TOPIC 1

INTRODUCTION

TO
STRATEGIC
MANAGEMENT
 1.1 Strategic Management: Background and
History
• The history of strategic management can be traced back to the 1950s-
60s. Among its founders are world-famous contributors like Alfred D.
Chandler, Jr., Philip Selznick, Igor Ansoff, Peter Drucker, and others.
They introduced many of the concepts that would later become
pivotal to the whole discipline.
• Alfred D. Chandler, Jr.,

• Philip Selznick
• Igor Ansoff

• Peter Drucker
 1.2 Strategic Management: Definition

• Strategic management involves:

• Analysis
• Strategic goals (vision, mission, strategic objectives)
• Internal and external environment
• Decisions - Formulation
• What industries should we compete in?
• How should we compete in those industries?
• Actions – Implementation of strategy
• Allocate necessary resources.
• Design the organization to bring intended strategies to reality.
• Evaluation & Control
• Evaluate the strategy and measure performance
• Strategic management is the art and science of formulating,
implementing and evaluating cross-functional decisions that will
enable an organization to achieve its objectives.
• It is the process that enables an organization to be better than its
competitors and ensure that it is able to achieve its vision, mission
and objectives.
• Strategic management seeks to coordinate and integrate the activities
of the various functional areas of a business in order to achieve long-
term organizational objectives.
1.3 Strategic Management Process
1. ENVIRONMENTAL SCANNING (STRATEGY ANALYSIS)
• Strategy analysis is the starting point in the strategic management process.

• The analysis needs to be done to effectively formulate and implement strategies.

• It involves careful analysis of the overarching goals of the organization.
• It requires a thorough analysis of the organization’s external and internal environment.
Analyzing organizational goals & objectives
• Establish a hierarchy of goals.
• Vision
• Mission
• Strategic Objectives
Analyzing the external environment of the firm
• Managers must monitor and scan the environment as well as analyze competitors.
• General environment
• Industry environment
Assessing the internal environment of the firm
• Analyze strengths & relationships among activities that constitute a firm’s
value chain.
• Analysis can uncover potential sources of competitive advantage.
Assessing a firm’s intellectual assets
• Knowledge workers & other intellectual assets drive competitive advantage &
wealth creation.
• Networks & relationships plus technology enhance collaboration,
accumulates & stores knowledge.
2. STRATEGY FORMULATION
• Based on strategy analysis, strategy formulation is developed at
several levels.
• Business-level strategy  how to compete in a given business to
attain competitive advantage
• Corporate-level strategy  what businesses to compete in; how
businesses can be managed to achieve synergy
• International strategy  what strategies are needed as the business
ventures beyond its national boundaries
• Entrepreneurial initiatives  how can businesses create new value
Formulating business-level strategy
• Successful firms develop bases for sustainable competitive advantage through:
• Cost leadership and/or
• Differentiation, as well as
• Focusing on a narrow or industrywide market segment.
Formulating corporate-level strategy
• Addresses a firm’s portfolio (or group) of businesses
• What business or businesses should we compete in?
• How can we manage this portfolio of businesses to create synergies?
Formulating international strategy
• What is the appropriate entry strategy?
• How do we go about attaining competitive advantage in international markets?
Entrepreneurial strategy and competitive dynamics
• How do we recognize viable opportunities?
• How do we formulate effective strategies?
Corporate-level managers
• Chief executive officer (CEO), other senior executives, and corporate staff
• Oversee the development of strategies for the entire organization.
• Provide a link between people who oversee the firm’s strategic development and the
shareholders.
• Ensure that business strategies pursued by the company are consistent with superior
profitability and profit growth.
Business-level managers
• Heads of business units
• Business unit - self-contained division that provides a product or service for a
particular market.
• Translate statements and intents from corporate level into concrete strategies for
individual businesses.
• Are concerned with strategies specific to a particular business.
Functional- level managers
• Responsible for specific business functions.
• Develop functional strategies to fulfill the strategic objectives set by business- and
corporate-level general managers.
• Provide information that helps formulate realistic and attainable strategies.
3. STRATEGY IMPLEMENTATION
Strategy implementation takes action to implement the formulated
strategy.
• Establish an appropriate organizational design, coordinating & integrating
activities within the firm.
• Coordinate activities with suppliers, customers, alliance partners.
• Leadership ensures organizational commitment to excellence & ethical
behavior.
• Promote learning & continuous improvement.
• Act entrepreneurially in creating new opportunities.
Creating effective organizational designs
• Organizational structures must be consistent with strategy.
• Organizational boundaries must be flexible & permeable.
• Strategic alliances must capitalize on capabilities of other organizations.
Creating a learning organization & an ethical organization
• Effective leaders
• Set a direction.
• Design the organization.
• Develop an organization committed to excellence & ethical behavior.
• Create a “learning organization”
• Benefit from individual & collective talents
Fostering corporate entrepreneurship
• Firms must continually improve & grow.
• Firms must find new ways to renew themselves.
• Entrepreneurship & innovation provide for new opportunities enhance a firm’s innovative
capacity.
4. EVALUATION & CONTROL
• Ensure proper strategic control systems.
Strategic control & corporate governance
• Informational control
• Monitor & scan the environment
• Respond effectively to threats & opportunities
• Behavioral control
• Proper balance of rewards & incentives
• Appropriate cultures & boundaries (or constraints)
• Effective corporate governance
 1.4 Strategic Management Model

Source: Adapted from Thomas L. Wheelen. & J. David Hunger; Strategic Management Business Policy: International Edition; 9 th Edition,
Prentice Hall (2004). pp.10
• Business model
• Conception of how strategies should work together as a whole to
enable the company to achieve competitive advantage.
• Deals with how a company:
• selects, acquires, and keeps its customers.
• defines and differentiates its product offerings.
• creates value for its customers.
• produces goods or services and delivers to the market.
• increases productivity and lowers costs.
• organizes its resources and activities.
• achieves and sustains high profitability and growth.
A Formal Strategic Planning Process
1. Select the corporate mission and goals.
2. Analyze the organization’s external competitive
environment; identify opportunities and
threats.
3. Analyze the internal operating environment;
identify strengths and weaknesses.
4. Select organizational strategies that:
• build on strengths and correct weaknesses.
• are consistent with the mission and major
goals.
• are congruent and constitute a viable business
model.
5. Implement the strategies.
 1.5 Basic Element in Strategic
Management: Direction (Vision and
Mission)
• Vision is defined as the desired or intended future state of a specific organization or enterprise
in terms of its fundamental objective and/or strategic direction.
• Characteristics of good vision statement are short, precise and if possible in one sentence.
• Features of an effective vision statement include:
(1) Clarity and lack of ambiguity
(2) Vivid and clear picture
(3) Description of a bright future
(4) Memorable and engaging wording
(5) Realistic aspirations
(6) Alignment with organizational values and culture

• Vision can be divided into two perspectives: general and specific.

• A mission is a statement describing the fundamental purpose of an organization to exist.

• It concentrates on the present and defines types of customer, business critical processes
and organization offer.

• Features of an effective mission statement include the followings:

(1) It is collaborative
(2) It translate into behaviour by managers and employees
(3) Easy to understand
(4) Mission Statements are built into goals

• The mission statement can also be divided to two perspectives: general and specific.
Components of a Mission statement
• Mission
• Purpose of the company, or a statement of what the company strives to do.
• Vision
• Articulation of a company’s desired achievements or future state.
• Values
• Statement of how employees should conduct themselves and their business to help
achieve the company mission.
• Major goals
• Goal: Precise, measurable, desired future state that a company attempts to realize.
Formulating a mission