Chapter 1: The strategic management process

LEARNING OUTCOMES
• Understand the definition and explanation of strategic
management
• Differentiate between the key elements of strategy
• Identify the people involved in strategic management
• Understand the characteristics of strategic planning
• Understand the strategic management process as well as why
strategy is important
• Recognise the benefits of strategic management
• Recognise the risks of strategic management
• Understand all the drivers of the organisation’s environment
• Perceive the link between strategy and ethics
 INTRODUCTION

• One of the most important questions in business and not-for-

profit organisations is why some organisations are successful and
others struggle or even fail.

• Luck and intuition may play a role, but organisations are usually
successful because they plan for the future.

• In South Africa, strategic management is even more important.

• An organisation cannot survive the volatile future without proper

strategic management.
 WHAT IS STRATEGIC MANAGEMENT?

Defining strategic management

• The ultimate objective is to position the organisation optimally for
the future.
• There are different definitions of strategic management.
• Strategic management can be defined as a process whereby the
internal and external environments are analysed to identify
strategic goals and to develop strategies in line with the
organisation’s vision and mission, that must be implemented
through a coordinated and integrated effort of different functional
areas in order to achieve these strategic goals of the organisation
with the ultimate purpose of gaining a competitive advantage.
 WHAT IS STRATEGIC MANAGEMENT?

• Different tasks can be identified:

– Formulating a strategic vision, mission and values, indicating
the long-term direction of the organisation.
– Identifying resources and capabilities through internal
environmental analysis.
– Analysing the external environments to identify the challenges
and opportunities for the organisation.
– Identifying the long-term goals and the most applicable
strategies to deliver value to the stakeholders.
– Coordinating and integrating the effort of people, structures,
technologies and allocated resources to implement the
identified strategies.
– Evaluating the success of the strategic choices and
implementation through strategic control and evaluation.
 WHAT IS STRATEGIC MANAGEMENT?

• When an organisation is successful in formulating and

implementing a value-creating strategy, the organisation will
achieve strategic competitiveness.

• What is a strategy then? Strategy can be defined as an effort or

deliberate action or a course of action that an organisation must
implement to outperform its rivals.

• An important concept in strategic management is “competitive

advantage”.
 WHAT IS STRATEGIC MANAGEMENT?

Origins of strategy
• The word “strategy” comes from the Greek word strategos –
meaning a military commander – military origin.
• In military strategy, the idea was to identify the weak spots of the
enemy and use your own strengths to attack where the enemy
was most vulnerable.
• Strategy is a common concept involving the process of analysing
the situation and then developing a strategy (plan) on how to
outsmart your opponent.
• Frederick Taylor and Henry Fayol laid the broad perspective of
how to perform better.
• It is only since the 1960s that strategic management really
became a distinct academic field.
 WHAT IS STRATEGIC MANAGEMENT?

Why is strategy important?

• The following reasons can be provided:
– The entire organisation is involved in the strategy process.
– It helps the organisation not only to survive, but also to add
value to stakeholders.
– Strategy helps the organisation to develop a relationship with
its environment.
– An organisation can only develop a sustainable competitive
advantage through an appropriate strategy.
– Good corporate governance requires an effective strategic
management process to be in place.
 WHAT IS STRATEGIC MANAGEMENT?

Key elements of strategy

• Sustainability – strategic decisions must be maintained over a

long time.

• Competitive advantage – the purpose of strategy is to achieve a

sustainable competitive advantage.

• Alignment with its environment – the internal environment must

be aligned with the challenges and opportunities from the
external environment.
 WHAT IS STRATEGIC MANAGEMENT?

Key elements of strategy

• Processes development to deliver the strategy – business

processes must be developed to answer the question on how to
outsmart competitors.

• Value add – strategy must add value for all the different
stakeholders.

• Who are the stakeholders?

 WHAT IS STRATEGIC MANAGEMENT?

Levels of strategy
Figure 1.1 Levels of strategy
 WHAT IS STRATEGIC MANAGEMENT?

The people involved in the strategic management process

• Environmental analysis is the responsibility of every manager

from top management to middle management and down to the
supervisory level.

• Strategy formulation is mainly the responsibility of top

management.

• At the implementation phase all the employees are important

and they must realise the vital role they play in implementing the
strategy.

• Strategy review and evaluation must be done by top

management.
 WHAT IS STRATEGIC MANAGEMENT?
Characteristics of strategic planning
• A well-written strategic plan plays an important role in an
organisation’s growth and success.

• A strategic planning process

– is a learning process
– is a discovery process
– is a process in which openness to different perceptions and
understandings are fundamental
– requires the separation of strategic thinking from other issues
when decision making has to be done
– is supported by priority-based resource allocations
– informs efforts to implement decisions
– establishes goals
– takes account of the need for “goal congruency”
– is responsive and innovative rather than reactive.
THE STRATEGIC MANAGEMENT PROCESS

• Organisational direction and environmental analysis

• Strategy formulation
• Strategy implementation
• Strategic control and evaluation
 THE STRATEGIC MANAGEMENT PROCESS

Figure 1.2 The strategic management

process (Textbook, page 8)
 THE STRATEGIC MANAGEMENT PROCESS

Figure 1.2 The strategic management process

(Textbook, page 8)
 THE STRATEGIC MANAGEMENT PROCESS

Figure 1.2 The strategic management process

(Textbook, page 8)
 THE STRATEGIC MANAGEMENT PROCESS

Figure 1.2 The strategic management process

(Textbook, page 8)
 DIFFERENT APPROACHES TO THE
STRATEGIC MANAGEMENT PROCESS

• Two main approaches:

– The prescriptive approach (systemic approach)

– The emergent strategic approach (process approach)

 DIFFERENT APPROACHES TO THE STRATEGIC
MANAGEMENT PROCESS

The prescriptive approach

• A linear and rational process – the different phases are linked

sequentially – known as a top-down approach to strategy.

• The formal prescriptive process is criticised mainly because of the

unpredictability of the real world.

• These critics point towards the basic assumptions.

 DIFFERENT APPROACHES TO THE STRATEGIC
MANAGEMENT PROCESS

The prescriptive approach

• What are some of these assumptions?

– The future of an organisation can be accurately predicted.
– The strategies proposed are logical and capable of being
managed in the way proposed.
– The long-term benefit is more important than the short-term
advantages.
– After the analysis phase, strategies are specified and need no
further development or change.
 DIFFERENT APPROACHES TO THE STRATEGIC
MANAGEMENT PROCESS

The prescriptive approach

• The prescriptive approach may present some advantages.

• There are, however, also some drawbacks to the formal
prescriptive approach.
• Despite what has been said about the prescriptive approach, it
favours a step-by-step way to achieve the organisation’s
objectives.
 DIFFERENT APPROACHES TO THE STRATEGIC
MANAGEMENT PROCESS

The emergent strategic approach

• The different phases of strategic management are interrelated – analysis is
still the first phase, but strategy development and implementation are
closely linked.
• The approach to strategy is to try a specific strategy and see what happens.
If it fails, management will adjust it as the organisation implements it.
• Strategic thinking enables managers to have an integrated perspective on
the organisation and to concentrate on the interrelationships between the
different components of strategic management.
• There are advantages of this emergent process.
• There are also drawbacks of this approach.
• The important conclusion from these approaches is that the strategic
management process consists of different phases.
 BENEFITS OF STRATEGIC MANAGEMENT

• In general, the benefits can be grouped as:

— Financial – organisations experience an improvement in their
financial performance.
— Non-financial benefits – an increased awareness in the external
environment with respect to threats and opportunities, an
increase in productivity and reduced resistance from employees
because they have a clearer understanding of what is
happening in the organisation.
 BENEFITS OF STRATEGIC MANAGEMENT

• Prevention of problems.
• Group-based decisions are better than individual decisions.
• Higher productivity.
• Improved communication across the different organisational
functions.
• Gaps and overlaps in activities are reduced.
• Resistance to change is reduced.
• Improved commitment.
• Forward thinking.
 RISKS OF STRATEGIC MANAGEMENT

• Time.

• Avoid responsibilities.

• Unattained expectations.

• Negative perception of strategic management.

• Success groove.

• Not involving key employees.

 THE DRIVERS OF THE ORGANISATION’S
ENVIRONMENT

• The context of the environment, in which organisations have to be

managed strategically, establishes the rules of the game.

• The drivers are:

– the information revolution
– technological changes and breakthroughs
– globalisation.
 THE DRIVERS OF THE ORGANISATION’S ENVIRONMENT

The information revolution

• The amount of information that is being created in digital format
is growing more than 57 % per year.
• The availability of this information has changed the way we do
business.
• When information is read, understood, interpreted and applied, it
is transformed into knowledge.
• Knowledge must be used to achieve increased effectiveness and
efficiency – becomes an essential resource to production.
• The implication for strategic management – information and
knowledge are the keys to gaining a competitive advantage.
 THE DRIVERS OF THE ORGANISATION’S ENVIRONMENT

Technological changes and breakthroughs

• Technology refers to all the equipment, material, knowledge and
experience in an organisation used to perform its tasks.
• Technological diffusion – speed at which technologies are available
and are used.
• Three aspects of the organisational environment are affected by
technological change:
• The amount of market competition and uncertainty are
increasing,
• There are requirements for more diversity and improved quality
in the organisation's products or services, and
• The political and legal environment influencing the organisation
will increase in complexity.
• This influence on the organisation’s structure and relationships with
employees and customers.
THE DRIVERS OF THE ORGANISATION’S ENVIRONMENT

Technological changes and breakthroughs

• Covid pandemic changed the working environment – expedited
technological use.
• Innovation is an important technological trend.
• Technology and innovation will influence the way an organisation
is managed strategically – influence on sustainable competitive
advantage.
• Perpetual innovation describes how fast and consistently new
technologies replace older ones.
• The challenge for organisations is to capture and exploit the
unique advantages of technology and use innovation to create
new valuable processes and products.
 THE DRIVERS OF THE ORGANISATION’S ENVIRONMENT

Globalisation
• World is the marketplace.
• Organisations can no longer remain ignorant about globalisation
when developing and implementing strategies.
• To create a competitive advantage, organisations must look locally
and globally for potential customers.
• Globalisation has created new ways of looking and thinking about
the organisational environment.
• Strategic implication of these drivers is that organisations are
operating in an environment characterised by continuous
turbulence and change – need for speed is more important than
ever before.
 ETHICS AND STRATEGY

• Ethics is an important concept that must have an influence on

strategic management.
• Organisational ethics refers to the standards of conduct that the
organisation must set itself in its dealings with all the different
stakeholders of the organisation.
• The code of ethics determines the behavioural norms according to
which the organisation operates.
• It is important that the organisation has an ethical framework that
will support the organisation’s standards of conduct.
 SUMMARY

• A definition of strategic management has been given.

• Discussed the reasons why strategic management is important.
• The strategic management process.
• The two main approaches to strategy.
• The benefits and the risks of strategic management.
• The drivers for strategic management.
• The importance of ethical conduct in an organisation.