Unit 1: Understanding strategy and external analysis
Corporate Strategy notes · PTU syllabus (MBA 401-18)
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Unit summary
Strategy sets the direction of the whole firm and is shaped by a careful reading of the environment. This unit covers the strategic management process, strategic decision making, levels of strategy, McKinsey's 7-S model, defining vision, mission and goals, and environmental scanning techniques — ETOP, PEST, SWOT and TOWS.
After this unit you can
- Explain the strategic management process and strategic decision making
- Distinguish levels of strategy and apply the 7-S model
- Define vision, mission and goals
- Apply ETOP, PEST, SWOT and TOWS for environmental scanning
PTU syllabus topics
- Strategic management process
- strategic decision making
- levels of strategy
- McKinsey's 7-S model
- defining vision/mission/goals
- environmental scanning techniques (ETOP, PEST, SWOT, TOWS)
- Corporate level
Which businesses should we be in?
- Business level
How do we compete in each business?
- Functional level
How does each function support it?
Topic 1
The strategic management process
- 1Strategic intent
Vision, mission, objectives
- 2Environmental scanning
External (opportunities, threats) and internal (strengths, weaknesses)
- 3Strategy formulation
Corporate, business and functional strategies
- 4Strategy implementation
Structure, resources, leadership, culture, policies
- 5Strategic evaluation and control
Measure, compare, correct
- The process is a feedback loop — evaluation results feed back into intent and formulation.
Example
Tata Motors' strategic intent to be a global automaker led to environmental scanning of global markets, a strategy of acquisition (Jaguar Land Rover, 2008), implementation through integration teams, and continuous evaluation of JLR performance.
Topic 2
Strategic decision making
- Strategic decisions are long-term, affect the whole organisation, commit large resources, are complex and uncertain, and are made by top management.
Entrepreneurial mode
A powerful leader makes bold decisions
Adaptive mode
Incremental, reactive steps — "muddling through"
Planning mode
Systematic analysis and formal plans
Logical incrementalism (Quinn)
Purposeful small steps that evolve into a strategy
- Deliberate vs emergent strategy (Mintzberg): realised strategy combines intended plans that are carried out with emergent patterns that arise from action.
- Aids: devil's advocacy, dialectical inquiry, scenario planning, decision matrices.
Topic 3
Levels of strategy
- Corporate level
Which businesses to be in; allocation of resources across them — board and CEO
- Business level
How to compete in a particular market — SBU heads
- Functional level
How each function supports the business strategy — marketing, finance, operations, HR
- Operational strategies at the level of plants, regions and teams turn functional strategies into day-to-day actions.
Topic 4
McKinsey's 7-S model
Hard S — Strategy
Plan to achieve competitive advantage
Hard S — Structure
Organisation chart, reporting lines
Hard S — Systems
Processes and procedures — budgeting, IT, HR systems
Soft S — Style
Leadership and management style
Soft S — Staff
People, their numbers and types
Soft S — Skills
Distinctive capabilities of the organisation
- All seven elements are interdependent — a change in strategy needs matching changes in structure, systems, skills and culture; used for organisational diagnosis, mergers and change management.
Topic 5
Defining vision and mission
Strategic intent (Hamel and Prahalad) is an ambitious, long-term aspiration that stretches the organisation beyond its present resources ("Encircle Caterpillar" — Komatsu).
Vision
What we want to become
Mission
Why we exist and what we do
Business definition
Customers, needs, technologies
Business model
How we create and capture value
Goals and objectives
Specific targets
Vision
A vision is a mental image of the possible and desirable future state of the organisation.
- Clear, inspiring, future-oriented, brief, easy to remember.
- Example: "To be the world's most customer-centric company" (Amazon).
Mission
A mission states the organisation's purpose — why it exists, what it does, for whom and how.
- Components (David): customers, products/services, markets, technology, concern for survival and growth, philosophy, self-concept, public image, concern for employees.
- Example: Infosys — "To achieve our objectives in an environment of fairness, honesty and courtesy towards our clients, employees, vendors and society at large."
Question
What do we want to become?
Why do we exist?
Time
Future
Present
Nature
Inspirational, aspirational
Practical, action-oriented
Change
Rarely changes
Can change with strategy
Topic 6
Defining goals and objectives
- Goals: broad, open-ended statements of desired results ("increase market share").
- Objectives: specific, measurable, time-bound targets ("increase market share from 12% to 15% by March 2027").
Characteristics of good objectives (SMART)
- Specific, Measurable, Achievable, Relevant, Time-bound.
- Also: understandable, challenging, consistent with each other, set within constraints.
Areas for objectives (Drucker)
Market standing, innovation, productivity, physical and financial resources, profitability, manager performance and development, worker performance and attitude, public responsibility.
Focus
Financial performance
Competitive position
Examples
Revenue growth, ROI, EPS, cash flow
Market share, quality, customer satisfaction, innovation
Time view
Often short term
Long term
Topic 7
Environmental scanning
Environmental scanning is monitoring, evaluating and disseminating information from the external and internal environments to key people in the organisation.
Internal
Resources, capabilities, structure, culture
External – Micro (task)
Customers, competitors, suppliers, intermediaries, publics
External – Macro (general)
Political, economic, social, technological, ecological, legal
- Approaches: systemic (continuous), ad hoc (special studies), processed-form (secondary data).
- Sources: government reports, industry associations, news, market research, competitors' annual reports, employees and customers.
Topic 8
PEST (PESTEL) analysis
Political
Government stability, tax policy, trade rules, FDI policy
Economic
GDP growth, inflation, interest rates, exchange rates
Social
Demographics, lifestyle, education, culture
Technological
Innovation, automation, digitalisation, R&D
PESTEL adds Environmental (climate, sustainability) and Legal (labour, consumer, competition laws).
Example
PEST for an Indian EV maker: Political — FAME and PLI subsidies; Economic — rising fuel prices; Social — growing environmental awareness; Technological — falling battery costs.
Topic 9
ETOP, SWOT and TOWS
SWOT analysis
Strengths
Internal positives — brand, technology, skilled staff
Weaknesses
Internal negatives — high cost, weak distribution
Opportunities
External positives — new markets, policy support
Threats
External negatives — new rivals, regulation, substitutes
- TOWS matrix turns SWOT into strategies: SO (use strengths to seize opportunities), WO (overcome weaknesses using opportunities), ST (use strengths to counter threats), WT (defensive, minimise weaknesses and avoid threats).
ETOP (Environmental Threat and Opportunity Profile)
- Lists environmental sectors (economic, market, technological, supplier, government, social) and rates the impact of each as an opportunity (↑), threat (↓) or neutral.
- Gives a quick, structured summary of the environment for a specific business.
| Sector | Impact | Example (for a two-wheeler maker) |
|---|---|---|
| Economic | ↑ Opportunity | Rising rural incomes |
| Market | ↓ Threat | Shift to electric scooters by start-ups |
| Technological | ↑ Opportunity | Cheaper batteries for own EV range |
| Government | ↑ Opportunity | PLI scheme for auto components |
| Supplier | ↓ Threat | Semiconductor shortages |
QUEST (Quick Environmental Scanning Technique)
Developed by Burt Nanus; a quick, low-cost way for senior managers to scan the environment.
- 1Preparatory work
Identify issues and participants
- 2First workshop
Brainstorm trends and events; rate impact
- 3Analysis
Staff prepare scenarios
- 4Second workshop
Discuss scenarios and strategic options
- 5Report
Summary of issues and options for planning
Key terms
- Strategic management
- Formulating, implementing and evaluating cross-functional decisions to achieve objectives
- Emergent strategy
- Strategy that arises from patterns of action rather than plans
- Corporate-level strategy
- Decisions about the scope of businesses
- Mission
- Statement of the organisation's purpose and business
- TOWS matrix
- Matching SWOT factors to generate strategies
Quick revision
- Process: intent, analysis, formulation, implementation, evaluation.
- Strategic decisions: features; Mintzberg's modes; deliberate vs emergent.
- Corporate, business, functional and operational levels.
- 7-S: strategy, structure, systems, shared values, style, staff, skills.
- Vision, mission, goals; scanning; PESTEL, ETOP, SWOT, TOWS.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.State three features of strategic decisions.
- Q2.Distinguish deliberate and emergent strategy.
- Q3.Name the levels of strategy.
- Q4.List the elements of the 7-S model.
- Q5.Distinguish vision and mission.
- Q6.What is ETOP?
Long-answer questions
- Q1.Explain the strategic management process.
- Q2.Discuss strategic decision making and the levels of strategy.
- Q3.Explain McKinsey's 7-S model and its use in strategy.
- Q4.Explain ETOP, PEST, SWOT and TOWS as tools of environmental scanning.
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