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Afework Getachew

(Asst. Professor )
PhD; MBA; BA-Management

Oct, 2016
An Overview of Strategic
1. Definitions of Strategy
2. Essence of strategic management
3. Levels of Strategy (briefly)
4. Characteristics of Strategic decisions
5. Benefits and challenges/pitfalls of Strategic
6. Strategic Management Process Model
 Define strategy and strategic management;
 Describe the different levels of strategy and their
 Discuss the nature and values of strategic
 Explain the strategic management process
 Identify benefits of strategic management
 In ancient Greek, ‘stratos’ was the term for the
army and so in military terms, ‘strategy’ referred
to ‘the act of the general’.
 So, the origins of ‘strategy’ – the ‘art of the
general’ – comes from the military arena – from
China came “The Art of War” by Sun Tzu, from
Prussia came “On War’ by Carl von Clausewitz.

 Strategy is formulation of future plan of action,
usually understood as being undertaken by
senior management at a high level of leadership
and management.

A strategy is
“The art of war*, especially the planning of
movements of troops and ships etc., into
favorable positions; plan of action or policy in
business or politics etc.”
(Oxford Pocket Dictionary)
*You can refer to The Art of War by Sun Tzu

 Hoferand Schendel define it as “the
mediating force or ‘match’ between
the organization and the
environment.” (Hofer and Schendel

Strategic Management – Defined
 Art & science of formulating, implementing,
and evaluating, cross-functional decisions that
enable an organization to achieve its objectives
 an important plan to deploy the available
resources in a manner to win the ever increasing
 plan to integrate the organization’s major goals,
policies, and action sequences into a cohesive
 To exploit and create new and different opportunities for
 In essence, the strategic plan is a company’s game
 vector … synergy …focus … Organization
 Strategy formulation

 Strategy implementation

 Strategy evaluation
Strategy Formulation Components

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Issues in Strategy

Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
International markets
Mergers or joint
Avoidance of hostile
Strategy Implementation

Annual Objectives


Employee Motivation

Resource Allocation
 Developing a strategy-supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts
 Preparing budgets
 Developing and utilizing information systems
 Linking employee compensation to organizational
Issues in Strategy Implementation

Action Stage of Strategic


Mobilization of employees
& managers
Most difficult stage
Interpersonal skills critical
Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

Integrating Intuition & Analysis
The strategic management process attempts to organize
quantitative and qualitative information under conditions
of uncertainty
Intuition is based on:
◦ Past experiences
◦ Judgment
◦ Feelings

Intuition is useful for decision making in

conditions of:
 Great uncertainty

 Little precedent
 Highly interrelated variables

 Several plausible alternatives

Cont’d …

Intuition & Judgment

Involve management at all levels

Influence all analyses

 Competitive advantage
 Strategists
 Vision and mission statements
 External opportunities and threats
 Internal strengths and weaknesses
 Long-term objectives
 Strategies
 Annual objectives
 Policies
Figure 1-1 Basic elements of strategic management process
Figure 1-2
ent model
Benefits of Strategic Management
 Nonfinancial Benefits
◦ Enhanced awareness of threats
◦ Improved understanding of competitors’ strategies
◦ Increased employee productivity
◦ Reduced resistance to change
◦ Clearer understanding of performance-reward
◦ Enhanced problem-prevention capabilities
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 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
 A people process more than a paper process
 A learning process
 Words supported by numbers
 Simple and non-routine
 Varying assignments, team membership, meeting
formats, and planning calendars
 Challenging assumptions underlying corporate strategy
 Welcomes bad news
 Requires open-mindedness and a spirit of inquiry
 Is not a bureaucratic mechanism
 Is not ritualistic or stilted
 Is not too formal, predictable, or rigid
 Does not contain jargon or arcane language
 Is not a formal system for control
 Does not disregard qualitative information
 Is not controlled by “technicians”
 Does not pursue too many strategies at once
 Continually strengthens the “good ethics is good
business” policy
 Strategic audit
◦ provides a checklist of questions, by area or issue, that
enables a systematic analysis to be made of various
corporate functions and activities
◦ Beginning with an evaluation of current performance,
the audit continues with environmental scanning,
strategy formulation, and strategy implementation, and
it concludes with evaluation and control.
◦ Used as a diagnostic tool to pinpoint corporate wide
problem areas and to highlight organizational
strengths and weaknesses.
Thank You