The illiterate of the 21st century will not be those who cannot read

and write, but those who cannot learn, unlearn, and relearn.
AlvinToffler,
daily Dawn 3 Feb 12

introduction to
Strategic Management
(STM)

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 COURSE PROFILE
SEMESTER FALL 2017

MBA 1.5 & 3.5

STRATEGIC MANAGEMENT
MGT - 662

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 COURSE DESCRIPTION

Todays Business World is extremely competitive and highly interactive and,

exceedingly well informed. It relies on the decisions made by its (Strategic)
Managers rather than its founders. The former, therefore, must develop
panoramic view of the business and more so business environment.
The strategic managers must develop panoramic view of Businesses
and Business environment, i.e., both internal and external.
The managers of modern businesses should be adequately skilled to
pre-empt the situation rather than resorting to reactive mode.
Recent economic slowdown since 2008 and currency war raging
between the USA, Europe (Euro Zone) and China are cases in
example.
Therefore, the strategic management course has been designed to
enable you to learn not only the fundamentals, but also the
intricacies of higher levels of management.
A careful look at the schedule would let you know the progression of
the course.

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 COURSE OBJECTIVES

Develop an:
Understanding of Strategy and Strategic Management and
its application to complex relationships that exist in todays
environment.
Awareness of the various environmental contexts under which
strategic formulation and implementation occur.
Ability to thoroughly analyze business problems.
Ability to function effectively as a member or a chairperson of a
strategic team and,
Ability to effectively communicate strategic thinking, both
orally and in writing.

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 Recommended Book

Dess, Gregory G; Lumpkin, G.T.; Eisner, Alan B.

Strategic Management Text and Cases.
2006. The McGraw-Hill Companies, Inc., NewYork.
Introduction to STM & Bus Policy by Thomas Wheeler & David Hunger
Cases in Strategic Management by Amita Mital
Strategic Management: Concepts and Cases By Fred R. David

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Quizzes and Assignments etc
At least 4 quizzes and 4 assignments including one presentation
(Group) will be held during the semester.
The general guidelines for Assignments / Research Papers /
Projects are:
In time submission would be highly appreciated
Utilize all the sources books, journals, e journals, magazines
and books to make your research paper authentic,
impressive and worthy of submission and reflection of your
personality.
Make it a habit to visit library at least once a week.
Make use of Internet as much as possible to download
useful information.
Avoid cut and paste. Indicate source so as to avoid
plagiarism.

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 METHOD OF EXAMINATION

The Mid Term and Final Term examinations are of 1-1/2 and 2
hours duration respectively. They can be Open Book, Open
Ended, and / or Take Home Examination. However, based on
experience it has been deduced that Open Ended is the best
and most suitable form of examination. It benefits a large
majority of students. The paper invariably would include
MCQs., Fill-in-the blanks, True / False and few subjective
questions. The final paper may or may not include case study.

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 COMMON PAPER

There would be one paper or common paper for all the

sections studying STM.
One of the FMs teaching STM would set the paper through
consensus.
Henceforth, it is of utmost importance that we adhere to the
course contents, study the prescribed book and reference
books including reading material provided in the class for
desirable results.

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AWARD OF MARKS / EVALUATION CRITERIA
The purpose of conducting examination is not to determine what
you do not know but to find out how much you know and what can
be done to enhance your knowledge:

ITEM ASSESSMENT TASK DURATION WEIGHT TOTAL MARKS

1 Final Examination 02 Hours 40% 40

2 Mid-Term Examination 1:30 Hour 25% 25

3 Quizzes 30 Minutes 15% 15

Case Study
4 20 Minutes 5% 5
Presentation
5 Individual Assignments 1000 words 10% 10

6 Class Participation 5% 5

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 SCHEDULE AND TOPICS

Please see the course profile and schedule of

topics, quizzes and assignments. Hard copy
has been provided to each one of you.

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 Shahid Nawaz
Senior Assist. Professor
0345-5139748

Email:
shahid.nawaz@bui.edu.pk

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 LP-1

Ch-1 Strategic Management ------

Creating Competitive Advantages (CA)
Learning Objectives
Definition and 4 key attributes of Strat. Mgmt
The Strat. Mgmt Process and its 3 related principal activities
Corporate Governance
Environmental Forces
Vision, Mission and Objectives Awareness of
Learning Outcomes
It is expected that you would get fundamental concepts why and how CA /CP is
created and maintained.

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 WHAT MAKES THE STUDY OF STRATEGIC MANAGEMENT
SO INTERESTING?
For one, struggling firms can become stars, while high flyers can
become earthbound very rapidly.
Consider, for example, the change in membership on the
prestigious Fortune 500 list of the largest U.S. firms:
Of the 500 companies that appeared on the first list only 62,
ranked by revenue, have appeared on the list every year
since 1955.
Some of the most powerful companies on todays list
businesses like Intel, Apple, and Google grew from nothing
to great on the strength of new technologies, bumping
venerable old companies off the list.
Between 2009 and 2013, admittedly more volatile years than
most, over one hundred companies including Bear Stearns,
Chrysler, Circuit City, Merrill Lynch, RadioShack, and Tribune
dropped off the 500.
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 PURPOSE OF STRATEGIC MANAGEMENT.

Regardless of the size, the scale, every

organization needs to adopt a well-planned
strategic management to survive and
compete in the market and try to optimize
for tomorrow following the trend of today.

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 Why study STM?
Falling oil prices and its impact
Tax Culture in Pakistan
Org like PIA, PSM, PR and other SOE running in loss
Absence of International Pakistani brand
Cost of doing business in Pakistan ----- Shortage of Energy
Demise of CNG Sector
Scams in Pakistan DHAs and AKD
Corruption in Pakistan
Writing off bank loans
Panama Leaks
Off shore companies
Tax Heavens
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 KEY TO successful STM
Intimate knowledge of Core competencies
Exploiting Competitive Advantage (CA)
Maintaining Competitive Position (CP)
Undertaking Internal and External analysis as frequently as
possible
Initiating Scenario Planning --- Be futuristic
Noticing and preparing for Changes in Trends and Events
Always ready to entrepreneur your Org / firm
And Being Ethical always

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 SUCCESSFUL STRAT MGMT

An industry is composed of a set of firms that produce

similar products or services, sell to similar customers, and
use the similar methods of production.

Gathering industry information and understanding

competitive dynamics among the different companies in
an industry is key to successful strategic management.

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 Strategy
is all about being different from
everyone else.
 STRAT MGMT & CEO
All Org are run by the CEOs
Role of CEOs
CEOs are synonymous with the success and failure of the org
Strat Mgmt is based on participatory decision making techniques with
the CEO taking full responsibility for the outcome
Leadership roles:
Romantic ---- Leader is the key to success or failure
External Factor ---- Focus is on the external factors for success or failure
of the Org
Recent examples:
Crude Oil Price crash and its impact on Economies the world over
Corporate fines against BOA, SC Bank, Lehman Brothers etc
Downfall of BCCI
Recent economic downturn in USA / Euro Zone / DPW etc

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 STRAT MGMT
The Essence of STRAT MGMT is to focus on 2 fundamental questions:
How should we compete in order to create Competitive Advantages
(CA) in the market place
How can we create competitive advantage in the market place that are
not only unique, sustainable and valuable but also difficult for
competitors to copy or substitute.
Important to note is:
Sustainable CA cannot be achieved without operational effectiveness
which means performing similar activities better than rivals.
Operational Effectiveness includes concepts of TQM, just-in-time,
benchmarking, business process reengineering, and outsourcing etc

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 STRAT MGMT DEFINITION

The Management is A step further than incremental

management Taking minor decisions in a stable, simple and
unchanging industry. Does it happen always?
No. Therefore, there is a need for Strat Mgmt.
Therefore, STM is defined as: Analyzing, taking decisions, and
initiating actions in order to create and sustain competitive
advantage.
Biggest Question
How (and when) and why do some firms outperform others?
Critical Answer
The challenge to managers is to decide on strategies that
provide advantages that can be sustained over time

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 STRAT MGMT AND 4 KEY ATTRIBUTES
1. Directed at overall organizational goals
Looking at the strategic issues rather than functional areas
What to produce and at what cost
2. Involving multiple stakeholders
Involve owners, employees, customers, suppliers, and the
community at large
3. Incorporating short term and long term perspectives
Keep an eye on the current production needs as well as
vision for the future ---- Creative Tension
4. Recognizing need for trade-offs between efficiency and
effectiveness using organizational resources wisely and
optimally

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Ambidexterity aligning resources with marketing opportunities
THE STRAT. MGMT PROCESS
It involves 3 related principal activities:
Analysis
Of strategic goals (V + M + Strat Obj)
Internal and External Environment of the Org
Decisions (Strategic)
Based on Orgs domestic and international operations, the Org
should address 2 basic questions, i.e.,
What industries should we compete in?
How should we compete in those industries?
Actions
In order to achieve success as a result of decisions, the
necessary resources must be made available for a desirable
outcome.
It is a continuing process and seeks intimate involvement of CEO
Henceforth, be able to differentiate between Intended Strategy and
Realized Strategy---------?

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 INTENDED V/S REALIZED STRATEGY

Intended: Organizational decisions undertaken Strategy

based on analysis
Realized: organizational decisions are based on analysis
and unforeseen environmental developments
Environmental Forces

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 Economic
Forces Internal
Environment
Culture
Sociocultural Resources
Focus
Task
Environment
Suppliers
Shareholders Industry
Employees
Interest Groups Societal
Customers Environment
Creditors
Trade Associations
Competitors

Politico-Legal
Technological
Forces
Forces
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 Case Study
ROLE OF CEO ----- EDS

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Electronic Data System since 1962

In 1998 --- EDS earned $22Bn (Total market $140Bn) as

Revenue with shares trading at $35.
In March 2003 --- Shares shrunk to $16. Additionally, EDSs
reputation was tarnished due investigations by S&EC resulting
in loss of competitive position.
EDS CA -- Technical competence, steady growth, old CEOs
conservative culture --- crisp white shirt and military cut hair
style v/s new CEOs culture --- gung-ho style to get rid of
bureaucratic life style
To spur growth the new CEO pushed for megadeals requiring
outsourcing companies to make large investments. Resultantly,
stocks were pushed up to $77. By 2001, CEO (Mr. Brown)
received $52M in compensation.

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 EDS- WHAT WENT WRONG
CEOs Attitude --- Over ruling the managers
By 2002, Navy contract suffered loss of $1.9Bn due poor calculation of
margins Mega deals / Mega risks
In the same time frame, a contract with WorldCom signed in 1998 incurred
a loss of $118M due bankruptcy of WorldCom.
As a result of Internet Bubble Burst of 2002 estimates were fudged and
investors were assured of 13-14% growth despite recession
Stocks plunged to $11.68
By 2003, EDS BOD lost patience and replaced CEO
Closing statement: Pay for performance, differentiate performance- not
organizational level.make difficult choices. Do as I say, not as I do.

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 LEARNING FROM MISTAKES
The Borders:
In 1971, Louis and Tom Borders opened their first store in Michigan. The
brothers, while students at the University of Michigan, created a then-
revolutionary system to track sales and inventoryand for years
executives called it the companys secret sauce.
With their Book Inventory System, Borders could oversee the flow of a
huge number of titles broken into thousands of different subject
categories across multiple stores.
As it grew, Borders provided the knowledge and feel of the
independents with its distinctive architecture, comfortable chairs, and
reading nooks. In addition, the stores carefully screened and trained
employees, paying them relatively well along with a generous set of
benefits.
It seemed like a winning strategyand it worked for quite a while.

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 The Borders:
By the 1990s
The Borders along with Barnes and Noble, controlled 40
percent of the retail book market.
Borders financials were impressive: between 2003 and 2005,
sales increased 11 percent to nearly $4 billion and net income
jumped 23 percent to $132 million.
Unfortunately, 2005 was its last profitable year.
By 2010 / 11
Borders was well into the red, losing a combined $293 million.
In February 2011, it filed for bankruptcy protection.
Attempts at reorganization failed, it soon began its final
liquidation of assets, and its last remaining stores closed their
doors on September 18, 2011.

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 WHAT WENT WRONG at Borders?
Borders focused on its retail strategy, expanding aggressively in the United
States and internationally and underwent debt.
It strove to improve the in-store experience for shoppers, added cafes, and
experimented with new concepts. The strategy failed to appreciate
introduction of Internet.
Grievous Mistakes
Borders was left with a conflicted strategy: Declining sales forced it to close
hundreds of stores. Unfortunately, it treated the Internet like a passing trend
instead of as a transformational phenomenon.
The company outsourced its Web operation to Amazonwhich obviously
became a fierce rival.
It waited until 2008 to develop its own Web strategy. Meanwhile, Amazon
had became the dominant player in online bookselling and e-books.
Borders was clearly late to the partyby then it had taken on quite a bit of
debt and had little to invest. In essence, it was forced to rely on third-party
readers from Sony and Kobo, which made it impossible to distinguish its Web
offerings.
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 WHAT WENT WRONG at Borders? Contd:
During its last eleven years, Borders was led by six different CEOs. None were
around long enough to make a lasting change or provide the vision that could
maneuver the debt-laden company through a shifting landscape.
To the end, it kept a traditional mindsetfocusing on rivals with which it was
most familiar. The book industry continued to consolidate. However,
discounters like Walmart and Target sell a ton of booksat big discounts
and their prices are usually matched by Amazon. Borders was faced with a
dilemma: It could take the losses and match the discounters, or it could justify
its higher prices by convincing customers that theyd enjoy a premium
experience. Neither worked.
Lesson Learnt
Focus on your core competency and dont get distracted by
timely trends or flashy ideas.
Borders had become a multibillion dollar business because of
its physical retail presence. However, this approach also led to
its demise.
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 A CONCLUDING NOTE

Amazon continues to outdistance its rivals. Its sales

have grown from $25 billion to $57 billion over the last
3-4 years.
During the same period, Amazons stock has soared
over 100 percent, and its market capitalization stands
at an impressive $121 billion as of mid-2013.
Jeff Bezos, Amazons founder and CEO, can boast a net
worth of over $23.6 billion.
In contrast, Borders is extinct.

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 CORPORATE GOVERNANCE AND STAKEHOLDERS MANAGEMENT
Management (CEO)
To run the Org to satisfy the interests and needs of the shareholders under the
guidelines prepared by BOD
As per HBR (Nov 15) only 25% of the most successful CEOs are MBAs

Shareholders (Owners)

BOD (Elected by the shareholders to represent their interests)

To align the interests and motives of the management with
those of the owners

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CORPORATE GOVERNANCE AND STAKEHOLDERS MANAGEMENT --CONTD

Creating Symbiosis or Zero Sum

Two views
1. Zero Sum --- All the stakeholders are to be satisfied:
Employees want higher wages
Shareholders want higher profits
Zero sum concept gives rise to Unionism
2. Stakeholder Symbiosis ---- Managers acknowledge
interdependence between employees, suppliers,
customers, shareholders and the community at large

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 Corporate Governance and Social Responsibility
Social Responsibility is the expectation that businesses or
individuals will strive to improve the overall welfare of the
society.
Companies have determined Triple Bottom Line which is:
1. Financial Measures / Capital
2. Ecological and material capital --- Renewable
resources generated by living systems, such as wood or
animal by-products
3. Human and Social Capital --- Human deals with
peoples knowledge, skills, health, nutrition, safety,
security, and fossil fuels, and Social includes assets of
civil society, social cohesion, trust, reciprocity, equity
and other values that provide mutual benefits
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 THE STRAT. MGMT Perspective --- An imperative
It requires managers to take an integrative view of the Org and assess
how all of the functions and activities fit together to help an Org
achieve its goals and objectives.
Some Key Driving Forces are:
1. Globalization
Global economy is NOT the flow of goods only but it is flow
of capital, people, and information worldwide.
2. Technology
Innovative technology is having impact on our lives, trade,
services and products (Innovation, Invention and digitization,
and Miniaturization)
3. Intellectual Capital
Creating and applying knowledge to deliver differentiated
products and services of superior value for customers
require the acquisition of superior talent, as well as ability
to develop and retain that talent

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 EMPLOYEES AND STRAT MGMT

Role of Leaders

Thinking and Working groups can not be different and

separated (System Approach)

Ideas must be encouraged, analyzed and implemented

Trg and Dev must move hand in glove

Albert Einstein once stated, Imagination is more important than

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 VISION, MISSION AND OBJECTIVES
Vision tends to be quite broad, and can be inspiring,
overarching and emotionally driven
Org express priorities best through stated goals and objectives
that form a hierarchy of goals
Hierarchy of goals is the Companys Vision
A vision may or may not succeed
Give examples of vision:
GOP
BU
Unilever
Telenor
PTCL
Engro Foods

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 MISSION

It encompasses both the purpose of the company as well as the

basis of competition and competitive advantage

It is more specific and depicts rationale for existence of org

Effective mission statements incorporates the concept of

stakeholder management, suggesting that org must respond to
multiple constituencies if they are to survive and prosper.

They also have the greatest impact when they reflect an orgs
enduring, overarching strategic priorities and competitive
positioning.

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 STRATEGIC OBJECTIVES
Operationalization of Mission statement
Outlining Strategy how to achieve higher goals
Cover well defined time frame
Resources are identified and allocated
To be meaningful, Objectives must be:
Specific - clear and concise
Measurable
Appropriate - Consistent with vision and mission
Realistic --- achievable in given time frame
Timely Have a time frame

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Vision
To become an internationally recognized university
that contributes towards the development of
nation through excellence in education and
research

Mission
To remain committed to the attainment of highest
standards in teaching, learning and research, at par
with the international standards
Thank you and make a visit to the library to
enhance your awareness.

any questions

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Additional Reading
 WHAT IS STRATEGIC MANAGEMENT?
Without a strategy, an organization is like a ship
without a rudder, going around in circles. Its like a
tramp; it has no place to go.
Joel Ross & Michael Kami (Fred 2011)
According to Wheelen and Hungers study (2006),
STM is a set of managerial decisions and actions that
determines the long-term performance of a corporation.
It involves
Environmental scanning (both external and internal), strategy
formulation (strategic or
Long range planning), strategy implementation, and evaluation and
control. They
Emphasize the analyzing and evaluating of external opportunities and
threats in terms of an organizations strengths and weaknesses.
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 STM Defined

Lamb (1984) states that strategic management is an ongoing

process that:
Evaluates and controls the business and the industries in
which the company is involved
Assesses its competitors and sets goals and strategies to
meet all existing and potential competitors; and then
Reassesses each strategy annually or quarterly to determine
how it has been implemented and whether it has succeeded
or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new
economic environment, or a new social, financial, or
political environment.

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 Summary
Strategic management is defined as consisting of the analyses, decisions, and
actions an organization undertakes to create and sustain competitive
advantages.
The issue of how and why some firms outperform others in the marketplace is
central to the study of strategic management.
Strategic management has four key attributes: It is directed at overall
organizational goals, includes multiple stakeholders, incorporates both short-
term and long-term perspectives, and incorporates trade-offs between efficiency
and effectiveness.
The strategic management process focuses on three core activities in the
strategic management processstrategy analysis, strategy formulation, and
strategy implementation. These activities are highly interrelated and
interdependent on the others.
Corporate governance and stakeholder managementwhich must be taken into
account throughout the strategic management process. Governance
mechanisms can be broadly divided into two groups: internal and external.
Five key stakeholders have been identified in all organizations: owners,
customers, suppliers, employees, and society at large. Successful firms go
beyond an overriding focus on satisfying solely the interests of owners.
Summary --- contd
Managers must also recognize the need to act in a socially
responsible manner which, if done effectively, can enhance a
firms innovativeness.
The shared value approach represents an innovative perspective
on creating value for the firm and society at the same time.
The managers also should recognize and incorporate issues
related to environmental sustainability in their strategic actions.
Finally there must be consistency among a firms vision, mission,
and strategic objectives. Collectively, they form an organizations
hierarchy of goals.
Visions should evoke powerful and compelling mental images.
However, they are not very specific.
Strategic objectives, on the other hand, are much more specific
and are vital to ensuring that the organization is striving toward
fulfilling its vision and mission.