Strategic Management

Ms.N.Jasintha,
MBA (UOJ), BBA spl in HRM, DBF
Senior Lecturer
Department of Human Resource Management,
Faculty of Management Studies and Commerce,
University of Jaffna
 Learning outcomes
• After learning this chapter you should be able to:
• Define the terms strategy and strategic management
• Describe the nature of strategic management
• Identify the different levels of strategies
• Explain the types of strategies
• Explain the main tasks in strategic management
process
• A company’s strategy consists of the set of competitive
moves and business approaches that management is
employing to run the company. Strategy is
management’s “game plan” to
• – Attract and please customers
• – Stake out a market position
• – Conduct operations
• – Compete successfully
• – Achieve organizational objectives
• A strategy is all about integrating organizational
activities and utilizing and allocating the scarce
resources within the organizational divisions so as to
meet the objectives.
• Strategy is the blueprint of decisions in an organization
that shows its objectives and goals, plans for achieving
these goals, and the actions to contribute to its
shareholders.
• Firms routinely revise or create new strategies, often
annually, by assessing and reacting to external and
competitive forces.
• By identifying their resources and capabilities, firms
attempt to deploy them through strategies that will give
them a competitive advantage
 Why Are Strategies Needed?
• To proactively shape how a company’s business will be
conducted
• To mold the independent actions and decisions of
managers and employees into a coordinated, company-
wide game plan
 Thinking Strategically: The Three Big
Strategic Questions
• 1. Where are we now?
• 2. Where do we want to go? – Business(es) to be in and
market positions to stake out? – Buyer needs and groups
to serve? – Outcomes to achieve?
• 3. How do we get there?
Rio Ice Cream
• In detailed, strategy can be defined as " the direction
and scope of an organisation over the long term, which
achieves advantage in a changing environment through
its configuration of resources and competences with the
aim of fulfilling stakeholder expectations" (Johnson,
Scholes and Whittington, 2008, p.3).
• Therefore, strategic decisions are likely to:
– Be complex in nature
– Be made in situations of uncertainty
– Affect operational decisions
– Require an integrated approach
– Involve considerable change
• Mintzberg's Five Ps of strategy
• Strategy as a plan – a direction, a guide or course of action into
the future, a path to get from here to there
• Strategy as a pattern of consistent behaviour over time, giving
the impression of a logically thought out strategy.
• Strategy as a ploy, which can be seen as a specific manoeuvre
intended to outwit opponents or competitors
• Strategy as a position is a means of identifying where an
organisation places itself in an environment or market.
• Strategy as a perspective consists not just of a chosen position
but also of a unique way of perceiving the world, of interpreting
information from it and judging its opportunities and choices. As
such, it can refer to organisation culture.
 Strategic Management
• Strategic Management is the development,
implementation and control of agreed strategies.
• It is the ongoing planning, monitoring, analysis and
assessment of all aspects of an organization to meet its
goals and objectives.
Stages in Strategic Management
 Rational model/top-down approach

Internal
environment

Mission & Position & Strategic Evaluation& Implementation Review &

Objectives appraisal options choice Control

External
environment
 Strategy formulation
• It includes developing a vision and mission,
identifying an organization’s external opportunities
and threats, determining internal strengths and
weaknesses, establishing long-term objectives,
generating alternative strategies, and choosing
particular strategies to pursue
• Deciding what new businesses to enter,
• What businesses to abandon,
• How to allocate resources,
• Whether to expand operations or diversify,
• Whether to enter international markets,
• Whether to merge or form a joint venture,
• How to avoid a hostile takeover.
 Strategy implementation
• It requires a firm to establish annual objectives,
devise policies, motivate employees, and allocate
resources so that formulated strategies can be
executed often called the action stage.
 Strategy evaluation
• It is about reviewing external and internal factors that
are the bases for current strategies, measuring
performance, and taking corrective actions.
 JSW Model

• Strategic management includes understanding the

strategic position of an organisation, making strategic
choices for the future and managing strategy in action
(Johnson, Scholes and Whittington, 2008).
• The strategic position is concerned with the impact on strategy
of the external environment, an organisation’s strategic
capability (resources and competences) and the expectations
and influence of stakeholders
• Strategic choices involve understanding the underlying bases
for future strategy at both the business unit and corporate
levels and the options for developing strategy in terms of both
the directions and methods of development
• Strategy in action is concerned with ensuring that strategies
are working in practice
 Strategic position
•What are the environmental
opportunities and threats?
•What are the organisation’s strengths
and weaknesses?
•What is the basic purpose of the
organisation?
•How does culture fit the strategy?
Strategic choices Strategy in action
•How should business units compete? •Are strategies suitable, acceptable
and feasible?
•Which businesses to include in a portfolio?
•What kind of strategy-making
•Where should the organisation compete
process is needed?
internationally?
•What are the required organisation
•Is the organisation innovating
structures and systems?
appropriately?
•How should the organisation
•Should the organisation buy other
manage necessary changes?
companies, ally or go it alone?
•Who should do what in the strategy
process?
Types of Strategy
 Intended strategy
• An intended strategy is the strategy that an organization
hopes to execute.
• Intended strategies are usually described in detail
within an organization’s strategic plan.
• When a strategic plan is created for a new venture, it is
called a business plan.

• The intended strategy is conceived by the top

management team after the process of negotiation,
bargaining, and compromise, involving many
individuals and groups within the organization.
 Emergent strategy
• An emergent strategy is an unplanned strategy that
arises in response to unexpected opportunities and/or
challenges.
• Sometimes emergent strategies result in disasters. It
involves the decisions that emerge when managers
interpret and apply the intended strategy.
• It emerges as a result of individual interpretation and it
is affected greatly by the external circumstances.
• The ultimate or final result is the realized strategy.
 Realized strategy
• A realized strategy is the strategy that an organization
actually follows.
• Realized strategies are a product of a firm’s intended
strategy (i.e., what the firm planned to do), the firm’s
deliberate strategy (i.e., the parts of the intended
strategy that the firm continues to pursue over time),
and its emergent strategy (i.e., what the firm did in
reaction to unexpected opportunities and challenges).
 Deliberate strategy
• A deliberate strategy is the elements of the intended
strategy that remain a constant part of the firm's
continued strategy.
 Unrealized strategy
• An unrealized strategy refers to the abandoned parts of
the intended strategy.
Levels of Strategy
 Corporate strategies
• Corporate strategy is established at the highest levels of
management and concerned with what types of business the
organization is doing.
• Characteristics of corporate strategic decisions are as
follows.
• It might involve diversifying into a new line of business
or closing a business down
• It has a long term impact
• It is therefore often concerned with issues such as
acquisitions, diversification, entering new industries/
markets, leaving existing industries/markets, etc.
 Business Strategy
• Business strategy refers to how an organization approaches a
particular product market area.
• This strategy can involve fundamental decisions such as
whether to segment the market and specialize in profitable
areas, or to compete by offering a wider range of products.
• Business strategies are narrower in scope than a corporate
strategy (applies to a single business unit). Business strategy
looks at how the organization can compete successfully in the
individual markets that it chooses to operate..
• Business strategy is concerned with issues such as:
• achieve advantage over competitors
• meet the needs of key customers. Corporate strategy
affects the organization as a whole, but business
strategy will focus upon strategic business units
(SBUs). An SBU is an independently managed
division of a large company, having its own vision,
mission and objectives. It’s planning is done
separately from other businesses of the company
 Functional / Operational strategies
• Functional strategies deal with specialized areas of activity.
• Composed of managers of product, geographic, and functional
areas
• Develop annual objective and short-term strategies in such
areas.
• Have greatest responsibility in implementing and executing
company’s strategic plans.
• Corporate level emphasizes on “doing the right things”
whereas functional level emphasize on “doing things right.”
• Addresses ‘efficiency’ and effectiveness of functional tasks.
• Directly addresses the efficiency and effectiveness of
production and marketing systems, the quality and extent of
customer service, and the success of particular products and
services in increasing the market share.
• These strategies deal with following functional areas.
• Marketing: Devising products and services, pricing,
promoting and distributing them, in order to satisfy
customers.
• Production: Factory location, manufacturing techniques,
outsourcing, etc.
• Finance: ensuring that the firm has enough financial
resources to fund its other strategies.
• HRM: Secure personnel of the right skills in the right
quantity at the right time Information systems: Have
Information systems as a tool for competitive strength.
• R&D: New products and techniques
Benefits of Strategic Planning to the
organization
• Make better business decisions
• Good connectivity
• Financial benefits
• Increase the efficiency, Market share
• Leads to innovative people/ Innovations
• Strategic Direction
• Sustainability/ Durability
• Profitability
• Goal achievement
• Moving to new technology
• CSR Award
What are the financial benefits of Strategic
Management
• Profits
• Minimizing the cost/ waste mgt procedure
• Keep the budget
• Cost of failure
• Reducing overheads
• EPF
• Prevention of legal risk
• Better control over RM
• Good will
• Businesses using strategic-management concepts
show significant improvement in sales, profitability,
and productivity compared to firms without systematic
planning activities
• High-performing firms seem to make more informed
decisions with good anticipation of both short- and
long-term consequences
What are the non-financial benefits of
Strategic Management?
• Happy work environment
• Problems identification
• Complete process
• Better decisions
• Anticipate the future
• High mgt
• Good employee relations
• Good customer relations
• Good employee engagement
• Quality product

• Expensive
• It allows for identification, prioritization, and
exploitation of opportunities.
• It provides an objective view of management
problems.
• It represents a framework for improved coordination
and control of activities.
• It minimizes the effects of adverse conditions and
changes.
• It allows major decisions to better support established
objectives.
• It allows more effective allocation of time and
resources to identified opportunities.
• It allows fewer resources and less time to be devoted
to correcting erroneous or ad hoc decisions.
• It creates a framework for internal communication
among personnel.
Why Some Firms Don’t do Strategic
Planning?
• Lack of knowledge in strategic planning
• Poor reward structures
• Firefighting
• Waste of time
• Too expensive
• Laziness
• Content with success
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Honest difference of opinion
• Suspicion
Role of CEO in Strategic Management
• CEO’s must give long-term direction to the firm.
• Personalities of CEO’s often affect in delegating substantive
authority in formulation and execution of strategies.
• Autocratic CEO reduces the firms effectiveness on strategic
decisions and planning.
• Team-oriented and participative CEO increases the efficiency
of strategic management processes.
• CEO’s must provide managers at all levels with an
opportunity to play a role in strategic decision process.
• CEO’s fulfillment of promise is parallel to the degree of
success enjoyed by a firm
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