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STRATEGIC MANAGEMENT

LECT.
DR. HASSAN KHALIFA OSMAN

Strategic Management achieves a firms success


through integration

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

MIS

Key Terms
Vision: What do we want to become?
Mission: What is our business?
Strategies: Means by which long-term objectives are
achieved
Strengths & Weaknesses (Internal): Controllable activities
performed especially well or poorly
Annual Objectives: Short-term milestones that firms must
achieve to attain long-term objectives
Policies: Means by which annual objectives will be achieved

Strategic Management

Art & science of formulating, implementing, and


evaluating, cross-functional decisions that enable an
organization to achieve its objectives
In essence, the strategic plan is a companys game plan

Definitions of Strategic Management


The strategic management discipline originated in the 1950s and 1960s.
Early contributors, were Peter Drucker, Philip Selznick, Alfred Chandler, and Bruce
Henderson
Strategic management involves the formulation and implementation of the major
organization goals, based on consideration of resources and assessment of internal and
external environments.
Strategy is defined as: 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 goals.
Strategies are established to set direction, focus effort, define or clarify the organization,
and provide consistency or guidance in response to the environment.
Strategic management involves the related concepts of strategic planning and strategic
thinking.
Strategic management is often described as involving two major processes formulation
and implementation of strategy.
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Basic concepts of strategy


Competitive advantage: operating with an attribute or set of attributes

that allows an organization to outperform its rivals.


Sustainable competitive advantage: one that is difficult for competitors
to imitate.
Strategy: a comprehensive action plan that identifies long-term direction
for an organization and guides resource utilization to accomplish
organizational goals with sustainable competitive advantage.
Strategic intent: focusing all organizational energies on a unifying and
compelling goal.
Strategic management: the process of formulating and implementing
strategies to accomplish long-term goals and sustain competitive
advantage.
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Goal of strategic management:


is to create above-average returns for investors:
Returns exceeding those for alternative
opportunities at equivalent risk.
Earning above-average returns depends in part
on the organizations competitive
environment.

Formulation of strategy
Involves analyzing and assessing existing strategies, organization, and
environment to develop new strategies and strategic plans capable of
delivering future competitive advantage.
Remote external environment, including the political, economic, social,
technological, legal and environmental landscape.
Industry environment, such as the competitive behavior of rival
organizations, the bargaining power of buyers/customers and suppliers,
threats from new entrants to the industry, and the ability of buyers to
substitute products.
Internal environment, regarding the strengths and weaknesses of the
organization's resources.
Formulation ends with a series of goals or objectives and measures for
the organization to pursue.
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Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

Issues in Strategy Formulation

New business opportunities


Businesses to abandon
Allocation of resources
Expansion or diversification
International markets
Mergers or joint ventures
Avoidance of hostile takeover

Strategic question for strategy formulation


What is the organization's business?
Who is the target customer for the organization's products and services?
Where are the customers and how do they buy? What is considered "value" to the
customer?
Which businesses, products/services should be included/excluded from the portfolio of
offerings?
What is the geographic scope of the business?
What differentiates the company from its competitors in the eyes of customers?
Which skills and capabilities should be developed within the firm?
What are the important opportunities and risks for the organization?
How can the firm grow, through both its base business and new business?
How can the firm generate more value for investors.
The answers to these and other strategic questions result in the organization's strategy
and a series of specific short-term and long-term goals or objectives and related measures.

Strategy implementation
Strategy implementation

The process of allocating resources and putting strategies into action.


All organizational and management systems must be mobilized to support and
reinforce the accomplishment of strategies.

Essential tasks for strategy implementation:

Identify organizational mission and objectives.


Assess current performance vs mission and objectives.
Create strategic plans to accomplish purpose and objectives.
Implement the strategic plans
Evaluate results; change strategic plans and/or implementation processes as
necessary.
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External stakeholders as strategic


constituencies of organizations.

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Strengths & weaknesses

What are our Strengths?

Manufacturing
efficiency?
Skilled workforce?
Good market share?
Strong financing?
Superior reputation

What are our Weaknesses?


Outdated facilities?
Inadequate research and
development?
Obsolete technologies?
Weak management?
Past planning failures?
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Analysis of organizational resources and capabilities:


Analysis of organizational resources and capabilities:

Important goal of assessing core competencies.


Potential core competencies:

Special knowledge or expertise.


Superior technology.
Efficient manufacturing approaches.
Unique product distribution systems.
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SWOT analysis of strengths, weaknesses, opportunities,


and threats.

Management - Chapter 9
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Opportunities & threats:


What are our Opportunities?

Possible new markets?


Strong economy?
Weak market rivals?
Emerging technologies?
Growth of existing market?

What are our Threats?

New competitors?
Shortage of resources?
Changing market tastes?
New regulations?
Substitute products?

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Analysis of industry and environment:


Assessment of macro environment:

Technology.
Government.
Social structures and population demographics.
Global economy.
Natural environment.
Analysis of industry environment:

Resource suppliers.
Competitors.
Customers.
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strategic forces affecting industry competition.

Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).

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The three levels of strategy in organizations:

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Types of strategies used by organizations:


Growth and diversification strategies:

Growth strategies: Seek an increase in size and the expansion of


current operations.
Types of growth strategies: Concentration strategies and
Diversification strategies. Related/ Unrelated diversification
Restructuring and Retrenchment strategies:

Readjusting operations when an organization is in trouble.


Retrenchment :Correcting, Liquidation or Restructuring
Global strategies: Globalization strategy, Transnational strategy and

Multidomestic strategy.
Cooperative strategies: Strategic alliances in an area of mutual interest
E-business strategies
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Strategy Evaluation

Internal Review
External Review
Performance Metrics
Corrective Actions

Comprehensive strategic management model


External
Audit

Chapter 3

Vision
&
Mission

Chapter 2

Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Measure &
Evaluate
Performance

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Internal
Audit

Chapter 4

Strategic Management Model

Audit external environment


Audit internal environment
Establish long-term objectives
Generate, evaluate & select strategies
Implement selected strategies
Measure & evaluate performance

Benefits of Strategic Management

Identification of Opportunities

Objective view of management problems

Improved coordination & control

Minimizes adverse conditions & changes

Decisions that better support objectives

Effective allocation of time & resources

Internal communication among personnel

Integration of individual behaviors

Clarify individual responsibilities

Encourage forward thinking

Encourages favorable attitude toward change

Provides discipline and formality to the management of the business

Why working with No Strategic Planning


Poor reward structures

Fear of failure

Fire-fighting

Overconfidence

Waste of time

Prior bad experience

Too expensive

Self-interest

Laziness

Fear of the unknown

Content with success

Suspicion