Strategic Management :

Process of SM:

Strategic Management Process in important:

● Helping the organization for any major decisions.

● Guiding organizations in fixing realistic and achievable goals, and align them with the
company vision.
● Assisting the business to analyze the competitor’s actions with the help of market trends
● Preparing the business for any potential challenges and help them copes with the
competition in a dynamic environment.
● Ensuring that the organizations copes with the competition in a dynamic environment
and survives in an uncertain market.

Steps of Strategic Management Process:

1.Goal Setting
Making a road map to assist you in achieving your vision is the central focus of the strategic
management process. Therefore, you must be clear about the goals your firm has before
moving forward. A vision statement is a common first step in the strategic management process
for businesses. Your future goals are expressed in your vision statement. Although it differs
from your company’s mission statement, which explains why it exists, both statements should
guide your strategic plan.

2.Analysis
Analysis is the next important strategic management step. Knowing your existing position is
absolutely necessary before defining strategy and other actions. This encompasses both
internal and external factors, including your location, structure, and talent that are internal
factors, as well as external factors like your competition and market forces.

3.Strategy Formulation
Utilizing the knowledge readily at hand, the process of developing a strategy include noting the
predicted trajectory of a business and the practical steps to meet its goals. This procedure is
used to allocate resources, set priorities, align the entire organisation, and validate business
objectives.

4.Strategy Implementation
Strategy implementation is the process of setting plans into action to obtain a desired result. In
essence, it’s the art of accomplishing things. Every organisation’s ability to make choices and
carry out crucial procedures effectively, consistently, and efficiently determines how successful
it will be.

5.Strategy, Evaluation and Control:

The process by which management determines whether a given strategy has been successfully
implemented is known as strategy evaluation. Simply expressed, assessing and evaluating the
strategy implementation process and gauging organisational effectiveness constitute strategy
evaluation

Types of Strategies
1. Corporate Strategy
Corporate Strategy is a high-level plan formulated by a company’s top management to direct
and guide the organization’s overall direction. It encompasses decisions related to the overall
scope and direction of the company, including which markets to enter or exit, resource
allocation, and the pursuit of growth through various means such as mergers, acquisitions, or
partnerships. The goal of corporate strategy is to achieve sustainable competitive advantage
and long-term profitability.

Features
● Broad Scope: Corporate Strategy encompasses the entire organization, including all its
business units and functions. It addresses high-level decisions that impact the overall
direction and long-term success of the company.
● Resource Allocation: It involves strategic decisions about how to distribute resources
(such as capital, personnel, and technology) across various parts of the organization to
maximize efficiency and effectiveness.
● Synergy Creation: Corporate Strategy aims to create synergies by leveraging the
strengths and capabilities of different business units, leading to greater overall value
than if the units operated independently.
Advantages
● Clear Direction: A well-defined corporate strategy provides a clear direction for the entire
organization, aligning all business units and employees with the same long-term goals
and objectives.
● Competitive Advantage: By carefully analyzing the competitive environment and making
strategic decisions, an organization can achieve and sustain a competitive advantage in
its markets.
● Optimal Resource Use: Effective corporate strategy ensures that resources are allocated
efficiently, reducing waste and improving the overall performance and profitability of the
organization.
Disadvantages
● Complexity: Developing and implementing a corporate strategy can be highly complex,
requiring extensive analysis and coordination across multiple business units and
functions.
● Risk of Misalignment: If not communicated and executed properly, there is a risk that the
corporate strategy may not be aligned with the day-to-day operations and goals of
individual business units, leading to inefficiencies and conflicts.
● Inflexibility: A rigid corporate strategy may limit an organization’s ability to respond
quickly to changes in the market or competitive landscape, potentially leading to missed
opportunities or threats.
2. Business Strategy
Business Strategy refers to a company’s plan for achieving its long-term goals and sustaining
competitive advantage. It encompasses the decisions and actions that guide the overall
direction of the business, including how it will compete in the market, satisfy customer needs,
and achieve financial and operational objectives.

Features
● Long-Term Focus: Business Strategy is oriented towards achieving goals over an
extended period, typically spanning several years, rather than focusing solely on short-
term gains.
● Alignment with Goals: It involves aligning every aspect of the business, including
operations, marketing, and finance, with the overarching goals and objectives of the
company.
● Adaptability: A good business strategy is flexible and adaptable, allowing for adjustments
in response to changes in the market, technology, or other external factors.
Advantages
● Competitive Advantage: A well-defined business strategy can help a company gain a
competitive edge by leveraging its strengths and exploiting opportunities in the market.
● Resource Optimization: By prioritizing initiatives and allocating resources effectively, a
business strategy enables companies to maximize their return on investment and
minimize waste.
● Risk Management: Business Strategy involves careful analysis of risks and
uncertainties, allowing companies to anticipate potential challenges and develop
contingency plans to mitigate them.
Disadvantages
● Complexity: Developing and implementing a comprehensive business strategy can be
complex and time-consuming, requiring input from various stakeholders and extensive
planning.
● Uncertainty: Despite careful planning, business strategies are subject to uncertainties in
the market, technology, and regulatory environment, which can impact their
effectiveness.
● Resistance to Change: Employees and stakeholders may resist changes associated with
a new business strategy, leading to implementation challenges and delays.

3. Functional Strategy
A functional strategy refers to the detailed, action-oriented plans developed by various
functional areas within an organization, such as marketing, finance, human resources, and
operations. These strategies are designed to support and achieve the overall business strategy
and corporate objectives.

Features
● Alignment with Business Goals: Functional Strategies are designed to support and
contribute to the achievement of the organization’s broader objectives.
 ● Specialization: Each functional area develops its own strategies tailored to its unique
requirements and challenges.
● Coordination: Functional Strategies must be coordinated across different departments to
ensure coherence and synergy in overall organizational performance.
Advantages
● Efficiency: By focusing on specific areas, functional strategies enable organizations to
allocate resources effectively and streamline operations for better efficiency.
● Expertise Utilization: Functional Strategies allow organizations to leverage the
specialized knowledge and skills of employees within each department, leading to
optimized performance.
● Flexibility: With separate strategies for different functions, organizations can adapt more
easily to changes in the business environment or market conditions.
Disadvantages
● Silos and Tunnel Vision: Functional Strategies may lead to siloed thinking, where
departments prioritize their own goals over the organization’s broader objectives,
hindering collaboration and innovation.
● Coordination Challenges: Ensuring alignment and coordination among different
functional strategies can be complex and may result in conflicts or inefficiencies.
● Lack of Holistic View: Functional Strategies may overlook the interconnectedness of
different business functions, potentially leading to suboptimal decision-making and
missed opportunities

What is Strategic Business Unit (SBU)?

Strategic Business Unit (SBU) can be defined as a separate business unit with its vision,
mission, and objectives. In a large business, where there are several departments, it is
preferred to build SBUs and give all of them the power to achieve their individual goals and to
contribute to organisational goals as a whole. Strategic Business Unit (SBU) is a separate,
independent, and fully functional unit. For example, TATA Group has several SBUs. Individual
SBUs for Automotive, Airlines, Chemicals, Defense, FMCG, Electric Utility, Finance, Home
Appliances, Hospitality, IT Services, Locomotives, Retail, Real Estate, Steel, and
Telecommunications, have been set up under the TATA group.

Characteristics of Strategic Business Unit (SBU)

1. Separate Mission and Objectives: Every SBU has its vision and missions for which it works.
Their objective is to achieve those missions and contribute towards the entity’s business.

2. Group of Related Businesses: SBU can have either a single business or a collection of
related businesses so that independent planning can be done. However, SBU may/may not
share the same utilities of business like raw material, power, human resources, etc.

3. Own Set of Competitors: Every Individual SBU has its own set of competitors for which
different strategies and goals are formulated.
4. Decentralised Management: In every created SBU, a manager will be deployed, who will
have the responsibility for planning, performance, profit, etc. The manager shall be accountable
for the performance of each SBU.

5.Own resources
6.Independent from parent company

7. Accountability

Types of Strategic Business Unit (SBU):

Companies after creating the Strategic Business Unit (SBU) have to ascertain how much
resources shall be employed by individual SBUs. For this, they have to take into account
several factors to decide, like, Profitability, Market Share, Opportunity Market, etc. To divide
SBU categories to ascertain resources to be deployed, Boston Consulting Group’s Matrix is
given which divides SBUs into four different categories which are:

1. Star: These are the SBUs that perform well and have recorded rapid growth. They possess a
decent market share and possess a high market growth rate. As they have growth potential,
they are the most favorable for expansion. For example, Apple’s iPhone.

2. Cash-Cow: These SBUs have a high market share but a low growth rate. These are generally
those markets that are already established and generate regular economies for business and as
their growth rate is low they need low costs to survive. For example, Apple’s IWatch
(Smartwatch) or Apple’s MacBook.

3. Question Marks: They have low market share but high growth opportunities. As opportunities
are high they require more cash to hold their market share and require heavy investment. If
Question Marks are attended well they can become Star, but if not handled carefully they may
turn into Cash Trap for business. For example, Apple’s iPad.

4. Dogs: These SBU’s growth rate and market share are relatively low. They do not have much
future and must be disinvested by the company. For example, Apple’s iPod.
 A. Relative Market Share
The creator of the BCG Matrix used this variable to actually measure a company’s
competitiveness. The exact measure for Relative Market Share is the focal company’s share
relative to its largest competitor. So if Samsung has a 20 percent market share in the mobile
phone industry and Apple (its largest competitor) has 60 percent so to speak, the ratio would be
1:3.

B. Market Growth Rate

The second variable is the Market Growth Rate, which is used to measure the market
attractiveness. Rapidly growing markets are what organizations usually strive for, since they are
promising for interesting returns on investments in the long term. The drawback however is that
companies in growing markets are likely to be in need for investments in order to make growth
possible