1. Introduction of Strategic Management
? Strategic Management is all about identification and description of the strategies
that managers can carry so as 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 can also be defined as a bundle of decisions and acts which
a manager undertakes and which decides the result of the firm’s performance. The
manager must have a thorough knowledge and analysis of the general and
competitive organizational environment so as to take right decisions. They should
conduct a SWT Analysis !Strengths" Weaknesses" pportunities" and Threats#"
i.e." they should make best possible utilization of strengths" minimize the
organizational weaknesses" make use of arising opportunities from the business
environment and shouldn’t ignore the threats.
? Strategic management is nothing but planning for both predictable as well as
unfeasible contingencies. $t is applicable to both small as well as large
organizations as even the smallest organization face competition and" by
formulating and implementing appropriate strategies" they can attain sustainable
competitive advantage.
? $t is a way in which strategists set the ob%ectives and proceed about attaining
them. $t deals with making and implementing decisions about future direction of
an organization. $t helps us to identify the direction in which an organization is
moving.
? 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 e'isting 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 needs replacement.
? Strategic Management gives a broader perspective to the employees of an
organization and they can better understand how their %ob fits into the entire
organizational plan and how it is co(related to other organizational members. $t is
nothing but the art of managing employees in a manner which ma'imizes the
ability of achieving business ob%ectives. The employees become more trustworthy"
1
more committed and more satisfied as they can co(relate themselves very well
with each organizational task. They can understand the reaction of environmental
changes on the organization and the probable response of the organization with
the help of strategic management. Thus the employees can %udge the impact of
such changes on their own %ob and can effectively face the changes. The managers
and employees must do appropriate things in appropriate manner. They need to be
both effective as well as efficient.
? ne of the ma%or role 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 ob%ectives of the organization.
Definitions:
I. Strategic management involves )the formulation and implementation of the
ma%or goals and initiatives taken by a company*s top management on behalf of
owners" based on consideration of resources and an assessment of the internal and
e'ternal environments in which the organization competes. Strategy is defined as
+the determination of the basic long(term goals of an enterprise" and the adoption
of courses of action and the allocation of resources necessary for carrying out
these goals.+ Strategies are established to set direction" focus effort" define or
clarify the organization" and provide consistency or guidance in response to the
environment.
II. Strategic management is the continuous planning" monitoring" analysis and
assessment of all that is necessary for an organization to meet its goals and
ob%ectives.
III. Strategic management is the Art and Science of ,ormulating" $mplementing" and
-valuating .ross(,unctional /ecisions That -nable an rganization to Achieve
$ts b%ectives.
2. Advantages And Disadvantages of Strategic Management
? Advantages of Strategic Management
2
1. Discharges Responsibility: Many organizations undertake a strategic
management process in order to discharge their responsibilities. There is an
e'pectation from shareholders" stakeholders and the general community at large"
that a well(managed organization has a strategic management process that guides
its future success.
2. Allos an !b"ective Assessment: Strategic management provides a discipline
that allows the senior management team to take a step back from the day(to(day
business and think about the future of the organization. Without this discipline"
the organization can become solely consumed with working through the ne't
issue or problem without consideration to the larger picture" longer(term trends
and associated operational and environmental alignment.
#. $rovides a %rameor& for Decision'Ma&ing: $t is not possible" !nor realistic or
appropriate#" for senior management to know all the operational decisions staff
make on a day(to(day basis. The cumulative effect of these day(today decisions"
!which can add up to thousands over the year#" can have a significant impact on
the success of the organization. 0roviding a framework within which staff can
make these day(to(day decisions helps better focus their efforts on those activities
that will best support the organization*s success. Strategy provides the framework
within which staff can make day(to(day operational decisions that are aligned
with the achievement of the organization’s goals.
(. )nables *nderstanding + ,uy'In: Allowing participation in the strategic
management process enables better understanding of the direction" why that
direction was chosen" and the associated benefits. ,or some people simply
knowing is enough& for many people" to gain their full support re1uires them to
understand. -stablishing the right process for the formulation and communication
of strategy not only allows thinking that challenges the status(1uo but also builds
support for the developed solution. 2ood strategy formulation and communication
process are key steps in enabling effective and efficient strategy deployment.
-. %acilitates Measurement of $rogress: Senior management is bombarded with
information. -stablishing performance measures that are aligned with the strategy
3
and provide timely and meaningful information is critical to breaking through the
e'cessive )information noise3. $t helps ensure timely" informed strategic decisions
to be made. Strategy sets the direction and enables an organization to align its
ob%ectives and performance measures. These ob%ectives and performance
measures allow meaningful information to be provided to decision(makers
regarding the organization’s progress through such vehicles as scorecards and
dashboards.
.. )nhances Strategic Agility /Innovation0: An organization is deemed to have
)Strategic Agility3 when it can successfully capitalize upon opportunities
resulting from unanticipated and significant change. When formulated
appropriately" strategy can improve the ability of the organization to respond
effectively to significant change. rganizational strategy is both formulated and
formed. Strategy formulation is most recognizable and depicted through senior
management offsite retreats in which the direction and priorities for the future of
the organization are established. The forming of strategy is the strategic decisions
made day(to(day through the culmination of operational decisions of which the
strategic implications are not generally evident until reviewed in retrospect. Many
of these )strategy forming3 decisions determine the opportunities the organization
chooses to pursue and not pursue. A good strategic management system provides
the organization with a good strategy formulation process while ensuring the
fle'ibility to capitalize upon appropriate opportunities that emerge over time
!formed strategy#.
? Disadvantages of Strategic Management
1. 1he %uture Rarely *nfolds as Anticipated: ne of the ma%or criticisms of
strategic management is that it re1uires the organization to anticipate the future
environment in order to develop plans" and as we all know" predicting the future is
not an easy undertaking. The belief is that if the future does not unfold as
anticipated" then it invalidates the strategy. 4esearch has demonstrated that
organizations that use strategic management processes achieve better performance
4
than organizations that don*t ( regardless of whether they actually achieve their
intended ob%ectives. $t appears that the very act of discussing the future of the
organization and thinking about the possible alternatives during the strategy
formulation process actually improves the decision(making ability of the senior
management team& especially during times of uncertainty.
2. Return on Investment: The issue of return on investment has been largely
associated with the inability to realize the value from the strategy formulation
process. $t is difficult to %ustify the value received from the strategy formulation
process when very little is deployed and the only tangible evidence in the
aftermath of the work is an attractive document that sits on the senior manager’s
bookshelf. 5owever" if your strategy formulation process is tied to a strategy
deployment process that results in a significant improvement in organizational
performance" the investment in strategy now represents a tremendous return on
your investment. The key is to start with the end in mind" that the formulation of
strategy is the beginning" not the end of the process.
#. 2ong 1erm ,enefit vs. Immediate Results: Strategic management processes are
designed to provide an organization with long(term benefits. $f you are looking at
the strategic management process to address an immediate crisis within your
organization" it usually won*t. $t generally makes sense to address the immediate
crises prior to allocating resources !time" money" people" opportunity cost# to the
strategic management process.
(. May Impede Agility: Strategic management processes can actually impede
organizational agility in two key ways. When you undertake a strategic
management process" it will most likely result in the organization saying +no+ to
some of the opportunities that are discussed. $f the only time and manner in which
new opportunities can be assessed is during the periodic strategy formulation
process" then the process itself may be inhibiting the organization to )form
strategy3 and thereby may result in missed opportunities and potentially stifle
innovation. $n this scenario" the strategic management process has become the
very tool that now inhibits the organization*s ability to innovate and capture
5
opportunities. The second way that agility can be impeded is through a well(
e'ecuted alignment and integration of the strategy. Alignment ensures that the
whole organization is pulling in the same direction and is often cited as the
pinnacle of success of a well(e'ecuted strategy& however" without appropriate
processes and criteria to assess and incorporate opportunities throughout the
planning period it can inhibit the organization*s agility. Again" there are a variety
of methods in strategic management that allow an organization to formulate and
deploy strategy while simultaneously allowing the integration and building of
strategic agility.
-. It 3an ,e )4pensive: There is no doubt that in the not(for(profit sector there are
many organizations that cannot afford to hire an e'ternal consultant to help them
develop their strategy. Today there are many volunteers that can help smaller
organizations and also funding agencies that will support the cost of hiring
e'ternal consultants in developing a strategy. 4egardless" it is important to ensure
that the implementation of a strategic management process is consistent with the
needs of the organization" and that appropriate controls are implemented to allow
the cost6benefit discussion to be undertaken" prior to the implementation of a
strategic management process.
#. Introduction of 1urnaround Strategy
Meaning
Turnaround strategy means to convert" change or transform a loss(making
company into a profit(making company. $t means to make the company profitable
again.
The main purpose of implementing a turnaround strategy is to turn the company
from a negative point to a positive one. $f a turnaround strategy is not applied to a
sick company" it will close down. $t is a remedy for curing industrial sickness.
Turnaround is a restructuring strategy. 5ere" a loss(bearing company is
transformed into a profit(earning company" by making systematic efforts.
6
$t tries to remove all weaknesses to help a sick company once again become
strong" stable and a profit(making institution.
$t tries to reverse the position from loss to profit" from declining sales to
increasing sales" from weakness to strength" and from an instability to stability.
$t aids to reduce the brought forward losses of the loss(making company.
$t helps the sick company to stand once again in the market.
$t is a complete 7(turn of a planned strategic economic transition.
Definition of 1urnaround Strategy
$n general" the definition of turnaround strategy can be stated as follows.
)Turnaround strategy is a corporate practice designed and planned to protect
!save# a loss(making company and transform it into a profit(making one.3
$n financial" commercial" corporate or from a business perspective" the turnaround
strategy can be defined as follows.
)Turnaround Strategy is a corporate action that is taken !performed# to deal with
issues of a loss(making !sick# company like increasing losses" lower return on
capital employed" and continuous decrease in the value of its shares.3
,inally" from an academic point of view" its definition can be stated as under.
)Turnaround strategy is an analytical approach to solve the root cause failure of a
loss(making company to decide the most crucial reasons behind its failure. 5ere" a
long(term strategic plan and restructuring plans are designed and implemented to
solve the issues of a sick company.3
)4amples of 1urnaround Strategy
Some e'amples of turnaround strategy are depicted below.
• ,inancial $nstitution" for e'ample" some bank 8A’ is suffering from losses
due to non(performing assets !90A#. 90A is loan given but not yet
7
recovered. This bank 8A’ will follow turnaround strategy and try to recover
its loans by appointing recovery agents.
• Manufacturing company say 8:;
? Strategic Management is all about identification and description of the strategies
that managers can carry so as 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 can also be defined as a bundle of decisions and acts which
a manager undertakes and which decides the result of the firm’s performance. The
manager must have a thorough knowledge and analysis of the general and
competitive organizational environment so as to take right decisions. They should
conduct a SWT Analysis !Strengths" Weaknesses" pportunities" and Threats#"
i.e." they should make best possible utilization of strengths" minimize the
organizational weaknesses" make use of arising opportunities from the business
environment and shouldn’t ignore the threats.
? Strategic management is nothing but planning for both predictable as well as
unfeasible contingencies. $t is applicable to both small as well as large
organizations as even the smallest organization face competition and" by
formulating and implementing appropriate strategies" they can attain sustainable
competitive advantage.
? $t is a way in which strategists set the ob%ectives and proceed about attaining
them. $t deals with making and implementing decisions about future direction of
an organization. $t helps us to identify the direction in which an organization is
moving.
? 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 e'isting 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 needs replacement.
? Strategic Management gives a broader perspective to the employees of an
organization and they can better understand how their %ob fits into the entire
organizational plan and how it is co(related to other organizational members. $t is
nothing but the art of managing employees in a manner which ma'imizes the
ability of achieving business ob%ectives. The employees become more trustworthy"
1
more committed and more satisfied as they can co(relate themselves very well
with each organizational task. They can understand the reaction of environmental
changes on the organization and the probable response of the organization with
the help of strategic management. Thus the employees can %udge the impact of
such changes on their own %ob and can effectively face the changes. The managers
and employees must do appropriate things in appropriate manner. They need to be
both effective as well as efficient.
? ne of the ma%or role 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 ob%ectives of the organization.
Definitions:
I. Strategic management involves )the formulation and implementation of the
ma%or goals and initiatives taken by a company*s top management on behalf of
owners" based on consideration of resources and an assessment of the internal and
e'ternal environments in which the organization competes. Strategy is defined as
+the determination of the basic long(term goals of an enterprise" and the adoption
of courses of action and the allocation of resources necessary for carrying out
these goals.+ Strategies are established to set direction" focus effort" define or
clarify the organization" and provide consistency or guidance in response to the
environment.
II. Strategic management is the continuous planning" monitoring" analysis and
assessment of all that is necessary for an organization to meet its goals and
ob%ectives.
III. Strategic management is the Art and Science of ,ormulating" $mplementing" and
-valuating .ross(,unctional /ecisions That -nable an rganization to Achieve
$ts b%ectives.
2. Advantages And Disadvantages of Strategic Management
? Advantages of Strategic Management
2
1. Discharges Responsibility: Many organizations undertake a strategic
management process in order to discharge their responsibilities. There is an
e'pectation from shareholders" stakeholders and the general community at large"
that a well(managed organization has a strategic management process that guides
its future success.
2. Allos an !b"ective Assessment: Strategic management provides a discipline
that allows the senior management team to take a step back from the day(to(day
business and think about the future of the organization. Without this discipline"
the organization can become solely consumed with working through the ne't
issue or problem without consideration to the larger picture" longer(term trends
and associated operational and environmental alignment.
#. $rovides a %rameor& for Decision'Ma&ing: $t is not possible" !nor realistic or
appropriate#" for senior management to know all the operational decisions staff
make on a day(to(day basis. The cumulative effect of these day(today decisions"
!which can add up to thousands over the year#" can have a significant impact on
the success of the organization. 0roviding a framework within which staff can
make these day(to(day decisions helps better focus their efforts on those activities
that will best support the organization*s success. Strategy provides the framework
within which staff can make day(to(day operational decisions that are aligned
with the achievement of the organization’s goals.
(. )nables *nderstanding + ,uy'In: Allowing participation in the strategic
management process enables better understanding of the direction" why that
direction was chosen" and the associated benefits. ,or some people simply
knowing is enough& for many people" to gain their full support re1uires them to
understand. -stablishing the right process for the formulation and communication
of strategy not only allows thinking that challenges the status(1uo but also builds
support for the developed solution. 2ood strategy formulation and communication
process are key steps in enabling effective and efficient strategy deployment.
-. %acilitates Measurement of $rogress: Senior management is bombarded with
information. -stablishing performance measures that are aligned with the strategy
3
and provide timely and meaningful information is critical to breaking through the
e'cessive )information noise3. $t helps ensure timely" informed strategic decisions
to be made. Strategy sets the direction and enables an organization to align its
ob%ectives and performance measures. These ob%ectives and performance
measures allow meaningful information to be provided to decision(makers
regarding the organization’s progress through such vehicles as scorecards and
dashboards.
.. )nhances Strategic Agility /Innovation0: An organization is deemed to have
)Strategic Agility3 when it can successfully capitalize upon opportunities
resulting from unanticipated and significant change. When formulated
appropriately" strategy can improve the ability of the organization to respond
effectively to significant change. rganizational strategy is both formulated and
formed. Strategy formulation is most recognizable and depicted through senior
management offsite retreats in which the direction and priorities for the future of
the organization are established. The forming of strategy is the strategic decisions
made day(to(day through the culmination of operational decisions of which the
strategic implications are not generally evident until reviewed in retrospect. Many
of these )strategy forming3 decisions determine the opportunities the organization
chooses to pursue and not pursue. A good strategic management system provides
the organization with a good strategy formulation process while ensuring the
fle'ibility to capitalize upon appropriate opportunities that emerge over time
!formed strategy#.
? Disadvantages of Strategic Management
1. 1he %uture Rarely *nfolds as Anticipated: ne of the ma%or criticisms of
strategic management is that it re1uires the organization to anticipate the future
environment in order to develop plans" and as we all know" predicting the future is
not an easy undertaking. The belief is that if the future does not unfold as
anticipated" then it invalidates the strategy. 4esearch has demonstrated that
organizations that use strategic management processes achieve better performance
4
than organizations that don*t ( regardless of whether they actually achieve their
intended ob%ectives. $t appears that the very act of discussing the future of the
organization and thinking about the possible alternatives during the strategy
formulation process actually improves the decision(making ability of the senior
management team& especially during times of uncertainty.
2. Return on Investment: The issue of return on investment has been largely
associated with the inability to realize the value from the strategy formulation
process. $t is difficult to %ustify the value received from the strategy formulation
process when very little is deployed and the only tangible evidence in the
aftermath of the work is an attractive document that sits on the senior manager’s
bookshelf. 5owever" if your strategy formulation process is tied to a strategy
deployment process that results in a significant improvement in organizational
performance" the investment in strategy now represents a tremendous return on
your investment. The key is to start with the end in mind" that the formulation of
strategy is the beginning" not the end of the process.
#. 2ong 1erm ,enefit vs. Immediate Results: Strategic management processes are
designed to provide an organization with long(term benefits. $f you are looking at
the strategic management process to address an immediate crisis within your
organization" it usually won*t. $t generally makes sense to address the immediate
crises prior to allocating resources !time" money" people" opportunity cost# to the
strategic management process.
(. May Impede Agility: Strategic management processes can actually impede
organizational agility in two key ways. When you undertake a strategic
management process" it will most likely result in the organization saying +no+ to
some of the opportunities that are discussed. $f the only time and manner in which
new opportunities can be assessed is during the periodic strategy formulation
process" then the process itself may be inhibiting the organization to )form
strategy3 and thereby may result in missed opportunities and potentially stifle
innovation. $n this scenario" the strategic management process has become the
very tool that now inhibits the organization*s ability to innovate and capture
5
opportunities. The second way that agility can be impeded is through a well(
e'ecuted alignment and integration of the strategy. Alignment ensures that the
whole organization is pulling in the same direction and is often cited as the
pinnacle of success of a well(e'ecuted strategy& however" without appropriate
processes and criteria to assess and incorporate opportunities throughout the
planning period it can inhibit the organization*s agility. Again" there are a variety
of methods in strategic management that allow an organization to formulate and
deploy strategy while simultaneously allowing the integration and building of
strategic agility.
-. It 3an ,e )4pensive: There is no doubt that in the not(for(profit sector there are
many organizations that cannot afford to hire an e'ternal consultant to help them
develop their strategy. Today there are many volunteers that can help smaller
organizations and also funding agencies that will support the cost of hiring
e'ternal consultants in developing a strategy. 4egardless" it is important to ensure
that the implementation of a strategic management process is consistent with the
needs of the organization" and that appropriate controls are implemented to allow
the cost6benefit discussion to be undertaken" prior to the implementation of a
strategic management process.
#. Introduction of 1urnaround Strategy
Meaning
Turnaround strategy means to convert" change or transform a loss(making
company into a profit(making company. $t means to make the company profitable
again.
The main purpose of implementing a turnaround strategy is to turn the company
from a negative point to a positive one. $f a turnaround strategy is not applied to a
sick company" it will close down. $t is a remedy for curing industrial sickness.
Turnaround is a restructuring strategy. 5ere" a loss(bearing company is
transformed into a profit(earning company" by making systematic efforts.
6
$t tries to remove all weaknesses to help a sick company once again become
strong" stable and a profit(making institution.
$t tries to reverse the position from loss to profit" from declining sales to
increasing sales" from weakness to strength" and from an instability to stability.
$t aids to reduce the brought forward losses of the loss(making company.
$t helps the sick company to stand once again in the market.
$t is a complete 7(turn of a planned strategic economic transition.
Definition of 1urnaround Strategy
$n general" the definition of turnaround strategy can be stated as follows.
)Turnaround strategy is a corporate practice designed and planned to protect
!save# a loss(making company and transform it into a profit(making one.3
$n financial" commercial" corporate or from a business perspective" the turnaround
strategy can be defined as follows.
)Turnaround Strategy is a corporate action that is taken !performed# to deal with
issues of a loss(making !sick# company like increasing losses" lower return on
capital employed" and continuous decrease in the value of its shares.3
,inally" from an academic point of view" its definition can be stated as under.
)Turnaround strategy is an analytical approach to solve the root cause failure of a
loss(making company to decide the most crucial reasons behind its failure. 5ere" a
long(term strategic plan and restructuring plans are designed and implemented to
solve the issues of a sick company.3
)4amples of 1urnaround Strategy
Some e'amples of turnaround strategy are depicted below.
• ,inancial $nstitution" for e'ample" some bank 8A’ is suffering from losses
due to non(performing assets !90A#. 90A is loan given but not yet
7
recovered. This bank 8A’ will follow turnaround strategy and try to recover
its loans by appointing recovery agents.
• Manufacturing company say 8:;