What is Strategic

Management?
STRATEGIC MANAGEMENT
“The role of management when setting long-term goals, and implementing
cross-functional decisions that should enable a business to reach these goals”

Future plan based on assessment of

 Current position
 External environment

Contains
 Key business objectives
 Decisions needed to achieve these
KEY TERMS
Corporate strategy: long-term plan of action for whole organization, to meet
a particular goal

Tactic: short-term policy or decision aimed at resolving a particular problem

OR meeting a specific part of the overall strategy
ESTABLISHING CORPORATE
STRATEGY

Strengths of the Resources available

business
Strategy
Competitive Objectives
environment
 Strategic decisions Tactical decisions

Long-term Short- to medium-term

Reversible, but there may still be costs

Difficult to reverse once made
involved

Taken by directors and/or senior Taken by less senior managers and

managers subordinates with delegated authority

Impact of tactical decisions is often only

Cross-functional
on one department
An analogy:
Football

Strategy vs tactics
Activity 37.1
 Mission &
objectives

If business does not

engage in strategic
management, it would
Control & Strategic fail to:
- Plan for the future
evaluation analysis
- Respond logically to
the changing
business
environment
- Make effective long-
term decisions
based on clear
objectives
Strategic
Strategic
implementatio
choice
n
 STRATEGIC DECISIONS
NEED TO BE CUSTOMER-
FOCUSED TO INCREASE THE
PROBABILITY THAT NEW
LONG-TERM PLANS WILL
CREATE VALUE.

Key concept
ALFRED CHANDLER –
STRUCTURE FOLLOWS
STRATEGY
All four organizations had:
 Acquired labor and raw materials to allow for growth that required the build-up of
marketing and distribution channels
 Established functional or departmental structure to improve specialization and
efficiency
 Adopted growth-and-diversification strategies – new markets and new products to
overcome the limits of original home market
 Developed divisional organizational structures that allowed geographical regions or
product groups to be created with considerable independence but controlled,
ultimately, from a centralized headquarters
MULTI-DIVISIONAL ORGANIZATIONAL
STRUCTURE
EXAMPLE 1: MERGER
1988 – merger of Asea and Brown Boveri (Swedish-Swiss companies)
Power generation, transportation, industrial automation, research on
superconductors/superconductivity
Percy Barnevik, young new chief executive adopted strategy of global market
penetration
 Functionally orientated groups were replaced by cross-functional team of top executives
 Product divisions made increasingly independent of head office to operate flexibly

This new structure made possible by developments of e-communication and

MIS systems -> delayered structures
EXAMPLE 2: DEVELOPING
NEW MARKETS
Classic form of M-form structure
As spread of Coca-Cola increased, company decentralized
 Moved regional managers closer to countries they were responsible for

India – decision-making moved further down to different geographical areas;

different market requirements in different regions
EXAMPLE 3: CONGLOMERATE
CUTS COSTS
Tata group delayered organizational structures of all of its business units
 Reduce layers from 10 to 6

All will have defined job descriptions

Will ensure mobility across organization
Manager will get the opportunity to work in different departments within
each business division
 WHEN ANSWERING QS ABOUT
STRATEGIC DECISIONS, TRY TO
ANALYZE THE EXTERNAL AND
INTERNAL CHANGES THAT ARE
MAKING STRATEGIC CHANGE
INEVITABLE

Top Tip
STRATEGY AND COMPETITIVE
ADVANTAGE
Competitive advantage: a superiority gained by a business when it can
provide the same value product/service as competitors but at a lower price, or
can charger higher prices by providing greater value through differentiation

Michael Porter’s concept

EXAMPLE: AUTOMATION
BMW increased investment by £400 million in the Mini production line to
buy 230 new robots for UK factory
Reduces costs of manufacture
Allows for flexible production system, can make all 3 types of Mini body
shell on same production line
Lowers costs, differentiates products
EXAMPLE: RATIONALIZATION
Merger of Thomas Cook and MyTravel (Europe’s two main travel
companies)
Saved costs of >USD 300 million within 2 years
 Cutting out job titles that were repeated
 Bulk purchasing of holiday accommodation
EXAMPLE: R&D
Shell spends >USD 1.3 billion on R&D each year
Has a strategy of technological developments to allow diversification away
from its original oil and gas business
Has low reserves of oil and gas compared to other businesses
Differentiates with R&D and focuses on
 Biotechnology
 Carbon-emission storage
 Alternative fuels
TO BE COMPETITIVE, LOW COSTS ARE
NOT ENOUGH IF CUSTOMERS ARE
LOOKING FOR UNIQUE PRODUCTS.
INNOVATION WILL BE AN IMPORTANT
COMPETITIVE FEATURE OF
SUCCESSFUL BUSINESS IN SUCH
CASES.

Key concept link

Homework
Notes for this chapter
Pg 542 – Essay Q 1 or 2

Investigate these business. Identify how the strategy for the business
led to the competitive advantage it established. Share with class (via
PPP or other)
Nemat: Pepsi vs Coca-Cola
Kalkidan: Disney vs Time Warner