CHAPTER 4: STRAGIC MANGEMENT

The set of managerial decisions and actions that determines the long-run performance of an
organization.
The strategic management process is all about creating a roadmap to help you achieve your
vision. .
Strategic management provides overall direction by developing plans and policies designed
to achieve objectives and then allocating resources to implement the plan
PROCESS OF STRAGIC MANGEMENT
1) IDENTIFICATION OF GOAL or GOAL Setting
Identifying the organization’s current mission, objectives, and strategies
• Mission: the statement of the purpose (firm’s reason for being)
• The scope of its products and services.
• Goals: the foundation for further planning
• Measurable performance targets

Many companies kick off the strategic management process by writing a vision statement. A vision statement
communicates where you want to be in the future. It’s different from your mission statement — which describes
why your company exists — but both statements should inform your strategic plan. Once you’ve created or
reviewed your vision statement, it’s time to pick some broad areas of focus. You don’t need to have specific,
measurable goals yet, but you should go into the planning process with an idea of what you want to work on.
1) For example, growing revenue or improving customer service could be goals at this point.

THE MISSION STATEMENT MAIN COMPONENTS

• Customers: Who are the organization’s customers?
• Products or services: What are the organization’s major products or
services?
• Markets: Where does the organization compete geographically?
• Technology: How technologically current is the organization?
• Concern for survival growth, and profitability: Is the organization committed
to growth and financial stability?
• Philosophy: What are the organization’s basic beliefs, values, aspirations,
and ethical priorities?
• Self-concept: What is the organization’s major competitive advantage and
core competencies?
• Concern for public image: How responsive is the organization to societal and
environmental concerns?
• Concern for employees: Does the organization consider employees a
valuable asset?

2. External scanning and analysis

• Focuses on identifying opportunities and threats
The next part of the process is Before you can define strategies and tactics, you need to know where you stand
currently.The more information you have, the stronger the foundation of your strategic plan.
3. Internal scanning and analysis

– Assessing organizational resources, capabilities, activities, and culture:

• Strengths (core competencies) create value for the customer and strengthen the
competitive position of the firm.
• Weaknesses (things done poorly or not at all) can place the firm at a competitive
disadvantage.

SOME COMPNOENTS OF STEP 2 AND STEP 3

1.feedback.
Talk to team leaders to get a better understanding of internal operations. Employee surveys, interviews, and
discussion groups can be used to learn about the perspectives of everyone in the company.
2. Learn about your customers.
You can survey your existing customers or email list to learn more about how your customers and prospects
feel. For example, if they’re generally frustrated with your customer service team’s response time, then
improving that can be a strategic objective. Or maybe you’ll learn about new product features they want, and
you can plan to develop them.
3. Research the competitive environment.
Researching your competitors can help you find your weak spots and learn where you stand out from the crowd.
4. Consider your resources.
When you’re setting your goals, you’ll have to know if you have the people and resources to accomplish them.
Having a clear idea of your resources from the start will help you set realistic objectives.
5. Conduct a SWOT analysis.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. You can organize your SWOT analysis
using
Miro’s SWOT Analysis template.

Step 4: Formulating strategies

– Develop and evaluate strategic alternatives
 – Select appropriate strategies for all levels in the organization that provide relative
advantage over competitors
– Match organizational strengths to environmental opportunities
– Correct weaknesses and guard against threats

SOME COMPONENTS OF FORMULATING STRATEGIES

Strategic objectives
Strategic objectives are high-level goals that help you accomplish your mission. Some examples of strategic
objectives include:
Grow earnings per share by 10% per year
Launch two new products per year
Increase NPS to 50 by 2024
Tactics
For each strategic objective, use tactics that tell you specific actions to achieve the goal. For example, if your
strategic objective is to increase awareness of your brand, a tactic could be to create profiles on the major social
media sites.
Metrics
Part of the strategic planning process is determining how you’re going to measure your progress toward your
objectives. Choose a metric for each goal and make sure you have the ability to track it .
Step 5: Implementing strategies
The process of putting a decision or plan into effects
Secure any resources you need.
Make sure you have the resources, budget, and approvals necessary to execute your plan.
Delegate the work.
Roles should be clearly defined at this point. Who’s in charge of communicating the plan to teams? Who will
report on plan progress? Which departments will be responsible for which tactics?
Launch the plan.
Communicate the details of the plan to the company.
Depending on your organization, you may also need a plan to communicate your strategy with the board, key
customers, investors, or the public.
Communication is a two-way street. Give people a way to ask questions or submit concerns about the plan.
Offer training.
If business decisions are going to be based on your company strategy, decision-makers need to know what that
strategy is.
For people who require a deep understanding of your strategic plan, like department leaders, offer educational
sessions to get them up to speed.
• Step 6: Evaluating Results
– How effective have strategies been?
– What adjustments, if any, are necessary?
Most strategic plans cover the next three to five years. But that doesn’t mean you can’t adjust your strategies
along the way.

Part of your implementation plan should be a schedule for continually reviewing your strategic plan, including
its relevance to your current circumstances, its practicality, and how much progress you’ve made so far.

If any of your strategic objectives or tactics haven’t been implemented on time, ask yourself:

 Are we still making progress toward this goal?

  Do we have the resources to achieve the goal?

 Can the goal be accomplished if the deadline is extended?

 Is the goal still relevant to our current circumstances?

 Can the goal be changed slightly to accomplish something similar?

Some strategies may need to be removed from the plan or updated.

Strategic management process secrets for success

The strategic management process has many points of possible failure. Some organizations never agree on a
plan, while others have great ideas that fall apart in the implementation process.

Types of Organizational Strategies

• Corporate-Level Strategies
– Top management’s overall plan for the entire organization and its strategic
business units.
• Types of Corporate Strategies
– Growth: expansion into new products and markets
– Stability: stability strategy is a strategy in which the organization retains its
present strategy at the corporate level and continues focusing on its present
products and markets. The firm stays with its current business and product
markets; maintains the existing level of effort; and is satisfied with incremental
growth.
– Renewal: redirection of the firm into new markets.This type of strategy helps an
organization stabilize operations, revitalize organizational resources and
capabilities, and prepare to compete once again.

GROWTH STRATEGY
A growth strategy is an organization's plan for overcoming current and future challenges to
realize its goals for expansion. Examples of growth strategy goals include increasing market
share and revenue, acquiring assets, and improving the organization's products or services
.These are Product, Placement, Promotion and Price.
CONCENTRATION STRATEGY
Concentration strategy is a business strategy that focuses on leveraging a company's resources
to target a single market or product line. This strategy involves a company concentrating all its
efforts, resources, and attention on a particular market segment, geographic location, or product
category to achieve dominance and gain a competitive advantage over its rivals.
IKEA
INTEGRATION Integration strategy growth is a business strategy that involves a
company expanding its operations by integrating vertically or horizontally in its value
chain
VERTICAL INTEGREATION you scale your business by building off of your existing
products and/or services. You can expand the products and/or services you offer, like adding a
new feature or expanding a product line.
TYPES
FORWARD VERTICAL INTEGRATION (moves forward to distribution)
Forward vertical integration is a type of business strategy that involves moving through the
production cycle and giving a company more control over its distribution
Netflix deciding to buy a chain of movie theatres (cinemas).
BACKWARD VERTICAL INTEGREATION (moves back to supply chain)
A backward vertical integration strategy involves a firm moving back, or upstream, along the
value chain and entering a supplier's business. Some firms use this strategy when executives are
concerned that a supplier has too much power over their firms and becomes self supplier
Good example was Apple Inc. buying a chip supplier Dialog in 2018
HORIZOTAL INTEGREATIONS
Refers to a strategy of seeking ownership of or increased control over a firm’s competitors.
Two manufacturers of electric engines merge
Facebook and Instagram.
Diversification
Product diversification is a strategy employed by a company to increase profitability and
achieve higher sales volume from new products.
Business-level product diversification – Expanding into a new segment of an industry that the
company is already operating in.
Corporate-level product diversification – Expanding into a new industry that is beyond the
scope of the company’s current business unit.
TYPES
1. Concentric diversification(related)
Concentric diversification involves adding similar products or services to the existing business.
For example, when a computer company that primarily produces desktop computers starts
manufacturing laptops, it is pursuing a concentric diversification strategy.
2. Horizontal diversification(COMPLIEMENTRY)
Horizontal diversification involves providing new and COMPLEMENTERY products or TO
services to existing consumers. For example, a notebook manufacturer that enters the pen
market is pursuing a horizontal diversification strategy.

3. Conglomerate diversification(totally unrelated)

Conglomerate diversification involves adding new products or services that are significantly
unrelated and with no technological or commercial similarities. For example, if a computer
company decides to produce notebooks, the company is pursuing a conglomerate diversification
strategy.

Why Companies Diversify?In addition to achieving higher profitability, there are several
reasons for a company to diversify. For example:
 Diversification mitigates risks in the event of an industry downturn.
 Diversification allows for more variety and options for products and services. If done
correctly, diversification provides a tremendous boost to brand image and company
profitability.
 Diversification can be used as a defense. By diversifying products or services, a company
can protect itself from competing companies.
 diversification allows the company to make use of surplus cash flows.

• Renewal Strategies
–Developing strategies to counter
organization weaknesses that are
leading to performance declines.
Retrenchment: occurs when an organization regroups through cost and asset reductions to
reverse declining sales and profit. a retrenchment strategy entails eliminating all the goods and
services that aren't profitable for your company. It also entails removing your company from a
market where it can no longer survive.
Retrenchment strategy example
For instance, a retail company with multiple stores in different locations may choose to close
down some of the unprofitable stores and focus on the ones that generate profits. This will help
the company reduce costs and improve its overall profitability.
TURNAROUND
The turnaround strategy is a set of strategies designed to rescue a failing business.
When a company that has experienced a period of poor performance moves into a period of a
financial recovery, it's called a turnaround. This means that you have to increase sales, reduce
expenses, and increase profits. In order to successfully implement a turnaround strategy, it is
important to first understand what caused the downturn.
EXAMPLE
Probably the most well-known turnaround success story is the rise of tech company Apple.
Apple went into a decade-long downward spiral after CEO Steve Jobs left the company in 1985
and lower-priced products from competitors, like Microsoft Windows, took over the personal
computer market
 • Strategy - a road map of the actions an entrepreneur draws up to achieve a company’s
mission, goals, and objectives.
Cost leadership strategy The cost leadership strategy is a business model that focuses on reducing
the cost of production and offering the lowest priced products to outperform competitors and gain market share.

CHINA MOBILE and IPHONE

Differenitation strategy Attempting to create a unique and distinctive product or service for
which customers will pay a premium
MAC BOOK
COCA COLA
, a candy company may differentiate their candy by improving the taste or using healthier
ingredients
FOCUS STATEGY
A focus strategy is a method of developing, marketing and selling products to a niche
market,
The focus strategy example is Pepsi Black. Pepsi focuses on broad markets to serve many
customers. However, it focuses on a specific market to serve a target group