Strategic Management

Abebe Zayede Kenu(BA, MBA)

Assistant Professor,
Department of Management
Arba Minch University
azayede540@gmail.com

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 Chapter One
Introducing Strategy and
Strategy Making

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 Meaning of Strategic Management
Strategy is arguably the most important concept in
management studies.
Strategy making is arguably the most important
activity of a practicing manager.

There are many people involved in the process of

strategy making.
There are also many different ways of interpreting
what strategy is.
Different authors perspectives are given below:

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Glueck
Glueck (1984) defines strategic management as “a
stream of decisions and actions which leads to the
development of an effective strategy or strategies to
help achieve corporate objectives”.

As visualized by him, the end result of strategic

management is a strategy or a set of strategies for the
organization.

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Hofer
Hofer and others (1984) consider strategic management
as “the process which deals with the fundamental
organizational renewal and growth with the
development of strategies, structures, and systems
necessary to achieve such renewal and growth, and with
the organizational systems needed to effectively manage
the strategy formulation and implementation
processes.”

The strategic management process is also considered as

the managing of the organizational systems which are
required for strategic management.
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Asnoff
Asnoff (1984) states that strategic management is “ a
systematic approach to a major and increasingly important
responsibility of general management to position and
relate the firm to its environment in a way that will assure
its continued success and make it secure from surprises.”

In this definition the emphasis is on environment-

organization relationship for the purpose of achieving the
objectives of continued success, and remaining protected
from environmental surprises through the adoption of a
systematic approach to general management.

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Sharplin
Sharplin (1985) defines strategic management as “the
formulation and implementation of plans and
carrying out of activities relating to the matters which
are of vital, pervasive or continuing importance to the
total organization.”
This is an all-encompassing view of strategic
management and considers all plans and activities
which are important for an organization.

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 Some noteworthy identities of Strategic Mgt

Strategic management is considered as either decision making and

planning, or a set of activities related to the formulation and
implementation of strategies to achieve organizational objectives.

Strategic management involves adapting the organization to its

business environment.

Strategic management affects the entire organization (regardless of

horizontally and vertically differences)by providing direction.

Strategic management is partially planned and partially unplanned.

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 A Brief History of the Concept Strategy
Today strategy is one of the most commonly used
words in management studies, but its use was not, and
is not, limited to that area.

Thinking and writing about strategy has a history

stretching back far earlier than management studies, a
history which is interesting in its own right.

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Cont’d
Etymologically, strategos, or general, derives from
stratos (the army) and agein (to lead).

So, in this original sense, "strategy" is "the art of

leading the army."

Strategic management is the principles of employing

the troops.

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 Cont’d
Commander "must be ingenious, energetic, careful, full
of stamina and presence of mind, loving and tough,
straightforward and crafty, alert and deceptive, ready to
gamble everything and wishing to have everything,
generous and greedy, trusting and suspicious."

A commander General was expected not only to plan for

battle, but also to lead the troops into battle himself.

Sun Tzu emphasized meticulous planning, the ideal of

vanquishing the enemy indirectly without the need to
fight, the qualities of effective Generals are a matter.

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 Cont’d
While strategy has originated in the military sphere,
since the 1960s it has risen into business world.

By then, when the large modern business corporation

emerged, strategy began its life as a practical
application to the business world

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 Cont’d
 The first real strategic management practitioner in a systematic way
was Alfred Sloan of General Motors.

 In 1912, the Harvard Business School began offering a course in

"Business Policy," intended to be a capstone course integrating the
functional knowledge that the students had gained in earlier study.

 The first academic commentator was Alfred Chandler (1962), who

chronicled the history of the modern business enterprise, using a
number of comparative treatments.

 Alfred Chandler’s explored the implications of strategy for the

emergence of the modern corporation.

 In particular he traced in some detail the interaction between strategy

and organizational structure.
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 Cont’d
As a separate branch of management studies, strategy
was born in 1965 with the publication of two
significant books:

1. Learned, Christensen, Andrews and Guth’s

Business Policy: text and cases (1965) (wherein
Andrews wrote the text and the other authors
wrote the cases) and

2. Ansoff ’s Corporate Strategy (1965).

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 Stages of strategic management development

An interpretation of the history of the strategy

concept sees it developing over the period from 1945 to
the present in four stages.

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 Stage 1
From 1945 to the mid- to late 1960s, the economic
context was a relatively stable one, simple to
understand, but expansionary.
Most economies had been exhausted by war.
In 1945, levels of production were well below pre-war
levels.
During this period overall demand in the world
economy tended to be greater than overall supply.
There was considerable pent-up demand.
There was also a backlog of unexploited technology.

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 Cont’d
The immediate aim of enterprises was the meeting of
that demand.
Satisfying precise consumer requirements did not
matter too much; almost any output was better than
none.
The role of strategy in such a context was to mobilize
economic resources in an orderly fashion to support a
rapid expansion in supply.

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 Cont’d
During this period long-range planning was still
accepted as at the heart of any strategy, since
economic priorities were clear.
Strategy consisted of budgets and programs put
together in one overall plan.
The main problem was to plan financially in order to
integrate the enterprise internally around the broad
aim of profit satisficing within the framework of the
plan.

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 Cont’d
The basic design school model (figure below), most
closely associated with the name of Andrews, is one
termed as the conception of the period.

It is intended as a practical guide for dealing with a

complex environment in which there are external as
well as internal contexts relevant to the enterprise.

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 Scanning the External Analyzing the internal
Environment (External Environment (internal
Appraisal) appraisal)

Identification of threats Formulation Identification of

and opportunities strength and
weaknesses

Consideration of all possible

combinations(creation of strategies)

Social Responsibility Managerial

Comparison Values

Evaluation of best machines

Fig. The Design School Model

Choice of Strategy

Implementation of Strategy
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Cont’d
The approach is best encapsulated in the SWOT
model (Strengths, Weaknesses, Opportunities,
Threats), probably the most commonly applied
method in strategy making.

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 Stage 2
From the late 1960s to the late 1970s, there was more
rapid and extensive change, but change of a reasonably
predictable kind.
Most developed economies were now operating close to
the frontier of best-practice technology.
Inflationary forces began to emerge, particularly cost
inflation involving various commodities and labor, but
were still under broad control.
Prioritization became less significant as supply began to
catch up with and even run ahead of demand.

The consumer became more discriminating.

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Cont’d
Strategy became more concerned with directing
resources into the most promising areas.

Strategy making began to change its nature, as a

changing environment prompted the first efforts to cope
with that outside environment, including the choice of
desired products and markets.

Positioning an enterprise became important.

Further development of strategic thinking resulted from

the work of the new consultancies.
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Cont’d
In the words of the founder of the Boston Consulting
Group (BCG) was in ‘the business of selling powerful
oversimplifications’.

The notion of the experience curve, the

growth/market-share matrix and the profit impact of
marketing strategies (PIMS) are well-known examples
of the new methods.

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Cont’d
Another consultancy, McKinsey’s, (7S model; staff,
style, skill, shared value, strategy, structure and system)
developed the notion of the strategic business unit.

Both McKinsey’s, 7S model and BCG (the growth/share

matrix) marked the entry of portfolio analysis into the
area of strategy making.

The practice of some kind of portfolio analysis became

common among American enterprises.

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 Stage 3
Between the mid-1970s and the mid-1980s change
became discontinuous.

This was the era of the oil price shocks and the later
debt crisis in the developing world.

Inflation accelerated and growth slowed.

In the era of stagflation, inflationary forces

temporarily masked the tendency of supply to run
ahead of demand.

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Cont’d
The main need strategy was now to allocate resources,
including cash flow, in order to develop a competitive
advantage.
Strategy was increasingly being made at various levels,
including business, functional and corporate levels.
The stage was dominated by Michael Porter Five forces
model.

11/14/2023 Figure Michael Porter Five forces model 28

 Stage 4
Finally, during the 1980s, change became not only
discontinuous but rather more unpredictable, with
new and more complicated dimensions added, as the
communications/information revolution began to bite
and other demands on business emerged.

In the 1990s, growth once more accelerated but in a

context in which there were the beginnings of
deflationary tendencies.

Overcapacity emerged in various sectors of the

economy.
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Cont’d
It became necessary for strategy to manage and integrate
problems in many different areas, including government
deregulation, contrasting economic circumstances, rapidly
changing technology and new conservationist and
environmental demands.

The 1990s saw the focus of interest shift once again to a greater
attention to the internal resource position of the enterprise.

There was an explosion of articles on the so called ‘resource-

based view’ (RBV) of strategy.
 Resource-based theory suggests that resources that are valuable, rare,
difficult to imitate, and no-substitutable best position a firm for long-
term success
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 Counting the Benefits
Whether you are managing a team, a start-up
business, a local government department, a large
commercial organization, or a charity, having a good
strategy will attract many benefits besides ensuring
you’re more likely to reach your goals.

It also helps you to map out your future, attract

funding, and establish a team of great people to work
with.

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 a. Mapping your future
First, a good strategy acts as a road map.
It should clearly identify where you want to be at a given
point in time, say, three years. For example, one of your
goals may be to increase sales by a factor of ten.
Your strategy should set out how you will achieve this
target.
Boosting sales by this amount will clearly require actions
bolder than printing a new sales leaflet.

A strategy has more than the destination in mind. It enables

you to map the roads and junctions along the way, so that
you can plot your way and, critically, measure your progress.
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 b. Attracting funding
Second, a clear strategy attracts interest and funding
from third parties.
This might be start-up finance for a new business,
internal funding (where you have to compete with
other teams for resources), or a bid for sponsorship.
In every scenario, funders want to know that you are in
control of the situation.
They can’t predict the future, so they seek reassurance
from your confidence in your plan for the future.
 A considered strategy demonstrates that their funds
will be well used and that they will receive a healthy
and secure return.
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 c. Unifying the organization
Finally, a clear strategy acts as a unifying force within an
organization.

By creating a clear strategy and sharing it with your team or

organization, everyone knows where they are going; people
are then far more likely to adjust their behavior to make the
whole enterprise work better.

Having a destination is very powerful in terms of human

motivation.

A well-communicated strategy sends the message:

“We’re all in this together.”
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 The chapter is Done

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