What is Strategic management?

Strategic management is the long-term aim

of an organization.
 is about handling the entirety of an
enterprise.
 This requires the degree to which
activities meet the strategic needs of
the organization’s policy.
Strategic management is the overall long-
term goal of the management of the
organization.
 It differs from strategy, the overall
method of a company in managing
activities to achieve the long-term
objective. COMPONENTS OF STRATEGIC
MANAGEMENT
 The organization's strategy must used
to guide and align sub-strategy What is purpose?
formation at different parts of the
It is the primary reason for an organization's
organization.
long-term existence and the starting point for
Strategic planning is the practice of understanding an organization in its entirety.
organizing scheduling tasks concerning roles
The purpose is the Vision and Mission top
and resources within a given timeline to
level and communicated from there through
achieve the organization's goals.
purpose statements of vision, mission, and
Strategic change is a phase of fundamental values.
transition that takes a company to a new
A situation analysis evaluates an
sustainable competitive position, which is
organization's current external and internal
likely to entail changes to the current strategy.
situations; these are used to develop
Continuous improvement is organizational strategic objectives.
learning, which promotes and incrementally
The strategy used to achieve strategic
increases the efficiency and satisfaction of
objectives is conditioned by the scale and
the customer in day-to-day management,
nature of an organization's activities, whether
according to the organization's strategic
single-business, multi-business, or global
requirements.
orientation.
Competitive strategy is a method at the
Implementation involves coordinating
company level intended to retain a
change management and strategic
competitive edge over rivals and future rivals.
monitoring through strategic performance
management, including feedback and
learning.
The effectiveness of strategic management
of an organization ultimately depends on
nature and commitment to top management
and strategic leadership.

The sole responsibility for handling the
elements of strategic management lies with
an organization’s top leadership.
To some degree, of course, everybody needs
to participate.
Senior level, however, is the one that spends
most of its time on strategic management.
TIME SPENT ON ORGANIZATIONAL
ACTIVITIES
Other levels spend their time primarily on
daily organizational and functional
character management.
Strategic management must, therefore, be a
top-down-oriented procedure, but this must
be done in ways that promote bottom-up
decision-making and input on the viability and
success of strategically relevant research at
both organizational and functional levels.
purpose.
Strategic goals and strategies of a top-level
to achieve them need to be broken down into
departmental strategic goals and strategies
and translated into operational goals and
daily management strategies.
This order of operation is often called a
Hierarchy of Strategy.
It must coordinate to ensure that everyone is
working on the organization's purpose.
What is STRATEGIC PLANNING?
Strategic planning is for an executive or
senior management to schedule strategic
decisions in advance.
It is a structured, systematic method that
offers a sequenced structure or
organizational template for an organization to
move toward a long-term goal.
Strategic planning is equated to POST at its
purest:
purpose,
Objectives,
Strategy,
Tactics.
Strategic planning is known at its most
dynamic, as long-range planning. This
explores patterns for predicting future things,
often well into the future.
What is STRATEGIC CHANGE?
Strategic change is a structural transition
aimed at bringing an organization to a new
success role.
It works by concentrating time and money on
critical success drivers or strategic goals to
bring a company to a new desired state and
marketplace.
So, a strategy designed to achieve a future
vision of the state guides the direction of
change.
It demands a small number of strategic goals
that senior managers can manage
realistically.
Given the demands on top management
regarding attention and time, keeping
strategy simple and not getting embroidered
in too much detail is essential.
What is CONTINOUS IMPROVEMENT?
• The continuous change is gradual and
is focused on progress.
• Those usually motivated by a need for
day-to-day management to maintain
and boost efficiency and consumer
satisfaction.
 • The principle is to remain within the The phrases strategic management and
core value-creating areas of an strategy are used interchangeably through
organization's stable business model. training courses and textbooks.
• To ensure a company remains fit for They are entirely different things.
purpose, many primary performance
The strategy principle is fundamental to
measures (KPIs) are set out, along
strategic management but is just a part of
with the plans and priorities to achieve
strategic management like strategic planning.
them, usually in the form of a business
plan. A strategy is an approach to managing the
activities of an entity to ensure its mission
Note: KPI – Key Performance Indicator
and function are maintained over time.
• These are often misunderstood as
It serves as a frame of reference for all
strategic plans, but they are about
organizational decision-making by clarifying
improving operational effectiveness to
the organization's overall goals and defining
the extent that the KPIs drive best
the critical options for advancing the course
practices.
of activities in line with its intent.
• While essential to sustaining strategy,
Two perspectives are considered individually
daily management's substance may
but must be brought together, especially for
not be very different from that of rivals.
an effective competitive strategy.
What is COMPETITIVE STRATEGY?
It begins with positioning the external market
• The competitive strategy gives a and the other, the internal strategic
company an edge in achieving above- resources.
average profits in its industry by
SUMMMARY
generating unique value relative to that
provided by its rivals.
• It needs a long-term strategic
plan that is sustainable.
• Its function is to integrate and
organize the activities of those
organizations, which
distinguishes the organization
from rivals in what it does and
offers.
• A sustainable competitive
advantage is not merely doing
similar activities better than What is VISION STATEMENT?
rivals: it is making those Visions may expand as a declaration of
activities impossible for intent in the form of a text.
competitors to replicate at an
equal price. Typically, they are short and memorably
ambitious but not overblown.
A vision should provide the underlying
rationale for the change and make sure the
reasons for the change and the specific
consequences for action are clear.
What is STRATEGY?
The motivational qualities should be The five competitive forces are the primary
sufficiently thrilling and motivating to influences affecting the choice of industry and
inspire people to seek possibilities and competitive positioning, which involve an
reconsider their jobs. organization's competitive advantage and
profitability.
What is MISSION STATEMENT?
Hyper competition is a dynamic state of
A mission statement explains WHY an
constant disequilibrium and competitive
organization.
change in an industry.
It explains the scope of an organization and
will typically have a rationale for explaining
how it adds value to stakeholders.
The style and form of statements vary
considerably in practice as organizations use
them in different ways.
What is VALUES STATEMENT?
THE PESTLE/PESTEL FRAMEWORK
A value statement documents the expected
collective norms and behavioral standards for • PESTEL, a mnemonic for Political,
managers and the workforce in an Economic, social, technological,
organization. environmental, and legal factor is
the most comprehensive and used
It can also express how managers and other
approach for grouping and reviewing
workers will do their job in terms of a set of
macro-environmental trends in
values.
strategic management.
Notice that values vary from the value of
• Structural breaks are major and
stakeholders: values are the principles under
unpredictable events in the external
which people operate, while the value is a
environment. These are likely to
product of that operate.
require a sudden rethinking of an
Value statements should be crafted to organization's purpose and strategy.
preserve social capital by stressing the
• Changes in these fields over time will
principles on which most working
likely contribute to industrial change.
relationships rely, confidence, fairness,
support, and honesty. • If an organization's external
environment is monitored and audited,
What is EXTERNAL MANAGEMENT?
it will be better able to respond to
The external environment is those trends and respond faster than its
conditions external to the organization, which competitors.
influences the organization and its industry,
• A PESTLE analysis studies the critical
especially those that influence the intensity of
external factors (Political, Economic,
competition.
Sociological, Technological, Legal, and
INDUSTRY LIFE CYCLE (Overview) Environmental) that influence an
organization.
The industry life cycle likens the life of an
industry to a living organism that goes • It can be used in various
through stages of INTRODUCTION, scenarios to guide people,
GROWTH, MATURITY, AND DECLINE; each professionals, and senior
step exhibits distinct characteristics that managers in strategic decision-
should be considered against the making.
organization’s purpose.
POLITICAL TRENDS
Governments and agencies and the thought Issues such as environmental wealth, global
and behavior of prominent organizations and warming, and plastic packaging waste and
individuals: in many ways, government intensive farming escalate.
policies and regulatory decisions influence
Many companies would have to take these
competition.
into account.
Significant uncertainty hangs over financial
LEGAL TRENDS
markets, for example, because of a potential
trade war between the United States and Legal considerations include legislation and
China. administrative action, boundary requirements,
standards, and labor regulations.
ECONOMIC TRENDS
It can also include topics of globalization that
Economic trends include resource and price
deal with international trade and competition
use, interest rates, disposal income,
law.
employment, inflation, and productivity.
Emerging economies in China, India, and National legal systems differ enormously, and
several other Asian countries have led the their consequences are profound for
world in economic growth rates since the individual industries.
2008 financial crisis.
One of the most significant trends is to tighten
Though globalization has slowed in the regulatory accounting standards after
aftermath of the global financial crisis, it massive corporate failures – like Enron, Tyco
shows every sign of continuing at a slower International, Peregrine Systems, and
pace. WorldCom – and the dot.com bubble burst.
SOCIAL TRENDS WHAT IS INDUSTRY LIFE CYCLE?
Social factors include economic, social, and The industry life cycle likens the life of an
lifestyle changes, gender roles and group industry to a living organism: markets
identities, national cultures, ethics, morals, expand over time, eventually MATURING and
and aspirations. DECLINING.
The post-WWII baby boom in Western The life cycle has an introduction, growth,
countries created a strong and distinct maturity, and decline stages.
community of customers who will spend more
on health and leisure as they age.
TECHNOLOGICAL TRENDS
The technology involves impacts on
personnel, organizational practices, goods
and services, and operations from current
and emerging technological changes.
The proliferation of smartphones and
applications for price scanning and the
expanded internet usage changes the nature
of shopping and the role of information more
STAGES
generally.
Introduction stage
ENVIRONMENTAL TRENDS
Production is low initially, costs are high, and
Environmental factors include not only quality
demand is deficient.
of life, sustainability, and resource recycling
but also logistical and infrastructure There may be a wide range of products and
possibilities. services and diverse organizations.
The first to perfect a robust design and has changed industries in modern times,
applications could capture a large portion of bringing in new life cycles.
the future market as a first mover.
THE FIVE COMPETITIVE FORCES
Success is not necessarily based on the best
Arguably the most crucial contribution to
function or the lowest cost, but rather a robust
thinking about strategic strategies came from
product supported by a marketing mix that
Michael Porter (1980), who introduced the
locks in first users, who frequently buy for
competitiveness of the market and the
novelty reasons and early adopters in the
concept of five competitive powers.
brand's personality.
The core factor is the strength of the
Growth Stage
competition between established
The time when first movers are well known in competitors; four others affect this – the
their industries and take dominant roles. threat of new company, the bargaining
power of customers, the bargaining power
The expansion comes as the latest items get
of suppliers, and the threat of substitutes.
familiar to consumers, dealers, and retailers.
The strength of these forces and how they
Supplier companies gain expertise and
influence one another influences industry
leverage more significant economies of scale
productivity and forms its structure.
to deliver lower prices.
The strength of these forces and how they
When a bandwagon effect gathers strength, a
influence one another influences industry
tipping point is reached at a sales threshold.
productivity and forms its structure.
As a dominant design establishes itself, the
number of competing organizations rises and
then reduces to a handful.
Maturity Stage
A mature industry is relatively stable, and a
handful of competitors have been reduced to
the competition.
Observers often use the term category killer
to identify a company that has managed to
remove much of the round for a product or
service category. During the maturity period,
individual growth levels can no longer be • If the competitive forces are healthy, it
sustained without taking market shares from is unlikely that a company can receive
other rivals. good returns on its investment.

Decline Stage • If they are low, the returns may be

above average.
The reasons for the decline lie in the global
environment and PESTLE variables. • Some factors affect short-term
productivity, but it is necessary to note
A significant explanation for this is that the five competitive forces are
technological change. long-term influences.
Old technology may rally, though – a 'sailing • For example, while food prices go up
ship effect' – as steamships were and down depending on the
introduced, sailing technology became more environment and fuel costs of storage
productive. and transportation, supermarkets'
The integration of computing, overall and longer-term profitability
telecommunications, and media technology depends on the retail chains'
 negotiating power compared to
their suppliers and consumers.
• The danger to new entrants is small,
and the potential for food substitutes is
limited.
THE THREAT OF NEW ENTRANTS
(NEW BUSINESS)
• New external competition brings
additional capacity pressures to
existing market shares, influencing the
industry's prices, costs, and
investment.
• Because of this, many existing
companies in a threatened industry will
hold down profitability and make their
business less appealing to potential
entrants.
• If entry barriers are small and the
market’s competitiveness is strong,
a new company will enter the
industry, push down prices, and
increase costs for established
competitors.
Here is the Challenge!
The challenge for new entrants is to find ways
to resolve the entry barriers without the high
investment costs that cancel the profitability
of industrial operations.
THERE ARE EIGHT SOURCES OF
BARRIERS TO ENTRY THAT ENTRANTS
HAVE TO CONSIDER AND OVERCOME:
1) Supply-side economies of scale
– incumbents have a cost advantage over
incumbents from economies of scale and can
sustain lower prices.
2) Demand-side benefits of scale
– incumbents have a reputation for quality
and service that comes from size.
3) Customer switching costs
– there is a high cost to customers of
incumbents in switching to entrants.
4) Capital requirements
– cost and availability for investment in new
areas will likely be high for entrants.
5) Incumbency advantages independent of
size advantages
- are stemming from the first advantage, such
as proprietary technology, access to
resources, and locations.
6) Unequal access to distribution
channels
– fewer wholesale and retail channels may
mean these are tied up by incumbents.
7) Restrictive government policy
– competition policy, regulation, and licensing
may foreclose entry to entrants from
overseas.
8) Expected retaliation
– the ability and history of incumbents to
retaliate when faced with new competition
may deter entrants.
The importance of the five forces
Michael Porter revisited his five-force
framework in an article published in 2008.
He summed up its importance:
Understanding the forces that shape industry
competition is the starting point for
developing a strategy.
Every company should know its industry's
average profitability and how it has changed
over time.
The five forces reveal why (1) industry
profitability is what it is.
Only then can a company (2) incorporate
industry conditions into a strategy.
An organization's competitive strategy can
base on building defenses against the five
forces or finding a position in an industry
where the forces are weak.
Porter warns that an organization should be
careful not to set in motion dynamics that will
undermine the industry's attractiveness in the
longer term.
However, the short-term may be more critical
for some industries, especially those
emerging from new technologies.
What is STRATEGIC FIT?
matching the external environment’s
opportunities with an organization's internal
capabilities.
The opportunities and threats suggested by
PESTEL, the industry life cycle, and the
five competitive forces have to be assessed
against the strengths and weaknesses of the
organization's internal environment.
How good this fit is will be an essential
determinant of the organization's strategic
success in achieving its purpose.
THE INTERNAL ENVIRONMENT
The VRIO framework – value, rarity,
inimitability, and organizational support is
a mnemonic that identifies four critical criteria
for assessing which capabilities are strategic.
1 Valuable – when they enable an
organization to implement a strategy that
improves its effectiveness and efficiency;
2 Rare – few, if any, competing organizations
have these valuable attributes;
3 Inimitable – the attributes are too difficult to
emulate because they have a unique history
and development, their nature is ambiguous
or socially complex; and
4 Organizable – and organization can
manage and exploit the competitive the
potential of the first three.
Core competencies are organization-
specific abilities that an organization's people
have, which enable them to sustain
competitive advantage and superior
performance.
Dynamic capabilities allow an organization
to renew and re-create its strategic
capabilities, including its core competencies,
to meet the needs of a changing
environment.
The internal environment comprises those
internal conditions, including the
organization's strategic resources, abilities,
and management capabilities.
The resource-based view of strategy
(RBV) is based on the idea that competitive
advantage and superior performance are
based on the internal management of
strategic resources.
• is a view of strategic management as
the management of strategic
resources.
• These are internal strategic assets,
such as core competencies and how
employees work in ways that are
unique to a particular organization; as
such, they provide a competitive
advantage that is difficult for rivals to
understand and imitate
Organizational learning is broad
incremental learning.
It is based on the organization's experience of
routine working and existing knowledge,
which is called EXPLOITATIVE LEARNING,
and innovatory, based on unfamiliar working
and new knowledge, which is called
EXPLORATORY LEARNING.
TOTAL QUALITY MANAGEMENT (TQM)
• TQM IS AN ORGANIZATION-WIDE
PHILOSOPHY AND A SET OF
MANAGEMENT PRINCIPLES FOR
IMPROVING THE QUALITY OF A
PRODUCT/SERVICE TO CONTINUE
TO MEET CUSTOMER NEEDS.
• THE 'TOTAL' PRINCIPLE IS THAT
CUSTOMER QUALITY IS ONLY AS
GOOD AS THE WEAKEST LINK IN
THE QUALITY CHAIN.
DEMING (OR PDCA) CYCLE (DEMING,
1986):
THE GUIDING PRINCIPLE IS THAT EVERY
PROCESS IS MANAGED ACCORDING TO
THE DEMING (OR PDCA) CYCLE
(DEMING, 1986):
1 PLAN –WHAT HAS TO DO
2 DO – CARRY OUT THE WORK TO PLAN
AND MONITOR
3 CHECK – PROGRESS OF WORK AND
REVIEW
4 ACT – IF REQUIRED TAKE CORRECTIVE
ACTION OR AMEND THE PLAN, THE
CYCLE STARTS OVER
In a tqm-conditioned environment, pdca used
for any business process, including strategic
management.
It forms the primary mechanism for
organizational learning. Pdca drives
continuous improvement (sometimes called
kaizen) in lean working.
As a purely operations-based approach, tqm
is mostly only about taking corrective action
to improve the business process. However,
when business processes are linked to
achieving strategic priorities, an external
dimension is brought to make tqm
strategically sensitive.
It happens with kaizen in lean working when
organizations use hoshin kanri (policy
deployment) to deploy strategic priorities in
the daily management of processes
BUSINESS EXCELLENCE (AUDIT)
MODELS
Excellence models are used to audit good
management practices in the general core
areas of a business or organization; a
familiar name is self-assessment, and the
main reason is to identify and deploy
good training and organization-wide
learning.
Organizations design their frameworks,
but most are based on three models: the
malcolm baldrige national quality award,
the efqm excellence award, and the
deming prize.
The areas for assessment are similar and
cover leadership, people, partnerships
and resources, and processes.
ORGANIZATIONAL LEARNING
• Central to the resource-based view
and the strategic management of
core competencies is organizational
learning.
• Chris argyris and donald schon
(1981) distinguish three kinds:
single loop, double loop, and
deutero-learning.
THESE THREE TYPES OF LEARNING
CORRESPOND TO THREE DIFFERENT
FORMS OF REVIEW:
Single feedback is most associated
•
with routine daily management in
operations;
• Double feedback is mainly
associated with periodic reviews of
strategy, and
• Deutero-learning is essential for
business audits of how an
organization learns and manages its
core processes.
OBJECTIVES:
• Objectives are strategically desired
outcomes that must be managed
effectively if the organization
continues to fulfill its purpose.
• The balanced scorecard is a
documented set of objectives and
measures grouped typically into
four perspectives.
Critical success factors (csfs) are
•
the factors that primarily account
for an organization’s success in
achieving its strategic purpose.
 • Key performance indicators (kpis) 3. ACTION-ORIENTED (AND AGREED
are targets used to monitor UPON)
progress on strategy-related 4. REALISTIC
incremental objectives. 5. TIME-BOUND

• Strategy maps are pictorial

representations of the relative order
of balanced scorecard perspectives,
which used to illustrate cause and
effect.

• Strengths, weaknesses,
opportunities, threats (swot) is a
mnemonic framework used to
analyze an organization's strengths
strategically, weaknesses
(concerned with internal factors),
opportunities, and threats (arising
because of changes in external
factors).
Strengths, weaknesses, opportunities,
threats (swot)
In developing a strategy to achieve strategic
objectives, an organization must take account
of the opportunities and threats present in the
external environment and the strengths and
weaknesses in its internal environment.
An analysis must start with the organization’s
overall purpose and how this translates into
strategic objectives. It should also take stock
of the current assumptions and management
of that purpose.
SWOT is an integrative framework to
consider an organization's strengths,
weaknesses, opportunities, and threats. It
can be used as a quick and simple method or
more deeply as a detailed and
comprehensive organizing framework.
The analysis components must be based on
the determination of strategic objectives, the
reason for a strategic swot, and how a
balanced scorecard fits into a swot scheme.
TO ESTABLISH CLARITY IN OBJECTIVES,
CONVENTIONAL OBJECTIVES SHOULD
BE SMART:
1. SPECIFIC
2. MEASURABLE