STRATEGIC MANAGEMENT

• Strategic Management: is fundamentally about setting the

underpinning aims of an organization, choosing the most appropriate
goals towards those aims, and fulfilling both over time(G.A. COLE
1997).
• First : strategic mgt entails three ongoing processes
• Strategic Management: it entails analysis, decision and actions an
organization undertake in order to create and sustain competitive
advantages
• It concern with the analysis of strategic goals(vision, mission and
strategic objectives along with analysis of the external and internal
environment of the organization.
• These decision address two basic questions
What industries should we do compete? How should we compete in those
industries?
• Actions that must be taken-firm must take necessary action to implement
their strategies.
• SECOND: the essence of strategic management is the study why some firms
outperform others. Thus, managers need to determine how a firm is to
compete so that is obtain advantage that are sustainable over lengthy period
of time.
• -how should we compete in order to create competitive advantage in the market place?
• -how can we create competitive advantage in the market place that are
unique, valuable and difficult for rivals to copy or substitute.
• Thus ; strategic management can be defined as the process whereby
managers establish organization long term direction, set specific
performance objectives, develop strategies to achieve these objective in
the light of all the relevant internal and external circumstances and
undertake to execute the chosen action plans.

• Strategic management is defined as that set of managerial decisions and

actions that determines the long run performance of a corporation. It
said to include environmental scanning(both internal and external,
strategy formulation, strategy implementation and evaluation and
control. The study of strategic management therefore, emphasizes the
monitoring and evaluating of external opportunities and threats in light
of organizations strength and weakness .
Key Attributes of Strategic Management
• Strategic management is directed toward overall organizational goals
and objectives
• Strategic management includes multiple stakeholders in decision
making-i.e. include individuals, groups, and organizations who a stake
in the success of the organization(employees, customers, suppliers, the
community at large)
• Strategic management requires incorporating both short-term and
long-term perspectives.
• Strategic management involves of trade off between effectiveness and
efficiency i.e. Doing the right thing (effectiveness) and doing thing right
(efficiency)
Strategy
• Chandler (1962) Strategy is the determination of the basic long-term
goals of an enterprise, and the adoption of courses of action and the
allocation of resources necessary for carrying out these goals;

• corporate strategy is the determination of the basic long term goals of

an enterprise and the adoption of courses of action and allocation of
resources necessary to carry out the goals.

• Mintzberg (1979) Strategy is a mediating force between the

organization and its environment: consistent patterns in streams of
organizational decisions to deal with the environment
Strategy
• Porter (1996) Strategy is about being different. It means deliberately choosing a
different set of activities to deliver a unique mix of value
• Strategy is a method or plan chosen to bring about a desired future, e.g
achievement of goals, or solution to a problem
• Strategy is an art and science of planning and marshalling resources for their
most effective and efficient use
• Strategy is a means by which long-term objectives are realized;
• The concept of strategy in business has been borrowed from military science and
sports where it implies out- maneuvering the opponent;
• Strategy is a broad program for defining and achieving an organization’s
objectives and impending mission
Strategy
• Strategy is a pattern of the organization response to its environment
overtime
• Strategy is the long term direction of an organization
• Thus, strategy is the direction and scope of an organization over the long
term, which achieve advantage for the organization through its
configuration of resources within a changing environment and fulfill
stakeholders’ expectation
• Note: The word strategy originated from Greek –strategia which means
the art or science of being a general. Effective generals needed to lead
an army to win and hold territory, protect a country from invasion,
wipe out the enemy .Each of objective required a different employment
of resources
The characteristic of strategic decisions
i. Strategy is likely to be concerned with long term direction of an
organization
ii. Strategic decisions are normally about trying to achieve some
advantage for organization over competition. Strategic decision may be
conceived of therefore as the search for effective positioning in
relation to competitor so as to achieve advantage
iii. Concerned with the scope of organization activities
iv. Strategy can be seen as matching of resources and activities of
organization to the environment in which it operates(strategic fit-
developing strategy b identifying opportunities in the business
environment and adapting resources and competencies so as to take
advantage of these
The characteristic of strategic decisions
v. The strategy of the organization is affected not only by environmental
forces and resource available but also, value and expectations of those
who have power in and around the organization.
The benefits of good strategic management
Research has revealed that organization that engage in strategic management
generally outperform those that do not
• Strategic management provides clearer sense of strategic vision of the firm-
gives sense of purpose and direction
• It help to ensure the future success of organization by forcing to think about
problems and try to anticipate need for future ends. Strategic management
is credited for contribution it makes to recognizing and responding to the
winds of change, new opportunities and threatening development.
• It helps in improved understanding changing environment. This allows the
firm to be proactive instead of being reactive to what is happening in the
environment
• It provides framework to guide operational activities in the organization
The benefits of good strategic management
• Proactive in shaping organizational structure
• Improved understanding of competitors strategies
• Formulate better strategies
• Financial benefits: Effective strategic management result in financial
benefits to organizations in the form of increased profit.
• Offsetting uncertainty: strategic management tries to offset
environmental uncertainty by prescribing the future course of action in
the light of various forecast made by organization
• Clarity in objective and direction: focuses on organizational objectives
and direction of action for achieving these objectives
The benefits of good strategic management
• Shows the right direction to the organization
• Helps companies or organizations to turn proactive rather than reactive
• Guides the companies to prepare and face the challenges which may
occur in future
• Plays an important factor in decision making
• Make sure to fight the competitions and have long term survival
assurance
• Have a competitive edge over the market
• Last but not least, helps in business development and success
The benefits of good strategic management
• Increased organizational effectiveness-organization is able to achieve its
objectives within a given resources
• Personnel satisfaction : contributes towards organizational effectiveness by
providing satisfaction to the personnel of the organization-in the organization
prescription of their roles thereby reducing role conflict and role ambiguity.

Limitations of strategic Management

• Complex and dynamic environment- this become serious limitations on
effective strategic management
• Rigidity : strategic mgt brings rigidity in the organization through strategic
planning it is claimed.
Cont..
• Limitations in implementation: there are various problem in
implementing strategy. Many problems cannot be solved by strategic
management alone but require to use other aspect of management
• Inadequate appreciation of strategic management : managers are
inadequate aware about its contribution to the success of organization
and the way in which strategic management can be undertaken
• Impedes Flexibility
Nature of strategy
• Strategy provides direction in which human and physical resources can be
deployed for achieving organizational goals in the face of environmental pressure
and constraints;
• Strategy relates an organization to its external environment;
• Strategic decisions are primarily concerned with expected trends in the market,
changes in government policy, technological developments etc.;
• Strategy determines the direction in which the organization is going in relation to
its environment. It is the process of defining intentions and allocating or matching
resources to opportunities and needs, thus achieving a strategic fit between them;
• The effective development and implementation of strategy depends on the
strategic capability of the organization, which will include the ability not only to
formulate strategic goals but also to develop and implement strategic plans
through the process of strategic management;
Nature of strategy
• A strategy gives direction to diverse activities, even though the
conditions under which the activities are carried out are rapidly
changing;
• The strategy describes the way that the organization will pursue its
goals, given the changing environment and the resource capabilities of
the organization;
• It provides an understanding of how the organization plans to compete;
• It is the determination and evaluation of alternatives available to an
organization in achieving its objectives and mission and the selection of
appropriate alternatives to be pursued;
Nature of strategy
• It is the fundamental pattern of present and planned objectives,
resource deployments, and interactions of a firm with markets,
competitors and other environmental factors. A good strategy should
specify;
• Strategy(ies) focuses at answering the questions: Where, i.e., which
product/markets it will focus on; How i.e., which resources and
activities will be allocated to each product/market to meet
environmental opportunities and threats and to gain a competitive
advantage
Components of Strategy

• Scope: refers to the number and types of industries, product lines, and
markets organization competes in or plans to enter;
• Goals and objectives: specific desires that organization plans to achieve
in a specified time period. It can be volume growth, profit contribution or
return on investment over a specified period;
• Resource deployment: strategy should specify which and how much
resources are required in order to be allocated for an activity to be done
leading to the realization of objectives.
• Identification of a sustainable competitive advantage: it refers to
examining the market opportunities in each business and product-market
and the firm’s distinctive competencies or strengths relative to
competitors.
Components of Strategy

• Synergy: this exists when the firm’s businesses, products, markets,

resource deployments and competencies complement one another i.e.,
the whole becomes greater than the sum of its parts
Stages of strategic management

1. STRATEGY FORMULATION: including developing vision, mission,

identifying organizations’ external opportunities and threats, determining
internal strength and weakness, establishing long term objectives,
generate alternatives strategies and choosing strategies to pursue
• -strategy formulation issues include deciding what new business to
enter, what business to abandon , how to allocate resources, whether
to expand operation or diversify; whether to enter international
market
Stages of strategic management

2. STRATEGY IMPLEMENTATION: require a firm to establish new objectives,

devise policies; motivate employee and allocate resources so that formulated
strategies can be executed.
-strategy implementation includes developing-supportive culture; creating an
effective organization structure, redirecting market effort, preparing budget,
developing and utilizing information system and linkage employee
compensation and to organization performance
-strategy implementation is action stage of strategic management
Strategy implementation hinges upon managers ability to motive employee
which is more an art than science
-interpersonal skills are especially critical for successful strategy
implementation
3. STRATEGY EVALUATION: Managers desperately need to know when
particular strategy are not working well.
-all strategies are subject to future modification because external and
internal factors are constantly changing
Three fundamental strategy Evaluation
i. Reviewing external and internal factors that are basis of current
strategies
ii. Measuring performance
iii. Taking corrective action
Note : strategy evaluation is needed because success today is not
guarantee of success tomorrow
LEVELS OF STRATEGY
Corporate level strategy: corporate level strategy specifies actions the
firm takes to gain a competitive advantage by selecting and managing a
group of different business competing in several industries and product
markets.
Corporate level strategy is concerned with the purpose and scope of an
organization and how will be added to the different parts (business units)
It is typically composed by board directors and chief executive
Strategy formulation by top management to oversee the ideas and
operation of organization made up of more than one line of business
The major questions are:-
• What kind of business should the company is engaged in? i.e. diversity
of products or business units
• What should be the geographical coverage?
• What are the goal and expectation of each business/
• How should resources be allocated to reach these goals
In developing corporate goals corporations need to decide where they want to be in at
least eight areas:
• Market standing
• Innovation
• Productivity
• Physical and financial resources
• Profitability
• Managerial performance
• Workers performance
• Public responsibility
• In a turbulent environment a firm may strive for stability, drawing on existing
strengths a way of surviving until more favorable time
Two major approach exist for corporate strategy:
a) The value based approach: in this approach, the beliefs and
convictions(value) of managers and workers about how the firm should
conduct its business are the key to setting the organization long term
direction. The value based strategy tend to develop gradually and
incrementally , providing general guidance rather narrow focused plan.
b) The corporate portfolio approach: in this approach top management
evaluate each of the corporation various business units with respect to
market and the corporation internal make up.
When all business unit have been evaluated an appropriate strategic role is
developed for each unit with the goals of improving the overall
performance of organization
The corporate portfolio approach is guided by marketing opportunities
and tends to be initiated and controlled by top management only.
One of the best examples of corporate portfolio is the BCG( Boston
Consulting Group)-MATRIX PORTFOLIO FRAMEWORK
It focus an aspect of a particular business unit
• Its sales
• Growth of it market
• Whether it absorb or produce cash in its operations
The approach seeks to develop a balance approach among business units
that use up cash and those that supply
Question marks(problem child).
Question marks are also referred to wildcat, problem child, adolescent
-these are new products with the potential for success but required
substantial cash inject for its development
-they consist of a business with a relatively small market share in rapidly
growing market
-such business can be uncertain and expensive, but to become market
leader and thus star, money must be sourced from matured products and
spend on question mark
STAR
-A star product has a high relative market share in a high growing market
-they are at the peak of the product life cycle and usually able to generate
cash to maintain their high market share
-however, the need to invest in order to keep up with the market rapid
growth may consume more cash
-failure to support a star sufficiently strongly may lead to product loosing
its leading market share position and become a problem child
-However, a star represents the best future prospect for organization
-as the growth rate for a star slows it will drop in the cash quadrant and its
characteristics will change
Cash Cow
-this type of product has high relative market share in a low growth market and
should be geniting substantial cash inflows that is needed to maintain their
market share
-high relative market share in a slowly growing marketing is both profitable and
source of excess cash
-the slow growth of market doesn’t require large investment to maintain
market position
-as a matter of fact they tend to generate cash in excess of what is needed to
sustain their market positions
In declining stage of their life cycle these product are milked for cash that will
be invested in question marks
DOG
This constitutes with low relative market share in static or declining
market
-They are the worst of all combinations
-They may be seen as moderate user or supplier of cash
-In the view of BCG a dog product is essentially worthless and should be
liquidated as they do not have any potential
NOTE: the natural sequence for balanced portfolio is t use surplus cash
form todays’ winner( cows )to develop tomorrow’s winners (question
marks) and promote them to stars which with maturity become cows-the
balance cash-generation portfolio
Note: Being clear about corporate level strategy is important as it is a
basis of other strategic decision. It may well take the form of implicit or
explicit statement of mission that reflect s expectation
2. Business unit strategy:
The business unit strategy or competitive strategy is about how to compete
successful in particular markets
-it concerned with how each strategic business unit (SBU) attempts to achieve its
mission within its chosen area of activity.
This level is composed by business managers
The strategy is about which or service should be developed and offered to which
markets and extent to which customers' need are meet whilst achieving the
objectives of the organization. Business strategy deal with such questions as:
How advantage over competitors can be achieved
What product/ service should it offer
To what extent do product /service meet the needs of customers so as to
achieve the organization objectives? .
Which customers does it seek to serve?.
How will the resources be distributed within the business?
What ne opportunities can be identified or created in the market?
Note; mangers translate the statements of direction and intent
generated at the corporate levels into concrete objective and strategies
for individual business divisions
Michael Porters Framework of competitive Analysis
Generally competition in market place is function of five competitive
forces
The five force model by Michael Porters- often referred to as porters
model allows to understand the complexity of how competition works
1. Barriers to entry/ the threat of new entrants
2. The bargaining power of suppliers
3. The bargaining power of customers/buyers
4. The threats of substitute products
5. Rivalry among current contestants
• Porter's Five Forces of Competitive Position Analysis were developed in 1979 by
Michael E Porter of Harvard Business School as a simple framework for assessing
and evaluating the competitive strength and position of a business organization.
• This theory is based on the concept that there are five forces that determine the
competitive intensity and attractiveness of a market. Porter’s five forces help to
identify where power lies in a business situation. This is useful both in
understanding the strength of an organization's current competitive position,
and the strength of a position that an organization may look to move into.
• Strategic analysts often use Porter’s five forces to understand whether new
products or services are potentially profitable. By understanding where power
lies, the theory can also be used to identify areas of strength, to improve
weaknesses and to avoid mistakes
• A) Barriers to entry/Threat of new entrants
• The threat of entry depend on the extend to which there are barrier
to entry.
• Identifying new entrants is important because they can threaten the
market share of existing competitors
• One reason new entrants pose such a threats is that they bring
additional production capacity, unless the demand for good or service
in increasing. The likelihood that a firm will enter the industry is a
function of barriers to entry but also the reaction that can be
expected from existing competitors.
• An entry barrier is an obstruction that makes it difficult for company
to enter an industry and often place them at competitive
disadvantage even when they are able to enter
• High entry barriers increase returns for firm in the industry and may
allow some firm dominate the industry
• Barriers to entry exist wherever it is hard for new comer to break to
the market and sometimes substantial resource which to compete
• Six barrier to market entry are typical:
• Economies of scale: economies of scale are marginal improvement in efficiency that
a firm experience. s as it incrementally increase in size. As the quantity produced
during the given period increase, the cost of manufacturing each unit decline
• Economies of scale refers to spreading the costs of production over units produced.
The cost of a product per unit declines as the absolute volume per period increases
• The presence of economies of scale deters entry because the aspirant is forced to
enter the market on the large scale basis(which is costly and risky move.
• New entrants face dilemma when confronting current competitors scale economies
• Product differentiation: by differentiation it means the provision of product
or service regarded by the user as different from and of higher perceived
value than the competition. when product of rivals sellers are differentiated
buyer have some degree of attachment to existing brands
• Customers valuing products uniqueness tend to be loyal to both the product
and the company producing.
• Brand identification creates a barrier by forcing entrants to pend heavily to
overcome customer loyalty.
• A potential entrant must therefore be passed to spend enough money on
advertising and sales promotion to overcome customer loyalty and built its
own clientele
• Capital requirements: competing in new industry requires a firm to
have resources to invest. The larger the total investment needed to
enter the market successfully , the more limited is the pool of
potential entrants.eg. Entering n airline industry would be difficult
because of the substantial resources required to be competitive.
• Access to distribution channels, overtime industry participants
develop effective means of distributing products. Once this
relationship with distributors has been developed, a firm will nurture
it creating switching cost for the distributors.
• Access to distribution channel can be a strong entry barrier for new
entrants particularly in consumer non durable good industries where
shelf space is limited
• Government policy. Entry can also be restricted by stringent
government mandated safety regulations and environment pollution
standards.
B. THE BARGAINING POWER OF SUPPLIERS
Increasing and reducing the quality of their products are potential
means used by suppliers to exert power over firms competing within an
industry. If a firm is unable to recover cost increases by its suppliers
through its pricing structure, its profitability is reduced by suppliers
actions.
This means that if an industry is realistic unable to raise price to cover
the cost of necessary goods and service the power of suppliers of good
and services naturally increase
• In general a group of supplier firm has more bargaining power:
• When the input is important to the buyer
• When the supplier industry is dominated by a few large producers
who enjoy reasonable secure market positions as they sell to many
buyers e.g. the petroleum industry
• When supplier respect products are differentiated to such an extent
that it is difficult or costly for buyer to switch firm one supplier to
another
• When suppliers’ customers are highly fragmented
• C) The bargaining power of customers/buyers
• Buyers threaten an industry by forcing down price, bargaining for higher
quality or more service and playing competitors against each other.
• These action erode industry profitability
• A buyer group is powerful when:
 it is concentrated or purchase large volume relative to sellers sales
The products it purchases from the industry are standard or
undifferentiated
The buyer faces few switching costs-buyer power is enhanced if the
seller faces high switching costs
When customers are few in number
• d)The threat of substitute products and services
• Substitute products are goods or service from outside a given industry
that perform similar or the same functions as a product that industry
produces
• Substitution reduce demand for a particular class of products as
customers switch to the alternative
• As a matter of fact firm have introduced to the market several low-
alcohol , fruits flavored drinks, that many customers substitute for
beer or soda
• The more attractive the price/ performance ration of substitute
products, the tighter the lid an industry profitability
• e) Intensity of Rivalry among competitive in an industry
• Firms use tactics like price competition, advising battle , product
introduction and increased customers services or warranties
• Rivals easily match price cuts , an action that lower level of
profitability in an industry
• Intensity of competitive rivalry is high when;-
-Number of competitors is high
-switching costs are low
-industry growth rate is low
Product differentiation is low
-storage costs are high
3.Fuctional /operational level strategies
.are concerned with how various functions of organizations (marketing,
production, finance etc.)contributes to the achievement of the
corporate and competitive strategies.
They essentially deal with how the component parts of organization
deliver effectively the corporate and business level strategies in terms
of resources, process and people.
functional strategies are important because they indicate the
contribution of each major sub activity in the business to the overall
business strrategy
Typical functional unit are marketing , finance, production, research
and research development and human resources.
Marketing;
Marketing strategies match products and service with customers
needs, decide where and where to sell and promote products and set
prices. The approach depends
-on whether the company is addressing existing customers or trying to
attract new ones
-on whether the product id new or already established. Several
strategies may be developed
• Marketing penetration -attempt to expand organization control of
market in which it already has a product or service
• Marketing development -introduce an existing product or service to
new customers
• Diversification marketing -this involve developing both a new product
and customers
Finance
• Finance strategies are concerned with the acquisition of both new
product and customers
Production/operation
• This is concerned with transformation of materials, labour and capital
inputs into products or services. Strategic decision include plant size
and location, the selection of equipment, inventory size and control,
product design and engineering as well as wages and supervision
Research and development
• Organization engage in research and development to sure their
products, services and production methods do not become obsolete
Human resources
• HRM includes recruitment, training and counselling employee,
determine compensation, maintain contact with both union and
government
• Its objectives are to attract, motivate and retain those employee
required by the organization
• The HR strategy may be geared towards reducing or increasing
employee numbers