Strategic management page No. 01. Syllabus 03 02. The Nature of Strategic Management 04

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Page No.

01. Syllabus 03

02. The Nature of Strategic Management 04

03. Management Accounting Business Strategy 21

04. Q & ANS : Business Environment 39

05. Q & ANS : Business Policy & Strategic Management 48

06. Q & ANS : Strategic Analysis 57

07. Q & ANS : Strategic Planning 65

08. Q & ANS : Formulation of Functional Strategy 71

09. Q & ANS : Strategy Implementation & Control 79

10. Q & ANS : Reaching Strategic Edge 85

11. Case Studies 93

12. Short Questions 99

Paper 6: Information Technology and Strategic Management

(One paper – Three hours – 100 Marks)
Level of Knowledge: Working knowledge
Section A: Information Technology (50 Marks)

Section B: Strategic Management (50 Marks)

(a) To develop an understanding of the general and competitive business environment,

(b) To develop an understanding of strategic management concepts and techniques,

(c) To be able to solve simple cases.


1. Business Environment

General Environment–Demographic, Socio-cultural, Macro-economic, Legal/political, Technological, and Global; Competitive Environment.

2. Business Policies and Strategic Management

Meaning and nature; Strategic management imperative; Vision, Mission and Objectives; Strategic levels in organisations.

3. Strategic Analyses

Situational Analysis – SWOT Analysis, TOWS Matrix, Portfolio Analysis – BCG Matrix.

4. Strategic Planning

Meaning, stages, alternatives, strategy formulation.

5. Formulation of Functional Strategy

Marketing strategy, Financial strategy, Production strategy, Logistics strategy, Human resource strategy.

6. Strategy Implementation and Control

Organisational structures; Establishing strategic business units; Establishing profit centres by business, product or service, market segment or customer; Leadership and behavioural challenges.

7. Reaching Strategic Edge

Business Process Reengineering, Benchmarking, Total Quality Management, Six Sigma, Contemporary Strategic Issues.

The Nature of Strategic Management

The Concept of Strategy:

1. Strategy. ‘A course of action, including the specification of resources required, to achieve a specific objective.’ CIMA: Management Accounting: Official Terminology, (2005 edition).

2. Strategic plan: ‘A statement of long-term goals along with a definition of the strategies and policies which will ensure achievement of these goals.’ CIMA: Management Accounting: Official Terminology (2005 edition)
3. Strategy is the direction and scope of an organization over the long term. Which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations..

  1. “The basic characteristic of the match an organization achieves with its environment is called its strategy.’

  1. ‘Corporate strategy is the pattern of major objectives, purposes and goals and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be..

  1. ‘Corporate strategy is concern with an organization’s basic direction for the future: its purpose, its ambitions, its resources and how it interacts with the world in which it operates.

Common themes in strategy:
From these different definitions strategy is concerned with:

  • The purpose and long-term direction of the business;

  • The scope of an organization’s activities and actions required to meet its objectives

(broad or narrow);

  • Meeting the challenges from the firm’s business external environment, such as

competitors and the changing needs of customers;

  • Meeting the challenges from the firm’s business external environment, such as competitors and the changing needs of customers;

  • Using the firm’s internal resources and competencies effectively and building on its strengths to meet environmental challenges;

  • Delivering value to the people who depend on the firm, its stakeholders, such as customers and shareholders, to achieve competitive advantage.

Whatever interpretation is put on strategy, the strategic actions of an organization will have widespread and long-term consequences for the position of the organization in the marketplace, its relationship with different stakeholders, and overall performance.

Levels of strategy:
Corporate strategy: The corporate center is at the apex of the organization. It is the head office of the firm and will contain the corporate board. The planning view of strategy assumes that all strategy was formulated at corporate level and then implemented in a ‘top-down’ manner by instructions to the business divisions. During the 1980s, high profile corporate planners like IBM, General Motors and Ford ran into difficulties against newer and smaller ‘upstart’

Corporate center of organization

Strategic business unit

or Corporate Strategy
Business Strategy

Strategic business unit

Strategic business unit


Financial Strategy

Marketing strategy

Human resources Strategy

Lost Strategy

Internal Audit
Organization chart showing corporate, strategic business unit & functional strategies.
Competitors who seemed to be more flexible and entrepreneurial. One consequence was the devolution of responsibility for competitive strategy to strategic business units (S.B.U.).
Corporate strategy today typically restricts itself to determining the overall purpose and scope of the organization. Common issues at this level include:

  • Decisions on acquisitions, mergers and sell-offs or closure of business units;

  • Conduct of relations with key external stakeholders such as investors, the government and regulatory bodies;

  • Decisions to enter new markets or embrace new technologies (sometimes termed diversification strategies);

  • Development of corporate policies on issues such as public image, employment practices or information systems.

A Model of the Rational Strategy process:
The traditional approach to strategic management is often termed the formal or rational approach, and can described as a series of logical steps including:

  • The determination of an organization’s mission;

  • The setting of goals and objectives;

  • The understanding of the organization’s strategic position;

  • The formulation of specific strategies;

  • The commitment of resources.

A continuous analysis of the external environment and the organization’s internal resources is needed in order to plan for the future development and survival of the business. This is often conceived as consisting of four major steps:

  1. Analysis 2. Formulation

  1. Implementation 4. Monitor, review and evaluation.

This process seeks to answer questions concerning where the organization is now, where it should go in the future, and how it should get there. The rational model therefore involves a number of interrelated stages. These are illustrated in Figure below, which shows the various stages which management may take to develop a strategy for their organization.

The basic idea from the model is that we start with the existing strategy of the organization and evaluate it using information collected from internal and external analysis. Form this we can determine if the organization should continue with its existing strategy or formulate a new strategy that will enable the organization to compete more effectively. Having made a choice on the strategic direction, the next stage involves implementing the

Position audit internal analysis

Review & control

1. Mission & objective

Strategy evaluation & choice

Strategic option generation

2. Corporate appraisal (SWOT)

Strategy implementation

Environmental analysis external analysis competitor analysis

A model of a rational strategy process
Strategy and then evaluating performance to determine whether or not goals have been achieved.
Each of the different stages in the model above will now be elaborated on, introducing some of the tools and techniques of strategic management.
Mission, Objectives and goals:

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