06/10/2019 1

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-19

STRATEGIC MANAGEMENT
MGT - 662

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 CONDUCT IN CLASS
• Be on Time. Punctuality should be hallmark of your conduct.
• Do not use mobile / cell phones
• Dress up smartly
• Have pride in you
• People should judge you by your dress that you are a BU student
• Bring hard copy of your assignment (always)
• Quiz would always be a surprise. Do not expect advance warning
• Be prepared to involve into discussion. Use English as a vehicle to convey your
thoughts both in writing and verbal format
• No question is a stupid question. We all learn through mutual exchange of ideas /
discussions
• Obtaining degree should not be your criteria. Your criteria should be “to learn,
unlearn and relearn”.
• Change your Attitude.
• Whatever you do, and you should be doing ethical things but do them with total
dedication.

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 COURSE DESCRIPTION
• Today’s 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 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 STM course has been designed to enable you to
learn not only the fundamentals, but also the intricacies of
higher levels of management.
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 COURSE OBJECTIVES
• Develop an:
• Understanding of “Strategy” and “Strategic
Management” and its application to complex
relationships that exist in today’s 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.

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 TEACHING PROCEDURE
• Interactive depending upon the queries raised by the students
• One or two case studies would be discussed at the beginning of the
lecture to highlight the topic’s importance
• Examples from local industry would be given as far as possible
• Avoid injecting Cellular services Providers / Companies every time we
discuss STM in the class
• Enhance your awareness of business management /
knowledge by reading different set of periodicals and
watching different business news relayed by BBC and our
own Business channel as well as reading yellow pages of
daily Dawn (every Monday).
• Visit to a Firm ----- The students would have to suggest the three names
before and / or after the Mid Term Exam. Earlier the better.

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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 FM’s 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 will be
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 today’s 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 and now LNG
• Scams in Pakistan – DHAs, BT, etc
• Corruption in Pakistan
• Writing off bank loans
• Panama Leaks / Off Shore Companies
• Tax Heavens worldwide

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 KEY TO successful STM

• Intimate knowledge of Core competencies of the firm

as well as of Industry including Competitors
• Exploiting (Own) Competitive Advantage (CA)
• Maintaining Competitive Position (CP)
• Undertaking Internal and External analysis as
frequently as possible and Initiating Scenario Planning
• Noticing and Preparing for Changes in Trends and
Events
• Entrepreneur your Org / Firm / Product
• And Being Ethical always
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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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 WHAT IS COMPETITIVE ADVANTAGE
• Value Creation Activity
• Value that is useful to the customer, for
which the customer is willing to pay
additional cost.
• The additional cost (sale price) would
then help increase the returns (the
profitability of the organization)
• The value can be in performance,
packaging, availability of the product,
sales and support including warranty and
guarantee 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 Advantage (CA) in the market place

• It should beunique, sustainable,

valuable and difficult for competitors to
copy or substitute. (Attributes of CA).

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 HOW TO achieve and maintain CA?
• 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 Inventory, benchmarking,
undertaking good business processes, re-
engineering, and outsourcing etc

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 FACTORS AFFECTING 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 STM.

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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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 THE STRAT. MGMT PROCESS
• It involves 3 related principal activities:
Analysis
Of strategic goals (V + M + Strat Obj) and understanding
Internal and External Environment of the Org
Decisions (Strategic)
Based on Org’s domestic and international operations, the
Org should address 2 basic questions, i.e.,
1. What industries should we compete in?
2. 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

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 STRAT MGMT & CEO
• All Org are run by the CEO’s
• 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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 INTENDED V/S REALIZED STRATEGY
• Intended: Organizational decisions
undertaken Strategy based on
analysis
• Realized: Organizational decisions are
based on analysis and unforeseen
environmental developments and
they may not be same already taken
in Board Rooms

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 STRATEGY

•is all about being different from everyone

else.
•But who gives it?
•The answers is CEO?
•Let us see how and why?

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 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, EDS’s
reputation was tarnished due investigations by S&EC resulting
in loss of competitive position.
• EDS CA -- Technical competence, steady growth, old CEO’s
conservative culture --- crisp white shirt and military cut hair
style v/s new CEO’s 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
• CEO’s Attitude --- Over ruling the managers
• By 2002, Navy contract suffered loss of $1.9Bn due
poor calculation of margins – Mega deals / Mega risks
• 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.
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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 inventory—and for
years, executives called it the company’s
“secret sauce.”

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 The Borders: Contd
• 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 strategy—and 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
Amazon—which obviously became a fierce rival.
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 WHAT WENT WRONG at Borders? Contd:

• 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 party—by then it
had taken on quite a bit of debt and had little to
invest.
• 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.
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 WHAT WENT WRONG at Borders? Contd:
• To the end, it kept a traditional mindset—focusing
on rivals with which it was most familiar.
• However, discounters like Walmart and Target sell
a ton of books—at 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 they’d enjoy a
premium experience.
• Neither worked.

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 LESSON LEARNT ---- BORDERS
• Focus on your “core competency” and
don’t 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, Amazon’s stock has soared
over 100 percent, and its market capitalization stands
at an impressive $121 billion as of mid-2013.
• Jeff Bezos, Amazon’s 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
• 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

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 VISION, MISSION AND OBJECTIVES

• Vision tends to be quite broad, and should invariably

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 Company’s Vision
• Obtain and consider the visions of:
• GOP
• BU
• Unilever
• Telenor
• PTCL
• Engro Foods etc
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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 org’s
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

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Thank you for investing your precious time
with me. Undertake a visit to the library to
enhance your awareness.
Any Questions

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 Additional Reading

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 WHAT IS STRATEGIC MANAGEMENT?
• “Without a strategy, an organization is like a ship
without a rudder, going around in circles. It’s 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 organization’s 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 process—strategy analysis, strategy formulation, and
strategy implementation. These activities are highly interrelated and
interdependent on the others.
• Corporate governance and stakeholder management—which 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.

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Summary --- contd
• Managers must also recognize the need to act in a socially
responsible manner which, if done effectively, can enhance a
firm’s 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 firm’s vision, mission,
and strategic objectives. Collectively, they form an organization’s
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.

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