Introduction to Strategic Management: formula sheet

Key formulas

Strategic management cycle

Analysis → Choice → Implementation → Evaluation (and back to analysis)

Use this to show that strategic management is continuous and has more than one stage. Write the stages in order.

Strategy vs policy vs tactics

Strategy = long-term direction | Policy = guide for decisions | Tactics = short-term actions

Compare on time horizon, level of management, scope, and flexibility. Do not mix the three.

Corporate level

Question: What businesses should we be in?

Top management. Whole organisation. Long term, high risk, large resources. Examples: diversification, acquisition, divestment.

Business level

Question: How do we compete in this business?

SBU or divisional head. Single business. Medium term. Examples: cost leadership, differentiation, focus, product-market scope.

Functional level

Question: How does this department support the business strategy?

Functional managers. Short term, specific, operational detail. Examples: marketing, finance, HR, production and R&D plans.

Direction of flow

Corporate → Business → Functional

Higher level sets the framework for the lower level. Lower levels give feedback on feasibility.

Stages of the process

Strategic intent → Environmental analysis → Strategy formulation → Strategy implementation → Evaluation and control

Write the stages in this order. Add that feedback from the last stage loops back to earlier stages.

Vision vs mission vs objectives

Vision = what we want to become; Mission = why we exist and for whom; Objectives = measurable targets with time frame

Use this one-line contrast whenever the question asks you to differentiate them.

Environmental analysis outcome

External scan → Opportunities and Threats; Internal appraisal → Strengths and Weaknesses

This is the base of SWOT. Do not mix up the internal and external sides.

Hierarchy of strategic intent

Vision → Mission → Goals → Objectives → Strategies

Each level is more specific than the one above. Use this order to structure any answer.

Vision vs mission

Vision = what we want to become (future); Mission = what we do now, for whom, and how (present)

The most tested distinction. Always state the time orientation.

Goals vs objectives

Goals = broad, often qualitative, open-ended; Objectives = specific, measurable, time-bound

Objectives are the quantified form of goals.

Features of a good mission statement

Business + customers + products/services + values/philosophy

Check any given mission statement against these elements.

Features of good objectives

Measurable, clear, consistent, realistic yet challenging, time-bound

Use as a checklist when asked to frame or critique objectives.

Strategic leadership (definition)

Strategic leadership = Direction + Culture + Execution

A memory aid, not an ICAI formula. Use it to structure any answer on the role of strategic leaders.

Key roles of a strategic leader (memory list)

Set vision and direction | Shape culture and values | Allocate resources | Build and develop people | Drive change | Ensure control and accountability

Wording may differ in ICAI material. Use the points that fit the question and give each a one-line explanation.

Transformational vs transactional

Transformational = vision, inspiration, change | Transactional = tasks, rewards, routine control

State both and say which fits the situation: change or turnaround suits transformational, stable operations suit transactional.

Quick revision

• Strategic management is a continuous process of formulating, implementing and evaluating strategy to achieve long-term objectives.
• Strategy shows how the organisation will use its resources to gain competitive advantage.
• Three strategic levels: corporate, business and functional.
• Corporate level looks at the overall direction and portfolio of businesses, usually led by top management.
• Business level focuses on how to compete in a particular business or market.
• Functional level supports the business strategy through the areas such as finance, marketing and operations.
• The process runs from strategic intent, through formulation and implementation, to evaluation and control.
• Strategic decisions are long-term, involve major resources, and are hard to reverse.
• Vision is what the organisation wants to become; mission is its purpose and what it does today.
• Goals and objectives turn the mission into specific targets to work towards.
• Strategic leaders set direction, shape culture and guide the organisation through change.

Common mistakes

• Treating strategy and strategic management as the same thing. Fix: Say strategy is the plan, while strategic management is the whole process of making, implementing and evaluating it.
• Calling policy and tactics the same. Fix: Remember policy guides decisions and sets limits. Tactics are specific short-term actions. Give one example of each.
• Treating business level strategy as strategy of the whole company. Fix: Remember business level means one SBU. The whole company is corporate level.
• Calling a departmental plan, such as a new pricing policy, a corporate decision. Fix: Judge by scope. If it concerns one function or one business, it is not corporate.
• Treating vision and mission as the same thing. Fix: Remember vision is the future picture and mission is the purpose, customers and way of working today. State the difference explicitly in the answer.
• Writing stages in the wrong order or skipping environmental analysis. Fix: Memorise the five-stage sequence and write it as a skeleton before elaborating.
• Calling a decision strategic just because it involves money. Fix: Check the other features too: long-term effect, scope of the whole organisation, difficulty of reversal and top-level involvement. A large but routine payment is still operational.
• Writing a list of dimensions with no explanation. Fix: Add one line per dimension saying what it means and why it matters. Marks go to explanation, not just headings.
• Using vision and mission as if they mean the same thing. Fix: Remember vision is future, mission is present. Always write the time focus when you differentiate.
• Writing a mission statement that has only a profit target. Fix: Include business, customers, products or services and values. Put numbers in objectives, not in the mission.

Exam tips

• Learn one clean definition and two or three features cold. They fit almost any question on this topic.
• For distinction questions, use paired comparison lines on four bases. Examiners can award marks quickly.
• In case studies, name the action from the facts before you label it. This earns step marks.
• For MCQs, spot the time horizon and the level of management first. They usually decide the answer.
• Do not spend more than the marks justify. A 4 mark question needs about 4 crisp points.
• Case-based questions usually give a decision and ask for its level. Decide by scope: whole firm, one business or one department.
• For a differentiate question, give at least four points: scope, decision makers, time horizon, risk and resources.
• Always include an example. Examiners reward application over memorised definitions.