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Strategic Management Lecture Slides

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Dunya Institute for Higher
Education

www.dunya.edu.af
Strategic Management
Dr Murtaza Noori
Sep-2017

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 General Issues
• The course include 12 consequent lectures.
• There will be a mid-term exam and a final exam. Attendance, assignment and class
participation will be scored.
• Homework, assignment, case studies and group researches are practiced accordingly
• National and international sources and books have been used to prepare this slide
• To comprehend lessons and topics if possible country practices or system are
introduced
• Active participation of students is welcomed and encouraged
• Mutual respect between students and the lecturer is inevitable and expected.

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 Topics/ Chapters
1. Introduction
2. Environment and Analysis
3. Strategy Formulation & Choice
4. Types of Strategies
5. Strategy Implementation & Functional Strategies
6. Strategy Evaluation and Control
Glossary

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 History

The strategic management concept was known as Business Policy. It was

first introduced at Harvard Business School in 1911. Many of the concepts
and techniques that deal with strategic management have been developed
and implemented successfully by business corporations such as General
Electric and the Boston Consulting Group. Over time, business
practitioners and academic researchers have expanded and refined these
concepts. Initially, strategic management was of most use to large
corporations operating in multiple industries.

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 History

Business Policy was made mandatory in 1969 for all business

school in USA. Many authors have used Business Policy and
Strategic Management interchangeably, however some
authors always think there are differences between the two.

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BP vs SM

• Business strategy: Focus on integrated knowledge gained in functional

areas, mainly looks inward to solve organization problems

• Strategic management: modern name for BP, focus on organization

capabilities and environmental opportunities, mainly looks outward to
gain competitive advantage in market

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Definitions

Strategic management is a set of managerial decisions and actions that

determines the performance of a corporation in the long run. It
includes environmental scanning (both external and internal), strategy
formulation (strategic or long-range planning), strategy
implementation, and evaluation and control. The study of strategic
management, therefore, emphasizes the monitoring and assessment
of external opportunities and threats in light of a corporation's
strengths and weaknesses. This is initiated with the set-up of mission,
vision, goals and objectives of a company.

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 Definition
• SM integrates rather activities like planning, organizing, leading and controlling
with respect to environment and organization direction.

• SM is set of decisions and actions resulting in the formulation and

implementation of plans designed to achieve company objectives (Pearce and
Robinson, 1988)

• SM is stream of decisions and actions which lead to the development of an

effective strategy to help achieve corporates objective (Glueck and Jauch, 1984)

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 SM vs Operational Management
• SM: long range planning, top management job, complex i.e. JV, mergers

• OM: short term, middle level, routine decisions, target functional areas i.e.
production planning, recruitment and sales planning

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SM vs Operational Management

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 SM Characteristics
• Long-term Direction
• Change will occur
• Future oriented and proactive
• Significant risks
• Affect operational decisions
• Competitive advantages

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 Strategy vs Tactics
• Tactics: sub-strategy developed by lower level, within a framework, more
certain decisions

• Strategy: comprehensive plan developed by top level, high risk and

uncertainty, work with external factors than internal

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Strategy vs Tactics

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 Benefits of SM
• Reduces uncertainty
• Links short and long term objectives
• Facilitates control
• Facilitates measurement
Limitations:
• Expensive
• Unrealistic Expectation
• Resistance or lack of commitment in implementation stage

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 Mintzberg’s Models of SM
Three approaches for strategy formulation and implementation are
introduced:

• Entrepreneurship (Ideas): fits for new organization with assistance of

strong and visionary leader tries to look for opportunities
• Adaptive (Expereince) : small and incremental steps to problems rather
than seeking opportunities
• Planning (Design): comprehensive and systematic analysis used in large
organization

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 Development of Strategy
Two main models related to strategic environment and strategic resources:

• Industrial Organization (I/O) (Porter): study environment at first,

resources are available, resources are mobile
• Resource Based View (RBV) (Hamel): organization resources,
competencies

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 Level of Strategy
Strategy exit in four levels of an organization:

• Corporate-Level
• Business Level
• Functional Level
• Operational

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Level of Strategy

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 Strategic Leadership
The organization head is influencing person on strategy, he needs special and
unique personality to develop and implement the strategy

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 Strategic Drift
If the strategy remain unchanged for long period of time and environment
change faster, then strategy gets out of line of its environment.

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 Strategic Management Model
Analyze External
Environment

Establish Analyze Evaluate and

Develop Vision & Implement
Long-term and Select Control
Mission Strategy
Objectives Strategy Strategy

Analyze internal
enviroment

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 Chapter 2: Environment and
Analysis
In this chapter we will discuss about approach to formulate strategies, vision
and mission formulation, business environment, internal analysis,
competitive advantage and value chain analysis

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 Strategy Formulation
• .

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 Vision
A view of what management thinks an organization should become.

• Core Ideology
• Envisioned Future

Canon: Beat Xerox

Microsoft: Empower people through great software any time, any place and
on any device

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 Mission/Creed

• Tangible face of organization’s vision which is linked to long term

objectives.

• It is an enduring statement of purpose

• The purpose or reason for the organization’s existence. It is specific,

more detailed and mention some of goals

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 Vision vs Mission

• Vision: what we want to be, broad, dream and future state

• Mission: what is our business, statement of purpose, more specific,

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 Class Discussion

• How vision and mission is related to SM?

• Discuss difference/connection between vision and mission
• Please prepare vision and mission statement for a assumed project or
organization

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 Goals

• The goal is open ended statement of what we want to achieve, it shows

long term results of organization and can be too general or broad

• Example: Increased profitability

• The official goals and operational goals are different. Operational goals
are like environmental, output or system

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 Objectives

• Objectives are outcomes and results of organization also objectives

convert vision and mission into specific targets. Objective shall be SMART

• Objective are in two types financial and strategic

•
• Example: Having stronger distribution network , 10% increase in annual
sales

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 Objective Setting

1- Top-down approach: objective are set at top level for business unit and
functional area in accordance with strategic objective of organization .

2- Bottom-up approach: objectives are set at bottom level and company-wide

objective are integration of these objectives

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 MBO
Superiors and subordinates jointly identify goals and define individual objectives and
results.

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 Problems

Strategic Intent: ambitions goal/objective set by an organization, it can be

achieved or too hard to achieve.
• At 1960 Nike’s strategic intent was to overtake Adidas
• Honda to crash Yamaha

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 Environment Analysis

• Environment in which organization operates is two parts, external and

internal environments.
• Business environment is complex, dynamic, uncertain and turbulent
• We explain external environment at first

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 Environmental Analysis

• EA or scanning is process of monitoring events and evaluating trends in

external environment, in order to identify opportunities and threats that
may influence firm's ability to reach its goals
• Final goal is environmental fit

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 External Environment’s Segments

1- Macro/ Mega Environment

2- Operating/ Relevant Environment
3- Industry/ Micro/ Competitive Environment

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 External Environment’s Segments-
Macro Factors

1. Political and Legal Factors

2. Economic (GDP, Inflation, Interest Rate, Employment rate)
3. Socio-cultural Factors ( gender, consumer behavior, life style, tradition)
4. Demographic factors ( population, age, sex, educational level and
religion)
5. Technological factors ( Robotics tech, satellite usage, internet coverage)
6. Ecological/ Global Factor (warming, war and regulations)

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External Environment’s Segments-
Macro Factors

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 External Environment’s Segments-
Operating Factors

1. Suppliers
2. Customers
3. Competitors
4. Labor Market
5. Retailers
6. Bankers

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 Techniques for Environmental
Analysis

1. PESTEL analysis
2. SWOT analysis
3. ETOP
4. QUEST
5. EFE Matrix
6. CPM
7. Forcasting

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 Techniques for Environmental
Analysis

1. PESTEL analysis
It is a future forecasting checklist that analyzes political, economic,
technological and legal aspects of the environment.

Warner Borthers analyzed fantasy market for making Harry Potter first film, it
was noted the film can stay attractive for long term in the World with a
sustainable income.

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Techniques for Environmental
Analysis

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 Techniques for Environmental
Analysis

SWOT Analysis
This is a basic method to analyze current position of the organization like its
strength, weakness, threats and opportunities. Its focus on external factor
too narrow.

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Techniques for Environmental
Analysis

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 Techniques for Environmental
Analysis

2. Environmental Threats and Opportunities Profile

Under this techniques we will identify - and + impacts of each factor

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Techniques for Environmental
Analysis

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 Techniques for Environmental
Analysis

3. External Factor Evaluation Matrix

• List 10 to 20 opportunities and threats

• Assign a weight of 0 to 1.0 for both factors (most important)
• Assign a rating to each factor 1 to 4 (superior)
• Multiple factor’s weight by its rating
Higher score means responsive organizations to factors

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Techniques for Environmental
Analysis

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 Techniques for Environmental
Analysis

4. Quick Environment Scanning Techniques

• In this method managers make observation about events and trends and
prepare a list of issues that can affect future business. Then issues and
scenarios are shared for review of the strategist.

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 Techniques for Environmental
Analysis

5. Competitive Profile Matrix (CPM)

• Under his methods critical success factors (market share, consumer

loyalty, price, advertisement …) of the organization is compared against
its competitors.

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Techniques for Environmental
Analysis

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 Techniques for Environmental
Analysis

6. Forecasting

• Time series analysis

• Delphi method
• Brainstorming
• Judgmental forecasting

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Techniques for Environmental
Analysis

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 Assignment
• Student will research and prepare a example for one of techniques used for
analysis of macro environmental factors

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 Competitive Analysis

Strategic Group is one where competitors are following similar strategies or

targeting the same market segments.

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 Competitive Analysis

Porters Five Forces Model: According to this model intensity of competition in

an industry depends on five forces:
• Threat of new entrants
• Intensity of rivalry
• Bargaining power of buyer
• Bargaining power of suppliers
• Threats of substitute product

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 Internal Analysis

1. SWOT Analysis (same as external environment)

2. IFE Matrix (same as EFE Matrix)
3. Financial analysis
4. Critical Success Factors (KPA, KPIs)
5. 7s Framework- McKinsey (strategy, structure, system, shared values,
skills, style and staff) for functional areas

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Internal Analysis

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 Value Chain Analysis
• Porter 1980
• Analysis of product value after each stage of production.
• Primary and Secondary cost are calculated.
• The product has specific value through production, inbound logistics,
operation and marketing stages

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 Core Competence
• Used by UN agency widely
• Prahalad and Hamel 1990
• Unique resources and strength of an organization
• Example: Honda= small engine design, Intel= design of complex chips for
PC/server, Canon= optics and microprocessors
• Core competence supports competitive advantage but it is different

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Core Competence

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 Class Discussion
• What is relation between RBM and SM?

• What is difference between Core competence and Competitive

Advantage?

• What is relation between KPIs and benchmarking?

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 Chapter 3: Strategy Formulation
and Choice
• Developing Alternatives Strategies
• Ansoff’s and Market Grid
• Strategic Analysis and Choice

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 Strategy Formulation and Choice
The process of generating, evaluating and selection of appropriate strategy
for implementation.

Strategy alternatives are different courses of action available to a firm to

pursue its objectives

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 Strategic Orientation
There are two approaches to search and generating alternatives to a strategy:

• Offensive Approach: An active search for opportunities and threats are

conducted e.i integration

• Defensive Approach: Developing alternatives to defend organization form

the forces i.e bankruptcy, liquidation

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 Strategic Choice
After identifying the options available, the next step is to select between them.

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 Ansoffs (1987) Product/Market
Grid
Framework for identifying corporate growth opportunities. Growth strategies
for corporate are:
• Market penetration
• Market Development
• Product Development
• Diversification

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Ansoffs (1987) Product/Market
Grid

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 Strategic Formulation and
Analytical Framework
Fred R David has developed a comprehensive framework for strategic analysis
and choice:

• Input Stage ( EFE, CPM and IFE)

• Matching Stage (PIMS, SWOT, BCG, Space matrix)
• Decision Stage ( Quantitative Strategic Planning Matrix- QSPM)

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 Strategic Position and Action
Evaluation (SPACE)
It is an important technique to show best appropriate strategy for
organization. The axes of the space matrix represent two internal dimension (
financial strength, competitive advantage) and external dimension (
environmental stability, industry strength )

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Strategic Position and Action
Evaluation (SPACE)
FS

Conservative Aggressive

CA IS

Defensive Competitive

ES

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 Quantitative Strategic Planning
Matrix (QSPM)

It is a tool that allows us to evaluate a strategy objectively based on internal

and external success factors. It is needs good judgmental skills.

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Quantitative Strategic Planning
Matrix (QSPM)

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 Chapter 4: Types of Strategies

• Corporate Strategies
• Business Strategies
• Global Strategies

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 Corporate Strategy
• Multi-business organization strategy to obtain economic of scale
advantage, resource sharing and coordination, lesson learnt and new
business creation in all business units.

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 Corporate Strategy
Types:
• Stability ( makes not change to the firms current activates)
• Expansionary ( expands firm’s activities
• Retrenchment (reduce firm’s level of activities)
• Combination ( uses several strategies )

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 1-Corporate Strategy-Growth

1. Intensive Strategies ( Ansoffs’ Market penetration, market development,

Product development strategies)
2. Integration Strategies: vertical integration like backward and forward
strategies to increase control over suppliers and distributors and
horizontal integration to increase control over competitors.
Examples: Brooke Bond bought a tea plantation, Raymonds opened its own
show room/shops, Microsoft purchased yahoo.
3. Diversification Strategies: adding new business to the existing business of
the company, it has several types like mergers, JV/alliance and new unit
creation

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 2-Corporate Strategy-
Retrenchment
1. Defensive Strategy: this is last resort strategy when company is in weak
competitive position or production is in poor performance:
• Turnaround ( recovery of internal and external factors) like cost-cutting
and revenue-increasing strategies
• Divestiture ( sale of a unit and demerger strategy
• Bankruptcy: when the firm is insolvent

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 Corporate Parenting
• Corporate is multi-business company and HQ s manage all units in
centers.
• By portfolio analysis helps us to share resources and synergies among
units

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 Business Strategies
How business competes in chosen market, it is also called competitive
strategy

Types as per Porter model:

1. Cost Leadership
2. Differentiation strategy ( new product Sony with superior quality
products)
3. Focus strategy ( specific niche of market is targeted)

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 Game Theory Concept
A competitive fame involving the moves and countermoves of different rivals
in the market.

The games can be simultaneous and sequential

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 Global Strategy
To become international and then global firm try to apply global strategies:
• Exporting
• Licensing
• Franchising (Coca-Cola)
• Sales subsidiaries
• JV ( Suziki Maruti)
• Strategic Alliances: two or more firms with common goals share
knowledge and sources like Boing and Airbus
• Offshoring (a firms outsource part of activities
to abroad firms)

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 Chapter 5: Strategy Implementation
• Programs, Policies, Procedures
• Resource Allocation
• Organization Structure
• Managing Strategic Change
• Functional Strategies

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 Strategy Implementation
• Strategy implementation is the process of putting organization’s
strategies into action by setting annual or short-term objectives,
allocating resources, development programs/ policies/ structures/
functional strategies.

• Strategy implementation may include strategy change that can be

analyzed by 7s framework.

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Management & operational Issues
1. Setting annual or short-term objectives
2. Developing programs, policies and procedures (strategies, plans,
programs, project, budget)
3. Allocation of resources
4. Matching structure with strategy
5. Providing leadership and org-culture
6. Implementing strategy in functional areas
7. Management of strategic change

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 Strategy vs Policy
• Strategy : course of action to achieve org goals, long-term direction,
crucial decision
• Policies: guideline to manager, helps in implementing plans and
programs, limits uncertainty
• Procedure: step-by-step activities with details how task or job is to be
done, procedure is developed after plan, policy and budget approval.

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 Resource Allocation

Procurement and commitment of organizational resources that are:

• Physical resources
• Financial
• HRs
• Technological
• Intellectual

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Approaches to Resource Allocation

• Top-down approach
• Bottom-up approach
• Strategic budgeting

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Techniques for Resource Allocation

• Product Life Cycle (PLC) Based Budgeting

• ZBB
• Capital Budgeting
• Operating Budgets

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 Organization Structure

Set of formal tasks and reporting relationship which provide a framework for
control and coordination within organization .

• Superstructure (division, departments)

• Infrastructure ( procedure, authority, reporting ..)

OS is affected by factors like complexity of business, span of control, chain of

command, authority and specialization of units.

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 Organization Structures

• Simple
• Functional
• Divisional
• Matrix (mix of functional and divisional
• Network

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 Strategic Leadership

• Clarifying strategic intent

• Setting direction
• Build an organization
• Build organization culture
• Oversight ethical behaviors

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 Leadership

• Transactional Leadership
• Transformational Leadership
• Charismatic Leadership

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 Types of Change

• Organizational Change (resistance against change)

• Strategic Change ( proactive change of strategy and organization to
achieve objectives)

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 Functional Strategies

• Marketing Strategy ( product design, distribution, pricing, withdrawal)

• HR Strategy ( planning, recruitment, selection, training, development,
compensation management, performance management)
• Production Strategy ( QC, inventory management, maintenance, machine
utilization, location, material management)
• Financial strategy ( financial decision, planning , dividend)

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Chapter 6: Strategic Evaluation and
Control
• Types of Control
• Operational and Strategic Control
• Corporate Social Responsibility
• Social Audit
• Corporate Governance

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 Strategic Evaluation and Control
The process of determining effectiveness of a given strategy in achieving
organization objectives and taking corrective action while strategy is being
implemented.

Evaluation is early warming system of the organization

Strategic control is like steering control of a ship

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 General Types of Control
1. Output control ( actual performance, end-result e.g sales)
2. Behavior control ( control activities and process e.g ISO 9000)
3. Input control ( resources like skills and knowledge)

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 Strategic Control
1. Premise Factors Control ( environmental factors)
2. Strategic surveillance ( events noted from journals and reports )
3. Special alerts (unexpected)
4. Implementation control ( programs, investment and milestone reviews )

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Strategic Control

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 Mechanism for Strategic Control
1. MIS
2. Benchmarking
3. Key Factor Rating
4. Network Techniques (CPM for operating control and resource allocation )
5. MBO ( continuous evaluation of performance against pre-formulated
objectives)

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Mechanism for Strategic Control

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 Resource & References

• Strategic Management and Business Policy, C Appa Rao- English

• Strategic Management, Ferred David- Dari
• Strategic Management Note, Dr Ahmad Farid Monib- Dari
• Glossary for Strategic Management Terminologies- English, By Murtaza
Noori

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 Thank You Very Much!
and
Good Luck !

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