STRATEGIC MANAGEMENT

DEFINITION
 The term strategic management is used to refer to the entire scope of
strategic-decision making activity in an organization. Strategic
management as a concept has evolved over time and will continue to
evolve. As result there are a variety of meanings and interpretations
depending on the author and sources.
 For example, some scholars and practitioners the term strategic planning
connote the total strategic management activities. Moreover, sometimes
managers use the terms strategic management, strategic planning, and
long-range planning interchangeable.
 Strategic management is the process of managing the pursuit of
organizational mission while managing the relationship of the
organization to its environment (James M. Higgins).
 Strategic management is defined as the set of decisions and actions
resulting in the formulation and implementation of strategies designed
to achieve the objectives of the organization (John A. Pearce II and
Richard B. Robinson, Jr.).
 Strategic management is the process of examining both present and
future environments, formulating the organization's objectives, and
making, implementing, and controlling decisions focused on achieving
these objectives in the present and future environments (Garry D.
Smith, Danny R. Arnold, Bobby G. Bizzell).
 Strategic management is a continuous process that involves attempts to
match or fit the organization with its changing environment in the most
advantageous way possible (Lester A. Digman).
 ELEMENTS
 Strategic management, as minimum, includes strategic planning and
strategic control. Strategic planning describes the periodic activities
undertaken by organizations to cope with changes in their external
environments (Lester A. Digman) It involves formulating and evaluating
alternative strategies, selecting a strategy, and developing detailed plans
for putting the strategy into practice.
 Strategic planning consists of formulating strategies from which overall
plans for implementing the strategy are developed.
 Strategic control consists of ensuring that the chosen strategy is being
implemented properly and that it is producing the desired results.
 KEY TERMS-
VISION&MISSION
 Vision: Defines the desired or intended future state of an organization or
enterprise in terms of its fundamental objective and/or strategic
direction. Vision is a long term view, sometimes describing how the
organization would like the world in which it operates to be. For example
a charity working with the poor might have a vision statement which read
"A world without poverty"
 Mission: Defines the fundamental purpose of an organization or an
enterprise, succinctly describing why it exists and what it does to achieve
its Vision.
 It is sometimes used to set out a 'picture' of the organization in the
future. A mission statement provides details of what is done and answers
the question: "What do we do?" For example, the charity might provide
"job training for the homeless and unemployed"
 A Mission statement tells you the fundamental purpose of
the organization. It defines the customer and the critical
processes. It informs you of the desired level of performance.
 A Vision statement outlines what the organization wants to
be, or how it wants the world in which it operates to be. It
concentrates on the future. It is a source of inspiration. It
provides clear decision-making criteria.
 Features of an effective vision statement include:
 Clarity and lack of ambiguity
 Vivid and clear picture
 Description of a bright future
 Memorable and engaging wording
 Realistic aspirations
 Alignment with organizational values and culture
 STRATEGY
 Strategies are the means by which long-term objectives will be achieved.
"A strategy is a unified, comprehensive, and integrated plan that relates
the strategic advantages of the firm to the challenges of the
environment. It is designed to ensure that the basic objectives of the
enterprise are achieved through proper execution by the organization"
(William F. Glueck, and Lawrence R. Jauch). The role of strategy is to
identify the general approaches that the organization utilize to achieve its
organizational objectives. Therefore, the choice of strategy is so central to
the study and understanding of strategic management
 STRATEGIST
 The final key term to be highlighted here is "strategists".
Strategists are the individuals who are involved in the
strategic management process. Several levels of
management may be involved in strategic decision making.
However, the people responsible for major strategic
decisions are the board of director, president, the chief
executive officer, the chief operating officer, and the division
managers
 STAGES OF STRATEGIC
MANAGEMENT
 The strategic management process represents a logical,
systematic, and objective approach for determining an
enterprise's future direction.
 However, a clear separation is needed between the
managerial process by which an organization formulates,
evaluates, implements, and controls the relationships
between its objectives, its strategies, and its environment.
 Researchers usually distinguish three stages in the process of
strategic management: strategy formulation, strategy
implementation, and evaluation and control.
 Strategy Formulation

 Strategy formulation is the process of establishing the

organization's mission, objectives, and choosing among
alternative strategies. Sometimes strategy formulation is
called "strategic planning."
 Strategy Implementation

 Strategy implementation is the action stage of strategic management.

 It refers to decisions that are made to install new strategy or reinforce
existing strategy.
 The basic strategy - implementation activities are establishing annual
objectives, devising policies, and allocated resources.
 Strategy implementation also includes the making of decisions with
regard to matching strategy and organizational structure; developing
budgets, and motivational systems
 Strategy Evaluation And Control

 The final stage in strategic management is strategy evaluation and

control.
 All strategies are subject to future modification because internal and
external factors are constantly changing.
 In the strategy evaluation and control process managers determine
whether the chosen strategy is achieving the organization's objectives.
 The fundamental strategy evaluation and control activities are: reviewing
internal and external factors that are the bases for current strategies,
measuring performance, and taking corrective actions.

MODELS
Strategic management is a broader term that includes not only the stages already identified
but also the earlier steps of determining the mission and objectives of an organization
within the context of its external environment. The basic steps of the strategic management
can be examined through the use of strategic management model.
 The strategic management model identifies concepts of strategy and the elements
necessary for development of a strategy enabling the organization to satisfy its mission.
Historically, a number of frameworks and models have been advanced which propose
different normative approaches to strategy determination. However, a review of the major
strategic management models indicates that they all include the following elements:
 Performing an environmental analysis.
 Establishing organizational direction.
 Formulating organizational strategy.
 Implementing organizational strategy.
 Evaluating and controlling strategy.
 Strategic management is a continuous and dynamic process. Therefore, it should be
understood that each element interacts with the other elements and that this interaction
often happens simultaneously.
 The major models differ primarily in the degree of explicitness, detail, and complexity. These
differences derive from the differences in backgrounds and experiences of the authors.
Some of these models are briefly presented below.
 Comprehensive strategic management
model
External
Audit

Chapter 3

Long-Term Generate, Implement Implement Measure &

Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9

Internal
Audit

Chapter 4
 SWOT ANALYSIS
 A scan of the internal and external environment is an
important part of the strategic planning process.
Environmental factors internal to the firm usually can be
classified as strengths (S) or weaknesses (W), and those
external to the firm can be classified as opportunities (O) or
threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis.
 The SWOT analysis provides information that is helpful in
matching the firm's resources and capabilities to the
competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The
following diagram shows how a SWOT analysis fits into an
environmental scan:
 Strengths

 A firm's strengths are its resources and capabilities that can be used as a
basis for developing a competitive advantage. Examples of such strengths
include:
 patents
 strong brand names
 good reputation among customers
 cost advantages from proprietary know-how
 exclusive access to high grade natural resources
 favorable access to distribution networks
 Weaknesses
 The absence of certain strengths may be viewed as a weakness. For
example, each of the following may be considered weaknesses:
 lack of patent protection
 a weak brand name
 poor reputation among customers
 high cost structure
 lack of access to the best natural resources
 lack of access to key distribution channels
 In some cases, a weakness may be the flip side of a strength. Take the
case in which a firm has a large amount of manufacturing capacity. While
this capacity may be considered a strength that competitors do not share,
it also may be a considered a weakness if the large investment in
manufacturing capacity prevents the firm from reacting quickly to
changes in the strategic environment.
 Opportunities
 The external environmental analysis may reveal certain new
opportunities for profit and growth. Some examples of such
opportunities include:
 an unfulfilled customer need
 arrival of new technologies
 loosening of regulations
 removal of international trade barriers
 Threats
 Changes in the external environmental also may present
threats to the firm. Some examples of such threats include:
 shifts in consumer tastes away from the firm's products
 emergence of substitute products
 new regulations
 increased trade barriers
 SWOT Matrix
 A firm should not necessarily pursue the more lucrative opportunities.
Rather, it may have a better chance at developing a competitive
advantage by identifying a fit between the firm's strengths and upcoming
opportunities.
 In some cases, the firm can overcome a weakness in order to prepare
itself to pursue a compelling opportunity.
 To develop strategies that take into account the SWOT profile, a matrix of
these factors can be constructed. The SWOT matrix (also known as a
TOWS Matrix)
 S-O strategies pursue opportunities that are a good fit to the
company's strengths.
 W-O strategies overcome weaknesses to pursue
opportunities.
 S-T strategies identify ways that the firm can use its strengths
to reduce its vulnerability to external threats.
 W-T strategies establish a defensive plan to prevent the
firm's weaknesses from making it highly susceptible to
external threats.
Benefits of Strategic Management

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement
Benefits of Strategic Management

Non-Financial Benefits

• Improved understanding of competitors strategies

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