STRATEGIC

MANAGEMENT
MRS AGNES KAIMA
 What is strategy?
Answer - It’s as simple as:
 Strategy: Creating “shareholder value” through effective strategy -
as easy as A-B-C...

Where Are you now? Monitor & Evaluate Where do you

(Strategic control)
want to Be, when?

Resource plans
Financial plans
Infrastructure plans

How to get there

© Strategy Institute,
(Course to be followed)
after Bryson & Alston
 A STRATEGY
A tactical course of action which is designed to achieve long term
objectives. It is an art and science of planning and marshalling resources
for their most efficient and effective use in a changing environment.

Strategy of a business enterprise consists of what management decides

about the future direction and scope of the business. It entails
managerial choice among alternative action programmes, competitive
moves and different business approaches to achieve enterprise
objectives.

Strategy once formulated has long term implications. It is framed by top

management in an organization. In short, it may be called as the ‘game
plan of management’.
Strategy……………
➢Strategy in every-day life:
What is strategy?
•Mintzberg’s 5 Ps of Strategy:
➢a Plan
➢a Ploy
➢a Pattern of behaviour
➢a Position in respect of others
➢a Perspective
 What is strategy?
•The determination of basic long-term goals and objectives of an enterprise, the
adoption of a course of action and the allocation of resources necessary to carry out
these goals
(Chandler, 1962)
•...as an integrated and coordinated set of commitments and actions designed to exploit
core competences and gain a competitive advantage
(Ireland et’al, 2011, 4)
•... a large-scale, future-oriented plan for interacting with the competitive environment
to achieve company objects... a company’s game-plan that provides a framework for
managerial decisions and reflects the company’s awareness of how, when and where it
should compete as well as against whom and for what purpose it should compete
(Pearce and Robinson, 2011, 3)
 FEATURES OF A STRATEGY
➢Top management responsibility
➢Involves allocation of large amount of resources
➢Impact on long term prosperity of the firm
➢Future oriented
➢Multi-functional or multi-business consequences
➢Consideration of factors in the external environment
 Why strategy?
➢Achieve organisation objective & goals (centred
on Mission & Vision)
➢Give organisation direction
➢Survival
➢Growth and profitability
➢Competitive advantage
 Corporate-level Strategy
• At this level, strategic decisions relate to organization-wide
policies and are taken care by top-level management (BOD) with
a vision of determining ‘Where the company wants to be?’
• It has two main aspects- Formulation of Strategy (strategic
planning) and Strategy Implementation
• The nature of strategy at this level tend to be value-oriented, and
conceptual than other levels.
• There is also greater risk, cost and profit potential as well as
greater need of flexibility associated with this level.
• Major financial policy decisions involving acquisition,
diversification and structural redesigning belong to this level.
 Business-Level Strategy
• Business-level strategy is more likely related to a unit within the
whole. It is concerned with competition in a market.
• The concerns are about what products or services should be
developed and offered, to which markets, in order to meet
customer needs and organizational objectives.
• At this level, multifunctional strategies developed at corporate
level are formulated and implemented for specific product market
in which the business operates. Thus, managers at this level
translate general directions and intent into concrete functional
objectives.
• Decisions at this level include policies involving new product
development, marketing mix, research & development, personnel,
etc.
 Functional/Operational-Level Strategy
• Functional strategy involves decision-making with respect to specific
functional areas- production, marketing, personnel, finance etc.

• While corporate and business level strategies are concerned with “Doing the
right things”, functional strategies stress on “Doing things right”.

• Operating level strategy is concerned with strategic approaches for managing

frontline operating units (like sales, etc) and for handling day to day tasks of
strategic significance (like advertising campaign, purchasing materials,
inventory control, maintenance, etc.). Thus, it focuses on how the different
functions of the enterprise contribute to the other levels of strategy.

• Thus, functional level strategic management is the management of relatively

narrow areas of activity, which are of vital, persistent or continuing importance
to the total organization.
 Strategy Formulation
The process of developing long-range plans to deal effectively with
environmental opportunities and threats in light of corporate
strengths and weaknesses.

Composed of:
▪ Mission
▪ Objectives
▪ Strategies
▪ Policies
Mission
The purpose or reason for the corporation’s existence. It tells who the company is, what they
do as well as what they’d like to become.

Objectives
The end results of planned activity.
They state WHAT is to be accomplished by WHEN.
They should be quantified, if possible.
Should be specific, measurable, achievable, relevant, time-bound (SMART); and obtainable.

Strategies
A strategy is a comprehensive master plan stating HOW the corporation will achieve its
mission and objectives.

Policies
Broad guidelines for making decisions.
 Strategic management
•...the set of decisions and actions that result in the formulation and
implementation of plans designed to achieve a company’s objectives; it
involves the planning, directing, organising and controlling of a
company’s strategy-related decisions and actions;
•Pearce and Robinson (2011, 3)
•...the managerial process of crafting and executing a company’s
strategy
•(Gamble and Thompson, 2011, 15)
•...the manner in which strategies come about that is concerned with the
how, who and when of strategy
•(De Wit and Meyer, 2005)
The Strategic management model
Company Mission & Vision

Global & Domestic

Resources
Remote/General
Capabilities
Industry/Competitor
Assets
EXTERNAL ENVIRONMENT ANALYSIS INTERNAL ENVIRONMENT ANALYSIS

Corporate-level strategy
Business-level strategy
International Strategy
Mergers & Acquisition Strategies

STRATEGY FORMULATION

Corporate Governance
Strategic Leadership
Organisational Structure and Controls

STRATEGY IMPLEMENTATION

Strategic Competitiveness
Above-Average Returns

SURVIVAL GROWTH PROFITABILITY

 Strategic management
•The Process:
1. Formulate company mission/vision;
2. External competitive Environment Analysis –
Macro & Micro;
3. Internal Analysis – resources/ capabilities;
4. Assess company’s strategic options in view of the
internal and external analysis findings;
 Strategic management
•The Process:
5. Select the best strategic options;
6. Identify company objectives by which
performance in the long-term will be measured;
7. Develop short-term objectives and strategies that
support the long-term objectives and strategies;
 Strategic management
•The Process:
8. Implement strategic choices by allocating
resources and capabilities necessary;
9. Evaluate the success of the strategic choices,
making adjustments accordingly
External environment
analysis
 External environment
analysis
➢Businesses do not operate in isolation
➢They interact/interface & relate with other entities
outside
➢Some have direct impact and others have an
indirect impact on the organisation and yet others
have no impact
➢There are two broad external layers of interaction:
Macro & Micro
External environment
analysis
 The macroenvironment
➢The macro environment is the broad business
environment outside an organization’s industry and
markets
➢Factors originate beyond and usually irrespective
of any single firm’s operating situation
➢It has factors that affect organisation’s strategic
actions & plans, direction and ultimately structure
and internal processes
 The macroenvironment
➢Factors can have significant impact on the industry
or market in which the firm operates in
➢Thus, analysis of them is key to strategic
management
 The macroenvironment
➢Macro environmental analysis involves:
1. Scanning the macro environment for warning signs and possible
environmental changes that will affect the business;
2. Monitoring environments for specific trends & patterns;
3. Forecasting future directions of environmental changes;
4. Assessing current and future trends in terms of the effects such changes
would have on the organisation
• (Ginter and Duncan, 1990)
The macroenvironment
•It consists of:
➢Political,
➢Economic,
➢Socio demographic,
➢Technological,
➢Legal and Environmental factors
INTERNAL environment
analysis
 What is THE MICRO-
ENVIRONMENT?

•The environment that immediately surrounds a

business, the parts of which the business interacts
with frequently and over which it may have some
influence
•Campbell, et’al, (2011, 149)
 What is THE MICRO-ENVIRONMENT?

•Also termed the ‘Industry /Business Environment’

•Defined as the general conditions for competition
that influence all businesses that provide similar
products and/or services
•(Pearce and Robinson, 2009)
 THE MICRO-ENVIRONMENT
•Main environment divisions elements:
➢Competitors
➢Suppliers
➢Customers
➢Competitively, includes interfacing
industries (threat of substitutes)
 Industry or Market?
•Industry:
➢Porter (1980): A group of businesses
whose products are close substitutes
➢A group of firms producing
products/services that are...the same
(Johnson et’al, 2014)
What about those that produce a range of
products for different markets?
Industry or Market? Does it
matter?
➢Organisations may operate in multiple
industries and/or markets
➢Each market/industry has its own distinct
structures & characteristics
➢Understanding competition in industry and
needs/wants of customers in the market is
central to crafting successful strategies
Industry or Market? Does it
matter?
➢Industry/market impacts formulation of
strategy
➢Flawed Analysis = Flawed Strategy
➢This is key to understanding Market
substitutes (threats)/ new markets
(opportunities)
Industry or Market? Does it
matter?
➢Identify threats from existing/potential
competitors in own or other industries
➢Understand resource market
 Industry or Market? Does it
matter?

•‘...a distinct capability or core competence becomes

a competitive advantage only when it is applied in a
market(s)’
•(Kay, 1993, 127)
 Industry or Market? Does it
matter?

•Thus, understanding the exact industry a business

is operating in and the consequent competition is
fundamental to formulating strategies for gaining
competitive advantage in a business’s industry.
Similarly, being able to tailor products and services
to exact target customer needs/wants is key to
success in the market.
Industry

Industry
Industry
Sectors

Industry
Subsectors

Strategic Groups
 Industry
Example: Construction Industry

Construction
Enterprise

Building
Sector

Social
Housing

Medium/Large Size Enterprise

 Why analyse?
•Analysis of its industry and markets allows a
business to:
➢ Understand its industry/market environment –
strategy formulation
➢ identify existing/new industries where it may be
able to deploy its core competences;
➢ understand the nature of its customers and their
needs;
 Why analyse?
•Analysis of its industry and markets allows a
business to:
➢ identify threats from existing and potential
competitors in its own and other industries;
➢ understand markets from which it obtains its
resources.
 Porter’S 5 forceS
Potential
Entrants

Competitive pressure
coming from the threat of
new entrants
Supplier Buyers
Bargaining bargaining
Competitive
power & Buyers power &
Suppliers Rivalry
supplier-seller seller-buyer
collaboration collaboration

Competitive Pressure coming from

attempts from outsiders to win
buyers to their products

Substitutes
INTERNAL ANALYSIS – HOW?
Three Internal Analysis Analytical tools:

1. SWOT Analysis

2. Value Chain Analysis

3. Benchmarking
1. SWOT Analysis
• SWOT provides a summary of the Strengths and Weaknesses found in
an internal analysis of a company’s Strategic Capabilities and the
Opportunities and Threats found in an analysis of the external
environment
• SWOT enables strategy crafting that capitalises on company’s
resources & seizes company’s best opportunities while defending
against threats to its well-being
SWOT Analysis
Internal Factors
Strengths (S) Weaknesses (W)
Opportunities (O) SO Strategic Option WO Strategic Options

Generate options here that Generate Options here

External Factors

use strengths that take that take advantage of

advantage of opportunities opportunities by
overcoming weaknesses
Threats (T) ST Strategic Option WT Strategic Options

Generate options here that Generate Options here

use strengths and avoid that minimise weaknesses
threats and avoids threats

The TOWS Matrix

Source: Johnson et’al, 2014, 94
 2. Value Chain Analysis
• A value chain is a set of activities that a firm operating in a specific industry
performs in order to deliver a valuable product (i.e., good and/or service) for
the market.
• The concept comes through business management and was first described by
Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and
Sustaining Superior Performance.
• VCA is a way to visually analyze a company's business activities to see how the
company can create a competitive advantage for itself.
• VCA helps a company understands how it adds value to something and
subsequently how it can sell its product or service for more than the cost of
adding the value, thereby generating a profit margin.
Adopted from: Johnson, G., Scholes, K., Whittington, R., (2008:110), Exploring Corporate
Strategy, 8th Ed., Financial Times/Prentice Hall, London
 Value Chain Analysis
• VCA is based on the principle that organisations exist to create value for
their customers.
• In the analysis, the organisation's activities are divided into separate sets
of activities that add value.
• The organisation can more effectively evaluate its internal capabilities by
identifying and examining each of these activities.
• Each value adding activity is considered to be a source of competitive
advantage.
3. Benchmarking
• Tool for assessing whether a company’s value chain activities are
competitive
• Assesses which companies (competitors) are best at performing
particular activities
• Are particular company functions industry best practice based on cost
& effectiveness?
• Lessons learnt (best practice) used to improve cost effectiveness of
company’s own internal activities
• Assessment based on Value Chain activity
Benchmarking
• Objective – how best activities can be performed while reducing cost
and increasing effectiveness
• Outcome: Adopt best practice to improve competitiveness
• Challenge – gaining access to commercially sensitive information
• Gather data indirectly e.g. published reports, consultant databases
(with anonymised companies)
THANK YOU