STRATEGY MANAGMENT PROCESS

Strategic management provides the route map for the firm. It lends a framework, which can ensure that
decisions concerning the future are taken in a systematic and purposeful way. Strategic management also
serves as a hedge against uncertainty, a hedge against totally unexpected developments on the business
horizon. It lends a frame of reference for investment decisions. It aids the concentration of resources on vital
areas of best potential. It offers a methodology by which the firm could anticipate and project the future and
be internally equipped to face it. It helps to develop processes, systems, mechanisms and managerial attitude
that are essential for this purpose.
1. Environment Scanning
he environmental scan includes the following components!
"nalysis of the firm #Internal environment$
"nalysis of the firm%s industry #micro or task environment$
"nalysis of the &xternal macro environment #'&S analysis$
he internal analysis can identify the firm%s strengths and weaknesses and the external analysis reveals
opportunities and threats. " profile of the strengths, weaknesses, opportunities, and threats is generated by
means of a S() analysis
"n industry analysis can be performed using a framework developed by *ichael 'orter known as 'orter%s
five forces. his framework evaluates entry barriers, suppliers, customers, substitute products, and industry
rivalry.
If an organization understands the environment in which it operates, half the problem is solved. his
requires an analysis of what is happening outside the organization and an evaluation of current resources
#strength and weaknesses$ and an assessment of opportunities and threats present in the environment.
PROCESS
&nvironmental scanning is a research process in which business collect all types of relevant information that
help their business in making decision regarding expanding or entering new markets.
It can be described as keeping a close eye on external or internal and analyzing the information to know how
it can be beneficial for the business.
&nvironment could be classified as external and internal.
Internal:
he internal environment of a corporation consists of variables #strengths and weaknesses$ that are within
the organization and are not usually within the short run control of top management. his includes the
corporation%s culture, structure and resources. )ne of the widely used methods for internal analysis of the
firms is +alue ,hain analysis which assesses the strengths and weaknesses that divides a business into a
number of linked activities, each of which may produce value to the customers.
External:
he external environment consists of variables that are outside the organization and not typically within the
short-run control of top management. hey may be general forces and trends within the overall societal
environment, which consists of socio cultural, economic, technological, political and legal force.
here may be specific forces called task environment that operates within the organization%s specific which
includes suppliers, employers, competitors, trade association, communities, and creditors, customers, special
interest groups, .overnment and shareholders. he method widely used to analyze the external environment
is 'orter/s 0ive-0orces *odel. his method involves analyzing the threat from the new entrant, rivalry
among the existing players, pressure from the buyers, pressure from the suppliers and pressure from the
substitutes.
SWOT
"n overview of the four factors #Strengths, (eaknesses, )pportunities and hreats$ is given below-
1. Strengths Strengths are the qualities that enable us to accomplish the organization/s mission. hese
are the basis on which continued success can be made and continued1sustained. Strengths can be
either tangible or intangible. hese are what you are well-versed in or what you have expertise in, the
traits and qualities your employees possess #individually and as a team$ and the distinct features that
give your organization its consistency. Strengths are the beneficial aspects of the organization or the
capabilities of an organization, which includes human competencies, process capabilities, financial
resources, products and services, customer goodwill and brand loyalty. &xamples of organizational
strengths are huge financial resources, broad product line, no debt, committed employees, etc.
2. Wea!nesses (eaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. hese weaknesses deteriorate influences on the organizational success
and growth. (eaknesses are the factors which do not meet the standards we feel they should meet.
(eaknesses in an organization may be depreciating machinery, insufficient research and
development facilities, narrow product range, poor decision-making, etc. (eaknesses are
controllable. hey must be minimized and eliminated. 0or instance - to overcome obsolete
machinery, new machinery can be purchased. )ther examples of organizational weaknesses are huge
debts, high employee turnover, complex decision making process, narrow product range, large
wastage of raw materials, etc.
3. O""ort#nities )pportunities are presented by the environment within which our organization
operates. hese arise when an organization can take benefit of conditions in its environment to plan
and execute strategies that enable it to become more profitable. )rganizations can gain competitive
advantage by making use of opportunities. )rganization should be careful and recognize the
opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients
while getting desired results is a difficult task. )pportunities may arise from market, competition,
industry1government and technology. Increasing demand for telecommunications accompanied by
deregulation is a great opportunity for new firms to enter telecom sector and compete with existing
firms for revenue.
4. Threats hreats arise when conditions in external environment jeopardize the reliability and
profitability of the organization/s business. hey compound the vulnerability when they relate to the
weaknesses. hreats are uncontrollable. (hen a threat comes, the stability and survival can be at
stake. &xamples of threats are - unrest among employees2 ever changing technology2 increasing
competition leading to excess capacity, price wars and reducing industry profits2 etc.
PEST
Economic environment:
he economic environment consists of macro level factors related to the means of production and
distribution of wealth that have an impact on the business of the organization. Some of the economic
environment factors to be analyzed are!
3 .eneral economic conditions
3 &conomic conditions of different segments of population
3 rends in income distribution and consumer spending patterns
3 4ate of growth of each sector of economy
3 4ate of inflation
3 5ehavior of capital market
3 Interest rate1exchange rate
3 ax rates
3 'rices of materials1energy
3 6abour scene
,hanges in economic environment can have an obvious impact on business activity. 0or example, an
increase in the interest rates translates into fewer sales of major home appliances. 7igher increase in interest
rates results in higher mortgage rates and higher cost of buying a house. *ost of the household goods are
bought when people shift their houses. 7igher costs of buying the house eat into the budget in appliances.
Technological environment:
he technological environment consists of the factors related to technology used in the production of goods
and services that have an impact on the business of an organization. echnological factors to be considered
are!
3 Source of technology like company, external and foreign sources, cost of technology acquisition,
collaboration and transfer of technology.
3 echnological development, rate of change of technology and research and development.
3 Impact of technology on human beings, the man-machine system and the environmental effects of
technology.
3 ,ommunication, infrastructure and managerial technology.
0or a business firm technology affects its final products by changing processes in raw material sourcing,
production and distribution. echnology, when rightly used can bring about huge changes in the productivity
of firms.
,omputer Industry is one example where the technology in the industry keeps pushing competition to the
brink.
Political environment:
'olitico-legal forces allocate power and provide laws and regulation that may constrain or protect the
business. he factors to be considered are!
3 he political system and its features like nature of the political system, ideological forces of the political
parties and sentries of power
3 he political structure, its goals and stability 3 'olitical process like party systems, elections, funding of
elections and legislation in economic and industrial matters and regulations
3 'olitical philosophy, role of government in business and its policy approach towards economic and
business development.
(ith the developments on the political front affecting the economy all the time, the economic environment
often becomes a by product of the political environment. 6egislations regulating the business are the by
product of the political configuration. In addition to government and legislative measures, media, social and
religious organizations and lobbies of various kinds are also a part of the political environment. hey
collectively exercise a huge influence on the conduct of business in a country.
$egal %rame&or!:
3 he constitutional framework, directive principles, fundamental rights and divisions of legislative power
between central and state government
3 'olicies related to licensing, monopolies, foreign investments and financing to industries
3 'olicies related to distribution and pricing and their control
3 'olicies related to imports and exports
3 )ther policies related to 'S8, SSI, sick industries, and development of backward areas and control of
environmental pollution.
5usinesses have to operate within the framework of the prevailing legal environment. hey have to
understand the general legal aspects and those particular to the industry the company is in. 5usinesses have
to understand the implication of such legislations and adapt themselves accordingly.
Socio c#lt#ral environment:
Socio cultural environment are the forces that regulate the values, morals and customs of society. Important
factors to be considered are!
3 9emographic characteristics
3 Social concerns
3 Social attitudes
3 0amily structure and changes in it
3 4ole of women in society, position of children and adolescents in family and society
3 &ducational level, awareness and consciousness of rights and work ethics of members of the society.
he social environment primarily affects the strategic management process within the organization in the
areas of mission and objective setting and decision related to products and markets.
2. STRATEGY 'ORM($ATION
Strategy formulation is the development of long range plans for the effective management of
environmental opportunities and threats in light of corporate strengths and weaknesses. It includes
defining the corporate mission, specifying achievable objectives, developing strategies and setting policy
guidelines. It begins with situational analysis. he simplest way is to analyze through is S() analysis.
his is the method to analyze the strengths and weakness in order to utilize the threat and to overcome
the threat. S() is the acronym for Strength, (eakness, )pportunities and hreats. he )(S matrix
illustrates how the external opportunities and threats facing a particular corporation can be matched with
that company/s internal strengths and weaknesses to result in four sets of possible strategic alternatives.
Mission:
"n organization/s mission is the purpose or the reason for the organization existence. " well conceived
mission statement defines the fundamental, unique purpose that sets a company apart from other firms of
its type and identifies the scope of the company%s operation in terms of the products offered and markets
served. " mission statement may be defined narrowly or broadly in scope. " broadly defined mission
statement keeps the company from restricting itself to one field or product line, but it fails to clearly
identify what it makes or which product1market it plans to emphasize. " narrow mission very clearly
states the organizations primary business, but it may limit the scope of the firm%s activities in terms of
product or service offered, the technology used and the market served.
O)*ectives:
)bjectives are the end result of planned activity. hey state what is to be accomplished by when and
should be quantified if possible. he achievement of corporate objective should result in the fulfillment
of a corporate mission. In contrast to an objective, a goal is an open ended statement of what one wants
to accomplish with no quantification of what is to be achieved and no time criterion for completion. he
areas in which a company might establish its goals and objective are profitability, growth, shareholder%s
wealth, utilization of resources etc.
Strategies:
" strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve
its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.
Strategy is the determination of the long-term goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of resources necessary for carrying out
these goals. Strategy is managements game plan for strengthening the organizations
position, pleasing customers, and achieving performance targets.
Types of strategy:
The typical business firm considers three types of strategy:
Corporate strategy:
It describes a companys overall direction in terms of its general attitude to!ards gro!th and
management of its various business and product lines.
"orporate strategy deals !ith three #ey issues facing the corporation as a !hole.
1. Directional strategy: The firms overall orientation to!ards gro!th, stability and
retrenchment. The t!o basic gro!th strategies are concentration and diversification. The
gro!th of a company could be achieved through merger, ac$uisition, ta#eover, joint ventures
and strategic alliances. Turnaround, divestment and li$uidation are the various types of
retrenchment strategy.
2. Portfolio analysis: The industries or mar#ets in !hich the firm competes through its
products and business units. In portfolio analysis, top management vie!s its product lines
and business units as a series of portfolio investment and constantly #eep analyzing for a
profitable return. T!o of the most popular strategies are the %"& &ro!th Share matri' and
&( business screen
3. Parenting strategy: The manner in !hich the management coordinates activities and
transfers resources and cultivate capabilities among product lines and business units.
Business strategy:
It usually occurs at the business unit or product level and it emphasizes improvement of the
competitive position of a corporations products or services in the specific industry or
mar#eting segment served by that business unit. It may fit !ithin t!o overall categories of
competitive or corporate strategies. "ompetitive strategy is the strategy battle against all
competitors for advantage. )ichael *orter developed three competitive strategies called
&eneric strategies. They are cost leadership, differentiation and focus. "ooperative strategy is
to !or# !ith one or more competitors to gain advantage against other competitors.

Functional strategy:
It is the approach ta#en by a functional area to achieve corporate and business unit
objectives and strategies by ma'imizing resource productivity. It is concerned !ith developing
nurturing a distinctive competence to provide a company or business unit !ith a competitive
advantage.
+ hierarchy of strategy is the grouping of strategy types by levels in the organization. This
hierarchy of strategy is a nesting of one strategy !ithin another so that they complement and
support one another. ,unctional strategies support business strategies that in turn support
the corporate strategy.

STRATEGY IMP$EMENTATION
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STRATEGY E+A$(TION AN, CONTRO$
&valuation and control is the process in which corporate activities and performance can be compared
with desired performance. *anagers at all levels use the clear, prompt, unbiased information from the
people below the corporation%s hierarchy to take corrective action and resolve problems. It can also
pinpoint weaknesses in previously implemented strategic plans and this stimulates the control of
performance. he evaluation and the control of performance complete the strategic management model.
5ased on the performance results, management may need to make adjustments in its strategy
formulation or implementation or both.