Professional Documents
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Chapter 1 Overview of SM
Chapter 1 Overview of SM
DEVELOPMENT PLANNING
&
STRATEGIC MANAGEMENT
Credit hours: 3
01/25/2023 1
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All organizations seek answers for three questions
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CHAPTER I
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Term Definitions
• In ancient Greek, ‘stratos’ was the term for the army and so in military
terms, ‘strategy’ referred to ‘the act of the general’.
• So, the origins of ‘strategy’ – the ‘art of the general’ – comes from the
military arena –“The Art of War”
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Views and Opinions Expressed by Leading thinkers in the Field of
Business Strategy
• Andrew defines strategy as: “The pattern of objectives, purpose, goals, and the major
policies and plans for achieving these goals stated in such a way so as to define what
business the company is in or is to be and the kind of company it is or is to be”.
• This definition refers to the ‘business definition’, which is a way of stating the current
and desired future position of company, and the objectives, purposes, goals, major
policies and plans required to take the company from where it is to where it wants to be.
Cont’d
• Igor Ansoff explained the concept of strategy as: “The common thread
among the organization’s activities and product markets…that defines the
essential nature of business that the organization was or planned to be in
future”.
• Ansoff has stressed on the commonality of approach that exists in diverse
organizational activities including the products and markets that define
the current and planned nature of business.
Cont’d
• ‘Unified’ means that the plan joins all the parts of an enterprise together;
‘comprehensive’ means it covers all the major aspects of the enterprise,
and ‘integrated’ means that all parts of the plan are compatible with each
other
Cont’d
“the determination of the basic-long term goals and objectives of an enterprise, and
the adoption of courses of action and the allocation of resources necessary for carrying
out these goals”.
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Cont’d
Generally:
• Strategy is organization's pattern of response to its environment over a period of time to achieve its goals
and mission.
• strategy is “A unified, comprehensive and integrated plan design to assure that the basic objectives of the
enterprise are achieved.”
• Strategy is the company’s long-term plan for how it will balance its internal strengths and weaknesses with
its external opportunities and threats to maintain a competitive advantage.
• Strategy is "the determination of basic long term goals and objective of an enterprise and the adoption of
the courses of action and the allocation of resources necessary for carrying out these goals
.
• The defeat of Nazi Germany was arguably due to a dire strategy by the
(Rusia)-so while the armed forces were highly skilled and had
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Hierarchy of Strategy
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a) Corporate level strategy
• Corporate level strategy concerned with the issue that are corporate
responsibilities like identifying the overall goals of the corporation, the type
of business in which the corporation should be involved & the way in which
business will be integrated & managed.
• Corporate strategies typically fit within the three main categories of stability,
growth, and retrenchment
01/25/2023 Ch 1 -19
…….Strategic Management
• SM is “aset of managerial decisions and actions that determines the long-
run performance of an organization”
“SM is defined as the process by which managers of the firm analyze the internal & external
environments for the purpose of formulating strategies and allocating resources to develop a
competitive advantage in an industry that allows for the successful achievement of organizational goal
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Strategic
. management answers the following 3
questions:
assessment)
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Contd…
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Contd..
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Strategic Management Process/model/elements
There are three stages in strategic management process;
1. Environment Scanning
2. Strategy formulation
3. Strategy implementation
4. Strategy evaluation
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strategic management model
Cont’d
Environmental Scanning: is the monitoring, evaluating and disseminating of
information from the external and internal environments to key people within the
organization
• Strategy formulation: includes developing a vision & mission, identifying an
organization’s external opportunities & threats, determining internal strengths &
weaknesses, establishing long-term objectives, generating alternative strategies, &
choosing particular strategies to pursue
and setting policy guidelines.
Mission
• the purpose or reason for the organization’s existence
Vision
• describes what the organization would like to become
Objectives
• the end results of planned activity
Cont’d
Strategies- form a comprehensive master plan that states how the corporation will
achieve its objectives and mission. It maximizes competitive advantage and
minimizes competitive disadvantage.
Policies- the broad guidelines for decision making that links the formulation of a
strategy with its implementation
Strategy implementation: the process by which strategies and policies are put
into action through the development of:
Programs
Budgets
Procedures
NB: the strategic-management process does not end when the firm decides what
strategy or strategies to pursue. There must be a translation of strategic thought
into strategic action.
Cont’d
Evaluation and Control: Strategy evaluation is the final stage in the
strategic management process.
• Management desperately needs to know when particular strategies are not
working well; strategy evaluation is the primary means for obtaining this
information. All strategies are subject to future modification because
external and internal forces are constantly changing.
• Performance: the end result of organizational activities
• Feedback/Learning Process: revise or correct decisions based on
performance
• Strategists do not go through the process in a lockstep fashion. Generally
there is a give and take among hierarchical level.
Need & Benefits of Strategic Management
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Why some managers failed to have strategy?
Some firms do not engage in strategic planning. Some reasons for poor or no strategic planning are as follows:
• Too Expensive—some organizations are culturally opposed to spending resources
• Poor Reward Structures—when an organization assumes success, it often fails to reward success. Where failure occurs,
then the firm may punish. In this situation, it is better for an individual to do nothing (and not draw attention) than risk
trying to achieve something, fail, and be punished
• Fire-fighting—an organization can be so deeply embroiled in crisis management and fire-fighting that it does not have time
to plan.
• Waste of Time—some firms see planning as a waste of time since no marketable product is produced. Time spent on
planning is an investment.
• Laziness—People may not want to put forth the effort needed to formulate a plan
• Content with Success—particularly if a firm is successful, individuals may feel there is no need to plan because things are
fine as they stand. But success today does not guarantee success tomorrow.
• Lack of accuracy- Future is unpredictable
Cont’d
• Fear of Failure—by not taking action, there is little risk of failure unless a problem is urgent and
pressing. Whenever something worthwhile is attempted, there is some risk of failure.
• Overconfidence—as individuals amass experience, they may rely less on formalized planning. Rarely,
however, is this appropriate. Being overconfident can bring demise. Forethought is rarely wasted and is
often the mark of professionalism.
• Prior Bad Experience—People may have had a previous bad experience with planning, where plans
have been long, cumbersome, impractical, or inflexible. Planning, like anything, can be done badly.
• Fear of the Unknown—People may be uncertain of their abilities to learn new skills, their aptitude with
new systems, or their ability to take on new roles.
• Honest Difference of Opinion—People may sincerely believe the plan is wrong. Different people in
different jobs have different perceptions of a situation.