Category: Management Notes

(1) Product

A product means what we produce. If we produce goods, it means tangible product and when we produce or generate services, it means intangible service product. A product is both what a seller has to sell and a buyer has to buy. Thus, an Insurance company sells services and therefore services are their product. In India, the Life Insurance Corporation of

India (LIC) and the General Insurance Corporation (GIC) are the two leading companies offering insurance services to the users. Apart from offering life Insurance policies, they also offer underwriting and consulting services.

(2) Pricing

With a view of influencing the target market or prospects the formulation of pricing strategy becomes significant. The pricing in insurance is in the form of premium rates. The three main factors used for determining the premium rates under a life insurance plan are mortality, expense and interest. The premium rates are revised if there are any significant changes in any of these factors.

• Mortality (deaths in a particular area) When deciding upon the pricing strategy the average rate of mortality is one of the main considerations. In a country like South Africa the threat to life is very important as it is played by host of diseases.
• Expenses: The cost of processing, commission to agents, reinsurance companies as well as registration are all incorporated into the cost of installments and premium sum and forms the integral part of the pricing strategy.
• Interest: The rate of interest is one of the major factors which determines people’s willingness to invest in insurance. People would not be willing to put their funds to invest in insurance business if the interest rates provided by the banks or other financial instruments are much greater than the perceived returns from the insurance premiums.

(3) Place

This component of the marketing mix is related to two important facets

i) Managing the insurance personnel, and

ii) Locating a branch.

The management of agents and insurance personnel is found significant with the viewpoint of maintaining the norms for offering the services. This is also to process the services to the end user in such a way that a gap between the services- promised and services offered is bridged over. In a majority of the service generating organizations, such a gap is found existent which has been instrumental in making worse the image problem. The transformation of potential policyholders to the actual policyholders is a difficult task that depends upon the professional excellence of the personnel. The agents and the rural career agents acting as a link, lack professionalism.

(4) Promotion:

The insurance services depend on effective promotional measures. In a country like

India, the rate of illiteracy is very high and the rural economy has dominance in the national economy. It is essential to have both personal and impersonal promotion strategies. In promoting insurance business, the agents and the rural career agents play an important role.

Due attention should be given in selecting the promotional tools for agents and rural career agents and even for the branch managers and front line staff. They also have to be given proper training in order to create impulse buying. Advertising and Publicity, organization of conferences and seminars, incentive to policyholders are impersonal communication.

Arranging Kirtans, exhibitions, participation in fairs and festivals, rural wall paintings and publicity drive through the mobile publicity van units would be effective in creating the impulse buying and the rural prospects would be easily transformed into actual policyholders.

(5) People

Understanding the customer better allows to design appropriate products. Being a service industry which involves a high level of people interaction, it is very important to use this resource efficiently in order to satisfy customers. Training, development and strong relationships with intermediaries are the key areas to be kept under consideration. Training the employees, use of IT for efficiency, both at the staff and agent level, is one of the important areas to look into. Human resources can be developed through education, training and by psychological tests. Even incentives can inject efficiency and can motivate people for productive and qualitative work.

(6) Process:

The process should be customer friendly in insurance industry. The speed and accuracy of payment is of great importance. The processing method should be easy and convenient to the customers. Installment schemes should be streamlined to cater to the ever growing demands of the customers. IT & Data Warehousing will smoothen the process flow.

IT will help in servicing large no. of customers efficiently and bring down overheads.

Technology can either complement or supplement the channels of distribution cost effectively. It can also help to improve customer service levels. The use of data warehousing management and mining will help to find out the profitability and potential of various customers product segments.

1. Flow of activities: all the major activities of banks follow RBI guidelines. There has to be adherence to certain rules and principles in the banking operations. The activities have been segregated into various departments accordingly.
2. Standardization: banks have got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction.
3. Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives.
4. Number of stores: numbers of steps are usually specified and a specific pattern is followed to minimize time taken.
5. Simplicity: in banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to ‗deposits ‘counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further.

(7) Physical Distribution:

Distribution is a key determinant of success for all insurance companies. Today, the nationalized insurers have a large reach and presence in India. Building a distribution network is very expensive and time consuming. Technology will not replace a distribution network though it will offer advantages like better customer service. Finance companies and banks can emerge as an attractive distribution channel for insurance in India. In Netherlands, financial services firms provide an entire range of products including bank accounts, motor, home and life insurance and pensions. In France, half of the life insurance sales are made through banks. In India also, banks hope to maximize expensive existing networks by selling a range of products.

The physical evidences include signage, reports, punch lines, other tangibles,

employee‘s dress code etc.

1. Tangibles: banks give pens, writing pads to the internal customers. Even the passbooks, chequebooks, etc. reduce the inherent intangibility of services.
2. Punch lines: punch lines or the corporate statement depict the philosophy and attitude of the bank. Banks have influential punch lines to attract the customers. Banking marketing consists of identifying the most profitable markets now and in future, assessing the present and future needs of customers, setting business development goals, making plans-all in the context of changing environment.

In India, banks hope to maximize expensive existing networks by selling a range of products. It is anticipated that rather than formal ownership arrangements, a loose network of alliance between insurers and banks will emerge, popularly known as bank assurance. Another innovative distribution channel that could be used are the non-financial organizations. We can‘t deny the fact that if foreign banks are performing fantastically, it is not only due to the sophisticated information technologies they use but the result of a fair synchronization of new information technologies and a team of personally committed employees. The development of human resources makes the ways for the formation of human capital.

Tourism marketing is different because the customer purchases a series of services, but is left with very little concrete value at the completion of his trip. As a result, the marketing initiatives have to emphasize the value of the memories, make the collection of services easily accessible and add value through additional programming and other factors. A key challenge is to convince potential customers that the item they are purchasing provides good value for the price, and that the services will be as described and expected. The 8 P’s in marketing tourism summarize the special approach that is required. Many small businesses market tourism products and employ these marketing strategies.

Product: What You Have to Offer

The product is the collection of services that have features and benefits. Standard features and benefits include the normal amenities of a hotel room, for example. Good marketing adds special features, such as free breakfasts or free Internet.

Price: What Customers Will Pay

The price has to match the product, but good marketing makes the price seem more attractive. The operator can either add features to the product and keep the price the same or give a discount for the same features.

Promotion: How You Sell Your Wares

The promotion gives details of the product and the price. The key characteristics of your travel marketing strategy are the method of communicating the information, the content of the promotion and the cost to the operator. The promotion has a target market, and the method and content of the promotion has to appeal to the people who it reaches. The price the members of the target market are willing to pay has to cover the cost of the promotion.

Place: Where You Do Business

Place refers to the location where the customer buys the collection of services. Ideally, the operator who sends out the promotion uses it to encourage the potential customer to visit the operator’s location and complete the purchase. With the convenience of online payments, the operator may find that the best strategy is to direct potential customers to an attractive website where they can complete the purchase.

People: Your Hidden Strength

Since the product is a collection of services, the people who provide the services are a key to the success of the transaction. Operators must have top-level service to initially complete the sale and to encourage repeat customers.

Planning: Look Ahead

The key service component of the tourism experience is planning. The customer expects that the experience will correspond closely to what he purchased. The only way to ensure that kind of correspondence is to execute according to detailed plans, and have contingency planning in place for problems.

Programming: Cater to Your Clients

One way to add value to the standard product and to distinguish a particular offering from competitors is to offer exclusive programming, a practice known as service marketing. Customers will purchase a product that caters to their particular interests. Special programming can address such preferences and draw in additional customers.

Physical Evidence

If possible, the provision of physical evidence that the customer experienced the particular tourism product can help sales. Providing professional photographs of the customers at key events or the supply of branded products are effective strategies for promoting particular tourism products.

Promotion

In marketing, promotion refers to any type of marketing communication used to inform or persuade target audiences of the relative merits of a product, service, brand or issue. The aim of promotion is to increase awareness, create interest, generate sales or create brand loyalty. It is one of the basic elements of the market mix, which includes the four Ps, i.e., product, price, place, and promotion.

Promotion is also one of the elements in the promotional mix or promotional plan. These are personal selling, advertising, sales promotion, direct marketing publicity and may also include event marketing, exhibitions and trade shows. A promotional plan specifies how much attention to pay to each of the elements in the promotional mix, and what proportion of the budget should be allocated to each element.

Promotional Mix

The Promotion Mix refers to the blend of several promotional tools used by the business to create, maintain and increase the demand for goods and services.

The fourth element of the 4 P’s of Marketing Mix is the promotion; that focuses on creating the awareness and persuading the customers to initiate the purchase. The several tools that facilitate the promotion objective of a firm are collectively known as the Promotion Mix.

The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion, Public Relations and Direct Marketing. The marketers need to view the following questions in order to have a balanced blend of these promotional tools.

• What is the most effective way to inform the customers?
• Which marketing methods to be used?
• To whom the promotion efforts be directed?
• What is the marketing budget? How is it to be allocated to the promotional tools?

Tools (Elements) of Promotion Mix

1. Advertising

The advertising is any paid form of non-personal presentation and promotion of goods and services by the identified sponsor in the exchange of a fee. Through advertising, the marketer tries to build a pull strategy; wherein the customer is instigated to try the product at least once. The complete information along with the attractive graphics of the product or service can be shown to the customers that grab their attention and influences the purchase decision.

2. Personal Selling

This is one of the traditional forms of promotional tool wherein the salesman interacts with the customer directly by visiting them. It is a face to face interaction between the company representative and the customer with the objective to influence the customer to purchase the product or services.

3. Sales Promotion

The sales promotion is the short term incentives given to the customers to have an increased sale for a given period. Generally, the sales promotion schemes are floated in the market at the time of festivals or the end of the season. Discounts, Coupons, Payback offers, Freebies, etc. are some of the sales promotion schemes. With the sales promotion, the company focuses on the increased short-term profits, by attracting both the existing and the new customers.

4. Public Relations

The marketers try to build a favourable image in the market by creating relations with the general public. The companies carry out several public relations campaigns with the objective to have a support of all the people associated with it either directly or indirectly. The public comprises of the customers, employees, suppliers, distributors, shareholders, government and the society as a whole. The publicity is one of the form of public relations that the company may use with the intention to bring newsworthy information to the public.

E.g. Large Corporates such as Dabur, L&T, Tata Consultancy, Bharti Enterprises, Services, Unitech and PSU’s such as Indian Oil, GAIL, and NTPC have joined hands with Government to clean up their surroundings, build toilets and support the swachh Bharat Mission.

5. Direct Marketing

With the intent of technology, companies reach customers directly without any intermediaries or any paid medium. The e-mails, text messages, Fax, are some of the tools of direct marketing. The companies can send emails and messages to the customers if they need to be informed about the new offerings or the sales promotion schemes.

E.g. The Shopper stop send SMS to its members informing about the season end sales and extra benefits to the golden card holders.

Thus, the companies can use any tool of the promotion mix depending on the nature of a product as well as the overall objective of the firm.

Strategic Management is a stream of decisions and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives. The Strategic Management process is the way in which strategists determine objectives and make strategic decisions. Strategic Management can be found in various types of organizations, business, service, cooperative, government, and the like.

Strategic Management can be defined as “the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives”. In fact, Strategic Management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success.

The term Strategic Management is used synonymously with the term Strategic Planning. The later term is more often used in the business world, whereas the former is often used in academia.

At time, the term Strategic Management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. The purpose of Strategic Management is to exploit and create new and different opportunities for tomorrow long-range planning in contrast, tries to optimize for tomorrow the trends of today.

A Strategic Plan is, in essence, a company’s game plan. Just as a football team needs a good game plan to have a chance for success, a company must have a good strategic plan to be able to complete successfully. A strategic plan results from tough managerial choices among numerous good alternatives, and signals commitment to specific markets, policies, procedures, and operations in line of other, “less desirable” courses of action.

Strategic management is a science of management of strategies. Hence, it deals with different types of strategies, i.e., different types of decisions. Different situations, different challenges, different opportunities, or different problems require different types of strategies to be formed and implemented. So, it is just not sufficient to put all the strategies in one category.

It is highly advantageous to know the classified information on different strategies and their characteristics to make right decisions at right time. Although the practice of decision-making is more of experience-oriented skill; it is significant to have clear knowledge of different types of strategies to understand the situations in which they are useful.

As the strategies are always crucial, every strategy must be formed after careful study of the situations, challenges, opportunities or problems being encountered. Ignorance about types of strategies may lead the managers to wrong conclusions or to wrong choice of strategies. Hence, the following account of types of strategies has practical significance in managing the firm well.

At the heart of strategic management is the question – ‘How and why do some firms outperform others?’ Thus, the challenge to managers is to decide on ‘strategies’ that provide advantages that can be sustained over time. Much of strategic management is about identifying and developing the strategies that managers can pursue to attain superior performance and a competitive advantage for their organisations.

Strategic management is the process of assessing the firm and its environment in order to meet the long-term objectives of the firm. It refers to the series of decisions taken by management to determine the strategies to achieve organisational goals.

Strategic management involves systematic analysis of the internal and external environments, to evaluate a company’s current policies, strategy and goals to build new strategic moves and plans.

Thus, strategic management is the process of planning, directing, organising, and controlling a company’s strategy-related decisions and actions to achieve competitive advantage and the long-run performance goals of a company.

By ‘Strategy’, managers mean:

1. Large-scale, future-oriented plans for interacting with the competitive environment.
2. An integrated and coordinated set of commitments and actions designed to exploit core competencies.
3. A company’s game and action plan of how, when and where it should compete, against whom it should compete; and for what purposes it should compete.

Different phases of development of strategic management are explained below:

Phase 1 Basic Financial Planning:

The first phase of the strategic development is fairly a simple routine of basic financial planning. The main concern during this phase is simply meeting annual budget requirement, operational functions like production, marketing, finance and human resources and emphasizing on the operational control.

Phase 2 Forecast-Based Planning:

During this phase, the primary concern is mainly on effective plans, environmental scanning, plan for the future and allocation of resources.

Phase 3 Externally-Oriented Planning:

There is a remarkable shift during this phase. The notable developments include: increasing response to markets and competition, complete situational analysis and assessment of competitive strength, evaluation of strategic alternatives and allocation of resources based on changing needs from time to time.

Phase 4 Strategic Management:

The focus shifts over time from meeting the budget to planning for the future, to thinking abstractly, to working to create desired future. To create future decision-makers, orchestrate and integrate all their organisation’s resources to gain a competitive advantage. They build flexibility into the organisational planning process, and foster a supportive, participative climate within the organisation.

Thus, developing an effective and efficient strategic management process can be a long and difficult task. It requires sustained effort, enormous patience and sharp political skills. Strategic management requires efficient leadership.

Some important objectives of strategic management are as follows:

1. To exploit and create new and different opportunities for tomorrow.
2. To provide the conceptual frameworks that will help a manager understand the key relationships among actions, context, and performance.
3. To put an organisation into a competitive position.
4. To sustain and improve that position by the deployment and acquisition of appropriate resources and by monitoring and responding to environmental changes.
5. To monitor and respond to the demands of key stakeholders.
6. To find, attract, and keep customers.
7. To ensure that the company is meeting the needs and wants of its customers, which is a cornerstone in providing the quality product or service that customers really want.
8. To sustain a competitive position.
9. To utilize the company’s strengths and take full advantage of its competitor’s weaknesses.
10. To understand the various concepts involved like strategy, policies, plans and programmes.
11. To have knowledge about environment—how it affects the functioning of an organisation.
12. To determine the mission, objectives and strategies of a firm and to visualize how the implementation of strategies can take place.
13. To find the solutions of problems in real-life business.
14. To develop analytical ability to identify threats and opportunities present in the environment.
15. To develop the skills of strategic decision making.
16. To develop a creative and innovative attitude and to think strategically.

Nature of strategic management specifies its characteristics which are as follows:

1. Strategic Management as a Process:

Strategic management is basically a process. It has emerged out of management in other fields where the concept of management is taken as a process for achieving certain objectives of the organization. Thus, strategic management involves establishing a framework to perform various processes. The concept of strategic management must embody all general management principles and practices devoted to strategy formulation and implementation in the organization.

2. Top Management Function:

Strategic management is basically top management function. Thus, in order to ensure effective top management function, it is necessary that a distinction should be made between strategic management and operational management which emphasises day-to-day operations in the organization, so that top management can focus more attention on the strategic aspect rather than emphasising on operational management.

Since the environment of the organization is always changing providing new opportunities and threats, top management must spend more and more time on this aspect. Thus, there is a considerable change on the emphasis of top management functions in the organizations, particularly in large and complex organizations. The change is from operational management to strategic management.

3. General Management Approach:

Strategic management has general management approach. This approach has three characteristics – (i) This approach uses system frame of reference in dealing with wholeness of an organization. In this dealing, the emphasis is put on identifying tendencies of various phenomena in the organization and relationships among these tendencies, (ii) Decision criteria are based on overall betterment of the organization as a whole, not the criteria used by functional specialists, (iii) Attempt is made to achieve organizational equilibrium and generation of synergy. This may be even suboptimal for some departments or units of the organization.

4. Relating Organization to Environment:

The focus of strategic management is on relating the organization to its external environment. This emphasises that there is continuous interaction between the organization and its environment taking an open systems approach. Thus, the organization must create adequate channel through which external information will pass to various points in the organization.

5. Long-Term Issues:

Strategic management deals primarily with long-term issues of the organization that may or may not have an immediate effect. For example, investment in research and development (R&D) may yield no immediate effect in terms of new product development. However, this investment may lead to development of new products and, therefore, enhanced profits.

6. Flexibility:

Strategic management has flexibility. This flexibility is required because strategic management works in the context of environment which is quite dynamic. As a result, many strategic actions planned maybe either left, postponed, or changed in the light of environmental requirements.

7. Innovation:

Strategic management puts emphasis on innovation which is the process of introducing new things or new ways of working. Innovation is achieved through new strategic actions which are quite different from the previous actions. Innovation is required to face environmental challenges effectively.

Strategic Management Importance

1. It helps the organization to be more proactive instead of reactive in shaping its future. Organizations are able to analyze and take action instead of being mere spectators.
2. It provides framework for all the major business decisions of an enterprise such as – decisions on businesses, products, and markets, manufacturing facilities, investments and organizational structure.
3. It seeks to prepare the corporation to face the future and acts as a pathfinder to various business opportunities. Organizations are enabled to identify the available opportunities and identify ways and means to reach them.
4. It helps organizations to avoid costly mistakes in product market choices or investments.
5. It helps organizations to evolve certain core competencies and competitive advantages that assist in their fight for survival and growth.
6. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success.

vii. It also adds to the reputation of the organizations because of the consistency that results from organizational success.

The term ‘strategic management’ is used to denote a branch of management that is concerned with the development of strategic vision, setting out objectives, formulating and implementing strategies and introducing corrective measures for the deviations (if any) to reach the organization’s strategic intent. It has two-fold objectives:

• To gain competitive advantage, with an aim of outperforming the competitors, to achieve dominance over the market.
• To act as a guide to the organization to help in surviving the changes in the business environment.

Here, changes refer to changes in the internal environment, i.e. within the organization, introduced by the managers such as the change in business policies, procedures etc. and changes in the external environment as in changes in the government rules that can affect business, competitors move, change in customer’s tastes and preferences and so forth.

Strategic Management Process

1. Defining the levels of strategic intent of the business:
   • Establishing vision
   • Designing mission
   • Setting objectives
2. Formulation of strategy
   • Performing environmental and organizational appraisal
   • Considering strategies
   • Carrying out strategic analysis
   • Making strategies
   • Preparing strategic plan
3. Implementation of strategy
   • Putting strategies into practice
   • Developing structures and systems
   • Managing behavioural and functional implementation
4. Strategic Evaluation and Control
   • Performing evaluation
   • Exercising control
   • Recreating strategies

Strategic Management is all about specifying organization’s vision, mission and objectives, environment scanning, crafting strategies, evaluation and control.

Importance of Strategic Management

• It guides the company to move in a specific direction. It defines organization’s goals and fixes realistic objectives, which are in alignment with the company’s vision.
• It assists the firm in becoming proactive, rather than reactive, to make it analyse the actions of the competitors and take necessary steps to compete in the market, instead of becoming spectators.
• It acts as a foundation for all key decisions of the firm.
• It attempts to prepare the organization for future challenges and play the role of pioneer in exploring opportunities and also helps in identifying ways to reach those opportunities.
• It ensures the long-term survival of the firm while coping with competition and surviving the dynamic environment.
• It assists in the development of core competencies and competitive advantage, that helps in the business survival and growth.

The basic purpose of strategic management is to gain sustained-strategic competitiveness of the firm. It is possible by developing and implementing such strategies that create value for the company. It focuses on assessing the opportunities and threats, keeping in mind firm’s strengths and weaknesses and developing strategies for its survival, growth and expansion.

Strategic Management Levels: Corporate, SBU and Functional Strategies

In a multi-business enterprise, having several SBUs, there would be three levels of strategy, viz., – corporate strategy, SBU strategy and functional strategy. In enterprises which do not have SBUs, there will be only two levels of strategy, i.e., corporate strategy and functional strategies.

1. Corporate Strategy:

Corporate strategy is the long-term strategy encompassing the entire organisation. Corporate strategy addresses fundamental questions such as what is the purpose of the enterprise, what business/businesses it wants to be in (portfolio strategy) and how to expand/get into such business/businesses (for example – by establishing greenfield enterprises or by M&As).

In other words, “corporate-level strategic management is the management of activities which define the overall character and mission of the organisation, the product/service segments it will enter and leave, and the allocation of resources and management of synergy among its SBUs.”

Corporate strategy is formulated by the top level corporate management (board of directors, CEO, and chiefs of functional areas).

2. SBU Strategy:

SBU-level strategy, sometimes called Business Strategy or Competitive Strategy, is concerned with decisions pertaining to the product mix, market segments and manoeuvring competitive advantages for the SBU.

While corporate strategy decides the business portfolio (i.e., the types of business), the competitive strategy decides the strategy/strategies to succeed in the chosen business/businesses.

SBU strategy has to conform, obviously, to the corporate philosophy and strategy.

In short, “the SBU-level strategic management is the management of an SBU’s effort to compete effectively in a particular line of business and to contribute to overall organisational purposes.”

The responsibility for SBU strategy is with the top executives of the SBU who are normally second-tier executives in the corporate hierarchy. In single-SBU organisations, senior executives have both corporate and SBU-level responsibilities.

3. Functional Strategies:

Functional-level strategies are strategies for different functional areas like production, finance, personnel, marketing, etc. In other words, “functional-level strategic management is the management of relatively narrow areas of activity, which are of vital, pervasive, or continuing importance to the total organisation.”

Functional-level strategy is the responsibility of functional area heads.

Strategic Management Functions

(a) Determination of basic long-term goals and objectives of the organization.

(b) Adoption of courses of action to achieve organization’s objectives.

(c) Adopting course of action necessary for allocation of resources.

(d) Relates formulation of company’s mission, including broad statements about its purpose, philosophy and goals.

(e) Long-term, future oriented plans for interacting with the competitive environment to achieve company’s objectives.

(f) Developing the company from its present position to the desired future position.

(g) Top management’s decision that directs organization and business towards predetermined goal,

(h) Carefully crafted plan with a stream of decisions and actions over time.

(i) Concerned with efficiency i.e. perceiving opportunities and threats and seizing initiatives to cope with them.

(j) Flows out of goals and objectives of the enterprise and is meant to translate them into realities.

(k) Recognize which competitor’s actions need critical attention.

(l) Identifies strengths and weaknesses compared with those of its competitors.

(m) Plan of action that reveals its objectives, purposes, goals, policies and plans that are required in achieving corporate mission.

(n) Analyze the company’s options by matching its resources with the external environment.

(o) Forward looking and it has orientation towards future.

(p) Provides an integrated and unified framework for managers, for effective decision making affecting all subsystems in an organization.

(q) Creates a fit between the organization and its external environment.

(r) Provides a framework for thinking about the business.

(s) Pattern in a stream of decisions and actions.

(t) Commonality of approach that exists in diverse organizational activities including the products and markets that define the current and planned nature of business.

(u) Way of stating current and desired future position of the company.

Following are the outstanding attributes of strategic decision:

(1) Strategic decision is major one which is fundamental in that it influences the entire or major part of the organisation.

(2) Strategic decision is one that contributes directly in the realisation of organisation. All other decisions are the off-springs of such a decision.

(3) Strategic decision is separating itself from day-to- operational decisions. It is strategic in the sense that it is innovative effective and has different approach in each area be it a production, personnel, finance and marketing.

(4) Strategic decision has in its kit wide range of alternatives to withstand the on sleights of environment which is ever changing. These alternatives provide vital differences in terms of the outcome and inputs needed.

(5) Strategic decision is found on trade-offs between the costs and the risks of innovating and the time vulnerability of competitors. Between the competing alternatives, the best one is chosen.

In a sense, what is strategic or non-strategic is a matter of individual’s independent interpretation. Though the distinction is not very fine, such classification provides management to achieve the benefits of delegation of authority in that routine, repetitive and day to day decisions can be passed on to the lower-level where it is a source of motivation and preparing the aspirants in the art of decision making.

As a result, strategic decisions can be taken with deep thought and logic of applying mental faculty of fertile imagination and sound judgment.

Strategic decision making, or strategic planning, describes the process of creating a company’s mission and objectives and choosing the course of action a company should pursue to achieve those goals. Strategic decisions are different in nature from all other decisions which are taken at various levels of the organization during their day-to-day working.

The major dimensions of strategic decisions are given below:

1. Strategic issues require top-management decisions.
2. Strategic issues involve the allocation of large amounts of company resources.
3. Strategic issues are likely to have a significant impact on the long term prosperity of the firm.
4. Strategic issues are future-oriented.
5. Strategic issues usually have major multi-functional or multi-business consequences.
6. Strategic issues necessitate consideration of factors in the firm’s external environment.

Strategic Management: Tasks

Strategic thinking provides the vision for Strategic Management; by providing an insight into the forces behind the new completion by helping us develop a sustainable competitive advantage based on our organization’s core competencies; creating in infrastructure for the review and redefinition of our strategic direction; and along us to recognize and capitalize on new developments and opportunities in the market. The vision and direction provided by strategic thinking has to be incorporated into the Strategic Management framework.

Strategic Management process can be described by a number of tasks to be undertaken by the organization. In the final analysis, the success of the Strategic Management process boils down to the ability of the organization to carry out these tasks effectively and efficiently.

1. Evolve business goals, by formulating its future mission and vision in terms of the expectations of the stakeholders.
2. Set objectives that are achievable in light of changing external factors that include regulation, competition, technology and customers.
3. Evolve and develop a competitive strategy to achieve the mission.
4. Create an effective organizational structure and arrange the resources to successfully carry out the strategy.
5. Finally, evaluate the performance so that necessary corrective measures can be taken to keep it on track to achieve the vision.

Strategic Management Levels: Corporate, SBU and Functional Strategies

In a multi-business enterprise, having several SBUs, there would be three levels of strategy, viz., corporate strategy, SBU strategy and functional strategy. In enterprises which do not have SBUs, there will be only two levels of strategy, i.e., corporate strategy and functional strategies.

1. Corporate Strategy:

Corporate strategy is the long-term strategy encompassing the entire organisation. Corporate strategy addresses fundamental questions such as what is the purpose of the enterprise, what business/businesses it wants to be in (portfolio strategy) and how to expand/get into such business/businesses (for example – by establishing greenfield enterprises or by M&As).

In other words, “corporate-level strategic management is the management of activities which define the overall character and mission of the organisation, the product/service segments it will enter and leave, and the allocation of resources and management of synergy among its SBUs.”

Corporate strategy is formulated by the top level corporate management (board of directors, CEO, and chiefs of functional areas).

2. SBU Strategy:

SBU-level strategy, sometimes called Business Strategy or Competitive Strategy, is concerned with decisions pertaining to the product mix, market segments and manoeuvring competitive advantages for the SBU.

While corporate strategy decides the business portfolio (i.e., the types of business), the competitive strategy decides the strategy/strategies to succeed in the chosen business/businesses.

SBU strategy has to conform, obviously, to the corporate philosophy and strategy.

In short, “the SBU-level strategic management is the management of an SBU’s effort to compete effectively in a particular line of business and to contribute to overall organisational purposes.”

The responsibility for SBU strategy is with the top executives of the SBU who are normally second-tier executives in the corporate hierarchy. In single  SBU organisations, senior executives have both corporate and SBU-level responsibilities.

3. Functional Strategies:

Functional-level strategies are strategies for different functional areas like production, finance, personnel, marketing, etc. In other words, “functional-level strategic management is the management of relatively narrow areas of activity, which are of vital, pervasive, or continuing importance to the total organisation.”

Functional-level strategy is the responsibility of functional area heads.