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Lesson 1: Introduction and Overview To Strategic
Management
"Plans are nothing, planning is everything."
Historical Development of Strategic Management
 Change in focus from production to
marketing
- Dwight D. Eisenhower
"If you don't know where you are going, you might
end up somewhere else."
- Casey Stengel
"A strategy is a plan that integrates an organization's
major goals, policies, decisions and sequences of
action into a cohesive whole. It can apply at all levels
in an organization and pertain to any of the
functional areas of management.."
The direction of strategic research also paralleled a
major paradigm shift in how companies competed,
specifically a shift from the production focus to market
focus.
The prevailing concept in strategy up to the 1950s was
to create a product of high technical quality. If you
created a product that worked well and was durable,
it was assumed you would have no difficulty profiting.
A strategy is the "game plan"
HISTORICAL DEVELOPMENT OF STRATEGIC
MANAGEMENT
Strategic Management
The art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives.
-- Fred David
Strategic management is the study of why some firms
outperform others.
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How to create a competitive advantage in the
marketplace that is unique, valuable, and
difficult to copy
"Total organization" perspective, integrating across
functional areas.
Strategies put together an understanding of the
external environment with an understanding of
internal strengths and weaknesses.
Why Are Strategies Needed?
To proactively shape how a company's business will
be conducted
To mold the independent actions and decisions of
managers and employees into a coordinated companywide game plan.
Attributes of Strategic Management
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Directs the organization toward overall goals
and objectives.
Includes multiple stakeholders in decision
making. (environment)
Needs to incorporate short- term and longterm perspectives.
Recognizes trade-offs between efficiency and
effectiveness.
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Origin and Development (1950-1973)
Formal strategic planning began in the 1950s in the
United States of America Drucker (1954): What is
our business and what should it be?
The first responsibility of top management is to ask
the question 'what is our business?' and to make sure
it is carefully studied and correctly answered." He
wrote that the answer was determined by the
customer.
 Andrews (1965)- corporate strategy
 Ansoff (1965) - corporate strategy Boston
consulting group (1965) - Henderson B.
He developed a grid that compared strategies for
market penetration, product development, market
development and horizontal and vertical integration
and diversification. He felt that management could use
the grid to systematically prepare for the future.
In his 1965 classic Corporate Strategy, he developed
gap analysis to clarify the gap between the current
reality and the goals and to develop what he called
"gap reducing actions".
 Chandler (1962): What is strategy? Structure
follows strategy
In his 1962 groundbreaking work Strategy and
Structure, Chandler showed that a long-term
coordinated strategy was necessary to give a company
structure, direction and focus. He says it concisely,
"structure follows strategy." Chandler wrote that:
"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.”
Bruce Henderson, founder of the Boston Consulting
Group, wrote about the concept of the experience
curve in 1968, following initial work begun in 1965.
BOSTON CONSULING GROUP MATRIX
RELATIVE MARKET SHARE
 Porter (1987): Although strategic planning
had gone out of fashion in the late 1970s, it
needed to be re-discovered. It would have to
be "re-thought" and "recast".
 Competitive strategy (1980)
 Competitive advantage (1985)
 Formation of the Strategic Management Society
(1981)
 Launch of the Strategic Management Journal
(1982)
Porter wrote in 1980 that companies have to make
choices about their scope and the type of competitive
advantage they seek to achieve, whether lower cost or
differentiation.
MARKET GROWTH
The idea of strategy targeting particular industries and
customers (i.e., competitive positions) with a
differentiated offering was a departure from the
experience-curve influenced strategy paradigm,
which was focused on larger scale and lower cost
Institutionalization of Strategic Planning - 1990
STAR
QUESTION MARK
CASH COW
DOG
The experience curve refers to a hypothesis that unit
production costs decline by 20-30% every time
cumulative production doubles. This supported the
argument for achieving higher market share and
economies of scale.
 Strategic management recognized as an
important element in corporate success.
 Strategic planning was differentiated from
budgeting the strategic planning process could
be managed Importance of setting objectives
as part of the strategic planning process
Emergence of concept of core competences
Emergency of concept of competitive
advantage.
 Rediscovery and recasting (1980-1990)
 Strategic planning becomes an integral part of
business operations Further developments in
the theory and technology of strategic
management Consistency between strategic
plans, annual plans and budgets Greater
attention to stakeholder interests’ Greater
attention to corporate social responsibility
Greater involvement in the strategic planning
process.
The Five Tasks of Strategic Management
Developing a
strategic vision
and business
mission
Revise as needed
Setting objectives
Crafting a strategy
to achieve the
objectives
Revise as needed
Improve/
change as
needed
Implementing
and executing
the strategy
Improve/
change as
needed
Evaluating
performance,
monitoring
new
developments,
and initiating
corrective
adjustments
Recycle to
tasks 1, 2, 3 or
4 as needed
1. Developing a Strategic Vision and Mission
The first step, developing a strategic vision and
mission, involves putting management's long-term
view of where the company is going on paper and
making that known to the employees of the company.
This step is made up of both the vision and the mission.
MISSION & VISION STATEMENTS
The mission is used to define why the organization
exists. Often companies within the same industry with
have similar mission statements.
The vision is management's view of where the
company is going.
2. Setting Objectives
BUSINESS OBJECTIVES
The second step, setting objectives, takes the strategic
vision and creates specific goals that will occur to
accomplish what is laid out in the vision statement.
Objectives or goals should be feasible but also not
easily attainable. These types of goals are called
"stretch" goals because they force the company to go
as far as they can to attain the goal. If objectives are set
too low, complacency will occur. Establishing these
objectives removes confusion employees may have on
what should be accomplished.
Managers can set both financial objectives and
strategic objectives.
Financial objectives are those that state what
management wants to achieve in "peso and cents."
Strategic objectives are goals that strive to increase
competitive position, gain market share, or to develop
a competitive advantage. Strategic objectives have the
power to motivate and prompt action where financial
objectives are seen more as a constraint. Managers
should define both goals but concentrate on strategic
objectives will bring about better results.
STRATEGIC OBJECTIVES
1.
2.
3.
4.
5.
6.
7.
EMPLOYEE SATISFACTION
A QUALITY PRODUCT
CUENT SATISFACTION
FINANCIAL STRENGTH
MANAGED RISK
GOALS CRENTED MANAGEMENT
CONTINUED GROWTH
3. Crafting Tactics to Achieve Organizational
Objectives
The third step, crafting tactics to achieve
organizational objectives, is where management
defines how to achieve the defined objectives. In this
step, management decides how best to respond to
changes in the environment, how to rise above the
competition, and how to move towards the corporate
vision and strategic objectives.
4. Implementing and Executing the Tactics
The fourth step, implementing and executing the
tactics, includes determining what company resources
should be allocated to each activity, establishing
policies, motivating employees, providing the
resources necessary to achieve objectives, and
encouraging a continuous improvement culture.
 Tactics must be tailored to organizational
capabilities and culture for them to work
efficiently.
 Change will most likely be needed, but the amount
of change varies depending on how new the tactics
are.
 This usually involves revising policies or resource
allocation, moving people around, retraining and
retooling, or making changes to reward systems.
Each manager must look at the tactics and their
department to determine how best to implement each
tactic correctly.
5. Evaluating and Measuring Performance
If performance is not to expectations, corrective action
must be taken.
Performance can be measured by various methods
such as
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financial data,
customer satisfaction,
quality reports,
employee satisfaction, and
capital utilization.
Each of these types of measures should be used to
analyze tactics to get a full picture of a tactic's success.
"It isn't that they can't see the solution, it's that they
can't see the problem."
- G. K. Chesterton
"In terms of the three key players (competitors,
customers, company) strategy is defined as the way in
which a corporation endeavors to differentiate itself
positively from its competitors, using its relative
corporate strengths to better satisfy customer needs."
-Kenichi Ohmae - "The Mind of the Strategist"
Lesson 2: INTERNAL ENVIRONMENTAL SCANNING
S - STRENGTHS
W - WEAKNESSES
O - OPPORTUNITIES
T - THREATS
Why SWOT Analysis Is Important?
SWOT Analysis is an important planning tool that
helps an institution identify, in a systematic and
organized way, its internal strengths and helps it
match those strengths with the best opportunities in
the environment.
SWOT
MEASURE PERFORMANCE
['swät]
The fifth step, evaluating and measuring performance,
is how management determines whether or not the
tactics implemented effectively to achieve
organizational objectives and comply with the
strategic vision.
A framework used to evaluate
a company's competitive
position and to develop
strategic planning.
Why SWOT Analysis Is Important?
It is one of the “cornerstone” analytical tool to help the
organization develop a preferred future. To respond
effectively to changes in environment, to examine the
internal and external contexts to develop a vision and
a strategy that links the two.
When analyzed together, the SWOT framework can
paint a larger picture of where you are and how to get
to the next step.
The Strategic Management Process
Identifying Resource Strengths
and Competitive Capabilities
A strength is something a firm does well or a
characteristic that enhances its competitiveness.
Examining these areas helps you understand what’s
already working. You can then use the techniques that
you know work.
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What are the organization’s Strengths, Weaknesses,
Opportunities and Threats ?
S W O T represents:
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Resource strengths and competitive capabilities are
competitive assets !
Identifying Resource Weaknesses
and Competitive Deficiencies
Strengths
Weaknesses
Valuable competencies or know-how
Valuable physical assets
Valuable human assets
Valuable organizational assets
Valuable intangible assets- e.g. “Image”
Important competitive capabilities
An attribute that places an organization in a
position of competitive advantage
What does our target audience like about our
organization?
Alliances with capable partners
Opportunities
A weakness is something a firm lacks, does poorly, or
a condition placing it at a disadvantage
Threats
Resource weaknesses relate to:
For an organization’s strategy to be well-conceived, it
must be matched to both
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Taking advantage of its internal strengths while
defending against its weaknesses
Identifying the best market opportunities and
minimizing external threats to its well-being
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Deficiencies in know-how or expertise or
competencies
Lack of important physical, organizational, or
intangible assets
Missing capabilities in key areas
Resource weaknesses and deficiencies are competitive
liabilities !
How do you use your SWOT analysis?
Use it to:
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Identify the issues or problems you intend to
change.
Set or reaffirm goals.
Create an action plan.
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Identify the company’s weaknesses by asking:
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Which initiatives are underperforming and
why?
What can be improved?
What resources could improve our
performance?
How do we rank against our competitors?
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