Introduction to
Strategic
Management
Session - 01
What is Strategic Management?
• Strategic Management is the term applied to
describe those activities of an organization
that enable it to meet the challenges of a
constantly changing environment.
• Strategic management as it exists today has
evolved over many years and continues to
evolve in response to the changes in
organizations and their environments.
What is Strategic Management?
Critical aspect of the management of organization’s
today involves …….
Matching organizational competences with the
opportunities and threats in their environment in
ways that will be both effective and efficient over the
time such resources are deployed
What is Strategic Management?
• The basic characteristics of a match an
organization achieves with its environment is
called its strategy.
• The concept of strategy is used by today’s
managers as one of the major tools for coping
with the internal and external changes
What is Strategic Management?
• Long term approach – decisions are made over the long term,
often for periods exceeding one year
• Focused on organisational objectives – the aim being to
ensure that the plan of action achieves the most important objectives
for a wide group of key stakeholders
• Aligned with internal strengths and weaknesses – the aim
should be to capitalize on the business strengths and overcome any
key weaknesses. Devising a strategy will often follow a position audit
of the business to ascertain the businesses current position.
• Adapted to the changing business environment – so that
changes in political, economic, social and technology factors are taken
account of, while adapting to industry changes, such as competitive
threats, supply issues or changing customer needs.
What is Strategic Management?
The strategic management is the term that collectively
describes the four main types of inter connected and
intergraded set of activities that constitute the process of
managing an organisation from a strategic standpoint. These
are:
– Strategic Analysis
– Strategy Formulation
– Strategy Implementation and
– Strategic Review and Control
What is an Organization?
• “Organization is a group of people working
together for achieving a common objective.”
• According to above definition, three major
elements can be identified in an organization,
namely
– a group of people,
– common objectives
– interaction among people
What is an Organization?
• Organisations are open systems
• Organisations could influence and are influenced
by the environment in which they operate.
• Health of an organisation is dependent on being
able to match its pace of change in line with the
rate of change with its environment.
The Concept of Strategy - I
• A strategy is a plan of action designed to achieve
a goal or objective. The aim of a strategy is to
gain some kind of competitive advantage or to
help to exploit future opportunities.
• In the example of a chess game, a ‘strategy’ provides the
over-riding approach that the player will take to win the
game, but the exact set of moves they undertake will vary
depending on the opponent’s moves.
The Concept of Strategy - II
According to the CIMA official terminology a
business strategy can be defined as:
"A course of action, including the specification of
resources required, to achieve a specific objective"
The Concept of Strategy - III
Complete definition is given by Johnson, Scholes and
Whittington as:
“The direction and scope of an organisation over
the long term, which achieves advantage for the
organisation through its configuration of resources
within a changing environment, to meet the needs
of the markets and to fulfil stakeholder
expectations”
The Concept of Strategy
Business strategy therefore is concerned with the
overall management of an organisation and
includes the management of and taking decisions
about:
– Products
– Markets
– Locations (production and sales)
– Structure
– Personnel
– Buildings and machinery
– How to compete
The Concept of Strategy - IV
A company’s strategy is the set of actions that its managers
take to outperform the company’s competitors and achieve
superior profitability. This include
• How to attract and please customers.
• How to compete against rivals.
• How to position the company in the marketplace and capitalize on attractive
opportunities to grow the business.
• How to respond to changing economic and market conditions.
• How to manage each functional piece of the business (R&D, supply chain
activities, production, sales and marketing, distribution, finance, and human
resources).
• How to achieve the company’s performance targets.
Characteristics of Strategic Decisions
–Strategic decisions are the long term direction of
the organization.
–Strategic decisions are normally about trying to
achieve some advantage for the organization.
–Strategic decisions are likely to be concerned with
the scope of an organization’s activities.
–Strategic decisions involve matching the activities
of an organization to the environment in which it
operates.
Characteristics of Strategic Decisions
–Strategic decision also involves building on or
stretching an organizational resources and
competencies to create opportunities or to
capitalize on them.
–Strategic Decisions involve major resource
changes for an organization.
–Strategic decisions affect operational decisions.
–Strategic decisions are affected by the values and
expectations of those who have power in and
around the organization.
The Importance of Strategy
• Provides a clear direction, focusing management
decision making
• Adapts the organisation to the changing environment
ensuring it’s continuing survival and success
• Ensures competitiveness through understanding and
adapting to competition
• Focuses in building key competences to meet
customer needs
• Co-ordinates all elements of the business in a
structured planned approach.
Levels of Strategy in an Organisation
There are three different levels on which
strategy can be set
–Corporate Level Strategy
–Business Level Strategy
–Functional Strategies
Hierarchy of Strategy
Hierarchy of Strategy
Hierarchy of Strategy
Levels of Strategy in an Organisation
Corporate Level Strategy
Corporate Strategy can be defined as the
management plan formulated by the highest level
of organization to direct and operate the entire
business organization. It provides the direction for
the business as whole, including all parts of the
business.
Levels of Strategy in an Organisation
• Corporate Strategy is the essence of strategic planning
process.
• It determines the growth objective of the company
• It highlights the pattern of business moves
• It defines how the firm will remain sustainable in the
long run.
• Which businesses and markets should the organisation
operate in?
• How to integrate and structure the business
• Example Racal Electronics’ decision to float off
Vodafone as a separate company
• Uncertainty is inherent in strategy, because nobody can
Levels of Strategy in an Organisation
Business Level Strategy
• Business-level strategy is about how to compete successfully
in particular markets
• At Business-level ALLOCATION of resources among
Functional-level an COORDINATE with the Corporate level
to the ACHIEVEMENT of the Corporate level
OBJECTIVES.
 Example: Ford’s Motor Co’s car division – an SBU - launched its
Mondeo model, aimed at fleet car buyers, who had not favored the
Sierra, its predecessor.
Levels of Strategy in an Organisation
Business Level Strategy
• Business-level strategy, which is about how the various
businesses included in the corporate strategy should compete
in their particular markets (for this reason, business-level
strategy is sometimes called ‘competitive strategy’).
• So, whereas corporate-level strategy involves decisions about
the organisation as a whole, strategic decisions relate to
particular strategic business units (SBUs) within the overall
people
Levels of Strategy in an Organisation
Business Level Strategy
 A strategic business unit (SBU) is a part of an organisation
for which there is a distinct external market for goods or
services that is different from another SBU.
Yahoo!’s strategic business units include businesses such as
Yahoo! Photos and Yahoo! Music.
In very simple organisations with only one business, the
corporate strategy and the business-level strategy are nearly
identical
Levels of Strategy in an Organisation
Each business unit or subsidiary of the business is likely to
have different goals, competitors, suppliers, manufacturing
approaches, IT, financial requirements and so on, and so each
strategic business unit (SBU) needs its own strategy. This
covers:
•
Which competencies?
•
Which products?
•
Which markets?
•
Tactics to beat competition in this market
•
Business resources (people, buildings, machinery, processes)
•
How to compete in this business area?
Levels of Strategy in an Organisation
Functional Strategies
 Operational strategies are concerned with how the
component parts of an organisation deliver effectively the
corporate and business-level strategies in terms of resources,
processes and people.
 Functional strategies deal functions such as Marketing,
Operations, Human Resources and Finance.
 Focus is on improving the effectiveness of operations within
a company
Levels of Strategy in an Organisation
Functional Strategies
 They are concerned with how the various functions of the
organisation contribute to the achievement of strategy.
 It examines how the different functions of the business
(marketing, production, finance etc) support the corporate and
business strategies.
 Example: revising delivery schedules and drivers’ hours to
improve customer service or recruiting a German-speaking sales
person to assist a UK company’s sales drive in Europe.
Strategy in an Organisation
Strategy in an Organisation
Benefits of Strategic Management
Financial Benefits
 Organizations using strategic-management concepts are more
profitable and successful than others.
 Businesses using strategic-management concepts show
significant improvement in sales, profitability, and productivity
Benefits of Strategic Management
Nonfinancial Benefits
Strategic management offers other benefits, such as
• an enhanced awareness of external threats,
• an improved understanding of competitors’ strategies,
• increased employee productivity,
• reduced resistance to change,
• clearer understanding of performance–reward relationships.
Benefits of Strategic Management
Generally stated that strategic management offers the following
benefits:
• It allows for identification, prioritization, and exploitation of
opportunities.
• It provides an objective view of management problems.
• It represents a framework for improved coordination and control of
activities.
• It minimizes the effects of adverse conditions and changes.
• It allows major decisions to better support established objectives.
• It allows more effective allocation of time and resources to identified
opportunities.
Benefits of Strategic Management
• It creates a framework for internal communication among personnel.
• It helps integrate the behavior of individuals into a total effort.
• It provides a basis for clarifying individual responsibilities.
• It encourages forward thinking.
• It provides a cooperative, integrated, and enthusiastic approach to
tackling problems and opportunities.
• It encourages a favorable attitude toward change.
• It gives a degree of discipline and formality to the management of a
business
Guidelines for the Strategic-Planning
Process to Be Effective
 It should be a people process more than a paper process.
 It should be a learning process for all managers and employees.
 It should be words supported by numbers rather than numbers
supported by words.
 It should be simple and no routine.
 It should vary assignments, team memberships, meeting formats, and
even the planning calendar.
 It should challenge the assumptions underlying the current corporate
strategy.
 It should welcome bad news.
Guidelines for the Strategic-Planning
Process to Be Effective
• It should welcome open-mindness and a spirit of inquiry and learning.
• It should not be a bureaucratic mechanism.
• It should not be too formal, predictable, or rigid.
• It should not contain jargon or arcane planning language.
• It should not be a formal system for control.
• It should not disregard qualitative information.
• It should not be controlled by “technicians.”
• Do not pursue too many strategies at once.
• Continually strengthen the “good ethics is good business” policy.