Advanced Strategic Management

The Nature of Strategic Management

Dr. Sajjad Haider
Business Management
Welcome to the World of Strategic Management
Discussion questions?

Some critics posit

that the Strategic
Planning has no
room in a global
emergency situation
like current COVID-
19 Pandemic. Do
you agree or
disagree with this
notion, what’s your
take on this?
Strategic Management –Defined

The Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives.
Strategic Management –Defined

It is concerned primarily with the

actions organizations take to achieve
competitive advantage and create
value for the organization and its
stakeholders.
More thoughts on Strategic Management

 To be truly successful, we need a strategy, and that

strategy is not about just being the best.
 Strategy is not just about being the # 1 or # 2 (Goals)
 It’s not one step, it’s a set of steps

 Strategy is the unique position that allows you to

get to whatever goal you set.
 Strategy is holistic and encompasses many intertwined
aspects
Michael Porter

Strategy is a set of choices we make –

long-term choices to distinguish
ourselves from our competitors.
It defines how we are going to
compete differently, and it also really
articulates the competitive advantages
that we will seek to create and use in
order to be successful.
 Competition dynamics

“There is no resting place

for an enterprise in a
competitive economy”
~Alfred P. Sloan
(Former President, chairman and
CEO of General Motors)
Strategic Management Process

The Strategic Management process is

the full set of commitments, decisions
and actions required for a firm to
achieve strategic competitiveness and
earn above-average returns (Hitt,
Ireland, & Hoskisson, 2001).
Strategic Management Process…

 A firm has a competitive advantage when it

implements a strategy competitors are
unable to duplicate or find too costly to try to
imitate.
 e.g. Chips/ Semiconductor manufacturing
 Above-average returns are returns in
excess of what an investor expects to earn
from other investments with a similar amount
of risk.
 Global Chips shortage

The increasing usage and rising demand for Semiconductors/Chips has triggered
a global shortage of Chips, forcing production halts in automotive industry.
o Ford recently cancelled shifts at two car plants and projected loss from this
crisis is $1bn to $2.5bn. Source; The Guardian, March 21, 2021
 Global Chips shortage…

Apple, that spends $58bn annually on Semiconductors, forced to delay the

launch of the much-hyped iPhone 12 by two months last year due to the
Chips shortage. Source; The Guardian, March 21, 2021
Competitive Advantage is not permanent
 Gaining competitive
advantage is significant…
 However, competitive
advantage is not
permanent and a firm can
gain or lost it anytime.
 For instance, In 2004,
Lenovo bought IBM's PC-
making division for
US$1.75 billion. While IBM once held a
competitive advantage in the
area of personal computers.
Strategic Management
In essence, the strategic
plan is a company’s
game plan

“Without a strategy, an organization

is like a ship without a rudder, going
around in circles.” ~Joel Ross and
Michael Kami.
 Discussion Question…

Who should craft

strategic plans?
Who’s involved in
strategic decision
making in an
organization?
What facilitates versus
inhibits the effective
decision making?
 Who’s involved in strategic decision making?

In essence, CEO / GM
or head of the
organization is
deemed to be a
strategic thinker.
However, other line
and departmental
managers are
increasingly involved
in strategic planning
and decision making.
 Strategic Leader

Strategic leaders are

people located in
different parts of the
firm using the strategic
management process to
help the firm reach its
desired goals.
Strategic leadership is
a complex but critical
form of leadership.
Effective Strategic Leadership
Steering the org
S
Strategic leaders play a pivotal
role in steering org ahead, despite
of uncertainty in external business
environment. A
P Proactive and anticipate changes
Entails the ability to anticipate
events, envision possibilities,
maintain flexibility, and empower
others to create strategic change.

Steadfast in Turbulent times B

C
Given the complexity and fragile D
nature of economy, strategic
leaders must learn how to
effectively influence human
behavior, often in uncertain
environments.

C Bring Positive Change

C
A strategic leader spearheads
and facilitates a positive change
in an org.
Responsible Leadership

 Responsible leadership
entails showing and
demonstrating concern
for the firm’s
stakeholders and society
at large.
 ESG (Environmental,
Social and Governance)
is gaining significance.
Effective Strategic Leadership…
Strategic Leadership and the Strategic Management
Process
The strategic leadership behind the miraculous
come back of CISCO systems
 Organizational Culture

Organizational culture
(OC) invariably affects
everything in an
organization.
OC affects strategic
leaders and their work
behavior. In turn,
strategic leaders’
decisions and actions
shape a firm’s culture.
3 Stages of the Strategic Management
Process

 Strategy formulation

 Strategy implementation

 Strategy evaluation
Strategy Formulation
 Strategy formulation is the process by which
an organization chooses the most appropriate
courses of action to achieve its defined goals.

 The managerial process of crafting and

executing a company’s strategy is an ongoing
and continuous process and a strategy made
years ago needs to be updated to incorporate
the changing needs and demands.
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Strategy Implementation

Action-oriented Goals

Policies, SoPs, Work proceses

Motivate team and employees

Adequate Resource Allocation

Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action
Strategic Management is about Gaining
and Maintaining Competitive Advantage

Anything that a firm does especially

well compared to rival firms
Strategists

Gather Information

Organize information

Analyze Information
Vision and Mission Statements

Vision Statement –
What do we want to become?
Where we want to see our organization in next
15~20 years down the road…

Vision is a picture of what the firm wants to be

and, in broad terms, what it wants to ultimately
achieve.
Vision and Mission Statements…

Mission Statement –
What is our business?

Mission statements are “enduring statements of

purpose” that distinguishes one org from
another.

Mission specifies the business or businesses in

which the firm intends to compete and the
customers it intends to serve.
Example: Vision and Mission Statements…
Our Vision: Our vision is to provide the best strategic-
management textbook in the world, available in ten
languages and widely used in both academia and
business.

Mission: Our mission is for students globally to fall in love

with strategic management by learning the latest
concepts, tools, and techniques that companies and
organizations globally are using to formulate,
implement, and evaluate strategies. This textbook
provides the knowledge base for developing a strategic
plan that can yield sustained, long-term competitive
advantage for any for-profit or not-for-profit
organization located anywhere.
External Opportunities and Threats
External opportunities and threats are largely
beyond the control of a single firm.
However, firms can proactively anticipate them
to minimize the negative effects and seize the
opportunities.
For instances, the Covid-19 Pandemic is a threat to
traditional businesses, but could be an opportunity too,
especially for pharmaceutical companies, tech co., and
internet based businesses.
 Amazon has recorded $75.5b profits during the pandemic.
 Similarly, Alphabets (the parent co. of Google) reported to earn
$61.81b in Q2 of 2021.
External Opportunities and Threats…
Analysis of Trends
 Economic (economic boom or recession, global
events, OPEC oil prices, Ukraine War, global economic
outlook etc.
 Social
 e.g. emerging trends, example?
 Cultural (e.g. a new breed of young people with
disposable income in China, triggering change in
cultural norms)
Example of Social and Technological Trends
Seeing the social and technological trends and to offset the stiff competition
from Tik Tok – Youtube launched “Shorts”, while Facebook rolled out its
“Reels”.
External Opportunities and Threats
Analysis of Trends
 Demographic/Environmental (e.g. declining
population growth rate, climate change, GLOF events
etc.)
 Political, Legal, Governmental, Regulatory
 Technological
 Competitors
 Unforeseen events, such as pandemics
Example: External Opportunities and Threats
 In the past, China was generally seen as a low-
competition market and a low-cost land. Today, China is
an extremely competitive market in which MNCs fiercely
compete against other MNCs and against those local
companies that are more cost effective and faster in
product development.

 While it is true that China has been viewed as a country

from which to source low-cost goods, lately, many
MNCs, such as P&G, are actually net exporters of local
management talent; they have been dispatching more
Chinese abroad than bringing foreign expatriates to
China.
External Opportunities and Threats
Basic Tenet of Strategic Management

Take advantage of
External Opportunities

Strategy Formulation

Avoid/minimize impact of
External Threats
Internal Strengths and Weaknesses

 Controllable activities performed

especially well or poorly
 Such as, management, work processes marketing,
financial systems, HR inventory and talent
management, inventory control, production &
distribution systems etc.
 e.g. TPS (Toyota Production System) is a market
leader in automotive industry.

 Determined relative to competitors

Internal Strengths and Weaknesses

 Typically located in functional areas of the firm

 Management
 Marketing

 Finance/Accounting

 Production/Operations

 Research & Development

 Management Information Systems

Internal Strengths and Weaknesses

Assessing the Internal Environment

Financial Strength

Performance Measures
Internal Factors
Innovation

Survey Data
Long-Term Objectives

 Specific results that an organization

seeks to achieve in pursuing its basic
mission
Long-Term Objectives

 Essential for ensuring the firm’s success

 Provide direction

 Aid in evaluation

 Create synergy

 Reveal priorities

 Focus coordination

 Provide basis for planning, organizing,

motivating, and controlling
Strategies

Means by which long-term objectives

are achieved
Strategies
 Examples
 Geographic expansion

 Diversification

 Acquisition

 Product development

 Market penetration

 Retrenchment

 Divestiture

 Liquidation

 Joint venture
Annual Objectives

Short-term milestones that firms must

achieve to reach long-term objectives
Policies

Policies are means by which annual

objectives will be achieved
Strategy Model
Strategic Management Model

 Strategic Management Process

 Dynamic & continuous
 More formal in larger organizations

 Divisional/Unit-wise and SBUs

(strategic business units).
Strategic Management
 Communication is a key to
successful strategic management

o A strategic vision describes “where we are going” –

the course and direction management has charted
and the company’s future.
o A strategic vision has little value to the organization
unless it’s effectively communicated down the line
to lower-level managers and employees.
 Importance of communication

Failure to
communicate
strategy causes
frontline workers to
invent their own
strategy…
Benefits of Strategic Management
Benefits of Strategic Management

 Nonfinancial Benefits
 Enhanced awareness of threats
 Improved understanding of competitors’ strategies
 Increased employee productivity
 Reduced resistance to change
 Enhanced problem solving and prevention
capabilities
Why Some Firms Do No Strategic Planning
Why Some Firms Do No Strategic
Planning
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Complacent and Content with success
 Monopoly and control over market
Why Some Firms Do No Strategic
Planning (continued)
 Fear of failure
 Overconfidence or lack of confidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Suspicion
The End

Happy Reading