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STRATEGIC MANAGEMENT
LO1 Be able to analyse key external influences on
an organisation’s strategy.

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 Unit Aim
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¨ The aim of this unit is to develop learners’ understanding of

strategic and change management models, as well as the
ability to review strategic plans, to propose strategic options,
to create implementation plans and to lead organisational
changes.

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 Indicative Content
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¨ To review the position of an organisation in its current market: market

situation analysis; organisational position measurement; strategic business
planning tools; e.g. SWOT (strength, weakness, opportunity and threats)
analysis; Porter’s Five Forces Analysis; value chain analysis; Boston growth-
share (BCG) matrix; market equilibrium; market share; sustainable
competitive advantage.
¨ To analyse the effects of exiting plans on organisation: organisational
planning effects; organisational agreement between several organisations;
communication
¨ with stakeholders; organisational planning development; objectives led
management; guidelines; action planning; strategic and structure fit;
Business Process Re- engineering; performance appraisal; policy
development; systems of communication; realignment and focus.

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 Key Terminology
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¨ What do we mean by strategy?

¤ a plan of action designed to achieve a long-term or overall aim.
¤ Strategy is a word which was first used by the military. It comes from an
ancient Greek word for the general officer commanding all the armed
forces of a state. A strategy is a long term plan on what to do to
achieve a certain goal. Strategy is what we broadly intend to do to
reach our long-term goal or objective.
¨ What is management?
¤ Management is the coordination and administration of tasks to achieve
a goal.
¤ Management is the coordination of all resources through the process of
planning, organising, directing and controlling in order to attain stated
goals.
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 What are the 3 types of strategy?
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¨ Corporate Strategy - This level answers the foundational question of what

you want to achieve.
¨ Business Strategy - his level focuses on how you're going to compete.
¨ Market Strategy - This strategy level focuses on how you're going to grow.

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 Evolution of Strategic Management
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 Strategic Management Process
(AFI Strategy Framework (Analysis, Formulation and Implementaton)
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 1.1 Critically evaluate the position of an
organisation in its current market.
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¨ The strategic position is concerned with the impact on strategy of the

external environment, internal resources and competences, and the
expectations and influence of stakeholders.
¨ Together, a consideration of the environment, strategic capability,
the expectations and the purposes within the cultural and political
framework of the organisation provides a basis for understanding
the strategic position of an organisation (Johnson and Scholes, 2005)
¨ It is important to take account of the future and to assess whether
the current strategy is a suitable fit with the strategic position. If not,
the organisation needs to determine what changes it needs to make
and whether it is capable of effecting such changes.

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 Key strategic models
SWOT
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¨ A SWOT analysis can be used as an

analysis tool in its own right or can be used
as a summary sheet on which other results
can be placed
¨ Strengths and weaknesses relate to
resources and capabilities:
¤ What is the organisation good at?
¤ What is it poor at?
¤ Where are resources in short supply?
¤ Where are resources excellent?
¨ Opportunities and strengths relate to
external factors:
¤ What will the effect on the organisation be of
economic changes?
¤ Can the organisation make use of new technologies?
¤ Are new entrants likely to enter the market place?
¤ Can a powerful customer dictate terms?

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 External environmental analysis
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¨ As well as thinking in terms of opportunities and threats, the

following tools can be used to analyse the external
environment:
¨ PEST analysis - looks at the environment under the headings
¨ Political / legal factors
¨ Economic factors
¨ Social / cultural factors
¨ technological factors
¨ A PEST analysis is particularly useful for identifying the drivers
of change to identify growth opportunities and sources of risk.

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 Porter's five forces model
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¨ Just because a market is

growing, it does not
necessarily mean that a firm
can be profitable in that
market. Porter identified five
forces that, collectively,
determine the profit potential
in an industry:
¨ competitive rivalry
¨ threat of new entrants
¨ threat from substitutes
¨ power of customers
¨ power of suppliers
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 Porter's diamond model
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¨ Porter tried to answer the following

questions:
¤ Why does a nation become the home
base for successful international
competitors in an industry?
¤ Why are firms based in a particular
nation able to create and sustain
competitive advantage against the
world's best competitors in a particular
field?
¤ Why is one country often the home of
so many of an industry's world
leaders?
¨ Porter called the answers to these
questions the determinants of national
competitive advantage. He suggested that
there are four main factors which
determine national competitive advantage
and expressed them in the form of
a diamond.

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 Internal analysis
Porter's value chain
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Porter developed the value

chain to help identify which
activities within the firm were
contributing to a competitive
advantage and which were
not.

The approach involves

breaking down the firm into
five 'primary' and four
'support' activities, and then
looking at each to see if they
give a cost advantage or
quality advantage.

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 Critical success factors and core competencies
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¨ When considering strengths and weaknesses it is important to

match these to the critical success factors (CSFs) in the industry
¨ CSF are our strengths the same as the ones necessary for
success?
¨ In particular, if a business can obtain unique resources and
core competencies that meet the CSFs in a market, then this
should lead to its success

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 Case Study: Evaluating the Current Market
Position of Apple Inc
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¨ Business Strategy: Apple Inc. has a clearly stated business strategy that can be
found in their annual 10-K reports. Their business strategy is as follows:
¤ The Company is committed to bringing the best user experience to its customers through its innovative
hardware, software, peripherals, and services.
¤ The Company’s business strategy leverages its unique ability to design and develop its own operating
systems, hardware, application software, and services to provide its customers new products and
solutions with superior ease-of-use, seamless integration, and innovative design.
¤ The company believes continual investment in research and development and marketing and
advertising is critical to the development and sale of innovative products and technologies.
¤ As part of its strategy, the Company continues to expand its platform for the discovery and delivery
of third-party digital content and applications through the iTunes Store.
¨ Target Market, and Distribution
¨ Industry Analysis – Competitive rivalry – Samsung, Google, Microsoft
¨ Porter’s 5 Forces Model – Buyer Bargaining power, Supplier Bargaining Power,
Threats of Substitutes, Threats of New Entrants
¨ SWOT & TOWS Analysis
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 Lets apply the models we have learnt now
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¨ SWOT – APPLE and of one major competitor to be applied

¨ Samsung’s SWOT Analysis

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 Apple Inc.’s TOWS Analysis
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 1.2 Critically analyse the effects of existing
plans on an organisation.
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¨ The purpose of planning is to develop a blueprint for growing a business. The

management team creates a vision for a larger, more profitable company. The
heart of the planning process is envisioning the actions that must be taken, and
the expenditures that must be made, to accelerate the company’s growth.
¨ Apple is the major brand in the technology industry in relation to its profit
generated and ranking of its brand. Apple always targets three main
segments.
¤ People who love music are targeted by Apple iPod and iTunes.
¤ Irrespective of age, people are targeted for Apple iPhone, MacBook,
Tablets and many more things.
¤ Products like Apple TV and Apple Watch also targeted many people.

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 Strategic analysis
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Strategic analysis is a key step

within the strategic
planning process:

strategic analysis (examination of

the current strategic position)

strategic choice

strategic implementation
(or strategy into action).

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 The strategic position / strategic analysis
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¨ Assessing the strategic position consists of analysing:

¨ the environment (competitors, markets, regulations, discoveries
etc). Key factors are often summarised as opportunities and
threats.
¨ the strategic capability of the organisation (resources,
competences). Key factors are often summarised as strengths
and weaknesses)
¨ the culture, beliefs and assumptions of the organisation
¨ the expectation and power of stakeholders (what do the
shareholders want? Will employees co-operate?).

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 The external environment
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¨ Since strategy is concerned with the position a business takes in relation to

its environment, an understanding of the environment's effects on an
organisation is of central importance to strategic analysis.
¨ The historical and environmental effects on the business must be considered,
as well as the present effects and the expected changes in environmental
variables. This is a major task because the range of environmental variables
is so great. Many of those variables will give rise to opportunities of some
sort, and many will exert threats upon the organisation.
¨ The two main problems that have to be faced are, first, to distil out of this
complexity a view of the main or overall environmental impacts for the
purpose of strategic choice; and second, the fact that the range of
variables is likely to be so great that it may not be possible or realistic to
identify and analyse each one.

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 The resources of the organisation
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¨ There are internal influences as well as outside influences on the firm and its
choice of strategies. One of the ways of thinking about the strategic
capability of an organisation is to consider its strengths and
weaknesses (what it is good or not so good at doing, or where it is at a
competitive advantage or disadvantage, for example). Considering the
resource areas of a business such as its physical plant, its management, its
financial structure and its products may identify these strengths and
weaknesses.
¨ Again, the aim is to form a view of the internal influences and constraints on
strategic choice. The expectations of different stakeholders are important
because they will affect what will be seen as acceptable in terms of the
strategies advanced by management. However, the beliefs and assumptions
that make up the culture of an organisation, though less explicit, will also
have an important influence.

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 Expectations and influence of stakeholders
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¨ A stakeholder can be defined as someone who has an interest in the well-

being of the organisation. A typical list of stakeholders for a large
company would include shareholders, employees, managers, customers,
locality, suppliers, government and society at large.
¨ Strategic planning and management cannot be achieved without regard to
stakeholders.
¨ In a profit-making organisation, management might have a choice of
adopting a high risk/high return strategy or a low risk/low return strategy.
It's important to know which the shareholders want.
¨ In a not-for-profit organisation, such as a hospital, managers need to know
what the government and potential patients want. How much resource
should go into heart operations, how much into hip replacement, etc.

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 The beliefs and assumptions within an
organisation
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¨ Culture affects the interpretation of the environmental and resource

influences; so two groups of managers, perhaps working in different
divisions of an organisation, may come to different conclusions about
strategy, although they are faced with similar environmental and resource
implications.
¨ Which influence prevails is likely to depend on which group has the greater
power, and understanding this can be of great importance in recognising
why an organisation follows, or is likely to follow, the strategy it does.
¨ A consideration of the environment, resources, expectations and objectives
within the cultural and political framework of the organisation provides the
basis for strategic analysis of that organisation.

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 Apple has gained many advantages over its
competitors:
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¨ Products with higher technology – its only of software like OS, MacBook
and Apple watch have leaded the market space.
¨ Brand Image – Apple is being on top years after years and well known for
its brand image.
¨ Profit gained over time – apple make high profits dues to its high profit
margins.
¨ Research and Development – The biggest advantage that Apple has
gained from competitors is that spending of research and development
keeps their eye on the future instead of focusing on the present.
¨ Apple Inc.’s Ethical Issues- Apple has encountered many different ethical
issues as an organization during their tenure. The issues have ranged from
things such as child labour law violations, workers natural rights being
violated, workers low wage cases, to unethical methods of hiring.

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Generic strategies

• Michael Porter introduced the term ‘generic strategy’

to mean basic types of competitive strategy that hold
across many kinds of business situations.
• Competitive strategy is concerned with how a
strategic business unit achieves competitive
advantage in its domain of activity.
• Competitive advantage is about how an SBU creates
value for its users, both greater than the costs of
supplying them and superior to that of rival SBUs.
Three generic strategies

Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by
Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved.
Cost-leadership

• Cost-leadership strategy
• Iinvolves becoming the lowest- cost organisation in a
domain of activity.
• Four key cost drivers that can help deliver cost
leadership:
¨ Lower input costs

¨ Economies of scale

¨ Experience

¨ Product/process design.
Differentiation strategies

Differentiation involves uniqueness along some dimension

that is sufficiently valued by customers to allow a price
premium.

Two key issues:

¨ The strategic customer on whose needs the
differentiation is based
¨ Key competitors – who are the rivals and who may
become a rival.
Focus strategies (1)

A focus strategy targets a narrow segment or domain of

activity and tailors its products or services to the needs of
that specific segment to the exclusion of others.

Two types of focus strategy:

¨ Cost-focus strategy (e.g. Iceland Foods)

¨Differentiation focus strategy (e.g. ARM Holdings

for mobile phone chips).

‘Stuck in the middle’?

Porter argues:
¨ It is best to choose which generic strategy to adopt and

then stick rigorously to it.

¨ Failure to do this leads to a danger of being ‘stuck in the

middle’ – doing no strategy well.

¨ The argument for pure generic strategies is controversial.
Porter acknowledges that the strategies can be
combined (e.g. if being unique costs nothing).
Combining generic strategies

¨ A company can create separate strategic business

units each pursuing different generic strategies and
with different cost structures.
¨ Technological or managerial innovations where both

cost efficiency and quality are improved.

¨ Competitive failures – if rivals are similarly ‘stuck in
the middle’ or if there is no significant competition
then ‘middle’ strategies may be OK.
 References
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¨ https://kfknowledgebank.kaplan.co.uk/business-
strategy/strategic-analysis
¨ Ansoff, I. H. (1957), Strategies for diversification, Harvard
Business Review, Vol. 35, No. 2
¨ Byars, L. (1991) Strategic Management, Formulation and
Implementation - Concepts and Cases, New York:
HarperCollins.
¨ Johnson, G. and Scholes, K. (1993) Exploring Corporate
Strategy - Text and Cases, Hemel Hempstead: Prentice-Hall

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