Introduction to strategy

Defining Strategy
Without a strategy, a company is like a ship without a rudder, going around in circles. It’s like a tramp; it has no place to go.
-Hoel Ross & Michael Kami

Alfred D. Chandler (1962) defined strategy as: “The determination of the basic 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.”

According to Andrews, strategy, policy and objectives embrace a range of statements from the “broad” and “important” to “narrow” and “unimportant”. Policies get merged into procedures and procedures into rules. Strategies get blended into tactics, resulting in an “end-means continuum”.

Strategy
To start with the word strategy was used in terms of Military Science to mean what a manager does to offset actual or potential actions of competitors. The word is still being used in the same sense, though by few only. Originally, the word strategy has been derived from Greek ‘Strategos’, which means generalship. The word strategy, therefore, means the art of the general.

In management, the concept of strategy is taken in slightly different form as compared to its usage in military form; it is taken more broadly. However, in this form, various experts do not agree about the precise scope of strategy. Lack of unanimity has resulted into two broad categories of definitions: strategy as action inclusive of objective setting and strategy as action exclusive of objective setting.

Strategy is:
· A plan or course of action or a set of decision rules forming a pattern or creating a common thread,
. The pattern or common thread related to the organization’s activities which are derived from its policies, objectives and goals,
· Related to pursuing those activities, which move an organization from its current position to a desired future state.


Strategy has four components.
Firstly, strategy should include a clear set of long term goals.
Second components are that it should define the scope of the firm i.e. the types of products the firm will serve etc.
Thirdly, a strategy should have a clear statement of what competitive advantage it will achieve and sustain.
Finally, the strategy must represent the firms’ internal contest that will allow it to achieve a competitive advantage in the environment in which it has chosen to compete.
Thus, we can say,
‘Goals’ are ‘What’ of the strategy
‘Competitive Advantage; is how of the strategy and the; logic is the ‘Way’ of the strategy.

Strategy covers the following aspects.
1. Exploring and determining the vision of the company in the form of a vision statement.
2. Developing a mission statement of the company that
should include statement of methodology for achieving the objectives, purposes, and the philosophy of the organisation adequately reflected in the vision statement.
3. Defining the company profile that includes the internal culture, strengths and capabilities of an organisation.
4. Critical study of external environmental factors, threats, opportunities etc.
5. Finding out ways by which a company profile can bematched with its environment to be able to accomplish mission statement.
6. Deciding on the most desirable courses of actions for accomplishing the mission of an organisation.
7. Selecting a set of longterm objectives and also the corresponding strategies to be adopted in line with vision statement.
8. Evolving shortterm and annual objectives and defining the corresponding strategies that would be compatible with the mission and vision statements.
9. Implementing the chosen strategies in a planned way based on budgets and allocation of resource, outlining the action programs and tasks.
10.Installation of a continuous compatible review system to create a controlling mechanism and also generate data for selecting future course of action)

Mintzberg's 5 Ps for Strategy
The word "strategy" has been used implicitly in different ways even if it has traditionally been defined in only one. Explicit recognition of multiple definitions can help people to manoeuvre through this difficult field. Mintzberg provides five definitions of strategy:
- Plan
- Ploy
- Pattern
- Position
- Perspective.

1.Plan
Strategy is a plan - some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation. By this definition strategies have two essential characteristics: they are made in advance of the actions to which they apply, and they are developed consciously and purposefully.

2. Ploy
As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor.

3. Pattern
If strategies can be intended (whether as general plans or specific ploys), they can also be realised. In other words, defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour: Strategy is a pattern - specifically, a pattern in a stream of actions. Strategy is consistency in behaviour, whether or not intended. The definitions of strategy as plan and pattern can be quite independent of one another: plans may go unrealised, while patterns may appear without preconception.
Plans are intended strategy, whereas patterns are realised strategy; from this we can distinguish deliberate strategies, where intentions that existed previously were realised, and emergent strategies where patterns developed in the absence of intentions, or despite them.

4. Position
Strategy is a position - specifically a means of locating an organisation in an "environment". By this definition strategy becomes the mediating force, or "match", between organisation and environment, that is, between the internal and the external context.

5. Perspective
Strategy is a perspective - its content consisting not just of a chosen position, but of an ingrained way of perceiving the world. Strategy in this respect is to the organisation what personality is to the individual. What is of key importance is that strategy is a perspective shared by members of an organisation, through their intentions and / or by their actions. In effect, when we talk of strategy in this context, we are entering the realm of the collective mind - individuals united by common thinking and / or behaviour.

Processes of Stretegic Management
The strategic management formulation and implementation methods vary with product profile, company profile, environment within and outside the organisation, and various other factors. Large organizations which use sophisticated planning use detailed strategic management models whereas smaller organisations where formality is low use simpler models.
The strategic management consists of different phases, which are sequential in nature.

There are four essential phases of strategic management
process. In different companies these phases may have different, nomenclatures and the phases may have a different sequences, however, the basic content remains same. The four phases can
be listed as below.
1. Defining the vision, business mission, purpose, and broad objectives.
2.. Formulation of strategies.
3. Implementation of strategies.
4. Evaluation of strategies.

Models of Strategic Planning

Comprehensive Model of Strategic Management
1. Business Vision

2. Business Mission

3. Defining Goals and Objectives

4. Environmental Appraisal

5. Development of Strategic alternative

6. Implementation of Strategy

7. Evaluation of Strategy

STRATEGIC INTENT

By strategic intent we refer to the purposes the organisation strives for. These may be expressed in terms of a hierarchy of strategic intent. Broadly stated, these could be in the form of a vision and mission statement for the organisation as a corporate whole. At the business level of a firm these could be expressed as the business definition. When stated in precise terms, as an expression of the aims to be achieved operationally, these may be the goals and’objectives.
Prof F. Drucker has framed the following questions
(a) What is our Business?
(b) What will our Business be?
(c) And what should it be ?
(d) What is our Business?

Vision of The Company
Vision of an organization has a long-term orientation and is derived from organizational philosophy. Vision represents a challenging portrait of what the organization and its members can be in the future.

Vision of a company is rather a permanent statement articulated by the CEO of the company who may be Managing Director, President, Chairman, etc. The purpose of a vision statement is
to:
1. Communicate with the people of the organisation and to those who are in some way connected or concerned with the organisation about its very existence in terms of corporate purpose, business scope, and the competitive leadership.
2. Cast a framework that would lead to development of interrelationships between firm and stakeholders viz. employees, shareholders, suppliers, customers, and various communities that may be directly or indirectly involved with the firm.
3. Define broad objective regarding performance of the firm and its growth in various fields vital to the firm.

ITC Limited Vison Statement: Sustain ITC's position as one of the India's most valuable corporations through world class performance, creating growing value for the Indian economy and company's stakeholders.

Mission of the Company
Organizational mission encompasses the broad aims of the organization; it defines what for the organization strives.

Characteristics of Mission Statement

Every organization has mission either defined explicitly or may be deduced from the actions of its top management. For a large organization, where its members do not have face-to-face contact, explicit mission statement is desirable as it serves as a binding force, providing a common objective towards which all of them should work.

Features of a good Mission Statement
Mission should be clear, both in terms of intentions and words used;
1. It should be feasible, neither too high to be unachievable, nor too low to demotivate the people for work.
2. It should be precise but self-explanatory, neither too narrow so as to restrict the organization’s activities, nor too broad to make itself meaningless.
3. It should be distinctive, both in terms of the organization’s contributions to the society and how these contributions can be made.

ITC Limited Mission statement: Tp enhance the wealth generating capability of the enterprise in a globalising environment, delievering superior and sustainable stakeholder value.

The Benefits of Having a Vision
• Good visions are inspiring and exhilarating
• Visions represent a discontinuity, a step function and a jump ahead so that the company knows what it is to be
• Good visions help in the creation of a common identity and a shared sense of purpose
• Good visions are competitive, original and unique. They make sense in the market place as

Mission
While the essence of vision is a forwardlooking view of what an organisation wishes to become, mission is what an organisation is and why it exists.

How to Formulate Mission Statements?
Most organisations derive their mission statements from a particular set of tasks they are called upon to perform in the light of their individual, national or global priorities* Several public sector organisations, set up in India during the 1950s and 60s owe their existence to the vision of Jawaharlal Nehru, the first prime minister, who enunciated and tirelessly worked for the national aim of building a strong and self reliant India by laying the foundations of many of our basic infrastructural industries. Mission statements, whether derived from set priorities or not, could be formulated either formally or informally.

Characteristics of a Mission Statement
It should be feasible. A mission should always aim high but it should not be an impossible statement. It should be realistic and achievableits followers must find it to be credible.
It should be precise. A mission statement should not be so narrow as to restrict the organisation’s activities nor should it be too broad to make itself meaningless.
It should be clear . A mission should be clear enough to lead to action. It should not be a high sounding set of platitudes meant for publicity purposes.
It should be motivating. A mission statement should be motivating for members of the organisation and of society, and they should feel it worthwhile working for such an organisation or being its customers.
It should be distinctive. A mission statement, which is indiscriminate, is likely to have little impact. If all scooter manufacturers defined their mission in a similar fashion, there would not be much of a difference among them.
It should indicate major components of strategy. A mission statement along with the organisational purpose should indicate the major components of the strategy to be adopted.
7. It should indicate how objectives are to be accomplished. Besides indicating the broad strategies to be adopted a mission statement should also provide clues regarding the manner in which the objectives are to be accomplished.

Distinction between Strategy and Tactics

In Business, there is an important distinction between strategy and tactics. A strategy is a plan or practical measure designed to achieve certain objectives, while the tactics are the actions taken to implement the strategy and achieve these objectives.

1. Level of Conduct. As discussed earlier, strategy is developed at the highest level of management either at the headquarter or at major divisional offices and related exclusively to
decisions in the province of these levels. Tactics is employed at and relates to lower levels of management.

2. Periodicity. The formulation of strategy is both continuous and irregular. The process is continuous but the timing of decision is irregular as it depends on the appearance of
opportunities, new ideas, crisis, management initiative, and other non-routine stimuli. Tactics is determined on a periodic basis by various or-ganisations. A fixed timetable
may be followed for this purpose, for example, prepa-ration of budgets at regular intervals.

3. Time Horizon. Strategy has a long-term perspective; specially the successful strategies are followed for quite long periods. In occasional cases, it may have short-term duration.
Thus, depending on the nature and requirement, its time horizon is flexible, however, emphasis is put on long-term. On the other hand, time horizon of tactics is short-run and
definite. The duration is uniform, for example budget preparation.

4. Uncertainty. Element of uncertainty is higher in the case of strategy formulation and its implementation. In fact, strategic decisions are taken under the conditions of partial
ignorance. Tactical decisions are more certain as these are taken within the framework set by the strategy. Thus, evaluation of tactics is easier as compared to evaluation of a
strategy.

5. Information Needs. The total possible range of alternatives from which a man-ager can choose his strategic action is greater than tactics. A manager requires more information for
arriving at strategic decision. Since an attempt is made to relate the organisation to its environment, this requires information about the various aspects of environment.
Naturally the collection of such information will be different. Tacti-cal informaton is generated within the organisation particularly from accounting procedures and statistical
sources.

6. Subjective Values. The formulation of strategy is affected considerably by the personal values of the person involved in the process. For example, what should be the goals of an
organisation is affected considerably by the personal values of the persons concerned. This aspect will be taken for further discussion m this text later. On the other hand,
tactics is normally free from such values because this is to .be taken within the context of strategic decisions.

7. Importance. Strategies are most important factors of organisation because they decide the future course of action for the organisation as a whole. On the other hand, tactics are of less importance because they are concerned with specific part of the organisation. This difference, though seems to be simple, becomes important from managerial action point of
view.

8. Type of Personnel Involved in Formulation. Generally separate group of managerial personnel are involved in strategy and tactics formulation and their im-plementation. As discussed earlier, strategic decisions are never delegated below a certain level m the managerial hierarchy. The basic principle m this context is not to delegate below the levels
than those possess the perspective required for most effec- tive strategic decisions. Tactical decisions can be taken by personnel at lower levels because these involve minute
implementation of strategic decisions.