DEPARTMENT OF MANAGEMENT

MBA CLASS

STRATEGIC MANAGEMENT
(MBA 741)
 “Notable Quote”

 "Without a strategy, an organization is like a ship

without a rudder, going around in circles. It’s like a
tramp; it has no place to go.’’

Joel Ross and Michael Kami.

 Strategic management
Lecture Outline
 U-1 Overview of Strategic Management, Benefits of Strategic
Management, The Nature of Strategic Management, Strategic
Management Model
 U-2 Business Vision, Mission, Objectives, Characteristics of Mission
Statement, Types of Strategies (Integration strategies, Intensive
strategies, Diversification strategies), Michael Porter Generic
Strategies
 U-3 Strategic formulation: Environmental Analysis - External and
industry analysis , Internal analysis –Strategic analysis and choice
 U-4 Strategic Implementation: The nature of strategic implementation,
resource allocation , Implementing strategies in functional areas.
 U-5 Strategy Evaluation: The nature of strategy evaluation,
Characteristics of effective evaluation systems , Criteria for strategy
control (Mechanism for strategic control).
Warm-Up Discussion: Your Knowledge & Experience in strategic management

• What does it comes in your mind when you

think strategic management & strategic plan?
Just describe!
• Do you have any personal experience in
developing strategic plan in your company?
• What’s the use of strategic management &
strategic planning?
 CONCEPTS OF STRATEGY

 Strategy was originally a term applied to warfare

 The term ‘strategy’ is derived from the Greek

word Strategos, which means generalship-the
actual direction of military force, as directed from
the policy governing to its deployment.

 No single universal accepted definitions of

strategy
 Let us see few definitions of strategy given by
different authors.
 Definitions of Strategy
1) Chandler defined strategy as: “The determination of the
basic long-term goals and objectives of an enterprise and
adoption of the course of action and the allocation of
resources necessary for caring out these goals.”

2) Andrew defines strategy as “The pattern of objectives, goals,

and the major policies and plans for achieving these goals stated
in such a way so as to define what business a company is in or is to
be and the kind of company is or is to be.”

3) Thompson and Strickland, defines strategy as, “a specific pattern

of actions and business approaches managers employ to please
customers, build an attractive market position, and achieve
organizational objectives; a company’s actual strategy is partly
planned and partly reactive to changing circumstances”.
 Summary of the Definitions
Looking at these definitions, we can say that strategy is about:
 A game plan or course of action or pattern of action or
competitive moves or business approaches that managers’
employ in running a company.
 A Strategy is the means used to achieve the ends (objectives)
 A strategy is both proactive (intended) and reactive
(adaptive)
 Strategies are partly visible and partly hidden to outside view
Without strategy, there is no established course to follow, no
road map to manage by, no cohesive action plan to produce the
intended results.
 Overview of Strategic Management
• Strategic management can be defined as the art and
science of formulating, implementing, and evaluating
cross-functional decisions that enable an organization
to achieve its objectives.
• It implies, strategic management focuses on
integrating management, marketing,
finance/accounting, production/operations, research
and development, and information systems to achieve
organizational success.
 Cont.…
• Sometimes the term strategic management is used to
refer to strategy formulation, implementation, and
evaluation, with strategic planning referring only to
strategy formulation.
• The purpose of strategic management is to exploit and
create new and different opportunities for tomorrow.
• Strategy is the direction and scope of an organization
over the long term, which achieves advantage in a
changing environment through its configuration of
resources and competences with the aim of fulfilling
stakeholder expectations.
STAGES OF STRATEGIC MANAGEMENT
1. Strategy formulation:
 Includes developing a vision and mission,
identifying an organization’s external opportunities
and threats, determining internal strengths and
weaknesses, establishing long-term objectives,
generating alternative strategies, and choosing
particular strategies to pursue.

 Strategy-formulation decisions commit an

organization to specific products, markets, resources,
and technologies over an extended period of time.
 Cont.…
2. Strategy implementation:
 requires a firm to establish annual objectives, devise
policies, motivate employees, and allocate resources so
that formulated strategies can be executed.

 Strategy implementation includes developing a strategy-

supportive culture, creating an effective organizational
structure, redirecting marketing efforts, preparing budgets,
developing and utilizing information systems, and linking
employee compensation to organizational performance.

 Strategy implementation often is called the “action stage”

of strategic management.
 Cont.…

3. Strategy evaluation is the final stage in strategic

management.
 Managers desperately need to know when particular
strategies are not working well; strategy evaluation
is the primary means for obtaining this information.
 Three fundamental strategy-evaluation activities
are :
(1) reviewing external and internal factors that are
the bases for current strategies,
(2) measuring performance, and
(3) taking corrective actions.
 Natures of strategic management
 The long-term direction of an organization
 The scope of an organization's activities
 Advantage for the organization over competition.
 Strategic fit with the business environment
 The organization's resources and
competences( capacity)
 Value & expectation of stakeholders
 Benefits of Strategic Management

• Strategic management allows an organization

to be more proactive than reactive in shaping
its own future;
• it allows an organization to initiate and
influence (rather than just respond to)
activities and
• thus to exert control over its own destiny.
Cont.…
 BENEFITS OF STRATEGIC MANAGEMENT
• 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 allows major decisions to better support established objectives.
• It allows more effective allocation of time and resources to
identified opportunities.
• 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.
 The Strategic Management Model
• This model does not guarantee success, but it
does represent a clear and practical approach
for formulating, implementing, and evaluating
strategies.
• Relationships among major components of the
strategic-management process are shown in
the model
Cont.…
 STRATEGIC MANAGEMENT MODEL

• Strategic management can be thought of as

having three main elements:
1. understanding the strategic position of an
organization,
2. making strategic choices for the future and
3. managing strategy in action
 Cont.…
• strategic position is concerned with identifying the impact on
strategy of the external environment, an organization's strategic
capability (resources and competences) and the expectations and
influence of stakeholders.

• Strategic choices involve the options for strategy in terms of

both the directions in which strategy might move and the
methods by which strategy might be pursued.
For example, an organization might have to choose between
alternative diversification moves, for example entering into new
products and markets.

• Strategy in action is concerned with ensuring that chosen

strategies are actually put into practice.
Cont.…
 Why Some Firms Do No Strategic Planning?
 reasons for poor or no strategic planning are as follows:
 Lack of knowledge or experience in strategic planning—No
training in strategic planning.
 Poor reward structures—When an organization assumes
success, it often fails to reward success. When failure occurs,
then the firm may punish.
 Firefighting—An organization can be so deeply embroiled in
resolving crises and firefighting that it reserves no time for
planning.
 Waste of time—Some firms see planning as a waste of time
because no marketable product is produced. Time spent on
planning is an investment.
 Too expensive—Some organizations see planning as too
expensive in time and money.
 Cont.…
 Laziness—People may not want to put forth the
effort needed to formulate a plan.
 Prior bad experience—People may have had a
previous bad experience with planning,
 Self-interest—When someone has achieved
status, privilege, or self-esteem through
effectively using an old system, he or she often
sees a new plan as a threat.
 Fear of the unknown—People may be
uncertain of their abilities to learn new skills of
their aptitude with new systems, or of their
ability to take on new roles.
ANY QUESTIONS …… ?