introduce strategic tradeoffs to adapt to the dynamic business
environment and market changes.
The need for this practice may arise when there’s an inconsistency in the company’s image and reputation or if
the offered product doesn’t match the target audience’s expectations.
One of the most challenging aspects of corporate strategy is balancing the tradeoffs between risk and return
across the firm. It’s important to have a holistic view of all the businesses combined and ensure that the
desired levels of risk management and return generation are being pursued.
Below are the main factors to consider for strategic tradeoffs:
Managing risk
 Firm-wide risk is largely depending on the strategies it chooses to pursue.
 True product differentiation, for example, is a very high-risk strategy that could result in a market
leadership position or total ruin
 Many companies adopt a copycat strategy by looking at what other risk takers have done and
modifying it slightly
 It’s important to be fully aware of strategies and associated risks across the firm
 Some areas might require true differentiation (or cost leadership) but other areas might be better suited
to copycat strategies that rely on incremental improvements
 The degree of autonomy business units have is important in managing this risk
Generating returns
 Higher risk strategies create the possibility of higher rates of return.
 The examples above of true product differentiation or cost leadership could provide the most return in
the long run if they are well executed.
 Swinging for the fences will lead to more home runs and more strikeouts, so it’s important to have the
appropriate number of options in the portfolio. These options can later turn into big bets as the strategy
develops.
Incentives
 Incentive structures will play a big role in how much risk and how much return managers seek
 It may be necessary to separate the responsibilities of risk management and return generation so that
each can be pursued to the desired level.
 It may further help to manage multiple overlapping timelines, ranging from short-term risk/return to longterm risk/return and ensuring there is appropriate dispersion
Bottom Line – Difference between Corporate Strategy and Business Strategy
Corporate Strategy is different than business strategy, as it focuses on how to manage resources, risk, and
return across a firm, as opposed to looking at competitive advantages.
Leaders responsible for strategic decision making must consider many factors, including allocation of
resources, organizational design, portfolio management, and strategic tradeoffs.
By optimizing all the above factors, a leader can hopefully create a portfolio of businesses that is worth more
than just the sum of the parts.
STRATEGIC MANAGEMENT Material No. 4
LEVELS OF STRATEGY
References: https://www.iedunote.com/levels-of-strategy
Introduction
Companies today compete in a variety of industries and markets. So, as they develop business-level strategies
for each industry or market, they also develop an overall strategy that helps define the mix of industries and
markets that are of interest to the firm.
These levels provide businesses a rich combination of strategic alternatives.
4 Levels of Strategy-Making / 4 Types of Strategic Alternatives
Strategy-making is involved with the identification of the ways that an organization can undertake to achieve
the performance targets, weaken the competitors, achieve competitive advantage, and ensure the long-term
survival of the organization.
In a diversified company, a company having different lines of business under one umbrella, strategies are
initiated at four levels.
The strategies at each level of the organization are known by the name of the level.
4 levels of strategy are:
 Corporate level strategy
 Business level strategy
 Functional level strategy
 Operational level strategy
1.Corporate Level Strategy:
Corporate level strategy is a long-range, action-oriented, integrated, and comprehensive plan formulated by
the top management.
It is used to ascertain business lines, expansion and growth, takeovers and mergers, diversification,
integration, new areas for investment and divestment and so forth.
The first level of strategy in the business world is corporate strategy, which sits at the top of the heap.
Corporate strategy is concerned with deciding which business or businesses an entity should be in and setting
targets for the achievement of the entity’s overall objectives.
It is easy to overlook this planning stage when getting started with a new business, but you will pay the price in
the long run for skipping this step. It is crucially important that you have an overall corporate strategy in place,
as that strategy is going to direct all of the smaller decisions that you make.
At the corporate level strategy however, management must not only consider how to gain a competitive
advantage in each of the line of businesses the firm is operating in, but also which businesses they should be
in in the first place.
It is about selecting an optimal set of businesses and determining how they should be integrated into a
corporate whole: a portfolio. Typically, major investment and divestment decisions are made at this level by top
management. Mergers and Acquisitions (M&A) is also an important part of corporate strategy.
Corporate strategy defines the markets and businesses in which a company will operate.
Corporate strategy is formulated at the top level by the top management of a diversified company (in our
country, a diversified company is popularly known, as ‘group of companies’, such as Alphabet Inc.). Such a
strategy describes the company’s overall direction in terms of its various businesses and product lines.
Corporate strategy defines the long-term objectives and affects all the business-units under its umbrella.
A corporate strategy, for example, of P&G may be acquiring the major tissue paper companies in Canada to
become the unquestionable market leader.
The corporate-level strategy is the set of strategic alternatives from which an organization chooses as it
manages its operations simultaneously across several industries and several markets.
This level of strategy is only necessary when the company operates in two or more business areas through
different business units with different business-level strategies that need to be aligned to form an internally
consistent corporate-level strategy. That is why corporate strategy is often not seen in small-medium
enterprises (SME’s), but in multinational enterprises (MNE’s) or conglomerates.
2. Business Level Strategy:
The strategies that relate to a particular business are known as business-level strategies.
It is developed by the general managers, who convert mission and vision into concrete strategies. It is like a
blueprint of the entire business.
Business strategy, also called competitive strategy, is concerned with how each business activity within
the entity contributes towards the achievement of the corporate strategy.
Business strategy uses corporate strategy to define specific tactics for each market and relates how each
business unit will deliver these planned tactics.
The business-level strategy is what most people are familiar with and is about the question “How do we
compete?”, “How do we gain (a sustainable) competitive advantage over rivals?”.
In order to answer these questions, it is important to first have a good understanding of a business and its
external environment.
Business strategy defines the basis on which firm will compete. It is a business-unit level strategy, formulated
by the senior managers of the unit.
This strategy emphasizes the strengthening of a company’s competitive position of products or services.
Business strategies are composed of competitive and cooperative strategies. The business strategy
encompasses all the actions and approaches for competing against the competitors and the ways
management addresses various strategic issues.
As Hit and Jones have remarked, the business strategy consists of plans of action that strategic managers
adopt to use a company’s resources and distinctive competencies to gain a competitive advantage over its
rivals in a market.
Business strategy is usually formulated in line with the corporate strategy.
The main focus of the business strategy is on product development, innovation, integration (vertical,
horizontal), market development, diversification and the like.
The competitive strategy aims at gaining a competitive advantage in the marketplace against competitors.
And competitive advantage comes from strategies that lead to some uniqueness in the marketplace.
Winning competitive strategies are grounded in sustainable competitive advantage.
Examples of the competitive strategy include differentiation strategy, low-cost strategy, and focus or marketniche strategy.
Business strategy is concerned with actions that managers undertake to improve the market position of the
company through satisfying the customers. Improving market position implies undertaking actions against
competitors in the industry.
Thus, the concept of competitive strategy (as opposed to cooperative strategy) has a competitor-orientation.
The objective of competitive strategy is to win the customers’ heart through satisfying their needs, and finally to
outcompete the competitors (or rival companies) and attain competitive advantages.
The success of a competitive strategy depends on the company’s capabilities, strengths, and weaknesses in
its competitors’ capabilities, strengths, and weaknesses.
In doing business, companies confront a lot of strategic issues. Management has to address all these issues
effectively to survive in the marketplace. Business strategy deals with these issues, in addition to ‘how to
compete.
A business-level strategy is the set of strategic alternatives from which an organization chooses as it conducts
business in a particular industry or market.
Such alternatives help the organization to focus its efforts on each industry or market in a targeted fashion.
At this level, we can use internal analysis frameworks like the Value Chain Analysis and the VRIO Model and
external analysis frameworks like Porter’s Five Forces and PESTEL Analysis.
When good strategic analysis has been done, top management can move on to strategy formulation by using
frameworks as the Value Disciplines, Blue Ocean Strategy and Porter’s Generic Strategies. In the end, the
business-level strategy is aimed at gaining a competitive advantage by offering true value for customers while
being a unique and hard-to-imitate player within the competitive landscape.
3.Functional level strategy: Developed by the first-line managers or supervisors, functional level strategy
involves decision making at the operational level concerning functional areas like marketing, production,
human resource, research and development, finance and so on.
This is the day-to-day strategy that is going to keep your organization moving in the right direction.
Functional strategy defines day-to-day actions needed to deliver corporate and business strategies.
Relationships needed between business units, department, and teams. How functional goals will be met and
monitored.
Functional strategy is also called as operational strategy. These decisions include product pricing,
investment in plant, personnel policy, and so on. It is important that these strategies link to the strategic
business unit strategies and through those strategies, in turn, to the corporate strategy, as the successful
implementation of these is necessary for the fulfillment of both corporate and business objectives.
Functional-level strategy is concerned with the question “How do we support the business-level strategy within
functional departments, such as Marketing, HR, Production and R&D?”.
These strategies are often aimed at improving the effectiveness of a company’s operations within departments.
Within these department, workers often refer to their ‘Marketing Strategy’, ‘Human Resource Strategy’ or ‘R&D
Strategy’.
The goal is to align these strategies as much as possible with the greater business strategy. If the business
strategy is for example aimed at offering products to students and young adults, the marketing department
should target these people as accurately as possible through their marketing campaigns by choosing the right
(social) media channels. Technically, these decisions are very operational in nature and are therefore NOT
part of strategy. As a consequence, it is better to call them tactics instead of strategies.
Just as some businesses fail to plan from a top-level perspective, other businesses fail to plan at this bottomlevel. This level of strategy is perhaps the most important of all, as without a daily plan you are going to be
struct in neutral while your competition continues to drive forward. As you work on putting together your
functional strategies, remember to keep in mind your higher-level goals so that everything is coordinated and
working towards the same end.
It is at this bottom-level strategy where you should start to think about the various departments within your
business and how they will work together to reach goals. Your marketing, finance, operations. IT and other
departments will all have responsibilities to handle, and it is your job as an owner or manager to oversee them
all to ensure satisfactory results in the end.
A functional strategy is, in reality, the departmental/division strategy designed for each organizational function.
Thus, there may be production strategy, marketing strategy, advertisement strategy, sales strategy, human
resource strategy, inventory strategy, financial strategy, training strategy, etc.
A functional strategy refers to a strategy that emphasizes a particular functional area of an organization. It is
formulated to achieve some objectives of a business unit by maximizing resource productivity.
Sometimes functional strategy is called departmental strategy since each business-function is usually vested
with a department.
For example, the production department of a manufacturing company develops production strategy’ as the
departmental strategy, or the training department formulates ‘training strategy’ for providing training to the
employees.
A functional strategy is concerned with developing a distinctive competence to provide a business, unit with a
competitive advantage.
Each business unit or company has its own set of departments, and every department has a functional
strategy. Functional strategies are adopted to support a competitive strategy.
For example, a company following a low-cost competitive strategy needs a production strategy that
emphasizes reducing the cost of operations and also a human resource strategy that emphasizes retaining the
lowest possible number of employees who are highly qualified to work for the organization.
Other functional strategies such as marketing strategy, advertising strategy, and financial strategy are also to
be formulated appropriately to support the business-level competitive strategy.
Again, the success or failure of the entire organization will likely rest on the ability of your business to hit on its
functional strategy goals regularly. As the saying goes, a journey of a million miles starts with a single steptake small steps in strategy on a daily basis and your overall corporate strategy will quickly become successful.
4.Operating Strategy Level
Operating strategy is formulated at the operating units of an organization.
A company may develop operating strategy, as an instance, for its factory, sates territory or small sections
within a department.



Usually, the operating managers/field-level managers develop an operating strategy to achieve immediate
objectives.
In large organizations, the operating managers normally take assistance from the mid-level managers while
developing the operating strategy.
In some companies, managers “develop an operating strategy for each set of annual objectives in the
departments or divisions”.
STRATEGIC MANAGEMENT Material No. 5
STRATEGIC MANAGEMENT PROCESS
Reference:
https://www.mbaknol.com/strategic-management/key-elements-of-the-strategic-management-process/
https://strategicmanagementinsight.com/tools/strategic-planning-process/
The Concept of Strategic Management
Strategic management is defined as a process of specifying the objectives of the organization, developing
policies and planning to achieve the objectives, and then allocating resources so that plans can be
implemented.
Strategic management is considered to be the highest level of managerial activity that the top
management of the organization performs and also the executive team.
Strategic management normally provides the overall direction of the entire organization.
Strategic management is a set of actions and decisions that result to the formulation and
implementation of approaches designed to achieve the objectives of the organization.
This is a continuous process that is normally involved with the attempt of matching the organization with
the changing environment in a manner that is advantageous.
Strategic management is extremely critical in the survival of the organization.
The concept of strategic management helps the leaders or owners of various companies to access their
company’s present position, develop strategies, deploy and analyze the effectiveness of the implemented
strategies.
Strategic management is an ongoing process and it the strategic manager should make sure that each
component interacts with the other components and that this interaction often happens in synchronization to
avoid chaos.
Strategic management is very important when it comes to the formulation of the roadmap, which can lead the
company to success.
The Purpose of Strategic Management
The purpose of strategic management is to endure uncertainties and accomplish goals despite challenges.
It requires you to think critically and make important decisions in the process.
The Strategic Management Process
Before we try to understand the phases of strategic management, it is essential first to understand what it is
and how critical it is for companies. We can describe it as a process that helps establishments achieve their
goals intelligently using available resources.
Isn’t that what every company is supposed to do? Yes, but companies get a direction to reach goals by
creating plans and policies in this procedure. Resources are allocated based on these plans.
What is most important is that all these strategies must percolate down to the last level. This method is suitable
for companies of all sizes. It helps them know their position in comparison with competitors. It enables them to
gain an edge over others.
As this process is entirely objective oriented it specifies clearly what each employee must do. They can get an
idea about how to perform their duties, how to do and when to do them.
Strategic management process is a method by which managers conceive of and implement a strategy that
can lead to a sustainable competitive advantage.
Strategic planning process is a systematic or emerged way of performing strategic planning in the
organization through initial assessment, thorough analysis, strategy formulation, its implementation and
evaluation.
What is that strategic planning process?
The process of strategic management lists what steps the managers should take to create a complete strategy
and how to implement that strategy successfully in the company.
It might comprise from 7 to nearly 30 steps and tends to be more formal in well-established organizations.
The ways that strategies are created and realized differ. Thus, there are many different models of the process.
The models vary between companies depending upon:
 Organization’s culture
 Leadership style
 The experience the firm has in creating successful strategies
7 Important Stages of Strategic Management Process
Fast-paced innovation, dynamic technologies, and ever-so-challenging customer expectations have forced
organizations to think and make decisions strategically to remain successful.
The concept of strategic management involves a continuous process of planning, monitoring, analyzing, and
assessing everything necessary for an organization to meet its goals and objectives. As simple as it may
sound, it involves various complexities that cover formulating strategies to match the ultimate goal and vision
and act in line with the organization’s objectives.
1.Setting the Goal – The first and foremost stage in the process of strategic management requires the
organization to set the short term and long term goals it wants to achieve.
2. Initial Assessment – The second stages say to gathers as much data and information as possible to help
state the mission and vision of the organization. The components of this stage are: Vision statement and
Mission statement.
The business vision answers the question – What does an organization want to become? Without visualizing
the company’s future, managers wouldn’t know where they want to go and what they have to achieve. Vision is
the ultimate goal for a firm and the direction of its employees. In addition, mission describes the company’s
business. It informs organization’s stakeholder about the products, customers. Markets, values, concern for
public image and employees of the organization (David, p. 93). Thorough mission statement acts as guidance
for managers in making appropriate daily decisions (Rothaermel, p. 34).
3. Situation Analysis – It refers to the process of collecting, scrutinizing and providing information for strategic
purposes. It helps in analyzing the internal and external environment that is influencing an organization. It must
assess its current situation in the market. This includes evaluating an organization’. The components of
Situation Analysis are: Internal and external environment analysis and competitor analysis. The tools used for
analysis are: PEST, SWOT, Core Competencies, Critical Success Factors, Unique Selling Proposition, Porter’s
Five Forces, Competitor Profile Matrix. External Factor Evaluation Matrix, Internal Factor Evaluation Matrix,
Benchmarking, Financial Ratios, Scenarios Forecasting, Market Segmentation, Value Chain Analysis and
VRIO Framework.
When the company identifies its vision and mission it must assess its current situation in the market. This
includes evaluating an organization’s external and internal environments and its competitors.
During external environment analysis, managers look into the key external forces: macro and
microenvironments and competition. PEST or PESTEL frameworks represent all the macro environment
factors that influence the organization in the global environment. Microenvironment affects the company in its
industry. It is analyzed using Porter’s 5 Forces Framework.
Competition is another uncontrollable external force that influences the company. A good example of this was
when Apple released its iPod and shook the mp3 players industry, including its leading performer Sony. Firms
assess their competitors using competitors profile matrix and benchmarking to evaluate their strengths,
weaknesses and level of performance.
Internal analysis includes the assessment of the company’s resources, core competencies and activities. An
organization holds both tangible resources: capital, land, equipment, and intangible resources: culture, brand
equity, knowledge, patents, copyrights and trademarks (Rothaermel, p. 90). A firm’s core competencies may
be superior skills in customer relationship or efficient supply chain management. When analyzing the
company’s activities managers look into the value chain and the whole production process.
As a result, situation analysis identifies strengths, weaknesses, opportunities and threats for the organization
and reveals a clear picture of company’s situation in the market.
4.Strategy Formulation – Strategy formulation is the process of deciding the best course of action to be taken
in order to achieve the goals and objectives of the organization.
The components of Strategy Formulation are: Objectives, Business level, Corporate level and Global Strategy
Selection.
The tools used: Scenario Planning, SPACE Matrix, Boston Consulting Group Matrix, GE-Mckinsey Matrix,
Porter’s Generic Strategies, Bowman’s Strategy, Porter’s Diamond, Game Theory, and QSP Matrix.
Successful situation analysis is followed by creation of long-term objectives. Long-term objectives indicate
goals that could improve the company’s competitive position in the long run. They act as directions for specific
strategy selection.
In an organization, strategies are chosen at 3 different levels:
Business level strategy, Corporate strategy level and Global/international strategy level.
Managers must choose between many strategic alternatives. That depends on a company’s objectives.
Results of situation analysis and level for which the strategy is selected.
5.Strategy Implementation – Executing the formulated strategy in such a way that it successfully creates a
competitive advantage for the company. In simple words, putting the chosen plan into action. The components
of this stage are: Annual Objectives, Policies, Resource Allocation, Change Management, Organizational
Chart, Linking Performance and Reward. The usual tools used are: Policies, Motivation, Resistance
Management, Leadership, Stakeholder Impact Analysis, Changing Organizational Structure and Performance
Management.
Even the best strategic plans must be implemented, and only well executed strategies create competitive
advantage for a company. At this stage managerial skills are more important than using analysis.
Communication in strategy implementation is essential as new strategies must get support all over
organization for effective implementation. The example of the strategy implementation that is used here is
taken from David’s book, chapter 7 on implementation.
It consists of the following 6 steps:
1) Setting annual objectives;
2) Revising policies to meet the objectives;
3) Allocating resources to strategically important areas;
4) Changing organizational structure to meet new strategy;
5) Managing resistance to change;
6) Introducing new reward system for performance results if needed.
The first point in strategy implementation is setting annual objectives for the company’s functional areas. These
smaller objectives are specifically designed to achieve financial, marketing, operations, human resources and
other functional goals. To meet these goals managers, revise existing policies and introduce new ones which
act as the directions for successful objectives implementation.
The other very important part of strategy implementation is changing an organizational chart. For example, a
product diversification strategy may require new SBU to be incorporated into the existing organizational chart.
Or market development strategy may require an additional division to be added to the company. Every new
strategy changes the organizational structure and requires reallocation of resources. It also redistributes
responsibilities and powers between managers. Managers may be moved from one functional area to another
or asked to manage a new team. This creates resistance to change, which has to be managed in an
appropriate way or it could ruin excellent strategy implementation.
6.Strategy Monitoring – Strategy Monitoring involves the key evaluation strategies like taking into account the
internal and external factors that are the root of the present strategies and measuring the team performance.
The components of Strategy Monitoring are: Internal and External Factors Review and Measuring Company’s
Performance. The tools used are: Strategy Evaluation Framework, Balanced Scorecards and Benchmarking.
Implementation must be monitored to be successful. Due to constantly changing external and internal
conditions managers must continuously review both environments as new strengths, weaknesses,
opportunities, and threats may arise. If new circumstances affect the company, managers must take corrective
actions as soon as possible.
Usually, tactics rather than strategies are changed to meet the new conditions, unless firms are faced with
such severe external changes as the 2007 credit crunch.
Measuring performance is another important activity in strategy monitoring. Performance must be measurable
and comparable. Managers must compare their actual results with estimated results and see if they are
successful in achieving their objectives.
If objectives are not met managers should:
 Change the reward system.
 Introduce new or revise existing policies.
The key element in strategy monitoring is to get the relevant and timely information on changing environment
and the company’s performance and if necessary, take corrective actions.
7.SWOT Analysis – It helps in determining the Strengths, Weaknesses, Opportunities and Threats (SWOT) of
an organization and taking remedial/corrective courses of actions to fight these weaknesses and threats.
The Various Models of Strategic Management
Constructing a strategic vision with long-term objectives in mind is useful for achieving organizational goals.
Consider these models of strategic management while creating your future-ready plan:
1. SWOT Analysis Model
A basic model of strategic management, SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
This technique is instrumental in determining growth strategies. By gauging available opportunities and
addressing weaknesses, organizations can leverage strengths and circumvent threats. By utilizing this basic
model of strategic management, organizations can gain a competitive advantage over others.
2. PEST Model
This type of business model in strategic management is a macro-level plan that helps organizations assess
future changes based on four factors—Political, Economic, Social and Technological. It helps you analyze
market growth, standing and position with respect to your competitors and customers in addition to assessing
growth strategies to expand your business. It helps you strategize based on different geographies,
demographics and products/services.
3. Porter’s Five Forces Model
According to Porter’s Five Forces Model, there are five forces that can strengthen or weaken your
organization’s position in the market. These are industry competition, new entrants in the market, supplier
power, buyer power and threat of substitutes. This model helps in assessing an organization’s competitive
environment. You can create, modify and update your business strategy based on these five competitive
forces.
Putting the Models of Strategic Management to Use
If you want to make the most of the various models of strategic management, you need to:
 Create a plan that will aid the process
 Set short-term and long-term goals as they form the basis of strategic management.
 Gather and assess data to identify trends and potential problems.
 The next step is to formulate the strategy.
 The penultimate step is to implement it and finally, you need to evaluate it.
By tracking your progress, you can make necessary revisions.
STRATEGIC MANAGEMENT Material No. 6
STRATEGIC PLANNING
Reference:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategic planning/
What is Strategic Planning?
Strategic planning is the art of creating specific business strategies, implementing them, and evaluating the
results of executing the plan, regarding a company’s overall long-term goals or desires.
It is a concept that focuses on integrating various departments (such as accounting and finance, marketing,
and human resources) within a company to accomplish its strategic goals. The term strategic planning is
essentially synonymous with strategic management.
Strategic planning is a process in which an organization's leaders define their vision for the future and identify
their organization's goals and objectives.
The process includes establishing the sequence in which those goals should be realized so that the
organization can reach its stated vision.
Strategic planning typically represents mid- to long-term goals with a life span of three to five years, though it
can go longer.
This is different than business planning, which typically focuses on short-term, tactical goals, such as how a
budget is divided up. The time covered by a business plan can range from several months to several years.
The product of strategic planning is a strategic plan. It is often reflected in a plan document or other media.
These plans can be easily shared, understood, and followed by various people including employees,
customers, business partners and investors.
Organizations conduct strategic planning periodically to consider the effect of changing business, industry,
legal and regulatory conditions. A strategic plan may be updated and revised at that time to reflect any
strategic changes.
The concept of strategic planning originally became popular in the 1950s and 1960s and enjoyed favor in the
corporate world up until the 1980s, when it somewhat fell out of favor. However, enthusiasm for strategic
business planning was revived in the 1990s and strategic planning remains relevant in modern business.
Strategic Planning Process
The strategic planning process requires considerable thought and planning on the part of a company’s upperlevel management. Before settling on a plan of action and then determining how to strategically implement it,
executives may consider many possible options. In the end, a company’s management will, hopefully, settle on
a strategy that is most likely to produce positive results (usually defined as improving the company’s bottom
line) and that can be executed in a cost-efficient manner with a high likelihood of success, while avoiding
undue financial risk.
The development and execution of strategic planning are typically viewed as consisting of being
performed in three critical steps:
1. Strategy Formulation
In the process of formulating a strategy, a company will first assess its current situation by performing an
internal and external audit.
The purpose of this is to help identify the organization’s strengths and weaknesses, as well as opportunities
and threats (SWOT Analysis). As a result of the analysis, managers decide on which plans or markets they
should focus on or abandon, how to best allocate the company’s resources, and whether to take actions such
as expanding operations through a joint venture or merger.
Business strategies have long-term effects on organizational success.
Only upper management executives are usually authorized to assign the resources necessary for their
implementation.
2. Strategy Implementation
After a strategy is formulated, the company needs to establish specific targets or goals related to putting the
strategy into action and allocate resources for the strategy’s execution.
The success of the implementation stage is often determined by how good a job upper management does
regard clearly communicating the chosen strategy throughout the company and getting all of its employees to
“buy into” the desire to put the strategy into action.
Effective strategy implementation involves developing a solid structure, or framework, for implementing the
strategy, maximizing the utilization of relevant resources, and redirecting marketing efforts in line with the
strategy’s goals and objectives.
3. Strategy Evaluation
Any savvy businessperson knows that success today does not guarantee success tomorrow. As such, it is
important for managers to evaluate the performance of a chosen strategy after the implementation phase.
Strategy evaluation involves three crucial activities: reviewing the internal and external factors affecting the
implementation of the strategy, measuring performance, and taking corrective steps to make the strategy more
effective.
For example, after implementing a strategy to improve customer service, a company may discover that it
needs to adopt a new customer relationship management (CRM) software program to attain the desired
improvements in customer relations.
All three steps in strategic planning occur within three hierarchical levels: upper management, middle
management, and operational levels.
Thus, it is imperative to foster communication and interaction among employees and managers at all levels, to
help the firm to operate as a more functional and effective team.
Benefits of Strategic Planning
 Strategic planning also helps managers and employees show commitment to the organization’s goals.
This is because they know what the company is doing and the reasons behind it. Strategic planning makes
organizational goals and objectives real, and employees can more readily understand the relationship between
their performance, the company’s success, and compensation. As a result, both employees and managers
tend to become more innovative and creative, which fosters further growth of the company.
Effective strategic planning has many benefits.
 It forces organizations to be aware of the future state of opportunities and challenges.
 It also forces them to anticipate risks and understand what resources will be needed to seize opportunities
and overcome strategic issues.
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Strategic planning also gives individuals a sense of direction and marshals them around a common
mission.
It creates standards and accountability. Strategic planning can enhance operational plans and efficiency. It
also helps organizations limit time spent on crisis management, where they're reacting to unexpected
changes that they failed to anticipate and prepare for.
The volatility of the business environment causes many firms to adopt reactive strategies rather than
proactive ones.
However, reactive strategies are typically only viable for the short-term, even though they may require
spending a significant number of resources and time to execute.

Strategic planning helps firms prepare proactively and address issues with a more long-term view.
They enable a company to initiate influence instead of just responding to situations.
Among the primary benefits derived from strategic planning are the following:
1. Helps formulate better strategies using a logical, systematic approach.
This is often the most important benefit. Some studies show that the strategic planning process itself makes a
significant contribution to improving a company’s overall performance, regardless of the success of a specific
strategy.
2. Enhanced communication between employers and employees
Communication is crucial to the success of the strategic planning process. It is initiated through participation
and dialogue among the managers and employees, which shows their commitment to achieving organizational
goals.
3. Empowers individuals working in the organization
The increased dialogue and communication across all stages of the process strengthens employees’ sense of
effectiveness and importance in the company’s overall success. For this reason, it is important for companies
to decentralize the strategic planning process by involving lower-level managers and employees throughout
the organization. A good example is that of the Walt Disney Co., which dissolved its separate strategic
planning department, in favor of assigning the planning roles to individual Disney business divisions.
Why is strategic planning important?
Businesses need direction and organizational goals to work toward. Strategic planning offers that type of
guidance. Essentially, a strategic plan is a roadmap to get to business goals. Without such guidance, there is
no way to tell whether a business is on track to reach its goals.
The following four aspects of strategy development are worth attention:
1. The mission. Strategic planning starts with a mission that offers a company a sense of purpose and
direction. The organization's mission statement describes who it is, what it does and where it wants to go.
Missions are typically broad but actionable. For example, a business in the education industry might seek to be
a leader in online virtual educational tools and services.
2. The goals. Strategic planning involves selecting goals. Most planning uses SMART goals -- specific,
measurable, achievable, realistic, and time-bound -- or other objectively measurable goals. Measurable goals
are important because they enable business leaders to determine how well the business is performing against
goals and the overall mission. Goal setting for the fictitious educational business might include releasing the
first version of a virtual classroom platform within two years or increasing sales of an existing tool by 30% in
the next year.
3. Alignment with short-term goals. Strategic planning relates directly to short-term, tactical business
planning and can help business leaders with everyday decision making that better aligns with business
strategy. For the fictitious educational business, leaders might choose to make strategic
investments in communication and collaboration technologies, such as virtual classroom software and services
but decline opportunities to establish physical classroom facilities.
4. Evaluation and revision. Strategic planning helps business leaders periodically evaluate progress against
the plan and make changes or adjustments in response to changing conditions. For example, a business may
seek a global presence, but legal and regulatory restrictions could emerge that affect its ability to operate in
certain geographic regions. As result, business leaders might have to revise the strategic plan to redefine
objectives or change progress metrics.
What are the steps in the strategic planning process?
There are myriad different ways to approach strategic planning depending on the type of business and the
granularity required.
Most strategic planning cycles can be summarized in these five steps:
1.Identify. A strategic planning cycle starts with the determination of a business's current strategic position.
This is where stakeholders use the existing strategic plan -- including the mission statement and long-term
strategic goals -- to perform assessments of the business and its environment.
These assessments can include a needs assessment or a SWOT (strengths, weaknesses, opportunities, and
threats) analysis to understand the state of the business and the path ahead.
2. Prioritize. Next, strategic planners set objectives and initiatives that line up with the company mission and
goals and will move the business toward achieving its goals. There may be many potential goals, so planning
prioritizes the most important, relevant, and urgent ones. Goals may include a consideration of resource
requirements -- such as budgets and equipment -- and they often involve a timeline and business metrics or
KPIs for measuring progress.
3. Develop. This is the main thrust of strategic planning in which stakeholders collaborate to formulate the
steps or tactics necessary to attain a stated strategic objective. This may involve creating numerous short-term
tactical business plans that fit into the overarching strategy. Stakeholders involved in plan development use
various tools such as a strategy map to help visualize and tweak the plan. Developing the plan may involve
cost and opportunity tradeoffs that reflect business priorities. Developers may reject some initiatives if they
don't support the long-term strategy.
4.Implement. Once the strategic plan is developed, it's time to put it in motion.
This requires clear communication across the organization to set responsibilities, make investments, adjust
policies and processes, and establish measurement and reporting. Implementation typically includes strategic
management with regular strategic reviews to ensure that plans stay on track.
5.Update. A strategic plan is periodically reviewed and revised to adjust priorities and reevaluate goals as
business conditions change and new opportunities emerge.
Quick reviews of metrics can happen quarterly, and adjustments to the strategic plan can occur annually.
Stakeholders may use balanced scorecards and other tools to assess performance against goals.
Who does the strategic planning in a business?
A committee typically leads the strategic planning process.
Planning experts recommend the committee include representatives from all areas within the enterprise and
work in an open and transparent way where information is documented from start to finish.
The committee researches and gathers the information needed to understand the organization's current status
and factors that will affect it in the future. The committee should solicit input and feedback to validate or
challenge its assessment of the information.
The committee can opt to use one of many methodologies or strategic frameworks that have been developed
to guide leaders through this process. These methodologies take the committee through a series of steps that
include an analysis or assessment, strategy formulation, and the articulation and communication of the actions
needed to move the organization toward its strategic vision.
The committee creates benchmarks that will enable the organization to determine how well it is performing
against its goals as it implements the strategic plan. The planning process should also identify which
executives are accountable for ensuring that benchmarking activities take place at planned times and that
specific objectives are met.
How often should strategic planning be done?
There are no uniform requirements to dictate the frequency of a strategic planning cycle.
However, there are common approaches:
Quarterly reviews. Once a quarter is usually a convenient time frame to revisit assumptions made in the
planning process and gauge progress by checking metrics against the plan.
Annual reviews. A yearly review lets business leaders assess metrics for the previous four quarters and make
informed adjustments to the plan.
Timetables are always subject to change. Timing should be flexible and tailored to the needs of a company.
For example, a startup in a dynamic industry might revisit its strategic plan monthly. A mature business in a
well-established industry might opt to revisit the plan less frequently.
Types Of Strategic Plans:
Strategic planning activities typically focus on three areas: business, corporate or functional.
They break out as follows:
Business. A business-centric strategic plan focuses on the competitive aspects of the organization -- creating
competitive advantages and opportunities for growth.
These plans adopt a mission evaluating the external business environment, setting goals, and allocating
financial, human and technological resources to meet those goals. This is the typical strategic plan and the
main focus of this article.
Corporate. A corporate-centric plan defines how the company works.
It focuses on organizing and aligning the structure of the business, its policies and processes and its senior
leadership to meet desired goals.
For example, the management of a research and development skunkworks might be structured to function
dynamically and on an ad hoc basis. It would look different from the management team in finance or HR.
Functional. Function-centric strategic plans fit within corporate-level strategies and provide a granular
examination of specific departments or segments such as marketing, HR, finance, and development.
Functional plans focus on policy and process -- such as security and compliance -- while setting budgets and
resource allocations.
In most cases, a strategic plan will involve elements of all three focus areas. But the plan may lean toward one
focus area depending on the needs and type of business
What is a strategy map?
A strategy map is a planning tool or template used to help stakeholders visualize the complete strategy of a
business as one interrelated graphic.
These visualizations offer a powerful way for understanding and reviewing the cause-and-effect relationships
among the elements of a business strategy.
While a map can be drawn in a number of ways, all strategy maps focus on four major business areas or
categories: financial, customer, internal business processes (IBPs), and learning and growth. Goals sort into
those four areas, and relationships or dependencies among those goals can be established.
For example, a strategy map might include a financial goal of reducing costs and an IBP goal to improve
operational efficiency. These two goals are related and can help stakeholders understand that tasks such as
improving operational workflows can reduce company costs and meet two elements of the strategic plan.
A strategy map can help translate overarching goals into an action plan and goals that can be aligned and
implemented.
Strategy mapping can also help to identify strategic challenges that might not be obvious.
For example, one learning and growth goal may be to increase employee expertise but that may expose
unexpected challenges in employee retention and compensation, which affects cost reduction goals.
STRATEGIC MANAGEMENT Material No. 7
STRATEGIC PLANNING MODEL AND FRAMEWORK
Reference:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategic planning/
https://www.cascade.app/blog/stakeholder-theory?hsLang=en-us
Strategic Planning Model Definition
A strategic planning model is a collective term for several elements that contribute to the strategic
planning process.
Strategic planning model is how an organization takes its strategy and creates a plan to implement it
to improve operations and better meet their goals.
The core components of a strategic planning model include:
1. A templated structure for creating goals.
2. Frameworks for helping managers to actually decide what he want to work on.
3. A loose structure of governance to help managers to manage and track his strategy.
The 3 essential elements of any good strategic planning model
1. Structure refers to the different components of your strategic plan and how they all fit together.
For example, your structure may start with a Vision Statement, then flow into Values, Focus
Areas, and any number of Goal levels.
2. Frameworks are methodologies that you can apply to help you come up with your goals, as well
as categorize your goals to ensure they're balanced and will meet your needs.
3. Governance refers to how you'll go about actually tracking and reporting on the goal elements
of your strategy.
Strategic Planning Process Model vs Strategic Frameworks
Strategic planning frameworks and strategic planning models are not the same things. Online
resources use these terms interchangeably, but they're quite different:
Strategic Planning Models provide structure
A strategic planning model refers to the overall structure you apply to your strategic planning
process.
It roughly describes the various components and how they interact with one another. For example,
imagine an architect building an airport.
A model of the airport would show you at a high level how the approach roads connect to the departure
hall and how the departure hall connects to immigration, which then connects to the terminals, the
runways, etc.
A strategic planning model functions much the same way in that it describes each of the elements of
a coherent strategy:
• What they do
• How they fit together
• In what order
and
Strategic Planning Frameworks provide principles
A strategic planning framework refers to the conceptual approach you will bring to populating your
strategic plan.
In our airport example, we might apply a building frame designed to maximize the speed at which
people move through the airport for efficiency. Or alternatively, we might apply a framework designed
not to maximize speed but rather to maximize the amount of time people spend in the airport shops.
These are two very different approaches to building an airport. Hence, two different frameworks.
However, both frameworks could use the same overall model.
What to choose first: the strategic planning model or framework
Strategic planning models provide a way to structure the information of your strategy, the content of
your strategic plan.
Strategic planning frameworks provide the context that surrounds your strategic plan, the information
that helped you define your strategy.
You should always start by selecting your strategic planning model. Then, move on to selecting
your strategic planning framework. Feel free to mix and match multiple different frameworks into your
model, since nobody uses them in whole.
Every organization is unique. Thus, every strategic plan is unique. The goal here is to give you
perspective on how you can approach your planning before you dive into the details.
Here are a few examples of strategic planning frameworks:
• Balanced Scorecard
• SWOT Analysis
• McKinsey's Three Horizons
• The Stakeholder Theory
of Innovation
What is a Balanced Scorecard?
The balanced scorecard (BSC) is a strategic planning and management system. The name “balanced
scorecard” comes from the idea of looking at strategic measures in addition to traditional financial
measures to get a more “balanced” view of performance. The concept of balanced scorecard has
evolved beyond the simple use of perspectives, and it is now a holistic system for managing strategy.
A key benefit of using a disciplined framework is that it gives organizations a way to “connect the dots”
between the various components of strategic planning and management, meaning that there will be a
visible connection between the projects and programs that people are working on, the measurements
being used to track success (KPIs), the strategic objectives the organization is trying to accomplish,
and the mission, vision, and strategy of the organization.
Organizations use BSCs to:
• Communicate what they are trying to accomplish
• Align the day-to-day work that everyone is doing with strategy
• Prioritize projects, products, and services
• Measure and monitor progress towards strategic targets
What Are Balanced Scorecard Perspectives?
The BSC suggests that we examine an organization from four different perspectives to help develop
objectives, measures (KPIs), targets, and initiatives relative to those views.
• Financial (or Stewardship): views an organization’s financial performance and the use of financial
resources.
• Customer/Stakeholder: views organizational performance from the perspective of the customer or
key stakeholders the organization is designed to serve.
• Internal Process: views the quality and efficiency of an organization’s performance related to the
product, services, or other key business processes.
• Organizational Capacity (or Learning & Growth): views human capital, infrastructure, technology,
culture, and other capacities that are key to breakthrough performance.
What is SWOT Analysis?
A SWOT (strengths, weaknesses, opportunities, and threats) analysis looks at internal and external
factors that can affect your business. Internal factors are your strengths and weaknesses. External
factors are the threats and opportunities. If an issue or situation would exist even if your business didn't
(such as changes in technology or a major flood), it is an external issue.
It helps organizations distinguish themselves from competitors by understanding their unique
capabilities and sources of competitive advantage, which can help them compete in their given
marketplace.
SWOT analysis is a strategic planning technique that provides assessment tools. Identifying core
strengths, weaknesses, opportunities, and threats leads to fact-based analysis, fresh perspectives,
and new ideas. SWOT analysis works best when diverse groups or voices within an organization are
free to provide realistic data points rather than prescribed messaging.
The SWOT Analysis MATRIX:
• Strengths (internal) – are things that the organization does particularly well, or in a way that
distinguishes the company from the competitors. Any aspect of the organization is only strength
if it brings a clear advantage.
• Weaknesses (internal) – like strengths, are inherent of an organization, so focus on the people,
resources, systems, and procedures. Think about anything that could be improve, and the sorts
of practices the company should avoid.
• Opportunities (external) - Opportunities are openings or chances for something positive to
happen, but company need to claim them for itself! They usually arise from situations outside
the organization and require an eye to what might happen in the future.
• Threats (external) - include anything that can negatively affect the business from the outside, such
as supply-chain problems, shifts in market requirements, or a shortage of recruits. It's vital to
anticipate threats and to take action against them before becoming a victim of them and
company’s growth stalls.
What is the Three Horizons Framework?
McKinsey’s Three Horizons of Growth are all about keeping you focused on growth and innovation.
This strategy framework requires you to categorize your goals into 3 different ‘horizons’:
The Three Horizons of Purpose Led Growth are:
• Maintain & Defend Core Business
• Nurture Emerging Business
• Create Genuinely New Business
Horizon 1: Maintain and Defend Core Business - Activities that are most closely aligned to your
current business.
Most of your immediate revenue making activity will sit in horizon 1. For a retailer, this would include
the day-to-day goals associated with selling, marketing, and serving your product/customers.
Your goals in horizon 1 will be mostly around improving margins, bettering existing processes, and
keeping cash coming in.
Horizon 2: Nurture Emerging Business -Taking what you already have and extending it into new
areas of revenue-driving activity.
There may be an initial cost associated with your horizon 2 activities, but these investments should
return fairly reliably.
This is based on them being an extension of your current proven business model. Examples of this
could include launching new product lines or expanding your business geographically or into new
markets.
Horizon 3: Create Genuinely New Business - Introducing entirely new elements to your business
that don't exist today.
These ideas may be unproven and potentially unprofitable for a significant period of time. This would
encompass things like research projects, pilot programs, or entirely new revenue lines that require a
significant upfront investment.
What Does McKinsey's Three Horizons of Growth Help to Achieve?
Most organizations want growth. Most organizations also acknowledge that innovation is a critical
component of achieving that growth. Yet so many of them treat innovation as one-off events.
Such as a huge project to be delivered, or a set 'innovation program' to be introduced. One of the most
common reasons for this approach is the perceived gap between the innovation of tomorrow versus
the reality of running the business today.
McKinsey's Three Horizons of Growth aims to help you bridge this intellectual gap. It does this by
creating stepping stones between running your business profitably today and growing it for the
future.
This strategy framework helps ensure that you consistently balance your focus between the needs of
today (horizon 1), the future state of your business (horizon 3), and the steps that you need to take to
get there (horizon 2).
The Three Horizons of Growth framework is an extremely versatile strategy framework, applicable to
most organizations. In particular, the framework lends itself to organizations who've identified that
growth and innovation have been a stumbling block.
If you feel as though your organization is mired in 'chugging along' delivering business as usual McKinsey's Three Horizons of Growth might just be the right strategic framework for you.
What is Stakeholder Theory?
Stakeholder theory is based on the assumption that businesses can only be considered successful
when they deliver value to the majority of their stakeholders. It goes hand in-hand with CSR
(Corporate Social Responsibility) and, therefore, sustainability as well. That means that profit alone
cannot be considered the only measure of business success, and value creation is not just about
money.
One of the first and most influential books that explore this approach is Strategic Management: A
Stakeholder Approach by R. Edward Freeman. A very interesting read for all business leaders that see
various stakeholder interests as crucial factors for success.
Stakeholder theory is widely applicable and can be used in many key fields such as project
management, strategic management, and business ethics. Now let's take a look at some of the
common stakeholders for a typical business:
Shareholders - No problem here - despite stakeholder theory being positioned as the antithesis of
shareholder theory, the reality is that shareholders (or yourself if you own the business) will always be
one of the biggest stakeholders you are responsible for. They are, therefore, entirely in keeping with
the philosophy of stakeholder theory.
• Employees - Another no-brainer, even the most hard-nosed business person will agree that
happy employees are a good thing.
• Customers - Customers are another obvious stakeholder group to consider in the ecosystem of
your business.
• Communities - You can define community in a variety of different ways, from local to virtual.
Either way, they are a key player in stakeholder theory.
• Friends and Family - This may seem a little odd, but your own friends and family (as well as
those of your employees) are also critical stakeholders to satisfy under stakeholder theory.
• Competitors - Now things are getting a bit weird - why would you want to satisfy the needs of
your competitors? Well, stakeholder theory suggests that a healthy competitive environment
benefits everyone, including other stakeholders such as customers.
There are plenty of other stakeholders you could identify such as suppliers, unions, trade
associations, political groups, etc.
As you read the list above, you might think to yourself: "Sure, it makes perfect sense to keep the likes
of my employees and customers happy - because the happier they are, the more money I'm likely to
make." And this is one of the most common misunderstandings behind the stakeholder theory.
The stakeholder theory is not all about keeping stakeholders happy to make more money - and is,
therefore, less prone to be exploited by managerial opportunism. Instead, it argues that companies
play a vital role in the very fabric of our society (creating jobs, innovating, etc.) and that therefore their
success must be valued as a whole, not just in the returns they make for their shareholders. It’s about
value maximization, not wealth maximization.
Important note: All of the strategic planning model examples below are framework agnostic. That
means that regardless of which strategic planning model you choose, you can apply any number of
frameworks to help you actually come up with your goals!
Choosing Your Strategy Model
The examples of strategic planning models we've picked have a lot in common. There’s a good
reason for it.
The best strategic planning models:
• Are
simple
• Contain all the right elements
• Combine goal setting with governance
STRATEGIC MANAGEMENT Material No. 8
STRATEGIC GOALS AND OBJECTIVES
Reference:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategic planning/
https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business
guides/glossary/strategic-goals/
https://www.clearreview.com/resources/guides/which-smart-objectives-definition should-i-use/
What is Strategic Goal?
Strategic goals are the specific financial and non-financial objectives and results a company aims to
achieve over a specific period of time, usually the next three to five years.
Strategic goals are one of three things a company’s management team must articulate as part of its
strategic planning process, with the others being its key success factors (the important elements
required to achieve its goals) and its strategic scope (the products and services that will be offered, to
whom and where).
Strategic goals are important because they:
• Drive priority setting, resource allocation, capability requirements and budgeting activities
• Inform individual and team objectives used to focus and align the efforts of all employees
• Inform the marketing, operations, IT and human resources plans for the coming years
• Provide benchmarks for comparing planned and actual results
Companies use the insights from their SWOT analysis to set their goals. They are refreshed annually
as part of the strategic planning process.
What are SMART Goals?
George T. Doran reportedly coined the phrase SMART objectives back in 1981. Since then, the
acronym has evolved and experienced a number of iterations — meaning different managers define
SMART objectives in different ways.
Goals are part of every aspect of business/life and provide a sense of direction, motivation, a clear
focus, and clarify importance. By setting goals, you are providing yourself with a target to aim for. A
SMART goal is used to help guide goal setting.
SMART is an acronym that stands for Specific, Measurable, Achievable, Realistic, and Timely.
Therefore, a SMART goal incorporates all of these criteria to help focus your efforts and increase the
chances of achieving your goal.
SMART goals are:
• Specific: Well defined, clear, and unambiguous
• Measurable: With specific criteria that measure
your progress toward the accomplishment of the
goal
• Achievable: Attainable and not impossible to achieve
• Realistic: Within reach, realistic, and relevant to your life purpose
• Timely: With a clearly defined timeline, including a starting date and
a target date. The purpose
is to create urgency.
Specific SMART Goals
Goals that are specific have a significantly greater chance of being accomplished. To make a goal
specific, the five “W” questions must be considered:
1. Who: Who is involved in this goal?
2. What: What do I want to accomplish?
3. Where: Where is this goal to be achieved?
4. When: When do I want to achieve this goal?
5. Why: Why do I want to achieve this goal?
For example, a general goal would be “I want to get in shape.” A more specific goal would be “I want
to obtain a gym membership at my local community center and work out four days a week to be
healthier.”
Measurable SMART Goals
A SMART goal must have criteria for measuring progress. If there are no criteria, you will not be able
to determine your progress and if you are on track to reach your goal. To make a goal measurable, ask
yourself:
1. How many/much?
2. How do I know if I have reached my goal?
3. What is my indicator of progress?
For example, building on the specific goal above: I want to obtain a gym membership at my local
community center and work out four days a week to be healthier. Every week, I will aim to lose one
pound of body fat.
Achievable SMART Goals
A SMART goal must be achievable and attainable. This will help you figure out ways you can realize
that goal and work towards it. The achievability of the goal should be stretched to make you feel
challenged, but defined well enough that you can actually achieve it. Ask yourself:
1. Do I have the resources and capabilities to achieve the goal? If not, what am I missing?
2. Have others done it successfully before?
Realistic SMART Goals
A SMART goal must be realistic in that the goal can be realistically achieved given the available
resources and time. A SMART goal is likely realistic if you believe that it can be accomplished. Ask
yourself:
1. Is the goal realistic and within reach?
2. Is the goal reachable, given the time and resources?
3. Are you able to commit to achieving the goal?
Timely SMART Goals
A SMART goal must be time-bound in that it has a start and finish date. If the goal is not timeconstrained, there will be no sense of urgency and, therefore, less motivation to achieve the goal. Ask
yourself:
1. Does my goal have a deadline?
2. By when do you want to achieve your goal?
For example, building on the goal above: On August 1, I will obtain a gym membership at my local
community center. In order to be healthier, I will work out four days a week. Every week, I will aim to
lose one pound of body fat. By the end of August, I will have realized my goal if I lose four pounds of
fat over the course of the month.
The Importance of SMART Goal Setting
Often, individuals or businesses will set themselves up for failure by setting general and unrealistic
goals such as “I want to be the best at X.” This goal is vague, with no sense of direction.
SMART goals set you up for success by making goals specific, measurable, achievable, realistic, and
timely. The SMART method helps push you further, gives you a sense of direction, and helps you
organize and reach your goals.
What is Strategic Objective?
Companies often create specific and measurable goals for progress. Strategic objectives allow
businesses to plan steps that help make their vision a reality. Understanding what strategic objectives
are and why they're important can help managers better take part in and shape these objectives through
his or her contributions to the workplace.
Strategic objectives are purpose statements that help create an overall vision and set goals and
measurable steps for an organization to help achieve the desired outcome. A
strategic object is most effective when it is quantifiable either by statistical results or observable data.
Business create strategic objectives to further the company vision, align company goals and drive
decisions that impact the daily productivity from the highest levels of the organization to all other
employees.
Types of Strategic Objectives
Business often group strategic objectives into categories to achieve multiple goals. Companies often
set strategic objectives in the following categories:
1. Financial strategic goals. Financial strategic are created to help companies to make projections
for profits, shape budgets and measure costs for their organization. They allow a company to
focus on the monetary needs of their organization with specific steps to increase or decrease
costs, re-evaluating spending, analyze revenue trends and plan for financial growth.
2. Growth strategic objectives. Business use strategic growth goals to make actionable statements
about expanding and increasing their company influence in the market and developing new
internal processes. Strategic objectives for growth can help a company plan for the future of the
business with specific steps on how to achieve those long-term goals.
3. Training/learning strategic objectives. Companies create strategic objectives for learning by
planning to increase staff knowledge and capabilities with specific actions. Strategic objectives
for training are ways that all business can plan to invest in their employees to address overall
performance goals.
4. Business processes/operations strategic objectives. Changing or restructuring the way a
business operates is the focus of strategic objectives for business processes and operations.
To effectively make goals for production, a business may choose to adjust and evaluate how
they create a product with the objective of implementing a more efficient process. Other
process and operational objectives might involve business-to-business strategies or businessto consumer tactics.
5. Customer strategic objectives. Some businesses want their strategic objectives to focus on the
customer experience. A business may want to work toward creating value for their consumers
based on the cost of a product or service. Or, a company may want to set goals for outstanding
customer service with actionable objectives to help achieve this outcome.
How to Create A Strategic Objective
The following are the steps to create a strategic objective:
1. Determine clear goals on company’s vision – Before making a strategic objective, decide on the
overall goals and desired outcomes. Plan what areas are most important to the company’s
devolvement strategy. Think about how many objective objectives the company needs to
achieve the overall vision. Consider discussing these ideas with colleagues and team members
to get their input before creating specific strategic objectives.
2. Make a purposeful statement – To create a strategic objective, form a statement that shares how
company will move from point A to point B in a certain amount of time. This formula ensures
managers stated what he wants to achieve and how he will make it happen. Choosing a timeline
also helps make an objective measurable rather than something general that managers are
working toward.
3. Use actionable steps – Make objective actionable, meaning the plans can be achieved through
a series of steps or specific actions. Consider how much time it will take to complete the objective
and the measured outcomes that will prove the company have met it. Use specific data figures
like percentages and years or quarters.
4. Check in on the progress – Plan to reassess the progress as managers work to meet strategic
objectives on the chosen timeline. Evaluate how company are using the action steps to make a
change toward the company’s goals. Adjust any objective that need different action steps, or
create new strategic objectives based on what the managers observe.
What Are SMART Objectives?
Put very simply, SMART objectives (or SMART goals) are a form of objective setting which allows
managers and employees to create, track and accomplish, short-and long-term goals.
All too often, goal setting gets sidelined in business. In fact, according to a Gallup poll, roughly half of
all employees don’t know what is expected of them at work. When this is the case, employees get
frustrated, confused and disengaged. On top of this, they are fated to let management down, as they
don’t have a clear picture of what goals to accom
plish — or how to go about achieving them.
This is where the SMART acronym comes into play. This system gives organizations a smarter way
of setting objectives. Through the use of SMART objectives, employee and
line manager can put together an action plan to improve performance, increase produc tivity and
contribute to organizational goals.
SMART Objectives Examples: How to Define SMART
Below, is the list of the different (and most commonly used) versions. S — SMART
Objectives should be SPECIFIC and STRETCHING
The “S” in SMART usually stands for specific, to ensure the objective is not vague. Unclear objectives
are a recipe for disaster and leave employees uncertain how to act, which means you will not
experience a true increase in productivity. Using the Gallup reference above, we know many managers
are failing when it comes to helping employ
ees set, understand and achieve goals.
Are your SMART objectives really specific? Take some time to honestly consider this. For example,
“increase sales” is far from a specific objective. An employee might ques tion: more sales of what?
How many more sales? By when? This uncertainty will only add to stress levels and can lead to
employee burnout (something that has very recently been recognized by the World Health
Organization (WHO) as an organizational phenom enon of concern).
A specific objective would be:
“Increase sales of advertising space this calendar year by 15%”.
This gives employees a clearer idea about what to achieve and by when.
In addition to specific, we also suggest objectives should be stretching. Studies have shown that when
an objective is stretching, it is more motivating for the individual and leads to higher levels of
achievement. Put simply, stretching goals create better results. It should be noted, however, the degree
of stretch needs to be reasonable to ensure the objective is realistically achievable (see A –“Achievable”
below).
M — SMART Objectives should be MEASURABLE
When it comes to the SMART objectives definition, “M” nearly always stands for measurable.
It is important for both an employee and their manager to understand what success looks like for the
objective. This is the only way both parties will know if the objective has been achieved. This is why
objectives need to be trackable, measurable goals.
The measure of a SMART objective could be quantitative or qualitative. A quantitative measure might
be “Reduce departmental overheads by 10% this financial year”, while a good qualitative objective
would be “Project completed on time and within budget to the satisfaction of the customer”.
A — SMART Objectives should be ACHIEVABLE and AGREED
This letter is where some variance occurs between different SMART objective definitions. The most
common variations are achievable, attainable, aligned and agreed. We suggest using achievable over
attainable, as the word sounds slightly less bureaucratic. While performance objectives should
certainly be aligned upward to the overall objectives of the organization, we prefer to use relevant as
the “R” to cover this point, as ”aligned” can sound like business jargon to employees.
The “agreed” point is an important one — all objectives should be agreed by both the individual and
the manager in question. If the objective is forced upon the individual by the manager, there will be no
ownership on behalf of the individual and the objective is less likely to be achieved. On the other hand,
if the employee has the freedom to create their own objectives to a certain extent, the goal is far more
likely to be achieved, and to a high standard.
If you use an online performance management software system to capture employee objectives, the
agreed word may not be necessary, as such systems tend to ensure that both parties formally agree
on the objectives before they are finalized.
R — SMART Objectives should be RELEVANT
An effective performance objective should be relevant to what the organization and/or the team needs
to achieve. Otherwise, objectives could be successfully delivered but have no impact on the overall
performance of the organization — defeating the ultimate purpose of performance management.
Therefore, the overall goals of the organization or team should be shared with individuals, in a language
they can understand, before employee objectives are set.
In this sense, we recommend aligning SMART objectives upward, rather than cascading goals
downward. This will improve company communication and transparency while enabling individuals to
come up with objectives that will contribute to the achievement of these overall goals.
Note that some SMART objectives definitions use”realistic” for the R. Of course, realistic goals are
important. However, if you have used achievable as the A, this is not neces sary, as the two words
are essentially making the same point.
T — SMART Objectives should be TIME-BOUND
It is very important that objectives have a target date, or a time frame for when they should be
completed — hence time-bound. This not only provides a sense of urgency but
also helps when it comes to reviewing whether or not the objective has been success fully achieved.
Some commentators advocate using ”trackable” for the T instead. How ever, our view is if a clear
success measure is defined (i.e. the objective is measurable) and a target deadline set, then it should
be easy to track progress towards achieving the objective anyway.
STRATEGIC MANAGEMENT Material No. 9
STEPS IN STRATEGIC MANAGEMENT PROCESS
Reference:
https://www.stratadecision.com/blog/strategic-management-process-what-is-it/
https://onstrategyhq.com/resources/goal-setting-as-an-art-form/
https://www.managementstudyguide.com/environmental-scanning.htm
Introduction
Strategic management refers to a branch of management that deals with an organization’s strategic
objectives. This may include the development of the organization’s vision, outlining its operational
objectives and coming up with and implementing the organization’s strategies. It may also include the
formulation and application of deviation corrective measures where necessary.
The Philosophy of the Strategic Management Process
To define the strategic management process, look at it as a philosophical approach to doing business.
This is a blanket terminology that refers to a process by which managers come up with and implement
an operational strategy that grants the organization a competitive advantage. The upper management
of an organization must first use data analytics to think strategically, then use the strategic management
process to put the thought into action.
So, what is strategic management process?
Strategic management process is a continuous culture of appraisal that a business adopts to outdo the
competitors. Simple as it may sound, this is a complex process that also covers formulating the
organization’s overall vision for present and future objectives.
The way different organizations create and realize their management strategies differ. As a result, there
are different models of SMP that the organization can adopt. The right model depends on various
factors including:
• The existing culture of the organization.
• Market dominance of the organization.
• Leadership style.
• The organization’s experience in creating
• Industry and competition.
and implementing SMPs.
Why is Strategic Management Process Important?
The primary purpose of strategic management process is to help the organization achieve a sustainable
strategic competition in the market. When properly conceived and implemented, SMP creates value for
the organization by focusing on and assessing opportunities and threats, then leveraging its strengths
and weaknesses to help it survive, grow, and expand. Strategic management process can help a
business achieve this by:
1. Acting as the reference for any major decisions of the organization.
2. Guiding the business to chart its future and move in that direction. SMP involves formulating the
organization’s goals, fixing realistic and achievable objectives, and ensuring that they are all
aligned with the company’s vision.
3. Assisting the business to become proactive, not reactive. With the SMP, the business can analyze
the competitor’s actions vis-à-vis market trends and come up with the steps that must be taken
to compete and succeed in the market.
4. Preparing the organization for any potential challenges and explore possible opportunities that
the business must pioneer in. The strategic management process steps also involve identifying
the best ways to overcome the challenges and exploiting new opportunities.
5. Ensuring that the organizations copes with the competition in a dynamic environment and
survives in an uncertain market.
6. Helping in the identification and maximization of the organization’s competitive advantages and
core competencies. These are responsible for the business’ survival and future growth.
Steps of Strategic Management Process
There are five strategic management process steps that must be followed in their chronological order.
1. Goal setting
This is essentially clarifying the organization’s vision. The vision will include short-term and long-term
objectives, the processes by which they can be accomplished, and the persons responsible for
implementing each task that culminates in the set goals.
The purpose of goal setting is to clarify the vision for your business. This stage consists of identifying
three key facets: First, define both short- and long-term objectives. Second, identify the process of how
to accomplish your objective. Finally, customize the process for your staff, give each person a task with
which he can succeed. Keep in mind during this process your goals to be detailed, realistic and
match the values of your vision. Typically, the final step in this stage is to write a mission statement
that succinctly communicates your goals to both your shareholders and your staff.
Questions to Ask:
Nothing is meaningful without a context. Once you know…
• What
needs is our company trying to meet? (Competitive Advantage)
• Why is our company is trying to meet these needs? (Purpose)
• What is our company is going to do about needs categorically? (Objectives)
• What is our company’s strengths, weaknesses, opportunities and threats? (SWOT)
…then you have established the context for steps that the company will take in meeting the needs by
setting realistic, measurable Goals. (Bobb Biehl)
Developing Goals
Realistic goals are developed from the SWOT analysis. They are not wishful thinking. Goals describe
objectives that are specific with respect to magnitude and time. A goal is a realistic, measurable, time-
dated target of accomplishment in the future. Goals are like stair steps to your mission and vision.
Goals become the bridge to turn
your mission and vision to reality.
Setting goals converts the company’s mission, strategic vision and objectives into specific performance
targets, something the organization’s progress can be measured. Goals represent a managerial
commitment to achieving specific performance targets with a specific time frame. Companies who set
goals for each objective area and then press forward with actions aimed directly at achieving these
performance outcomes typically outperform companies who exhibit good intentions, try hard, and hope
for the best. (Thompson Strickland, p.36)
Goals ought to serve as a tool for stretching an organization to reach its full potential; this means setting
them high enough to be challenging to energize the organization and its strategy. Company
performance targets that require stretch and disciplined effort are best. Bold, aggressive performance
targets pushes an organization to be more intentional and focused in its actions. Setting bold,
audacious goals and challenging the company to achieve them improves the quality of the
organization’s effort, promotes a can-do spirit, and builds self-confidence. (Thomas Strickland,
p.3,5,41)
For goals to function as yardsticks for tracking an organization’s performance and progress, they must
be stated in quantifiable or measurable terms, contain a deadline for achievement, and state how much
of what kind of performance by when. “You cannot manage what you cannot measure…And what gets
measured gets done.” (Bill Hewlett, cofounder of Hewlett-Packard)
Stating goals in measurable terms and then holding managers accountable for reaching their
assigned targets with a specified time frame:
• provides
strategic decision making for what to accomplish
a set of benchmarks for judging the organization’s
performance. (Thompson Strickland, p.36)
• provides
Performance target goals must be established not only for the organization as a whole, but also for
each of the organization’s separate businesses, product lines, functional areas, and department. Every
unit in a company needs concrete, measurable performance targets that contribute meaningfully toward
achieving company objectives. The ideal situation is a team effort where each organizational unit strives
to produce results in its area of responsibility that contribute to the achievement of the company’s
performance target goals and objectives. (Thomas Strickland, p.3,5)
Goals must state How and What. Goals must spell out how much of what kind of performance by
when.
• How
much is to be accomplished
• What kind of performance to be accomplished
This means avoiding generalities like “maximize profits,” “reduce costs,” “become more efficient,” “or
increase sales,” which specify neither how much or when.
2. Analysis
Analysis involves gathering the data and information that is relevant to accomplishing the set goals. It
also covers understanding the needs of the business in the market and examining any internal and
external data that may affect the organization.
Environmental Scanning
Environmental scanning refers to a process of collecting, scrutinizing and providing information for
strategic purposes. It helps in analyzing the internal and external factors influencing an organization.
After executing the environmental analysis process, management should evaluate it on a continuous
basis and strive to improve it.
Environmental scanning refers to possession and utilization of information about occasions, patterns,
trends, and relationships within an organization’s internal and external environment.
It helps the managers to decide the future path of the organization. Scanning must identify the threats
and opportunities existing in the environment. While strategy formulation, an organization must take
advantage of the opportunities and minimize the threats. A threat for one organization may be an
opportunity for another.
Internal analysis of the environment is the first step of environment scanning. Organizations should
observe the internal organizational environment.
This includes employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with shareholders, access to
natural resources, brand awareness, organizational structure, main staff, operational potential, etc.
Also, discussions, interviews, and surveys can be used to assess the internal environment.
Analysis of internal environment helps in identifying strengths and weaknesses of an organization.
As business becomes more competitive, and there are rapid changes in the external environment,
information from external environment adds crucial elements to the effectiveness of long-term plans.
As environment is dynamic, it becomes essential to identify competitors’ moves and actions.
Organizations have also to update the core competencies and internal environment as per external
environment.
Environmental factors are infinite; hence, organization should be agile and vigile to accept and adjust
to the environmental changes. For instance - Monitoring might indicate that an original forecast of the
prices of the raw materials that are involved in the product are no more credible, which could imply the
requirement for more focused scanning, forecasting and analysis to create a more trustworthy
prediction about the input costs. In a similar manner, there can be changes in factors such as
competitor’s activities, technology, market tastes and preferences.
While in external analysis, three correlated environments should be studied and analyzed:
o
o
o
immediate/industry environment
national environment
broader socio-economic environment/macro-environment
Examining the industry environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular organization and it’s main
rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It
also implies evaluating the effect of globalization on competition within the industry.
Analyzing the national environment needs an appraisal of whether the national framework helps in
achieving competitive advantage in the globalized environment. Analysis of macro-environment
includes exploring macro-economic, social, government, legal, technological, and international factors
that may influence the environment. The analysis of organization’s external environment reveals
opportunities and threats for an organization.
Strategic managers must not only recognize the present state of the environment and their industry
but also be able to predict its future positions.
Models for Strategic Analysis
Business analysis models are useful tools and techniques that can help you understand your
organizational environment and think more strategically about your business. Dozens of generic
techniques are available, but some are used more frequently than others do. These include:
• SWOT (strengths, weaknesses, opportunities, threats) analysis
• PESTLE (political, economic, social, technological, legal, and environmental) analysis
• scenario planning
• Porter's Five Forces framework
SWOT analysis - SWOT analysis is one of the most popular strategic analysis models. It involves
looking at the strengths and weaknesses of your business capabilities, and any opportunities and
threats to your business.
Once you identify these, you can assess how to:
• capitalize
on your strengths
• minimize the effects of your weaknesses
• make the most of any opportunities
• reduce the impact of any threats
A SWOT analysis gives you a better insight into your internal and external business environment.
However, it does not always prioritize the results, which can lead to an improper strategic action.
One way to make better use of the SWOT framework is to consider the customer's perspective when
making strategic plans and decisions. You can do this by applying importance-performance analysis
to identify SWOT based on customer satisfaction surveys.
Other strategic analysis tools - In addition to SWOT, other useful techniques include:
• PESTLE analysis - a technique for understanding the various external influences on a business.
• Scenario planning - a technique that builds various plausible views of possible futures for a
business.
• Critical success factor analysis - a technique to identify the areas in which a business must
succeed in order to achieve its objectives.
• The Five Forces - a framework for looking at the strength of five important factors that affect
competition - potential entrants, existing competitors, buyers, suppliers and alternative
products/services. Using this model, you can build a strategy to keep ahead of these influences.
3. Strategy Formulation
A business will only succeed if it has the resources required to reach the goals set in the first step. The
process of formulating a strategy to achieve this may involve identifying which external resources the
business needs to succeed, and which goals must be prioritized.
Strategy formulation is the generation of long-term plans for the proper management of environmental
openings and fears considering the fortes and faintness of the business or the company. It consists of
defining the mission, attainable objectives, forming strategies and setting policies.
• Mission: An organization’s purpose or the reason for its survival is called mission. It mentions
how it is serving the society. An ideal mission statement specifies the unique purpose that differs
the company from other similar companies and defines the scope of its functions in the form of
the products and services served to the market.
• Objectives: The outcomes of the planned functions are called objectives. Objectives mention
what is to be attained by when. The attainment of the objectives should lead to the fulfillment of
the company’s mission.
• Strategies: A strategy is a broad master plan expressing how a company will accomplish its
mission and objectives, maximizing competitive advantages and minimizing competitive
disadvantages. Generally, a company or business takes into consideration three kinds of
strategy: corporate, business, and functional.
• Policies: A policy is a comprehensive guideline for making decisions linking the formation and
implementation of a strategy. Companies set policies to ensure that its employees’ decisions
and actions support the company’s mission, its objectives, and strategies.
Strategy formulation is the process of deciding the best course of action to be taken in order to
achieve the goals and objectives of the organization.
4. Strategy Implementation
Since the purpose of strategic management process is to propel an organization to its objectives, an
implementation plan must be put in place before the process is considered viable. Everyone in the
organization must understand the process and know what their duties and responsibilities are in order
to fit in with the organization’s overall goal.
After a strategy is formulated, the company needs to establish specific targets or goals related to putting
the strategy into action, and allocate resources for the strategy’s execution. The success of the
implementation stage is often determined by how good a job upper management does in regard to
clearly communicating the chosen strategy throughout the company and getting all of its employees to
“buy into” the desire to put the strategy into action.
Effective strategy implementation involves developing a solid structure, or framework, for implementing
the strategy, maximizing the utilization of relevant resources, and redirecting marketing efforts in line
with the strategy’s goals and objectives.
Executing the formulated strategy in such a way that it successfully creates a competitive advantage
for the company. In simple words, putting the chosen plan into action.
5. Evaluation and Control
The evaluation and control actions for the strategic management process include performance
appraisal as well constant review of both internal and external issues. Where necessary, the
management of the organization can implement corrective actions to ensure success of the SMP.
In order for a business’ efforts to have the most impact on a business’ bottom line, strategic
management process must be employed. This will also go a long way in helping a business to survive
stiff competition in the market.
Strategy evaluation is the final step of strategy management process. The key strategy evaluation
activities are: appraising internal and external factors that are the root of present strategies, measuring
performance, and taking remedial/corrective actions. Evaluation makes sure that the organizational
strategy as well as it’s implementation meets the organizational objectives.
Strategy evaluation involves three crucial activities: reviewing the internal and external factors affecting
the implementation of the strategy, measuring performance, and taking corrective steps to make the
strategy more effective. For example, after implementing a strategy to improve customer service, a
company may discover that it needs to adopt a new customer relationship management (CRM)
software program in order to attain the desired improvements in customer relations.
All steps in strategic planning occur within three hierarchical levels: upper management, middle
management, and operational levels. Thus, it is imperative to foster communication and interaction
among employees and managers at all levels, so as to help the firm to operate as a more functional
and effective team.
These components are steps that are carried, in chronological order, when creating a new strategic
management plan. Present businesses that have already created a strategic management plan will
revert to these steps as per the situation’s requirement, so as to make essential changes. Strategic
management is an ongoing process. Therefore, it must be realized that each component interacts with
the other components and that this interaction often happens in chorus.