Strategy and Strategic Management: Concept and Process

A kirana owner has saved ₹10 lakh. She could add a cold store, open a second shop or start home delivery, but not all three. And a supermarket may open down the road next year.

A strategy integrates the organisation's activities and commits resources for the long term. It takes account of how customers, competitors and employees are likely to behave. Writers have defined it in several ways.

Features. Strategy is needed because the future cannot be foreseen. It deals with long-term developments, such as new products, methods and markets, rather than routine operations. It anticipates the behaviour of customers, competitors and employees. And it is a roadmap that sets direction, building on the organisation's strengths and blunting rivals' advantages.

Mintzberg's five Ps. Henry Mintzberg (1987) noted that the word is used in five senses. The kirana store shows each one.

Don't confuse strategy with operational effectiveness. In Porter's 1996 argument, doing the same activities better than rivals is operational effectiveness. It matters, but rivals can copy it. Strategy means doing different activities, or similar ones in different ways.

Where it breaks. Strategy as a plan assumes managers can see far enough ahead to plan. Often they cannot, and the strategy is visible only afterwards, as a pattern. That is why Mintzberg's other Ps matter.

For exams. Match each definition to its writer and year, and learn the five Ps.

Strategy bridges the gap between where we are and where we want to be.

A chain of six bakeries writes a careful five-year plan. A year later, no budget, shop or job has changed. The strategy was written down, but nobody managed it.

It is the stream of decisions and actions through which an organisation develops and carries out its strategies. It is found in businesses, cooperatives, government bodies and non-profits alike. It integrates management, marketing, finance and accounting, production and operations, research and development, and information systems.

Against long-range planning. In David's contrast, strategic management seeks to exploit and create new and different opportunities for tomorrow. Long-range planning tries to optimise for tomorrow the trends of today. The bakeries show the difference.

Objectives. Strategic management aims:

• to exploit and create new opportunities;
• to give managers a framework linking actions, context and performance;
• to win a competitive position and sustain it, by acquiring and deploying the right resources and monitoring the environment;
• to respond to key stakeholders;
• to find, attract and keep customers.

The result is a strategic plan, the company's game plan. It is a set of hard choices among good alternatives that commits the firm to particular markets, policies and operations.

Don't confuse strategic management with strategic planning. The two are often used as synonyms, more in business than in academic writing. In the narrower sense, strategic planning means formulation only. Strategic management covers formulation, implementation and evaluation.

Where it breaks. Strategic management can shrink into a yearly paperwork ritual, with plans filed and forgotten. Too much analysis can also delay action until the opportunity has passed.

For exams. Learn David's definition, his contrast with long-range planning, and the narrow meaning of strategic planning.

Picture a tiffin service in Pune that loses half its office customers when offices empty. Its owner must notice the change, choose a response, carry it out and check that it worked, and then do it all again.

The steps are carried out in order when a strategy is first made. They are revisited whenever the situation demands.

The aim is strategic alignment: making the organisation's resources, structure and capabilities support its long-term objectives. Scooters, routes and staff all have to serve the new home-delivery strategy.

Don't confuse formulation with implementation. Formulation chooses what to do; implementation makes it happen through structure, resources and people. Some textbooks, such as Fred David's, describe three stages, formulation, implementation and evaluation, and treat scanning as part of formulation.

Where it breaks. Real organisations rarely move through the steps one at a time. Implementation often reveals facts that change the formulation, and scanning never stops.

For exams. Know the order of the four steps and place an activity in its step: allocating resources is implementation, measuring performance is evaluation.

Scan, formulate, implement, evaluate, and begin again.

A founder-led start-up, a state university and a large conglomerate all make strategy, but in very different ways. Knowing which way your organisation works tells you how to get a decision made in it.

Logical incrementalism, a fourth mode, was added by James Brian Quinn (Strategies for Change, 1980). Top management first sets a reasonably clear mission and objectives. Strategy then emerges through probing the future, experimenting and learning from a series of partial commitments, rather than one grand plan. It suits a fast-changing environment, a need to build consensus, and a need to develop resources before committing the whole company.

Deliberate and emergent strategy (Mintzberg and James Waters, 1985). A deliberate strategy is realised as intended. An emergent strategy is a pattern of action that forms over time without, or despite, intentions. The strategy an organisation actually follows, its realised strategy, is usually a mix of the two. Some intended strategy is never realised.

Don't confuse logical incrementalism with the adaptive mode. Both move in small steps. In logical incrementalism, top management sets a clear mission first and the steps are deliberate experiments toward it. In the adaptive mode there is no clear goal; steps come from bargaining over today's problems. Nor is emergent strategy the same as having no strategy: it is still a consistent pattern, just not one planned in advance.

Where it breaks. The modes are ideal types. Most organisations mix them, and a firm can shift mode as it grows: a founder's start-up may adopt formal planning once it is large.

For exams. Match each mode to its author and year, its features and the organisations it typifies. Know the three kinds of strategy in Mintzberg and Waters: deliberate, emergent and realised.

Go deeper for practitioners

The limits of planning. In The Rise and Fall of Strategic Planning (1994), Mintzberg argued that formal planning cannot create strategy on its own. Analysis breaks a problem into parts, while strategy needs synthesis. Planning helps most in turning a strategy already chosen into budgets and programmes, and in spotting patterns as they emerge.

A decision. A Pune auto-parts maker built its business on carmakers. Over three years, one-off orders from a tractor maker have grown, as an illustration, to ₹30 crore of its ₹120 crore sales, a quarter. Nobody planned this; it is an emergent strategy. Should the board make it deliberate, with a tractor-parts team and budget, or treat it as a distraction from cars? Either way, the board should decide now, not drift.

Links. Strategic intent (the next chapter) is the clear direction that logical incrementalism assumes. Strategy implementation and evaluation shows how a chosen strategy is carried through.

Strategy can be planned, improvised, bargained over or learned along the way.