Strategic Management: A Simplified Approach

MODULE 1: Overview of Strategic Management

MODULE OUTCOME:
For students to demonstrate an understanding on the strategic management process.

SPECIFIC LEARNING OUTCOMES:

At the end of this module, you are expected to;

1. Define strategic management,

2. discuss the components of the strategic management process, and
3. compare and contrast strategic analysis from strategic decision-making,
and strategic intelligence from strategic thinking.

GENERAL ELECTRIC, one of the pioneers of STRATEGIC PLANNING,

led the transition from STRATEGIC PLANNING to STRATEGIC
MANAGEMENT during the 1980s. By the year 1900s, (most) other
corporations around the world had also begun the conversion to
STRATEGIC MANAGEMENT. What is the logo of General Electric? What are
their products?

INTRODUCTION

For this module, a synopsis of strategic

management is presented, as well as in
understanding the process in strategic
management.
Strategic Management is intriguing and
interesting. It makes essential decisions about
the firm’s future course – its mission, its
resources and how it communicates with its
operating environment. Every part of the
company plays a significant role in the
strategy – its employees, its finances, its
methods of production, its clients, and many
more. Strategic management can be defined
as determining the intent of the company and
the plans and actions to achieve the
objectives. It is the collection of management
decisions and actions that decide the long-
term success of an organization. It requires
formulating and executing plans that will
FUN FACTS:
The game of chess is about war. It is about
protecting a prized piece, and engaging in war with
the opponent who wishes to defeat you. There are
differing strategies for both offensive and defensive
play, and the wise chess player will have experience
with both. Corporate strategy is much the same:
protecting something of value (the company) and
engaging in war with the opponent who wishes to
win. The business person who can successfully
navigate offensive and defensive tactics will be an
asset to a company in the game of business.
https://www.cleverism.com/chess-principles-make-better-
corporate-strategist/

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align the organization and its environment in order to achieve organizational goals.

Strategic management will not potentially replace management practices such as

planning , coordinating, performing or managing. Instead, it incorporates them into a wider
context, taking into account the external environment and internal resources and the overall
function and direction of the organization. Therefore, strategic management encompasses all
management processes in organizations in which the probable effect of change is calculated
and current decisions are made in order to achieve the desired outcome. To put it briefly,
strategic management is referring to looking ahead to and understanding the future.

An activity before discussing the lessons in this module. This part is not graded.

In your own words, what is your understanding of STRATEGIC

MANAGEMENT? Why do you think companies are using such?

LESSON 1: DEFINITION OF STRATEGIC MANAGEMENT

Strategic management principles have been developed by a variety of writers such as

Alfred Chandler, Kenneth Andrews, Igor Ansoff, William Glueck, Henry Mintzberg,
Michael E. Porter, Peter Drucker and many others. There are a number of interpretations of
strategic management. Some of the relevant meanings are as follows:

“Strategic management involves the establishment of the basic long-term goals and the goals of a
business, and in the implementation of courses of action and allotment of resources needed for the
objectives of the company”.
– Alfred Chandler, 1962

“Strategic management is a process of actions and decisions that contribute to the implementation of a
valuable plan or strategy to help achieve organizational objectives.”.
– Glueck and Jauch, 1984

“Strategic management is an approach of developing, implementing and assessing cross-functional

decisions that enable a company to attain its goals”.
– Fed R David, 1997

“Strategic management is the list of steps leading to the formulation and implementation of plans
designed to meet the objectives of a company.”
– Pearce and Robinson, 1988

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“Strategic management requires recognizing an organization's strategic role, making strategic

decisions for the future and translating strategy into practice.”
– Johnson and Sholes, 2002
“Strategic management includes the analysis, decisions and actions undertaken by an organization to
create and maintain competitive advantages.”
– Dess, Lumpkin & Taylor, 2005

Note from the definitions above that different authors have different ways of defining
strategic management. Notice that Chandler's description quoted above is from the early
1960s, the time when strategic management was known as a separate discipline. This
concept is composed of three main elements:
1. Determining the long-term goals
2. Adaptation of the courses of action
3. Allotment of resources to attain company objectives

Fred R. David, Pearce and Robinson, Johnson and Sholes and Dell, Lumpkin and
Taylor's definitions are just some of the meanings of modern origins. Such concepts, taken
together, describe three key elements that go to the core of strategic management. The three
current processes are strategy analysis, strategic formulation, and implementation of
strategies. These three elements complement the analytical methods, the decisions and the
actions.

Strategic management focuses primarily on:

1. Assessment of strategic goals (vision, mission, and goals) along with evaluation of
the organization's external and internal climate.

2. Decisions on the following:

(a) What businesses should we compete in?
(b) How should we compete in those businesses to implement strategies?

3. Actions to implement strategies. This requires leaders to allocate the necessary

resources and to design the organization to bring the intended strategies to reality.
This also involves evaluation and control to ensure that the strategies are effectively
implemented.

The real strategic challenge to managers is to decide on strategies that provide

competitive advantage which can be sustained over time. This is the essence of strategic
management, and Dess, Lumpkin and Taylor have rightly captured this element in their
definition.

David, F.R. (2011). Strategic Management: Concepts and Cases (13 thed). Florence,
South Carolina: Prentice Hall., page 6., and
https://www.kau.edu.sa/Files/0057862/Subjects/Strategic%20Management%
20Book.pdf

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ASSESSMENT 1.1. Constructively answer the questions below. Your

answer must be in essay format with a minimum of five sentences and a
maximum of seven sentences. Essay rubric will be used in grading
(found at the end of this module). 10 points each.

1. Briefly describe the context of strategic management.

2. What is the importance of strategic management in a company? Explain briefly.
3. Explain this statement. “A company’s strategy is its game plan to attract and please
customers, outperform its competitors, and achieve superior profitability.”

LESSON 2: COMPONENTS OF STRATEGIC MANAGEMENT

It is a systematic way of performing strategic planning in the organization through

initial assessment, thorough analysis, strategy formulation, its implementation and
evaluation. The process of strategic management lists what steps the managers should take
to create a complete strategy and how to implement that strategy successfully in the
company. It might comprise from seven to nearly 30 steps and tends to be more formal in
well-established organizations.

The ways that strategies are created and realized differ. Thus, there are many different
models of the process. The models vary between companies depending upon:
 Organization’s culture
 Leadership style
 The experience the firm has in creating successful strategies

Components of Strategic Planning Process

There are many components of the process which are spread throughout strategic
planning stages. Most often, the strategic planning process has four common phases:
strategic analysis, strategy formulation, implementation and monitoring. For clearer
understanding, this article represents 5 stages of strategic planning process:
 Initial Assessment
 Situation Analysis
 Strategy Formulation
 Strategy Implementation
 Strategy Monitoring

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1. Initial Assessment

Components: vision statement & mission statement

Tools used: Creating a Vision and Mission statements.

The starting point of the process is initial assessment of the firm. At this phase
managers must clearly identify the company’s vision and mission statements.

2. Situation Analysis

Components: Internal environment analysis, External environment analysis

and Competitor analysis
Tools used: PEST, SWOT, Core Competencies, Critical Success Factors,
Unique Selling Proposition, Porter's 5 Forces, Competitor Profile
Matrix, External Factor Evaluation Matrix, Internal Factor Evaluation
Matrix, Benchmarking, Financial Ratios, Scenarios Forecasting, Market
Segmentation, Value Chain Analysis, VRIO Framework

When the company identifies its vision and mission it must assess its current
situation in the market. This includes evaluating an organization’s external
and internal environments and analyzing its competitors.

A firm’s core competencies may be superior skills in customer relationship or

efficient supply chain management. When analyzing the company’s activities
managers look into the value chain and the whole production process. As a
result, situation analysis identifies strengths, weaknesses, opportunities and
threats for the organization and reveals a clear picture of company’s situation
in the market.

3. Strategy Formulation

Components: Objectives, Business level, Corporate level and Global Strategy

Selection
Tools used: Scenario Planning, SPACE Matrix, Boston Consulting Group
Matrix, GE-McKinsey Matrix, Porter’s Generic Strategies, Bowman’s Strategy
Clock, Porter’s Diamond, Game Theory, QSP Matrix.

Successful situation analysis is followed by creation of long-term objectives.

Long-term objectives indicate goals that could improve the company’s
competitive position in the long run. They act as directions for specific
strategy selection. In an organization, strategies are chosen at 3 different
levels:

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 Business level strategy. This type of strategy is used when strategic

business units (SBU), divisions or small and medium enterprises select
strategies for only one product that is sold in only one market.

 Corporate level strategy. At this level, executives at top parent

companies choose which products to sell, which market to enter and
whether to acquire a competitor or merge with it. They select between
integration, intensive, diversification and defensive strategies.

 Global/International strategy. The main questions to answer: Which

new markets to develop and how to enter them? How far to diversify?

Managers may choose between many strategic alternatives. That depends

on a company’s objectives, results of situation analysis and the level for
which the strategy is selected.

4. Strategy Implementation

Components: Annual Objectives, Policies, Resource Allocation, Change

Management, Organizational chart, Linking Performance and Reward
Tools used: Policies, Motivation, Resistance management, Leadership,
Stakeholder Impact Analysis, Changing organizational structure,
Performance management

Even the best strategic plans must be implemented and only well executed
strategies create competitive advantage for a company. At this stage
managerial skills are more important than using analysis. Communication in
strategy implementation is essential as new strategies must get support all
over organization for effective implementation. The example of the strategy
implementation that is used here is taken from David’s book, chapter 7 on
implementation. It consists of the following 6 steps:
 Setting annual objectives;
 Revising policies to meet the objectives;
 Allocating resources to strategically important areas;
 Changing organizational structure to meet new strategy;
 Managing resistance to change;
 Introducing new reward system for performance results if needed.

The first point in strategy implementation is setting annual objectives for the
company’s functional areas. These smaller objectives are specifically designed
to achieve financial, marketing, operations, human resources and other
functional goals. To meet these goals managers revise existing policies and
introduce new ones which act as the directions for successful objectives
implementation.

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The other very important part of strategy implementation is changing an

organizational chart. For example, a product diversification strategy may
require new SBU to be incorporated into the existing organizational chart. Or
market development strategy may require an additional division to be added
to the company. Every new strategy changes the organizational structure and
requires reallocation of resources. It also redistributes responsibilities and
powers between managers. Managers may be moved from one functional
area to another or asked to manage a new team. This creates resistance to
change, which has to be managed in an appropriate way or it could ruin
excellent strategy implementation.

5. Strategy Monitoring

Components: Internal and External Factors Review, Measuring Company’s

Performance
Tools used: Strategy Evaluation Framework, Balanced Scorecard,
Benchmarking

Implementation must be monitored to be successful. Due to constantly

changing external and internal conditions managers must continuously
review both environments as new strengths, weaknesses, opportunities and
threats may arise. If new circumstances affect the company, managers must
take corrective actions as soon as possible.

Usually, tactics rather than strategies are changed to meet the new conditions,
unless firms are faced with such severe external changes as the 2007 credit
crunch. Measuring performance is another important activity in strategy
monitoring. Performance has to be measurable and comparable. Managers
have to compare their actual results with estimated results and see if they are
successful in achieving their objectives. If objectives are not met managers
should:
 Change the reward system.
 Introduce new or revise existing policies.

The key element in strategy monitoring is to get the relevant and timely
information on changing environment and the company’s performance and if
necessary take corrective actions.

Some models of strategic management process are presented here. Along with it are
some questions that would help you to understand the models.

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Figure 1. Model of Strategic Management Process

.
Source: David, F.R. (2011). Strategic Management: Concepts and Cases (13thed). Florence, South
Carolina: Prentice Hall.

ASSESSMENT 1.2. Answer the questions with a minimum of two

sentences and a maximum of five sentences. Essay rubric will be
used in grading this (found at the end of this module).10 points
each.

Model of Strategic Management (Source: David, 2009)

AS 1.2.1. What are the stages that you can identify in the above
framework?
AS 1.2.2. Does it indicate all the major steps that have to be met during
the process? Why do you say so?
AS 1.2.3. The arrows show the two way process. What does this mean?

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Figure 2. Rothaermel’s The Analysis-Formulation-Implementation (AFI)

Strategy Framework

Source: Rothaermel, F. T. (2017). Strategic Management: Concepts and

Cases. McGraw-Hill/Irwin, p. 20, 32-45, 90

AFI Strategy Framework (Source: Rothaermel, 2012)

AS. 1.2.4. What are the stages that you can identify in the
AFI Strategy Framework?

AS. 1.2.5. What is the focus of the above framework?

Explain.

AS.1.2.6. The arrows indicate a one way process. What

does it mean?

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Figure 3. Strategic Management Framework

Source: Thompson, J. & Martin, F. (2010). Strategic Management: Awareness &

Change. 6th ed. Cengage Learning EMEA, p. 34, 557, 790

Strategic Management Framework (Source: Thompson and

Martin, 2010)

AS. 1.2.7. The framework is supplemented by four

fundamental strategic management questions. What are
these? Explain each.

AS.1.2.8. The arrows indicate a one way process. What does it

mean?

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LESSON 3: STRATEGIC ANALYSIS and STRATEGIC DECISION-MAKING,

STRATEGIC INTELLIGENCE and STRATEGIC THINKING

STRATEGIC ANALYSIS AND STRATEGIC

DECISION-MAKING

Strategic analysis refers to the process of

conducting research on a company and its
operating environment to formulate a
strategy. The definition of strategic analysis
may differ from an academic or business perspective, but the process involves
several common factors:
 Identifying and evaluating data relevant to the company’s strategy
 Defining the internal and external environments to be analyzed
 Using several analytic methods such as Porter’s five forces analysis, SWOT
analysis, and value chain analysis

On the other hand, managers of successful

businesses do more than simply find a way to
make money and sell stuff. Not only do they
handle the day-to-day tasks of selling, they also
think of the big picture and make decisions that
will get the company to where it wants to go.
This is called strategic decision making, where
decisions are made according to a company's
goals or mission. This type of decision making
guides the choices that are made, aligning them
with the company objective. It requires out-of-
the-box thinking as managers need to consider future scenarios that may or may not
happen. It's these scenarios that will determine in which direction a company will go.

STRATEGIC INTELLIGENCE AND STRATEGIC THINKING

Strategic intelligence is the capability of the organization to possess relevant

and related knowledge, abilities, foresight, and systems thinking, such that it is able
to assess its own strengths and vulnerabilities, the pressing challenges confronting
the organization, as well as the trends and opportunities existing in the environment.

Alternatively, strategic thinking is the cognitive process of competently and

analytically weighing factors and arriving at critical decisions in the context of the
current milieu of which an organization is part.

Consequently, if strategic analysis is accurately conducted, organizations can

develop strategic intelligence. If strategic decision-making is correctly effected,
organizations can acquire the capability of thinking strategically.

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Additional notes:

Below is a strategic management framework from Barney, J.B., Hesterly, W.S. (2012).
Strategic Management and Competitive Advantage: Concepts and Cases (4 thed). Prentice
Hall.

On the left side of the figure are the strategic management processes. It starts
with strategic analysis, followed by strategic decision-making, next is strategy
formulation, followed by strategy implementation, and then the strategic control.
The double headed arrow between the processes indicates that the company may go
back to a certain process if need be. On the other hand, the right side indicates the
result of each process.

Previous page already discussed strategic thinking as a result of strategic

analysis, and strategic thinking as a result of strategic decision-making.

ORGANIZATIONAL COMPETITIVENESS – pertains to the ability of any

company to utilize its resources optimally and sustainably for maximum
performance and productivity.

COMPARATIVE ADVANTAGE – refers to the ability of the organization to

produce a particular good or service at lower marginal and opportunity costs than its
competitors.

STRATEGIC PERFORMANCE – is the accomplishment of a high level productivity

that is characterized by efficiency in the context of lean and quantifiable
management.

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ASSESSMENT 1.3. Answer these questions in at least five to seven

sentences. Essay rubric will be used in grading this (found at the end
of this module). 10 points each.

1. Why do you think strategic analysis results to the development of strategic

intelligence?
2. Why do you think correct implementation of strategic decision-making
would result to a company having strategic thinking?
3. How does strategy formulation result to organizational competitiveness?
4. How does strategy implementation result to comparative advantage?
5. How does strategic control result to strategic performance?

Final Activity for MODULE 1. In this case study, you are to

analyze the case thoroughly and answer the questions. A rubric for
the case study is presented at the end of the module. Answers
should be at least seven sentences, and with a maximum of ten
sentences in each question.

The Star is Struck

Iridium is named after the 77th element to signify the 77 satellites that were
supposed to beam signals around the world, creating a worldwide mobile satellite
telephone service (MSS). However, things did not work out as planned. Motorola,
Iridium's chief sponsor, has vowed not to invest any more than the $1.6 billions it has
already invested in the venture, unless other investors do so too. Iridium was
chasing a very modest goal in terms of number of subscribers - 27,000 by end of July,
from 10,000 at the end of March.

These two events are symptoms of deeper problems within the Iridium
network, as people try to work out what went wrong. Were its estimates of MSS
market (between 32 millions and 45 millions subscribers within ten years)
unrealistic? Or, are Iridium's problems due to poor vision and poor planning? Mobile
telephony, in general, has been a growth market, with subscribers expected to reach
600 millions within the next two years. MSS providers plan to capture 2.5% of the
market by offering handsets that operate as a land-based cellular phone and a
satellite telephone when cellular service is unavailable. Apart from business
executives, other specialized users include truckers, civil engineers, field scientists,
disaster-relief agencies, news organisations, extractive industries, and geologists.
Shipping and aviation, as well as operations in less developed countries, which lack
traditional telephone infrastructure, are also potential markets. Yet Iridium has not
been able to sign up many subscribers. The technology is quite sound - the problem
has been poor forecasting, marketing, production glitches, and some unexpected
competitive moves.

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Iridium's market size forecast and value did not materialize. This may be due
to several marketing problems. Iridium's handsets cost more than $3,000, and call
charges range from $2 to $7 a minute. Iridium's handset is large (7 inches), and
weighs 1 pound, limiting its portability. Manufacturing delays at Motorala and
Kyocera left customers waiting to get their telephones. In any case, its marketing
partners, Sprint, and Telecom Italia were not prepared to sell the telephones. Its
generic. "schmoozy" and "generic life-style marketing" (according to John
Richardson, Iridium's new CEO) was not suitable for its specialized target market.

Competitive entry also hurt Iridium's already weak network. Two new
entrants to the MSS market, Global star and ICO have been able to promise the same
service at a lower cost. At a volume of 1 billion minutes per year, for instance, the
cost of a minute using Iridium's system is $1.28, compared to 51 cents a minute for
Global star, and 35 cents for ICO. The difference arises mainly because of Iridium's
numerous satellites and their use of more power to maintain their low earth orbit.
This also shortens their life span to 5 - 7 years. ICO's satellites, on the other hand, fly
about 6000 miles higher in medium-earth orbit and have a life span of 12 years. With
Iridium being forced to charge prices far lower than it had planned, and two low cost
operators about to enter the market, Iridium's future is uncertain.

Source: Ritson, N. (2011). Strategic Management. Neil Ritson & Ventus Publishing ApS ISBN
978-87-7681-417-5

Questions
1. Analyze the role of poor strategic management at Motorola in Iridium's
failure.
2. What steps do you think should have been collectively taken by Motorola,
Kyocera, Sprint and Telecom Italia to save Iridium?
3. “ Strategic management process is the way in which strategists determine
objectives and strategic decisions.” Discuss.

you are done with Module 1

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Essay and Case Study Rubric for Module 1

Indicators
Criteria 5 4 3 2 1
Content and The content is well Most of content Few of the content Contents are Missing
ideas structured and is well is well structured unstructured and
relevant to the topic. structured and and relevant to irrelevant to the topic,
Paper is not copy- relevant to the the topic. and misleading.
pasted, with topic.
references
Presentation The transition of The transition of The transition of The transition of Missing
of thoughts ideas and thought ideas and ideas and thought ideas and thought
from one another is thought from from one another from one another is
well mannered, one another is is forced. unclear.
smooth and confusing.
sequential.
Grammar, Rules of grammar, Rules of Paper contains Paper contains
punctuation usage, and grammar, usage, few grammatical, numerous
and spelling punctuation are and punctuation punctuation and grammatical,
followed; spelling is are followed spelling errors. punctuation, and
correct. with minor spelling errors.
errors.
Spelling is
correct.

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