Strategic management: process, levels and implementation (7S)
Strategic management is the cycle of scanning, formulating, implementing and controlling long-term choices at corporate, business and functional levels. Implementation succeeds only when the 7S elements fit.
The strategic management process
- back to Environmental scanning
Fred David groups it as formulation, implementation and evaluation. Wheelen and Hunger add environmental scanning as the first step.
Levels (types) of strategy
| Level | Question it answers | Who decides | Example |
|---|---|---|---|
| Corporate | Which businesses should we be in? | Board and top management | Reliance entering telecom with Jio (2016) |
| Business (SBU) | How do we compete in this business? | SBU heads | D-Mart competing on everyday low prices |
| Functional | How does each function support the business strategy? | Functional managers | HUL's rural distribution plan |
| Operational (some texts) | How are day-to-day tasks done? | Supervisors | Shift schedules in a plant |
Strategic decisions and key ideas
- Strategic decisions are long-term, taken by top management, commit large resources, affect the whole firm, and are complex and non-routine.
- Chandler (1962) defined strategy as setting long-term goals and choosing the actions and resource allocation needed to reach them.
- Ansoff's Corporate Strategy (1965) classified decisions as strategic, administrative and operating.
- Hierarchy of strategic intent: vision → mission → goals → objectives → plans. 'Strategic intent' is from Hamel and Prahalad (1989).
- Mintzberg: intended strategy splits into deliberate and unrealised parts; emergent strategy arises from patterns in action. Realised strategy = deliberate + emergent.
Implementation: what has to be done
| Area | What it involves |
|---|---|
| Structural | Design a structure that fits the strategy (Chandler): functional, divisional, SBU or matrix |
| Resource allocation | Move budgets, people and capital to priority areas |
| Behavioural | Leadership, culture, power, ethics and values |
| Functional and operational | Marketing, finance, HR and operations plans and policies |
| Procedural | Licences, approvals and legal clearances (stressed in Indian texts) |
| Strategic control | Premise control, implementation control, strategic surveillance, special alert control (Schreyögg and Steinmann, 1987) |
McKinsey 7S framework
| Element | Type | Meaning |
|---|---|---|
| Strategy | Hard | The plan to build and keep competitive advantage |
| Structure | Hard | How units are organised and who reports to whom |
| Systems | Hard | Processes and procedures: budgeting, IT, appraisal |
| Shared values | Soft (at the centre) | Core beliefs; first called 'superordinate goals' |
| Style | Soft | Leadership style and the culture of the top team |
| Staff | Soft | The people: numbers, types and development |
| Skills | Soft | The distinctive capabilities of the firm |
Challenges of change during implementation
A new strategy usually needs a new structure, new systems and often new shared values: that is why the 7S elements must fit together.
NET asks you to sequence the process, match levels with examples, split the 7S into hard and soft, and name who said 'structure follows strategy' (Chandler).
Typical MCQ: “Which three of the McKinsey 7S are 'hard' elements?” Strategy, structure and systems. Trap: 'staff' sounds hard but is soft, along with style, skills and shared values.
Typical MCQ: “Who said 'structure follows strategy'?” Alfred Chandler, in Strategy and Structure (1962). Trap: Mintzberg wrote on emergent strategy and the 5 Ps, not this dictum.
7S: the hard three are Strategy, Structure, Systems (they live on paper); the soft four circle Shared values at the heart.