Strategic Management –

INS 4123

M.A.C.H. Perera- Department of Insurance & Valuation

The Nature of Strategic Management

Learning Objectives
 Describe the Strategic Management process;
 Explain the need for Integrating analysis and
Intuition in Strategic Management
 Define key terms in Strategic Management
 Discuss
the nature of strategy formation,
Implementation and evaluation activities

M.A.C.H. Perera- Department of

Insurance & Valuation
The Nature of Strategic Management

 Thistopic will provide the overview of

Strategic management and will discuss
the basic activities and terms in
Strategic management.
What is Strategic Management

 Strategic Management can be defined as the art

and the science of formulation, implementing,
and evaluating cross-functional decisions that
enable an organization to achieve its objectives.
 Therefore, strategic management focuses on
integrating management, marketing,
finance/accounting, production/operations,
research and development, computer information
systems to achieve organizational success.
What is Strategic Management cont…..

 Sometimes the term strategic management is

used to refer to strategy formation,
implementation and evaluation with strategic
planning referring only to strategy formation.
 The purpose of strategic management is to exploit
and create new and different opportunities for
tomorrow; long-range planning, in contrast, tries
to optimize for tomorrow the trends of today.
What is Strategic Management cont…..

 The term strategic planning originated in

the 1950s and was very popular between
the mid-1960s and mid-1970s. During these
years, strategic planning was widely
believed to be the answer for all problems.
 A strategic plan is, in essence, a company’s
game plan. A company must have a
strategic plan to complete successfully.
What is Strategic Management cont…..
 Profitmargins among firms in most industries
have been so reduced that that there is little
room for error in the overall strategic plan.
A strategic plan result from tough managerial
choices among numerous good alternatives,
and it signals commitment to specific markets,
policies, procedures and operations in lieu of
other “less desirable” courses of action.
Stages of Strategic Management

The strategic management process consists of

three stages
 Strategy Formation
 Strategy Implementation
 Strategy evaluation
Strategy Formation
 StrategyFormation includes developing a
vision and mission, identifying an
organizations; external opportunities and
threats, determining internal strengths
and weaknesses, establishing long-term
objectives, generating alternative
strategies, and choosing particular
strategies to pursue.
Stages of Strategic Management
Strategy formation issues include deciding
 what new business to enter;
 what business to be abandon,
 how to allocate resources,
 whether to expand operation or diversify,
 whether to enter international markets,
 whether to merge or form a joint venture, and
 how to avoid hostile takeover.
Stages of Strategic Management Cont…

 Because no organization has unlimited resources,

strategist must decide which alternative
strategies will benefit the firm most.
 Strategy formation decisions commit an
organization to specific products, markets,
resources and technologies over and extended
period of time.
 Strategies determine long term competitive
advantages.
Stages of Strategic Management Cont…

 Topmanagers have the best

perspectives to understand the
ramifications of strategy-formation
decisions; they have the authority to
commit the resources necessary for
implementation.
Stages of Strategic Management Cont…
Strategy implementation requires a firm
to
 Establish annual objectives,
 Devise policies,
 Motivate employees, and
 Allocate resources so that formulate
strategies can be executed.
Stages of Strategic Management Cont…

Strategy includes
 Developing a strategy-supportive culture,
 Creating and effective organizational
structure,
 Re-directing marketing efforts,
 Preparing budgets,
 Developing and utilizing information
systems, and
 Linking employee compensation to
organizational performances.
Stages of Strategic Management Cont…
 Strategic implementation often called the
action stage of strategic management.
 Implementing strategy means mobilizing
employees and managers to put
formulated strategies into action.
 Often considered to be the most difficult
stage in strategic management.
Stages of Strategic Management Cont…
Strategy implementation requires
 Personal discipline,
 Commitment, and
 Sacrifices.
Stages of Strategic Management Cont…

Successof strategy
implementation depend on the
managers’ ability to motivate
employees towards the goals.
Stages of Strategic Management Cont…

 Interpersonalskills are especially critical

for successful strategy implementation.
 Everydivision must decide to answer the
questions such as “What must we do to
implement our part of the organization
strategy?” and “How best can we get the
job done?”.
Stages of Strategic Management Cont…
The challenge of implementation
is to stimulate employees and
managers throughout an
organization to work with pride
and enthusiasm toward achieving
stated objectives.
Stages of Strategic Management Cont…
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.
Stages of Strategic Management Cont…
All strategies are subject to future
modification because external and internal
factors are constantly changing. Therefore
necessary for
 Reviewing external and internal factors
that are base for current strategies,
 Measuring performances and
 Taking corrective actions
Stages of Strategic Management Cont…
 Strategy evaluation is needed because
success today is no guarantee of
success tomorrow. Success always
creates new and different problems.
 Strategy formation, implementation
and evaluation activities occur at
three hierarchical levels in a large
organization; Corporate, divisional, or
strategic business unit, and functional.
Stages of Strategic Management Cont…
 By fostering communication and
interaction among managers and
employees across hierarchical levels,
strategic management helps a firm
function as a competitive team.
 Most small businesses and some large
businesses do not have divisions or
strategic business units; they have only
the corporate and functional levels.
Thank you..