STRATEGIC MANAGEMENT

LECTURE 1: WHAT IS STRATEGY?

WHAT IS STRATEGY?
• A set course of action designed to achieve a long term objective.
• It consists of planning and marshalling of resources for their most efficient and effective use in
a changing in a changing environment.
• In business, STRATEGY consists of a set of management decisions which deals with the
future direction and scope of the organization or firm.
• It entails management choice among different alternative actions, competitive moves and
different business approaches to achieve enterprise objectives.
FEATURES OF STRATEGY
• Top management responsibility
• Allocation of large amounts of resources.
• Impact on long term viability/prosperity of the firm.
• Future-oriented
• Multi-functional or multi-business consequences
• Consideration of factors in the external environment
THE 3 HIERARCHICAL LEVELS OF STRATEGY
CORPORATE LEVEL STRATEGIES
• Decisions concerning organization-wide policies made by top-level management (BOD) to
determine “Where the company wants to be.”
• Strategy at this level is value –oriented and conceptual.
• It has two main aspects: Formulation of Strategy (Strategic Planning) and Strategy
Implementation.
• Major financial policy decisions involving acquisition, diversification and structural
redesigning belong to this level.
BUSINESS LEVEL STRATEGIES
• Decisions concerning particular Business Units within the organization.
• Concerns about what products or services should be developed and offered to which market in
order to meet customer needs and organizational objectives.
• Multifunctional strategies developed at the corporate level are formulated and implemented for
specific product markets.
• Decisions at this level include policies involving new product development, marketing mix,
research and development HRD etc.
FUNCTIONAL/OPERATIONAL LEVEL STRATEGIES
• Decisions involving the different specific functional areas: marketing, finance, operations,
human resource.
• While Corporate and Business Level Strategies are concerned about “Doing the right things
“Functional Strategies are concerned with “Doing things right”.
• Concerned with the development of approaches for managing frontline operations and handling
day to day tasks of strategic significance (inventory control, advertising campaigns, purchasing,
work force development etc.).

STRATEGIC MANAGEMENT
A set of management decisions and actions that determine the long-run performance of an
organization.
STRATEGIC MANAGEMENT PROCESS
A set of management decisions and actions that determine the long-run performance of an
organization.
- Strategic Intent - Strategy Implementation
- Strategy Formulation - Strategy Evaluation and Control
STRATEGIC INTENT
• The purpose for what Organization exists or strives for. Organizations must define “What they
want to do” and “Why they want to do.”
• This “Why they want to do” is the organization’s Strategic Intent.
• Strategic Intent has a Hierarchy: Vision, Mission, Goals and Objectives.
STRATEGIC FORMULATION
• The process of choosing the most appropriate action/s that would realize organizational goals
or objectives and thereby leading towards the achievement of organizational vision.
• Strategy formulation uses various analytical tools to appraise organizational (internal) and
environmental (external) forces.
STRATEGIC IMPLEMENTATION
• The ACTION STAGE of Strategic Management where decisions are made to install new
strategy or to re craft or re install existing strategies. It involves Decisions in the following for
areas:
1. Designing the Structure, Process and System within the Organization.
2. Functional Implementation
3. Behavioral Implementation
4. Operationalizing the strategy by setting up actionable objectives.
STRATEGIC EVALUATION AND CONTROL
• Strategic evaluation and control is the process of determining the effectiveness of a given
strategy in achieving the organizational objectives and taking corrective actions whenever
required.
STRATEGIC MANAGEMENT
PROCESS
THE STRATEGIC MANAGEMENT PROCESS
Strategic management is the art and science of formulating, implementing and evaluating cross-
functional decisions that enable an organization to achieve its objectives. (David, F. 2012)
Cross functional means integrating and coordinating all aspects of the business to achieve
organizational success.
Organizational activity involves two basic dimensions:
● SUBSTANTIVE DIMENSION: Involves determining WHAT to do (Strategy) and the
● PROCEDURAL DIMENSION: Concerned with determining HOW to do (Strategic
Management Process)

STRATEGIC MANAGEMENT refers to the set of managerial process of:

● Establishing a strategic Vision
● Setting Objectives
● Crafting Strategy (Strategy Formulation)
● Implementing and Executing the Strategy
● Overtime, initiating corrective adjustments to its various key components. (Mission, Vision,
Goals, Objectives, Strategies)

REVIEW OF SOME TERMS:

● VISION: What the company wants to achieve in the future. The “Big Picture” idea of what
you want to achieve.
● MISSION: The reason for your Company’s existence.
● GOALS: What the company wants to achieve in general in accordance with its vision.
● OBJECTIVES: The specific, measurable goals that are to be achieved in the future.

The Strategic Management Process Involves 4 steps:

● Strategic Intent
● Environmental Analysis and Strategy Formulation
● Strategy Implementation
● Strategy Evaluation and Control
FORMULATION OF A WINNING STRATEGY
● Performing situational analysis, self-analysis and competitors’ analysis (Internal and external
analysis)
● Setting of Objectives: Long Term or Short Term.
● These set Objectives made in the light of the Situational Analysis will suggest Strategic Plans.
The plans provide the details on how to achieve the Objectives.
EVALUATING THE STRATEGY:
● SUITABILITY: Will it work?
● FEASIBILITY: Can it be made to work?
● ACCEPTABILITY: Will they (employees and critical stakeholders) be willing and capable to
work on it?
IMPORTANCE OF STRATEGIC MANAGEMENT
● Helps organizations to be proactive, not reactive.
● Provides a framework for all decisions that can be made in a business like: Products, Markets,
Manufacturing, Resources and Investments
● Performs the role of a Path Finder for the organization in identifying opportunities in the
market and how to reach them.
● Serves as a corporate defense mechanism against mistakes and pitfalls.
● Helps to develop Core Competencies and Competitive Advantage for survival and growth.

KEY TERMS IN STRATEGIC MANAGEMENT

• COMPETITIVE ADVANTAGE – “anything that a company does extremely well as
compared to their competitors”
• VISION STATEMENT - What the company wants to achieve in the future. The “Big Picture”
idea of what you want to achieve.
• MISSION STATEMENT - The “raison d’etre”; reason for your Company’s existence.

SAMPLE VISION AND MISSION STATEMENTS

“NIKE”
Vision statement: Bring inspiration and innovation to every athlete* in the world. If you have a
body, you’re an athlete.
Mission statement: Create groundbreaking sports innovations, make our products sustainable,
build a creative and diverse global team, and make a positive impact in communities where we
live and work.
“AMAZON”
Vision statement: To be Earth’s most customer-centric company, where customers can find and
discover anything they might want to buy online.
Mission statement: We strive to offer our customers the lowest possible prices, the best
available selection, and the utmost convenience.
“GOOGLE”
Vision statement: “to provide access to the world’s information in one click.”.
Mission statement: “to organize the world’s information and make it universally accessible and
useful.”
“COCA-COLA”
Vision statement: “to craft the brands and choice of drinks that people love, to refresh them in
body & spirit.”.
Mission statement: To refresh the world...To inspire moments of optimism and happiness… To
create value and make a difference.
• GOALS: What the company wants to achieve in general in accordance with its vision.
• OBJECTIVES: The specific, measurable goals that are to be achieved in the future. Must
conform to the acronym S.M.A.R.T.
S – Specific
M - Measurable
A – Attainable
R – Realistic
T – Time-bound
S.M.A.R.T.
1. Specific
Your goal should be clear and concrete, otherwise efforts will not be focused and people will not
feel truly motivated to achieve it. When drafting objectives, try to answer the five "W" questions:
• What do I want to accomplish?
• Why is this goal important?
• Who is involved?
• Where is it located?
• Which resources or limits are involved?
2. Measurable
Measurable objectives s allow progress to be tracked and evaluated. It enables organizations to
stay focused in meeting deadlines
A measurable goal should address questions such as:
• How much?
• How many?
• How will I know when it is accomplished?
3. Achievable
Objectives need to be realistic and attainable to be successful. In other words, it should stretch
the organization’s abilities but still remain possible. An achievable objective will usually answer
questions such as:
• How can I accomplish this goal?
• How realistic is the goal, based on other constraints, such as financial factors?
4. Relevant
This feature ensures that your set objectives really matter, and that it also aligns with other
relevant objectives. A relevant goal can answer "yes" to these questions:
• Does this seem worthwhile?
• Is this the right time?
• Does this match our other efforts/needs?
• Am I the right person to reach this goal?
• Is it applicable in the current socio-economic environment?
5. Time-bound
Objectives need target dates. This part of the SMART goal criteria helps to prevent everyday
tasks from taking priority over longer-term goals. A time-bound goal will usually answer these
questions:
• When?
• What can I do six months from now?
• What can I do six weeks from now?
• What can I do today?

EXTERNAL OPPORTUNITIES AND THREATS – refers to uncontrollable forces happening

outside of the organization that could significantly benefit or hurt the organization in the future.
P –political S – Social
E –economic T - Technological
INTERNAL OPPORTUNITIES AND THREATS – refers to controllable resources and
activities of the organization that are performed exceptionally well or poorly that could
significantly benefit or hurt the organization in the future.
M – manpower
M – money
M – machine
M – material
M – method
M – market
LONG TERM OBJECTIVES – objectives whose time frame is beyond one year as compared
to Short Term Objectives that will have a time frame of one year.
POLICIES – guidelines set to guide how goals will be achieved.

LESSON 3: STRATEGIC INTENT: THE BUSINESS VISION AND MISSION

WHAT IS A VISION STATEMENT?
Vision statement identifies where the organization intends to be in the future or where it should
be to best meet the needs of stakeholders.
Incorporates a shared understanding of the nature and purpose of the organization and uses this
understanding to move the organization toward a greater purpose.
It is a business’s guiding image of success. “Destiny is not a matter of chance, but of choice. Not
something to wish for, but to attain.”
WHAT MAKES A GOOD VISION STATEMENT?
It would be short, simple and powerful. Remember a vision is meant to inspire, has an emotional
impact.
It must give a clear direction or mental image to anyone that reads it.
Provide a sense of belonging to the stakeholders. “We provide the world’s builders.”
SAMPLES OF VISION STATEMENTS
General Motors: “To be the world leader in transportation products and related services.”
Samsonite: “Find innovative solutions to a travelling world.”
Proctor & Gamble: “To be recognized as the best consumer product company in the world.”
Ford: “To be a company that delivers excellent products and services, and strives to make the
world a better place.”

WHAT IS A MISSION STATEMENT?

A mission statement is a role, or purpose, by which an organization intends to serve its
stakeholders.
It describes what the organization does (current capabilities), who it to serve (stakeholders), and
what makes the organization unique (justification for existence).
Mission statements always exist at the top level of an organization, but may also be set for
different organizational levels or components.
A mission statement is simply an organization’s reason for existing.
WHAT DOES A MISSION STATEMENT DO?
It tells a company’s stories and ideals in less than 30 seconds.
It provides the focus on the main business activities.
If it is written well, it can help reduce “clutter” in other documents and processes.
It can be described as “The best way to make a fire with two sticks is to make sure one of them is
a match.”
SAMPLES OF MISSION STATEMENTS
General Motors: “to earn customers for life by building brands that inspire passion and loyalty
through not only breakthrough technologies but also by serving and improving the communities
in which we live and work around the world.”
Samsonite: “To find an answer to the consumer’s needs by building a product that meets the
challenges of today’s extremely mobile environment.”
Proctor & Gamble: “We will provide branded products and services of superior quality and
value that improve the lives of the world's consumers, now and for generations to come.”
Ford: “to make people's lives better by making mobility accessible and affordable.”
 VISION VS. MISSION

BENEFITS OF A VISION AND MISSION STATEMENTS

• Insures unanimity of purpose.
• To provide a standard for allocating organizational resources.
• To establish a general tone or organizational climate.
• To serve as a focal point of identity for all members of the organization.
• To facilitate the translation of objectives into work structures.
• To specify organizational purpose and to translate this purpose into organizational structure.
MISSION STATEMENT COMPONENTS
• Customers – who are the firm’s customers?
• Product or Service – What are the firm’s major product or service?
• Market – Geographically, where does the firm compete?
• Technology – is the firm technologically current?
• Concern for survival, growth and profitability.
• Philosophy – what are its basic beliefs, values, aspirations and ethical priorities.
• Self-concept –What is the firm’s competitive advantage?
• Concern for public image
• Concern for its employees
 SUPPLEMENTARY LECTURE 3.1: STAKEHOLDER ANALYSIS
STAKEHOLDER ANALYSIS
A Stakeholder is any part who may have an interest in an organization action or will be affected
by its outcomes.
Stakeholders can be organizations, business units, departments, groups or individuals.
Families of employees, employees, lenders, partners, unions, the Media, the community, the
government, Senior Executives, shareholders, investors, suppliers, customers, end users.
Primary stakeholders are those who are part of the economic transactions of the business.
Secondary stakeholders are those who are affected by or can affect the business in some way.
Stakeholder Analysis is the process of identifying and analyzing the stakeholders that are likely
to affect or be affected by a proposed action (positively or negatively).
This is useful to manage them appropriately and effectively.
It can be done once or on a regular basis to track the attitudes of stakeholder overtime.
Widely used in project management.
When it is Used?
In project management to develop cooperation between the stakeholders and the project team.
It helps to identify:
 The people to be informed during implementation.
 The key people to be involved and consulted.
 The people who may have potential negative impact on the project.
In conflict resolution.
In organizational transformation.
IDENTIFY YOUR STAKEHOLDERS
Your boss
Senior executives Shareholders Government
Your coworkers Alliance Partners Trades associations
Your team Suppliers The press
Customers Lenders Interest groups
Prospective customers Analysts The public
Your Family Future recruits The community
Note: Stakeholders may be both organizations and people
You can only communicate with individual people
 LECTURE 4: THE EXTERNAL ASSESSMENT
WHAT IS AN EXTERNAL AUDIT?
An External Audit is a strategic management tool that focuses on identifying and evaluating
trends and events beyond the control of an organization.
• Reveals key opportunities and threats confronting the firm
• Upon identifying such opportunities and threats, managers can now formulate strategies to take
advantage of the opportunities and avoid or reduce the impact of the threats.
 THE STRATEGIC MANAGEMENT MODEL

KEY EXTERNAL FORCES

• ECONOMIC FORCES
• SOCIAL, CULTURAL, DEMOGRAPHIC AND NATURAL ENVIRONMENTAL FORCES
• POLITICAL, GOVERNMENT AND LEGAL FORCES
• TECHNOLOGICAL FORCES
• COMPETITIVE FORCES
PROCESS OF PERFORMING AN EXTERNAL AUDIT
1. Gathering of competitive intelligence and information about the key external forces.
2. The information gathered must be assimilated and evaluated.
3. A meeting of key managers are called who will collectively identify the most important
opportunities and threats facing the firm.

CHARACTERISTICS OF KEY EXTERNAL FORCES

1. Important enough to the achievement of the long term and annual objectives of the
organization.be
2. The key forces must be measurable;
3. They must be applicable to all competing firms;
4. Hierarchical i.e. some will affect the overall company while others will be more narrowly
more focused on functional and divisional areas.
5. Communicated and distributed widely in an organization
ECONOMIC FORCES
• Economic forces refer to the nature and direction of the economy in which business operates.
• The general state of the economy (e.g., depression, recession, recovery, or prosperity), interest
rate, stage of the economic cycle, balance of payments, monetary policy, fiscal policy, are key
variables in corporate investment, employment, and pricing decisions.
• To assess the local situation, an organization might seek information concerning the economic
base and future of the region and the effects of this outlook on wage rates, disposable income,
unemployment, and the transportation and commercial base. The state of world economy is most
critical for organizations operating in such areas.
SOCIAL FORCES
• Social forces include traditions, values, societal trends, consumer psychology, and a society's
expectations of business.
• The following are some of the key concerns in the social environment: ecology (e.g., global
warming, pollution); demographics (e.g., population growth rates, aging work force in
industrialized countries, high educational requirements); quality of life (e.g., education, safety,
health care, standard of living); and noneconomic activities (e.g., charities)
POLITICAL AND LEGAL FORCES
• Political-legal forces include the outcomes of elections, legislation, and court judgments, as
well as the decisions rendered by various commissions and agencies.
• Among the most important government actions are: regulation, taxation, expenditure, takeover
and privatization.
• Political activity may also have a significant impact on following:
Supplier function – the management and transfer of critical goods.
Customer Function – control of the disbursement of products and services.
 Competitor Function – government may often act as an unbeatable competitor.
TECHNOLOGICAL FORCES
• Technological developments can significantly alter the demand for an organization's or
industry's products or services.
• Technological change can decimate existing businesses and even entire industries, since its
shifts demand from one product to another.
• Changes in technology can affect a firm's operations as well its products and services. These
changes might affect processing methods, raw materials, and service delivery.
COMPETITIVE FORCES
• An important part of an external audit is the identification of rival firms and determining their
strengths, weaknesses, capabilities, opportunities, threats, objectives and strategies.
• 7 Characteristics of the most competitive firms:
o Market Share matters
o Understand and remember precisely what business you are in
o “Whether it’s broke or not, fix it” – continue to make it better.
o Innovate or evaporate, nothing quite recedes like success
o Acquisition is essential to success
o People make a difference
o There is no substitute for quality and no greater threat than failing to be cost-
competitive on a global basis.
COMPETITIVE ANALYSIS: PORTER’S FIVE-FORCES
 INDUSTRY ANALYSIS: THE EXTERNAL FACTOR EVALUATION

The External Factor Evaluation allows strategists to summarize and evaluate the various
external forces identified in the External Audit.

1. List key-external factors as identified by the External Audit Process.

2. Assign each factor a weight ranging from 0.0 (not important) to 1.0. The weights indicate the
relative importance of that factor to being successful in the industry. The sum of all weights
assigned must equal 1.0
3. Assign a rating between 1 -4 to each factor to indicate how effectively the firm’s current
strategy responds to the factor:
4 – response is superior
3 - response is above average
2 - response is average
1 - response is poor
4. Multiply each factor’s weight by its rating to determine a weighted score.
5. Sum the weighted scores for each variable to determine the total weighted score for the
organization
6. Interpret the results as follows:
• A total weighted score of 4.0 indicates that the firm is responding in an outstanding way
to existing opportunities and threats
• A total score of 1.0 indicates the firm is not capitalizing on opportunities or avoiding
threats.
 THE COMPETITIVE PROFILE MATRIX
The Competitive Profile Matrix (CPM) identifies a firm’s major competitors and its particular
strengths and weaknesses to the firm’s strategic position. The weights and total weighted score in
both the CPM and the EFE have the same meaning.
However, the rating refers to Strengths and Weaknesses as follows:
4 – Major Strength
3 – Minor Strength
2 – Minor Weakness
1 – Major Weakness

In the Competitive Profile Matrix, the companies are evaluated in terms of the following Critical
Success Factors:
• Advertising • Financial Position
• Customer Service • Global Expansion
• Price Competitiveness • Sales Distribution
• Top Management Expertise • Market share
• Product quality • Product Line Offerings
• E-Commerce • Production Capacity