Nature of Strategic

Management
Strategic Management-1
Dr. Şebnem Kuzulugil
Strategic Management
 Is the art and science of formulating,
implementing, and evaluating cross-
functional decisions that enable an
organization to achieve its objectives.
 Focuses on integrating functional
departments.
 ...to achieve and maintain competitive
advantage.

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Stages of Strategic Management

 Strategy formulation
 Develop a vision and mission
 Identify external opportunities and threats
 Identify internal strengths and weaknesses
 Establish long-term objectives
 Generate alternate strategies
 Choose the strategies to pursue

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Stages of Strategic Management

 Strategy implementation
 Create an effective organizational structure
 Establish annual objectives
 Develop policies
 Allocate resources

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Stages of Strategic Management

 Strategy evaluation
 Review external and internal factors that are
bases for current strategies
 Measure performance
 Take corrective actions

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Key Terms
 Competitive advantage
 “anythingthat a firm does especially well
compared to rival firms”
 Should be “sustainable”

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Key Terms
 Strategists
 Individuals who are most responsible for the success
or the failure of the organization.
 All strategists have to be chief learning officers
 They help an organization gather, analyze and
organize information.
 They track industry and competitive trends, develop
forecasting models and scenario analyses, evaluate
corporate and divisional performance, spot emerging
market opportunities, identify business threats and
develop creative action plans.

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Key Terms
 Vision and mission statements
 Vision statement is the first step in strategic planning
 Answers the question: “What do we want to become?”
 Mission statement answers the question: “What is our
business?”
 Identifies the scope of a firm’s operations in product
and market terms.
 Describes the values and priorities of the organization

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Key Terms
 External opportunities and threats
 Economic, social, cultural, demographic,
environmental, political, legal, governmental,
technological and competitive trends and
events that could significantly benefit or harm
the organization in the future.

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Key Terms
 Internal strengths and weaknesses
 An organization’s controllable activities that
are performed especially well or poorly.
 Strengths and weaknesses are determined
relative to competitors.

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Key Terms
 Long-term objectives
 Objectives are specific results that an
organization seeks to achieve in pursuing its
basic mission.
 Long-term is more than one year, actual time
span depends on industry.
 Objectives should be challenging,
measurable, consistent, reasonable and clear.

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Key Terms
 Strategies
 The means by which the long-term objectives
will be reached.
 Potential actions that require top management
decisions and large amounts of a firm’s
resources.

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Key Terms
 Annual objectives
 Short-term milestones that organizations must
achieve to reach long-term objectives.

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Key Terms
 Policies
 The means by which annual objectives will be
reached.
 Policies include guidelines, rules and
procedures to established to support efforts to
achieve stated objectives.

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Strategic Management Model
External
External
audit
audit

Generate,
Generate, Implement
Implement
Develop
Develop Implement
Implement Measure
Measure and
and
Long-term
Long-term evaluate
evaluate && strategies-
strategies-
vision
vision &
& strategies-
strategies- evaluate
evaluate
objectives
objectives select
select marketing,
marketing,
mission
mission management
management performance
performance
strategies
strategies finance
finance etc
etc

Internal
Internal audit
audit

Strategy Strategy Strategy

formulation implementation evaluation
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Modern Views on Strategy
 Intended strategies
 Realized strategies
 Emergent strategies
 Strategy dynamics

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Contingency Approaches
 Igor H. Ansoff: environmental turbulence

TURBULANCE ENVIRONMENT STRATEGIC

LEVEL RESPONSE
Level 1 Continuous Authoritarian
Level 2 Discontinuous Experimentative
Level 3 Incremental change Extensive
Level 4 Constant change Advanced forecast
Level 5 Chaos Creative
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Contingency Approaches
 H. Mintzberg: perceived environmental
complexity
Dynamic Entrepreneurial Startup Adhocracy
Direct supervision Mutual
Environmental adjustment
Variety Machine Bureaucracy Professional
Standardized work Organization
Stable processes and outputs Standardized
skills and norms
Simple Complex
Environmental Complexity
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Benefits of Strategic Management
 Financial benefits
 Significant
improvements in sales, profitability
and productivity
 Non financial benefits
 Enhanced awareness to external issues
 Enhanced problem-preventing capabilities
 Brings some order and discipline
 Facilitates change

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Why some companies do no
strategic planning
 Poor reward  Fear of failure
structures  Prior bad experience
 Fire fighting  Self-interest
 Waste of time  Fear of unknown
 Too expensive  Honest difference of
 Laziness opinion
 Content with success  Suspicion
 Overconfidence

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