Strategic Management Process: Notes | Financial Management & Strategic Management for CA Intermediate PDF Download

 Page 1


 
LEARNING OBJECTIVIES 
 
STRATEGIC 
MANAGEMENT 
PROCESS 
After studying this chapter, you will be able to: 
? Have a basic knowledge of strategic planning.
? Learn about the concept of strategic decision making. 
? Understand the concepts of strategic intent and vision. 
? Have knowledge of different stages of strategic 
management process. 
Sound strategy starts with having the right goal.
Michael Porter
“The real challenge in crafting strategy lies in detecting subtle 
discontinuities that may undermine a business in the future. And for 
that there is no technique, no program, just a sharp mind in touch with 
the situation.”
Henry Mintzberg
CHAPTER 
3 
Page 2


 
LEARNING OBJECTIVIES 
 
STRATEGIC 
MANAGEMENT 
PROCESS 
After studying this chapter, you will be able to: 
? Have a basic knowledge of strategic planning.
? Learn about the concept of strategic decision making. 
? Understand the concepts of strategic intent and vision. 
? Have knowledge of different stages of strategic 
management process. 
Sound strategy starts with having the right goal.
Michael Porter
“The real challenge in crafting strategy lies in detecting subtle 
discontinuities that may undermine a business in the future. And for 
that there is no technique, no program, just a sharp mind in touch with 
the situation.”
Henry Mintzberg
CHAPTER 
3 
 
 
STRATEGIC MANAGEMENT 
3.2 
 
 
 3.1 INTRODUCTION 
It is a process of strategic planning that culminates in the formulation of 
corporate strategy. The strength of the entire process of strategic planning is 
tested by the efficacy of the strategy finally forged by the firm. The ultimate 
question is whether the strategy formulated is the appropriate one, i.e. whether it 
would take the firm to its objectives. Corporate strategy is the game plan that 
actually steers the firm towards success. The degree of aptness of this game plan 
decides the extent of the firm’s success. That is why formulation of corporate 
strategy forms the crux of the strategic planning process. 
3.2 STRATEGIC PLANNING 
Planning means deciding what needs to done in the future (today, next week, 
next month, next year, over the next couple of years, etc.) and generating 
blueprints for action. Good planning is an important constituent of good 
management. Planning involves determination of the course of action to attain 
the predetermined objectives. It bridges the gap between where we are to where 
we want to go. Thus, planning is future oriented in nature. Planning can be 
strategic or operational. Strategic plans are made by the senior management for 
the entire organisation after taking into account the organisation’s strength and 
Strategic Planning
Stragetic Decision 
Making
Strategic Intent
Vision
Mission
Business Definition
Business Model
Goals and Objectives
Strategic Management 
Model
Strategy Formulation
 3
 
Page 3


 
LEARNING OBJECTIVIES 
 
STRATEGIC 
MANAGEMENT 
PROCESS 
After studying this chapter, you will be able to: 
? Have a basic knowledge of strategic planning.
? Learn about the concept of strategic decision making. 
? Understand the concepts of strategic intent and vision. 
? Have knowledge of different stages of strategic 
management process. 
Sound strategy starts with having the right goal.
Michael Porter
“The real challenge in crafting strategy lies in detecting subtle 
discontinuities that may undermine a business in the future. And for 
that there is no technique, no program, just a sharp mind in touch with 
the situation.”
Henry Mintzberg
CHAPTER 
3 
 
 
STRATEGIC MANAGEMENT 
3.2 
 
 
 3.1 INTRODUCTION 
It is a process of strategic planning that culminates in the formulation of 
corporate strategy. The strength of the entire process of strategic planning is 
tested by the efficacy of the strategy finally forged by the firm. The ultimate 
question is whether the strategy formulated is the appropriate one, i.e. whether it 
would take the firm to its objectives. Corporate strategy is the game plan that 
actually steers the firm towards success. The degree of aptness of this game plan 
decides the extent of the firm’s success. That is why formulation of corporate 
strategy forms the crux of the strategic planning process. 
3.2 STRATEGIC PLANNING 
Planning means deciding what needs to done in the future (today, next week, 
next month, next year, over the next couple of years, etc.) and generating 
blueprints for action. Good planning is an important constituent of good 
management. Planning involves determination of the course of action to attain 
the predetermined objectives. It bridges the gap between where we are to where 
we want to go. Thus, planning is future oriented in nature. Planning can be 
strategic or operational. Strategic plans are made by the senior management for 
the entire organisation after taking into account the organisation’s strength and 
Strategic Planning
Stragetic Decision 
Making
Strategic Intent
Vision
Mission
Business Definition
Business Model
Goals and Objectives
Strategic Management 
Model
Strategy Formulation
 3
 
 
 
3.3 
STRATEGIC MANAGEMENT PROCESS 
weaknesses in the light of opportunities and threats in the external environment. 
They involve acquisition and allocation of resources for the attainment of 
organisational objectives. But operational plans on the other hand are made at the middle 
and lower level management. They specify details on how the resources are to be utilized 
efficiently for the attainment of objectives. 
Strategic Planning: It is the process of determining the objectives of the firm, 
resources required to attain these objectives and formulation of policies to 
govern the acquisition, use and disposition of resources. Strategic planning 
involves a fact of interactive and overlapping decisions leading to the 
development of an effective strategy for the firm. Strategic planning determines 
where an organisation is going over the next year or more and the ways for going 
there. The process is organisation-wide, or focused on a major function such as a 
division or other major function. 
Dealing with uncertainty: Strategic uncertainty, which has far reaching 
implications, is a key construct in strategy formulation. A typical external analysis 
will emerge with dozens of strategic uncertainties. To be manageable, they need 
to be grouped into logical clusters or themes. It is then useful to assess the 
importance of each cluster in order to set priorities with respect to Information 
gathering and analysis.  
Sometimes, strategic uncertainty is represented by a future trend or event that 
has inherent unpredictability. Information gathering and additional analysis will 
not be able to reduce the uncertainty. In that case, scenario analysis can be 
employed. Scenario analysis basically accepts the uncertainty as given and uses it 
to drive a description of two or more future scenarios. Strategies are then 
developed for each. One outcome could be a decision to create organisational 
and strategic flexibility so that as the business context changes the strategy will 
adapt.  
Impact of uncertainty: Each element of strategic uncertainty involves potential 
trends or events that could have an impact on present, proposed, and even 
potential businesses. , a trend toward natural foods may present opportunities for 
juices for a firm producing aerated drinks on the basis of a strategic uncertainty. 
The impact of a strategic uncertainty will depend on the importance of the 
impacted SBU to a firm. Some SBUs are more important than others. The 
importance of established SBUs may be indicated by their associated sales, 
profits, or costs. However, such measures might need to be supplemented for 
potential growth as present sales, profits, or costs may not reflect the true value. 
Page 4


 
LEARNING OBJECTIVIES 
 
STRATEGIC 
MANAGEMENT 
PROCESS 
After studying this chapter, you will be able to: 
? Have a basic knowledge of strategic planning.
? Learn about the concept of strategic decision making. 
? Understand the concepts of strategic intent and vision. 
? Have knowledge of different stages of strategic 
management process. 
Sound strategy starts with having the right goal.
Michael Porter
“The real challenge in crafting strategy lies in detecting subtle 
discontinuities that may undermine a business in the future. And for 
that there is no technique, no program, just a sharp mind in touch with 
the situation.”
Henry Mintzberg
CHAPTER 
3 
 
 
STRATEGIC MANAGEMENT 
3.2 
 
 
 3.1 INTRODUCTION 
It is a process of strategic planning that culminates in the formulation of 
corporate strategy. The strength of the entire process of strategic planning is 
tested by the efficacy of the strategy finally forged by the firm. The ultimate 
question is whether the strategy formulated is the appropriate one, i.e. whether it 
would take the firm to its objectives. Corporate strategy is the game plan that 
actually steers the firm towards success. The degree of aptness of this game plan 
decides the extent of the firm’s success. That is why formulation of corporate 
strategy forms the crux of the strategic planning process. 
3.2 STRATEGIC PLANNING 
Planning means deciding what needs to done in the future (today, next week, 
next month, next year, over the next couple of years, etc.) and generating 
blueprints for action. Good planning is an important constituent of good 
management. Planning involves determination of the course of action to attain 
the predetermined objectives. It bridges the gap between where we are to where 
we want to go. Thus, planning is future oriented in nature. Planning can be 
strategic or operational. Strategic plans are made by the senior management for 
the entire organisation after taking into account the organisation’s strength and 
Strategic Planning
Stragetic Decision 
Making
Strategic Intent
Vision
Mission
Business Definition
Business Model
Goals and Objectives
Strategic Management 
Model
Strategy Formulation
 3
 
 
 
3.3 
STRATEGIC MANAGEMENT PROCESS 
weaknesses in the light of opportunities and threats in the external environment. 
They involve acquisition and allocation of resources for the attainment of 
organisational objectives. But operational plans on the other hand are made at the middle 
and lower level management. They specify details on how the resources are to be utilized 
efficiently for the attainment of objectives. 
Strategic Planning: It is the process of determining the objectives of the firm, 
resources required to attain these objectives and formulation of policies to 
govern the acquisition, use and disposition of resources. Strategic planning 
involves a fact of interactive and overlapping decisions leading to the 
development of an effective strategy for the firm. Strategic planning determines 
where an organisation is going over the next year or more and the ways for going 
there. The process is organisation-wide, or focused on a major function such as a 
division or other major function. 
Dealing with uncertainty: Strategic uncertainty, which has far reaching 
implications, is a key construct in strategy formulation. A typical external analysis 
will emerge with dozens of strategic uncertainties. To be manageable, they need 
to be grouped into logical clusters or themes. It is then useful to assess the 
importance of each cluster in order to set priorities with respect to Information 
gathering and analysis.  
Sometimes, strategic uncertainty is represented by a future trend or event that 
has inherent unpredictability. Information gathering and additional analysis will 
not be able to reduce the uncertainty. In that case, scenario analysis can be 
employed. Scenario analysis basically accepts the uncertainty as given and uses it 
to drive a description of two or more future scenarios. Strategies are then 
developed for each. One outcome could be a decision to create organisational 
and strategic flexibility so that as the business context changes the strategy will 
adapt.  
Impact of uncertainty: Each element of strategic uncertainty involves potential 
trends or events that could have an impact on present, proposed, and even 
potential businesses. , a trend toward natural foods may present opportunities for 
juices for a firm producing aerated drinks on the basis of a strategic uncertainty. 
The impact of a strategic uncertainty will depend on the importance of the 
impacted SBU to a firm. Some SBUs are more important than others. The 
importance of established SBUs may be indicated by their associated sales, 
profits, or costs. However, such measures might need to be supplemented for 
potential growth as present sales, profits, or costs may not reflect the true value. 
 
 
STRATEGIC MANAGEMENT 
3.4 
3.3  STRATEGIC DECISION MAKING 
Decision making is a managerial process of selecting the best course of action out 
of several alternative courses for the purpose of accomplishment of the 
organisational goals. Decisions may be operational, i.e., which relate to general 
day-to-day operations. They may also be strategic in nature. According to Jauch 
and Glueck “Strategic decisions encompass the definition of the business, products to be 
handled, markets to be served, functions to be performed and major policies needed for 
the organisation to execute these decisions to achieve the strategic objectives.” 
The major dimensions of strategic decisions are as follows: 
? Strategic decisions require top-management involvement: Strategic decisions 
involve thinking in totality of the organisation. Hence, problems calling for 
strategic decisions require to be considered by the top management. 
? Strategic decisions involve commitment of organisational resources: , Strategic 
decisions to launch a new project by a firm requires allocation of huge 
funds and assignment of a large number of employees.  
? Strategic decisions necessitate consideration of factors in the firm’s external 
environment: Strategic focus in organisation involves orienting its internal 
environment to the changes of external environment. 
? Strategic decisions are likely to have a significant impact on the long-term 
prosperity of the firm: Generally, the results of strategic implementation are 
seen on a long-term basis and not immediately. 
? Strategic decisions are future oriented: Strategic thinking involves predicting 
the future environmental conditions and how to orient for the changed 
conditions. 
? Strategic decisions usually have major multifunctional or multi-business 
consequences: As they involve organisation in totality they affect different 
sections of the organisation with varying degree. 
 3.4 STRATEGIC INTENT 
Strategic Management is defined as a dynamic process of formulation, 
implementation, evaluation, and control of strategies to realise the organisation’s 
strategic intent. Strategic intent refers to purposes of what the organisation 
strives for. Senior managers must define “what they want to do” and “why they want 
to do”. “Why they want to do” represents strategic intent of the firm. Clarity in 
Page 5


 
LEARNING OBJECTIVIES 
 
STRATEGIC 
MANAGEMENT 
PROCESS 
After studying this chapter, you will be able to: 
? Have a basic knowledge of strategic planning.
? Learn about the concept of strategic decision making. 
? Understand the concepts of strategic intent and vision. 
? Have knowledge of different stages of strategic 
management process. 
Sound strategy starts with having the right goal.
Michael Porter
“The real challenge in crafting strategy lies in detecting subtle 
discontinuities that may undermine a business in the future. And for 
that there is no technique, no program, just a sharp mind in touch with 
the situation.”
Henry Mintzberg
CHAPTER 
3 
 
 
STRATEGIC MANAGEMENT 
3.2 
 
 
 3.1 INTRODUCTION 
It is a process of strategic planning that culminates in the formulation of 
corporate strategy. The strength of the entire process of strategic planning is 
tested by the efficacy of the strategy finally forged by the firm. The ultimate 
question is whether the strategy formulated is the appropriate one, i.e. whether it 
would take the firm to its objectives. Corporate strategy is the game plan that 
actually steers the firm towards success. The degree of aptness of this game plan 
decides the extent of the firm’s success. That is why formulation of corporate 
strategy forms the crux of the strategic planning process. 
3.2 STRATEGIC PLANNING 
Planning means deciding what needs to done in the future (today, next week, 
next month, next year, over the next couple of years, etc.) and generating 
blueprints for action. Good planning is an important constituent of good 
management. Planning involves determination of the course of action to attain 
the predetermined objectives. It bridges the gap between where we are to where 
we want to go. Thus, planning is future oriented in nature. Planning can be 
strategic or operational. Strategic plans are made by the senior management for 
the entire organisation after taking into account the organisation’s strength and 
Strategic Planning
Stragetic Decision 
Making
Strategic Intent
Vision
Mission
Business Definition
Business Model
Goals and Objectives
Strategic Management 
Model
Strategy Formulation
 3
 
 
 
3.3 
STRATEGIC MANAGEMENT PROCESS 
weaknesses in the light of opportunities and threats in the external environment. 
They involve acquisition and allocation of resources for the attainment of 
organisational objectives. But operational plans on the other hand are made at the middle 
and lower level management. They specify details on how the resources are to be utilized 
efficiently for the attainment of objectives. 
Strategic Planning: It is the process of determining the objectives of the firm, 
resources required to attain these objectives and formulation of policies to 
govern the acquisition, use and disposition of resources. Strategic planning 
involves a fact of interactive and overlapping decisions leading to the 
development of an effective strategy for the firm. Strategic planning determines 
where an organisation is going over the next year or more and the ways for going 
there. The process is organisation-wide, or focused on a major function such as a 
division or other major function. 
Dealing with uncertainty: Strategic uncertainty, which has far reaching 
implications, is a key construct in strategy formulation. A typical external analysis 
will emerge with dozens of strategic uncertainties. To be manageable, they need 
to be grouped into logical clusters or themes. It is then useful to assess the 
importance of each cluster in order to set priorities with respect to Information 
gathering and analysis.  
Sometimes, strategic uncertainty is represented by a future trend or event that 
has inherent unpredictability. Information gathering and additional analysis will 
not be able to reduce the uncertainty. In that case, scenario analysis can be 
employed. Scenario analysis basically accepts the uncertainty as given and uses it 
to drive a description of two or more future scenarios. Strategies are then 
developed for each. One outcome could be a decision to create organisational 
and strategic flexibility so that as the business context changes the strategy will 
adapt.  
Impact of uncertainty: Each element of strategic uncertainty involves potential 
trends or events that could have an impact on present, proposed, and even 
potential businesses. , a trend toward natural foods may present opportunities for 
juices for a firm producing aerated drinks on the basis of a strategic uncertainty. 
The impact of a strategic uncertainty will depend on the importance of the 
impacted SBU to a firm. Some SBUs are more important than others. The 
importance of established SBUs may be indicated by their associated sales, 
profits, or costs. However, such measures might need to be supplemented for 
potential growth as present sales, profits, or costs may not reflect the true value. 
 
 
STRATEGIC MANAGEMENT 
3.4 
3.3  STRATEGIC DECISION MAKING 
Decision making is a managerial process of selecting the best course of action out 
of several alternative courses for the purpose of accomplishment of the 
organisational goals. Decisions may be operational, i.e., which relate to general 
day-to-day operations. They may also be strategic in nature. According to Jauch 
and Glueck “Strategic decisions encompass the definition of the business, products to be 
handled, markets to be served, functions to be performed and major policies needed for 
the organisation to execute these decisions to achieve the strategic objectives.” 
The major dimensions of strategic decisions are as follows: 
? Strategic decisions require top-management involvement: Strategic decisions 
involve thinking in totality of the organisation. Hence, problems calling for 
strategic decisions require to be considered by the top management. 
? Strategic decisions involve commitment of organisational resources: , Strategic 
decisions to launch a new project by a firm requires allocation of huge 
funds and assignment of a large number of employees.  
? Strategic decisions necessitate consideration of factors in the firm’s external 
environment: Strategic focus in organisation involves orienting its internal 
environment to the changes of external environment. 
? Strategic decisions are likely to have a significant impact on the long-term 
prosperity of the firm: Generally, the results of strategic implementation are 
seen on a long-term basis and not immediately. 
? Strategic decisions are future oriented: Strategic thinking involves predicting 
the future environmental conditions and how to orient for the changed 
conditions. 
? Strategic decisions usually have major multifunctional or multi-business 
consequences: As they involve organisation in totality they affect different 
sections of the organisation with varying degree. 
 3.4 STRATEGIC INTENT 
Strategic Management is defined as a dynamic process of formulation, 
implementation, evaluation, and control of strategies to realise the organisation’s 
strategic intent. Strategic intent refers to purposes of what the organisation 
strives for. Senior managers must define “what they want to do” and “why they want 
to do”. “Why they want to do” represents strategic intent of the firm. Clarity in 
 
 
3.5 
STRATEGIC MANAGEMENT PROCESS 
strategic intent is extremely important for the future success and growth of the 
enterprise, irrespective of its nature and size. 
Strategic intent can be understood as the philosophical base of strategic 
management. It implies the purposes, which an organisation endeavours to 
achieve. It is a statement that provides a perspective of the means, which will lead 
the organisation, reach its vision in the long run. Strategic intent gives an idea of 
what the organisation desires to attain in future. It answers the question what the 
organisation strives or stands for? It indicates the long-term market position, 
which the organisation desires to create or occupy and the opportunity for 
exploring new possibilities. 
Strategic intent provides the framework within which the firm would adopt a 
predetermined direction and would operate to achieve strategic objectives. 
Strategic intent could be in the form of vision and mission statements for the 
organisation at the corporate level. It could be expressed as the business 
definition and business model at the business level of the organisation.  
Strategic intent is generally stated in broad terms but when stated in precise 
terms it is an expression of aims to be achieved operationally, i.e., goals and 
objectives. 
 
Elements of Strategic Intent 
1. Vision: Vision implies the blueprint of the company’s future position. It 
describes where the organisation wants to land. It depicts the organisation’s 
aspirations and provides a glimpse of what the organisation would like to 
Goals and Objectives
Business Model
Business definition
Mission
Vision
Strategic 
Intent