STRATEGIC MANAGEMENT

2ND LECTURE
 DISCUSSION OUTLINES

DEFINITION OF STRATEGIC MANAGEMENT

THE STAKEHOLDER
BENEFITS OF STRATEGIC MANAGEMENT
THE DIFFERENCE BETWEEN STRATEGIC
MANAGEMENT FROM OTHER TYPES OF
MANAGEMENT
 Introduction

The concept on strategy related to business became

greater after WW2
Business has moved from a relatively stable
environment into a rapidly changing and competitive
environment
2 significant factors:
 Acceleration in the rate of change within firms
 Acceleration application of science and technology to the
process of management
The strategy in business involving:
 An environmental or situation analysis
 Utilization of its resources to attain its major goals
The major importance of SM is that it gives
organizations a framework for developing abilities
for anticipating and coping with change.
Its also helps to develop the ability to deal with
uncertain futures by defining a procedure for
accomplishing goals.
 CONCEPT

The best policy for military

operations is to gain
victory by means of
strategy……..
"The Art of War"
The use of force against enemy weak points, by
passing their strong points.
Seek points of enemy weakness and exploit them.
Viewed the objective of war as the strengthening of
the state through the acquisition of enemy resources,
and to that end, he viewed battle as a possible means
to an end but not an ideal one.
 CONCEPT

Clausewitz Model of
Strategy
Clausewitz counseled that one should seek out enemy
strong-points such as armies and fortresses, and attack
them directly.
Public morale depended upon achieving spectacular
victories.
Emphasized on boldness.
Alexander the Great and Julius Caesar, both of whom
were highly aggressive and demonstrated a pattern of
seeking out the enemy's strongest forces for battle.
Emphasis on aggression, martial spirit, and destruction
of the enemy resonates emotionally with the audience.
What Is Planning?
 What Is Strategic Management?

Strategy is the employment of, the management of

overall resources to gain an objective.
Tactics are the use of a subset of these resources to
gain a part of the overall objective.
Strategic management is the modern application of
this ancient art to contemporary business and
public administration.
 What Is Strategic Management?

Strategic management is the conscious selection of

policies, development of capacity, and
interpretation of the environment by managers to
focus organizational efforts toward the
achievement of preset objectives.
Private example: doubling of annual dividends.
Public example: reduction in crime rate.
 What Is Strategic Management?

Features of strategic management.

 Definition of the organizational process within a mission
statement;
 Identification of objectives in a vision statement to be
achieved in the future;
 The adoption of a time frame (or “planning horizon”) in
which these objectives are to be achieved;
 A systematic analysis of the current circumstances of an
organization, especially its capabilities;
 What Is Strategic Management?

Features of strategic management (contd.).

 An assessment of the environment surrounding the
organization – both now and within the planning
horizon.
 The selection of a strategy for the achievement of desired
objectives by a future date often comparing various
alternatives;
 The integration of organizational efforts around this
strategy; and
 The creation of control and evaluation systems for
continuing feedback.
 What Is Strategic Management?

Objectives.
 Objectives were originally part of military thinking.
 The distinction between a strategic objective and a tactical
objective.
 The public sector has been slower to adopt strategic
management than the private sector because public
administration was more concerned about functions
and responsibilities rather than objectives.
 Strategy VS Tactic

Strategy Tactic
Strategy is about the Tactic is about the
long-term short-term
Strategy – as the Tactics – as the answer
answer to the question to the question ‘how’
‘what for’ (objective, (process, actions)
purpose) Tactics: How you will
Strategy: What you are achieve your strategy
going to do to achieve and when.
your vision.
 What Is Strategic Management?

Objectives (contd.).
 Causes of change from responsibility and function to
objectives.
 The first was the popularization of management by objectives by
Peter Drucker (measurable goals to be achieved over a set period
of time).
 The second was the more rapid pace of change in communities.
 The third was the pervasiveness of strategic management in the
private sector.
 Public organizations still often separate statements of
function and statements of objectives.
 What Is Strategic Management?

Objectives.
 A statement of objectives should be:
 Succinct, and limited to organization’s sphere of influence;
 Directional, with specific future states to be achieved;
 Time limited, with indications when each objective is to be
achieved; and
 Measurable, so that achievement or progress can be evaluated.
 What Is Strategic Management?

The planning horizon.

 It is of the utmost importance to assess whether or not
organizations have strategic intent – that is, the will to
shape their future, rather than simply reacting to changes
driven by others.
 Any organization’s planning horizon, the time limit
beyond which the future is too uncertain or unimportant
to waste time on, is an important factor in assessing its
short- as well as long-term viability.
 What Is Strategic Management?

The planning horizon (contd.).

 Severe obstacles exist for public organizations in
establishing time horizons.
 Political nature of public administration (election and public
opinion cycles).
 The budgeting process (political leverage).
 Publicly owned businesses are forced to plan, however.
 In general, pluralistic (developed) democracies may have
the luxury of incremental decision-making. Many
developing countries require more rational planning.
 What Is Strategic Management?

Capabilities.
 Strategic management is a matching process in which variables
of strategy, capability, and environment are matched as the
organization seeks to manage change through strategy.
 As the environment moves from stable to turbulent, capability
moves from custodial (unchanging) to entrepreneurial (risk-
taking).
 What Is Strategic Management?

Capabilities (contd.).
 In considering future strategic directions, managers must
contemplate whether they have or can obtain the
personnel, systems, finance, structure, and other
requirements that might be essential to realize their
vision.
 SWOT (Strengths, Weaknesses, Opportunities, and
Threats) analysis tests strategic viability.
 Strengths and weaknesses highlight capabilities.
 Opportunities and threats highlight survival.
 What Is Strategic Management?

Environment.
 An assessment of an organization’s present, currently
emerging, and likely future environments is a critical aspect of
strategic management.
 Demand forecast – population, economic growth, consumer
behavior.
 Futures analysis – Likely scenarios.
 STRATEGIC MANAGEMENT PROCESS

 The process through which organizations analyze and learn

from their internal and external environment, establish
strategic direction, create strategies, all in an effort to satisfy
key organizational stakeholders.
 The strategic-management process is based on the belief that
organizations should continually monitor internal and
external events and trends so that timely changes can be made
as needed. The rate and magnitude of changes that affect
organizations are increasing dramatically.
 The need to adapt to change leads organizations to key
strategic-management questions, such as, What kind of
business should be become?´, Are we in the right field?´,
Should we reshape our business?´, What new competitors are
entering our industry?´
STRATEGIC MANAGEMENT PROCESS
 Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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 Strategy Implementation

Annual Objectives –
consensus on goals

Policies

Employee Motivation/
Readiness – interpersonal skills

Resource Allocation –
mobilization of resource

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 Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions
– subject to future modification

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 PUBLIC SECTOR STAKEHOLDERS

Stakeholders play important roles as advocates,

sponsors, partners and agents of change.
Much has been written about stakeholder
relationships in the private sector and many
companies now have dedicated relationship
managers and strategies in place to improve and
develop external relationships.
However, stakeholder management in the public
sector still lags some way behind, and is often
haphazard.
 PUBLIC SECTOR STAKEHOLDERS

Particular customers @ clientele groups

Private sector firms and non-profit organizations
who contract to help do the work of public agencies
Other governmental units that may involve in the
frequent intergovernmental provisions of services
Interest groups @ community groups who feel they
have a stake in what public agencies do
Policy making bodies that both define the mission
and provide the oversight of public agencies
 BENEFITS

• Proactive in shaping firm’s future

• Initiate and influence firm’s activities
• Formulate better strategies
•Systematic, logical, rational
 BENEFITS

It allows for identification, prioritization and exploitation

of opportunities
It provides an objective view of management problems
It represents a framework for improved coordination and
control of activities
It minimizes the effects of adverse conditions and
changes
It allows major decision to support established objectives
It helps integrate the behavior of individuals into a total
effort
It provides a basis for clarifying individual
responsibilities
 BENEFITS
34

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement

Copyright 2005 Prentice Hall

 BENEFITS
35

Nonfinancial Benefits

• Improved understanding of competitors’

strategies
• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities

Copyright 2005 Prentice Hall

 REASONS FOR NO STRATEGIC PLANNING

Poor reward structure

Fire-fighting
Waste of time
Too expensive
Laziness
Fear of failure
Fear of the unknown
 DRAWBACKS IN STRATEGIC PLANNING

To gain control over decisions and resources

To satisfy accreditation or regulatory requirements
Failing to communicate the plan to employees,
makes them continue working in the dark
Many intuitive decisions that conflict with formal
plan
THE DIFFERENCE BETWEEN STRATEGIC MANAGEMENT
AND OTHER TYPES OF MANAGEMENT

It is interdisciplinary and not focus on specific areas

such as human resources or operations.
Emphasis on the interactions of the organization
with its external environment. It has external focus.
Emphasis on emportant of interactions and
coordination of the organization’s various functional
areas. It has an internal focus.
Concerns the choice of future direction of the
organization (future focus)
 TUTORIAL QUESTIONS

IDENTIFY BENEFITS OF STRATEGIC

MANAGEMENT
DIFFERENTIATE STRATEGIC MANAGEMENT
FROM OTHER TYPES OF MANAGEMENT