CHAPTER ONE

OVERVIEW OF STRATEGIC MANAGEMENT

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 The Nature of Strategic management

• Strategic Management
– is the art and science of formulating, implementing and evaluating
cross functional decisions that enable an organization to achieve its
objectives.

– it implies that strategic management focuses on integrating the different

functional units of an organization so as to achieve its objectives.

– it implies that strategic management cement all the functional units

together.

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 The Nature of Strategic management

• Strategic Management:
– is both a philosophy and a processes by which an organization
determines its long term objectives and how to realize them as well as
taking actions to implement them.

– By its very process and methods strategic management encourages

consensus building and team work among staff.

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 Historical Development of Strategic Management

• Basic Financial Planning

• Long Range Planning

• Strategic Planning

• Strategic Management

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 Strategic Management Vs Strategic Planning

• Strategic management
– is different from strategic planning which was widely believed to be the
answer for all problems specially in 1960/1970’s. Because:

• The concept of strategic management includes the notion of strategy

formulation, implementation, and evaluation.

• Where as strategic planning referring only to strategy formulation.

• Strategic planning is an incomplete instrument for managing change

in today's “Dog eat, Dog world” since it is not action driven.

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 Strategic management Vs Long Range Planning

• Strategic management is also different from long range planning. Because:

– The essence of strategic management is just to exploit and create new

and different opportunities for tomorrow. Where as long range planning
tries to optimize for tomorrow the trends of today

– In other words Strategic management has an anticipatory stance where

as long range planning is done on the basis of retroactive analysis.

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 Strategy Myopia

• Definition; Strategic myopia refers to a narrow focus on short-term goals,

often at the expense of long-term planning and growth.
• This type of myopia is characterized by a failure to anticipate or adapt to
changes in the market or technological advances.
• Basic decisions on a short term concern for profitability would lead to a
strategy myopia.

• A firm may overlook the enduring concerns of customers, suppliers, creditors,

regulatory agents.

• Because in the short term the result may produce profit, but over time the
financial consequence become detrimental.

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 Stages of Strategic Management

Strategy  Strategy  Strategy 

formulation implementation evaluation 

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 Stages of Strategic Management

• Strategy formulation includes;

• Crafting a vision and mission

– Determining the strategic factors

– Establishing long-term objectives

– Generating alternative strategies

– Choosing particular strategies to pursue

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 Stages of Strategic Management

• Strategy formulation issues include;

– Deciding what new businesses to enter

– What businesses to abandon

– How to allocate resources

– Whether to expand operations or diversify

– Whether to enter international markets, to merge or form a joint

venture, and

– How to avoid a hostile takeover.

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 Stages of Strategic Management

• Strategy implementation requires a firm to:

• Establish annual objectives

• Devise policies

• Motivate employees

• Allocate resources so that formulated strategies can be executed

– often called the action stage

– involves mobilizing employees and managers to put

formulated strategies into action
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 Stages of Strategic Management

• Strategy implementation includes

– Developing a strategy-supportive culture

– Creating an effective organizational structure

– Redirecting marketing efforts

– Preparing budgets

– Developing and utilizing information systems and

– Linking employee compensation to organizational performance.

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 Stages of Strategic Management

• Strategy evaluation
– reviewing external and internal factors that are the bases for current
strategies, measuring performance, and taking corrective actions

– Managers desperately need to know when particular strategies are not

working well; strategy evaluation is the primary means for obtaining
this information

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 The Strategic-Management Model
 The strategic management model dictates:

Where are we now?

Where we want to go?

How will we get there?

 Where are we now? Must consider

 the company’s market positions and competitive pressures it confronts

 its resources, strengths and capabilities,

 its competitive shortcomings,

 the appeal its products and services have to customers and

 its current performance

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 The Strategic-Management Model

 Where do we want to go?

 The direction which management believes the company should be headed
in light of the company’s present situation and the winds of market change

 How will we get there?

 Concerns the ins and outs of crafting and executing strategy.

 Without a strategy a company cannot have a particular destination

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 A Comprehensive Strategic-Management Model

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 Benefits of Strategic Management

• The principal benefit of strategic management has been to help organizations

formulate better strategies through the use of more systematic, logical, and
rational approach to strategic choice

• Strategic management:

– Enhance communication

– Improved/deeper understanding

– Increase Commitment

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 Benefits of Strategic management

• Economic benefits

• Improve the ability of managers to prevent problems

• Improved the quality of strategic decisions through group interactions

• Reduce gaps and overlaps in activities of groups and individuals through

proper role identifications

• Provide a platform for better employee incentive

• Lesser resistance to change

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 Limitations of strategic management

• Complex and dynamic environment

– The more uncertain is the future, the less is the relevance of strategic
management in exploring opportunities and mitigating threats

• Rigidity – strategic management brings rigidity in the organization through

strategic planning

– various internal inflexibilities may be experienced in the organization like

human and procedural

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 Limitations of Strategic Management

• Limitations in implementation – strategic management may not be in a

position to address tasks that have an operative nature

• Costly exercise

• Sense of frustration

• Risk of avoiding responsibility

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 VMOSA
• Vision

– answers the question “What do we want to become?”

– often considered the first step in strategic planning

– provides a direction and inspiration for organizational goal settings

– is a symbol and a cause to which we want bond stakeholders

– Should never carry the how part

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 VMOSA
• Vision

– A statement of realistic dream

– A vision statement should be a few short phrases or a sentence that conveys

your hopes for the future

– Craft a statement that is:

• Understood and shared by members of the organization

• Broad enough to include a diverse variety of perspectives

• Inspiring and uplifting

• Easy to communicate (fits on a T-shirt!)

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 VMOSA
• Features of a good vision statement:

– Easy to read and understand.

– Compact and Crisp to leave something to people’s imagination.

– Gives the destination and not the road-map.

– Provides a motivating force, even in hard times.

– Is perceived as achievable and at the same time is challenging and

compelling, stretching us beyond what is comfortable.

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 VMOSA
• Mission
– enduring statements of purpose that distinguish one business from other similar
firms
– identifies the scope of a firm’s operations in product and market terms
– addresses the basic question that faces all strategists: “What is our business?”
– It expresses the "what and how" of your effort, describing what your group is
going to do to make your vision a reality.
– An example of a mission statement: "Our mission is to develop a safe and
healthy neighborhood through collaborative planning, community action, and
policy advocacy.“
– While your vision statement inspires people to dream, your mission
statement should inspire them to action.
– Make it concise, outcome-oriented, and inclusive.
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 VMOSA
• A good mission statement:
– Have to have a very visible linkage to the business goals and strategy

– Should not be same as the mission of a competing organization

– Clear to understand and communicate.

• Objectives
• are the specific, measurable steps that will help you achieve your mission.
• Develop objectives that are SMART+C:
• specific, measurable, achievable (eventually), relevant to your
mission, and timed (with a date for completion.)
• An example of an objective would be: "By the year (x), 90 percent
of the area's drug houses will be eliminated from our target area."
– The +C reminds you to adds another important quality to your goals:
make them challenging. Stretch your group to make improvements that
are significant to members of the community.

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 Objectives should be S.M.A.R.T. + C.:
• Specific. That is, they tell how much (e.g., 10%) of what is to be achieved (e.g.,
what behavior of whom or what outcome) by when (e.g., by 2025)?

• Measurable. Information concerning the objective can be collected, detected,

or obtained.

• Achievable. It is feasible to pull them off.

• Relevant to the mission. Your organization has a clear understanding of how

these objectives fit in with the overall vision and mission of the group.

• Timed. Your organization has developed a timeline (a portion of which is made

clear in the objectives) by which they will be achieved.

• Challenging. They stretch the group to set its aims on significant

improvements that are important to members of the community.
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 Why should you create objectives?

• There are many good reasons to develop objectives for your

initiative. They include:
– Having benchmarks to show progress.

– Completed objectives can serve as a marker to show members of your

organization, funders, and the greater community what your initiative
has accomplished.

– Creating objectives helps your organization keep focused on initiatives

most likely to have an impact.

– Keeping members of the organization working toward the same long-

term goals.

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 How do you create objectives?

• So once your organization has decided that it does wish to develop

objectives, how do you go about doing so? Let's look at the process that
will help you to define and refine objectives for your organization.

• Define or reaffirm your vision and mission statements

– The first thing you will need to do is review the vision and mission
statements your organization has developed. Before you determine your
objectives, you should have a "big picture" that they fit into.

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 How do you create objectives?

• Determine the changes to be made

– The crux of writing realistic objectives is learning what changes need to

happen in order to fulfill your mission.

• Collect baseline data on the issues to be addressed

– As soon as your organization has a general idea of what it wants to

accomplish, the next step is to develop baseline data on the issue to be
addressed. Baseline data are the facts and figures that tell you how big
the problem is; it gives specific figures about the extent to which it
exists in your community.

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 VMOSA

• Strategy
– is a means by which long-term objectives of the firm will be achieved

– is the creation of a unique and valuable position , involving a different

set of activities. It is about being different (Porter)

– relates to non-routine problems for which no pre-determined solutions

exist

– Is a tool that can be used to fight business rivalries

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• A strategy
– is a way of describing how you are going to get things done.

– It is less specific than an action plan (which tells the who-what-when);

instead, it tries to broadly answer the question, "How do we get there from
here?" (Do we want to take the train? Fly? Walk?)

– The following are some of the fundamental objectives of strategy:

– To foresee the future

– To know where firms are going and why they are going there

– To take into account the probable behaviours of customers and competitors

– To maximize the strength of the corporate firm and minimize the strength
of competitors
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 VMOSA
• Strategy is a set of actions and decisions that enables a firm to answer
questions like:

– Where does a firm compete?

– What unique values would a firm bring in, why customers choose
products or services of a particular firm?

– What resources and capabilities do the firm utilize?

– How does a firm sustain its capabilities to provide that unique value?

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• Mintzberg summarize strategy using 5P’s

• Strategy is:

– a plan because it relates how we intend to realize our goals

– a ploy because it relies on secrecy and deception

– a pattern in decisions and actions

– a position (the stance we take). It is a mediator between the internal and

external environment

– a perspective as it is a vantage point and can be seen from other

vantage points too

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• A good strategy will take into account existing barriers and resources (people,
money, power, materials, etc.). It will also stay with the overall vision, mission,
and objectives of the initiative.

• Often, an initiative will use many different strategies-

– providing information,

– enhancing support,

– removing barriers,

– providing resources, etc.--to achieve its goals.

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• Objectives outline the aims of an initiative--what success would look like in
achieving the vision and mission.

• By contrast, strategies suggest paths to take (and how to move along) on the
road to success. That is, strategies help you determine how you will realize
your vision and objectives through the nitty-gritty world of action.

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 MISSION TO VISION VIA STRATEGY

MISSION
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• Annual objectives
– short-term milestones that organizations must achieve to reach long-term
objectives

– should be measurable, quantitative, challenging, realistic, consistent, and

prioritized

– should be established at the corporate, divisional, and functional levels in

a large organization

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• Policies

– the means by which annual objectives will be achieved

– include guidelines, rules, and procedures established to support efforts to

achieve stated objectives

– guides to decision making and address repetitive or recurring situations

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 Determinants of strategy

• The four major determinants of strategy in todays complex, dynamic and

uncertain environment:

– External opportunities and Threats (Industry specific factors)

– Internal Resources, Capabilities and competencies (Firm specific

factors)

– Personal values of the executives (Ethical Behaviour)

– Obligation to the society and stakeholders (CSR)

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 End of Chapter
one

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