E R S IT Y,

TY U N IV
UN I C I A L
M A S P E
AD A
CAM P U S
Oct., 2020

12/30/2020 By Dr. Bogale A. 1

 E T i tl e
R S
COU
T E G I C
STR A
M E N T
N A G E
M A x
B A x x
C o d e : M
Cou rs e
g a l e A.
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truct or: 
Ins
 Chapter 
c M ana gem ent
re of St rat e gi
The Natu

12/30/2020 By Dr. Bogale A. 3

 Learning objectives:
•After reading this chapter you will be able to:
 Define Strategy and Strategic Management
 Describe the Stages of the Strategic Management Process
 Define key terms in strategic management
 Describe the Benefits of Strategic Management

12/30/2020 By Dr. Bogale A. 4

 Notable Quote !
a t i o n is
o rg a n iz
t e g y , an g o i n g
a s t r a r ud d e r,
W ith o u t o u t a i t h a s
• " ip w i th t r a m p ;
a s h ’s li k e a
like cir c l e s . I t
u n d in a mi
aro g o . " an d M i ch a e l K

p l ac e to — Joe l R oss
no •

12/30/2020 By Dr. Bogale A. 5

 Term Definitions
• In ancient Greek, ‘stratos’ was the term for the army
and so in military terms, ‘strategy’ referred to ‘the
act of the general’.

• So, the origins of ‘strategy’ – the ‘art of the general’

– comes from the military arena –“The Art of War”

12/30/2020 By Dr. Bogale A. 6

 Cont’d…
• Alfred Chandler Jr. suggests that: strategy is;

“the determination of the basic-long term goals and

objectives of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for
carrying out these goals”.

12/30/2020 By Dr. Bogale A. 7

 Cont’d…
• Porter relates strategy to the success or failure of a
company

“obtaining a competitive position or series of

competitive positions that lead to superior and
sustainable financial performance”.

12/30/2020 By Dr. Bogale A. 8

 Strategic Management –Defined

 Art & science of formulating,

implementing, and evaluating, cross-
functional decisions that enable an
organization to achieve its objectives.

12/30/2020 By Dr. Bogale A. Ch 1 -9

 Cont’d…
• Strategic management consists of the
analyses, decisions, and actions an
organization undertakes in order to create
and sustain competitive advantages.
• This definition captures two main elements:
 the strategic management of an organization entails
three ongoing processes: analyses, decisions, and
actions
 the essence of strategic management is the study of
why some firms outperform others.
12/30/2020 By Dr. Bogale A. 10
 Cont’d…
• Key Attributes of Strategic Management
 Directs the organization toward overall goals and
objectives.
 Includes multiple stakeholders in decision making.
 Needs to incorporate short-term and long-term
perspectives.
 Recognizes trade-offs between efficiency and
effectiveness.

12/30/2020 By Dr. Bogale A. 11

 Purpose of Strategic
Management
To exploit and create new and different
opportunities for tomorrow
In essence, the strategic plan is a company’s
game plan

12/30/2020 By Dr. Bogale A. Ch 1 -12

 Stages of the Strategic Management Process

• There are three stages in strategic

management process;
1. Strategy formulation
2. Strategy implementation
3. Strategy evaluation

12/30/2020 By Dr. Bogale A. Ch 1 -13

 Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

12/30/2020 By Dr. Bogale A. Ch 1 -14

Issues in Strategy
Formulation


Businesses
Businessestotoenter
enter

Businesses
Businessestotoabandon
abandon

Allocation
Allocationof
ofresources
resources

Expansion
Expansionorordiversification
diversification

International
Internationalmarkets
markets

Mergers
Mergersororjoint
jointventures
ventures

Avoidance
Avoidanceofofhostile
hostiletakeover
takeover

12/30/2020 By Dr. Bogale A. Ch 1 -15

 Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

12/30/2020 By Dr. Bogale A. Ch 1 -16

 Strategy Implementation Steps
 Developing a strategy-supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts
 Preparing budgets
 Developing and utilizing information systems
 Linking employee compensation to organizational
performance

12/30/2020 By Dr. Bogale A. Ch 1 -17

Issues in Strategy
Implementation

Action
ActionStage
Stageof
ofStrategic
Strategic
Management
Management

Mobilization
Mobilizationof
ofemployees
employees&&
managers
managers

Most
Mostdifficult
difficultstage
stage

Interpersonal
Interpersonalskills
skillscritical
critical

12/30/2020 By Dr. Bogale A. Ch 1 -18

 Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

12/30/2020 By Dr. Bogale A. Ch 1 -19

Prime Task of Strategic Management
• Peter Drucker says the prime task of strategic
management is “thinking through the overall mission of
a business”. That is of ask the key question: “What
is our Business?”
•This leads to;
 the setting of objectives,
 the development of strategies, and
 the making of today’s decisions for tomorrow’s results.

12/30/2020 By Dr. Bogale A. Ch 1 -20

 Integrating Intuition & Analysis

• The strategic management process

attempts to organize quantitative and
qualitative information under conditions
of uncertainty.

12/30/2020 By Dr. Bogale A. Ch 1 -21

 Cont’d…
Intuition is based on:
– Past experiences
– Judgment
– Feelings
Intuition is useful for decision making in conditions of:
 Great uncertainty
 Little precedent
 Highly interrelated variables
 Several plausible alternatives

12/30/2020 By Dr. Bogale A. Ch 1 -22

 Key Terms in Strategic Management
 Competitive advantage
 Strategists
 Vision and mission statements
 External opportunities and threats
 Internal strengths and weaknesses
 Long-term objectives
 Strategies
 Annual objectives
 Policies

12/30/2020 By Dr. Bogale A. Ch 1 -23

Strong strategic plan achieves the following;

1. Reflects the values of the organizations

2. Inspires action to achieve a big future
3. Explains how you will win in the market
4. Clearly defines the criteria for achieving
success
5. Guides everyone in daily decision making

12/30/2020 By Dr. Bogale A. 24

Benefits of Strategic Management

By Dr. Bogale A. 25
Why Some Firms Do No Strategic Planning
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success
 Overconfidence

12/30/2020 By Dr. Bogale A. Ch 1 -26

 Comparing Business and Military Strategy
• Strategic planning started in the military
• Similarity
– Both business and military organizations
must adapt to change and constantly
improve
• Difference
– Business strategy assumes competition
– Military strategy assumes conflict

12/30/2020 By Dr. Bogale A. Ch 1 -27

 Need for Strategy
• There is a need in modern times for strategies;
 To achieve agreed goals and objectives,
 To give a strong sense of purpose and direction
 To gain competitive edge over rival organizations
 To cope with recent technological and social changes

12/30/2020 By Dr. Bogale A. 28

 Key Elements of Planning
Where are we now?

Where are we going?

How will we get there?

How will we measure our progress?

12/30/2020 By Dr. Bogale A. 29

 Phase one: Determining
Phase two:
core
Phasepurpose/
Phaseone:
two:
Assessing
and
core
the
envisioning
mission
Determining
strategic
the
purpose/ mission
Assessing the strategic
position
future
Strategic Planning Process
and envisioning the
position
future

Ph
as
e
th
re
e:
De
vel
op
in
g
str
at
eg
ic
pri
ori
tie
s

12/30/2020 By Dr. Bogale A. 30

 Phase five:
people
four:Aligning
Phase five:
four:
strategies
with
strategies
people with
operations
resources
operations
resources
Applying
ofAligning
Applying
financial
of financial
Strategic Planning process
P
h
as
e
si
x:
Ex
ec
u
ti
ng
th
e
pl
an

12/30/2020 By Dr. Bogale A. 31

 c h a p te r !
e
End of th

12/30/2020 By Dr. Bogale A. 32

 CH AP T E R 
I C IN T E NT:
O F S T RA T EG
HIERARC H Y
I N G T H E
ESTABLISH
D IR E C T I O N
A T IO N ’ S
ORGANIZ

12/30/2020 By Dr. Bogale A. 33

 Learning Objectives:
• At the end of this lesson you should be able to:
 Define strategic intent and list elements in
hierarchy of strategic intent
 Identify the distinction and similarity between
vision, mission, goals and objectives
 Discuss the role of vision and mission

12/30/2020 By Dr. Bogale A. 34

 Notable Quotes !
e , s t a t u t es , or
e d b y it s n a m
ss i s n o t d e fin in e d b y th e
• "A busine . I t is d ef
i n c o r p o r a t io n n o f t h e
ni ti o
articles of . O n l y a c l e a r d e f i
a k es
m is s i o n ni z a t io n m
business p o s e o f th e o r g a
“
n a n d p u r o b j e c t i v e s .
missio r e al is ti c b u s i n e s s
c le a r a n d
possible t e r D r u c k e r
—P e o t iv a t e ,
u s , d ir ect, m
i o n c a n f o c e r i o r
r a te v i s s i n t o s u p
• "A corpo e x c ite a b u s i n e s
e n t i fy
e v e n t is t o i d
unify, and j o b o f a s t r a t eg i s
. T h e
performance r v is i o n ."
cl e a
and project a n K e a n e
— J o h
12/30/2020 By Dr. Bogale A. 35
 THE MEANING OF STRATEGIC
INTENT
• Strategic intent refers to the purposes the
organisation strives for.
• These may be expressed in terms of a
hierarchy of strategic intent.
• Broadly stated, these could be in the form of
a vision and mission statement for the
organisation as a corporate whole.

12/30/2020 By Dr. Bogale A. 36

 Levels of strategy
• Most academics classify strategies into three
levels:
• 1. Corporate
• 2. Business
• 3. Functional/Operational

12/30/2020 By Dr. Bogale A. 37

12/30/2020 By Dr. Bogale A. 38
 Corporate Strategy
• It relates to the future formula and structure of the
company, and affects the rationale of the company
and the business in which it intends to compete.

• Corporate strategy –
 what business are we in, or hope to be in?
 what business or businesses the firm should be in?

12/30/2020 By Dr. Bogale A. 39

 Business Strategy
• Competitive or business strategy – Strategic Business
Units (SBUs) are a part of an organization for which
there is a distinct external market for goods or services.

• It deals with how each business attempts to achieve its

mission within its chosen area of activity.

12/30/2020 By Dr. Bogale A. 40

 Cont’d…
In Business Strategy; strategy is about
 which products or services should be
developed and offered to which markets and

 the extent to which the customer needs are

met whilst achieving the objectives of the
organization.

12/30/2020 By Dr. Bogale A. 41

 Cont’d…
•Johnson and Scholes (2002) place Porter’s ‘generic strategies’ here, at the
business level:
 This is because the SBU concept has different markets to address and
so different resources and operational strategies will be needed.

 In brief, Porter says businesses – but not the Corporate level – must
choose between ‘cost-leadership’ and so compete on price, and
‘differentiation’ and so compete on quality.

12/30/2020 By Dr. Bogale A. 42

 Operational or functional strategies
• Operational or functional strategies – departmental
level – accounting, HR, manufacturing, marketing –
how the different functions of the business support the
corporate and business strategies.
• They are concerned with how the various functions of
the organization contribute to the achievement of
strategy

12/30/2020 By Dr. Bogale A. 43

 Process of strategy
• Strategic management is an organized development of
resources of the functional areas (financial,
manufacturing, marketing, technological, manpower
etc.,) in pursuit of its objectives.

• This is done through hierarchy of process.

12/30/2020 By Dr. Bogale A. 44

 The hierarchy of process
• The complex nature of many large organizations has led
to the splitting of strategies into inter-related levels
comprising the hierarchy of process.
 The hierarchy of process: A sequence of developing
plans that move from general to specific and intent to
action that create several levels of planning, which
could be illustrated in the triangle below.

12/30/2020 By Dr. Bogale A. 45

 The hierarchy of process
Vision

12/30/2020 By Dr. Bogale A. 46

 Vision
• ‘Vision’ and ‘mission’ are often used
interchangeably:
• Vision is broader and future looking.
• Delimits the scope of activities that the
company is, or will be, undertaking

12/30/2020 By Dr. Bogale A. 47

 Cont’d…
• “Vision is the art of seeing things
invisible”...........Jonathan Swift
• Vision is a picture of what the firm wants to be and, in
broad terms, what it wants to ultimately achieve.
• The vision statement points the firm in the direction of
where it would eventually like to be in the years to come.
• Vision is “big picture” thinking with passion that helps
people feel what they are supposed to be doing.

12/30/2020 By Dr. Bogale A. 48

 Mission - Mission Statement
• While the essence of vision is a forward-looking view of what an
organisation wishes to become, mission is what an organisation is
and why- it exists.
• Peter F. Drucker raised important philosophical /fundamental
questions related to business:
 What is our business?
 What will it be? and
 What should it be?
• The answers are based on the analysis of the underlying needs of the
society that any organisation serves to fulfil.
• The satisfaction of that need is, then, the business of the organisation.

12/30/2020 By Dr. Bogale A. 49

 Continued…
• Thompson (1997) defines mission as the "essential
purpose of the organisation, concerning particularly
why it is in existence, the nature of the business it is
in, and the customers it seeks to serve and satisfy".
• Hunger and Wheelen (1999) say that mission is the
"purpose or reason for the organization's existence.
• Some examples of mission statements are shown
below:

12/30/2020 By Dr. Bogale A. 50

 Cont’d…
• Ethiopian Airline has the following missions:
• To create value to our customers and stakeholders by providing
safe and reliable passenger and cargo air transport service.
(Ethiopian Airline)
• Dashen Bank has the following mission statement:
• Provide Efficient and Customer Focused Domestic and
International Banking Services, overcoming the continuous
Challenges for excellence through the Application of Appropriate
Technology.

12/30/2020 By Dr. Bogale A. 51

 Mission Statement Components
• Most practitioners and academicians of strategic management feel that an
effective statement should include nine components.
1. Customers—Who are the firm’s customers?
2. Products or services—What are the firm’s major products or services?
3. Markets—Geographically, where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, and profitability—Is the firm committed to
growth and financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations, and ethical
priorities of the firm?
7. Self-concept—What is the firm’s distinctive competence or major competitive
advantage?
8. Concern for public image—Is the firm responsive to social, community, and
environmental concerns?
9. Concern for employees—Are employees a valuable asset of the firm?

12/30/2020 By Dr. Bogale A. 52

 Roles Played by Mission and Vision
• Mission and vision statements play three critical
roles:
1) Communicate the purpose of the organization to
stakeholders,
2) Inform strategy development, and
3) Develop the measurable goals and objectives by
which to gauge the success of the organization’s
strategy.

12/30/2020 By Dr. Bogale A. 53

 Ten Benefits of Having a Clear Mission and Vision
1. Achieve clarity of purpose among all managers and
employees.
2. Provide a basis for all other strategic planning activities,
including the internal and external assessment, establishing
objectives, developing strategies, choosing among alternative
strategies, devising policies, establishing organizational
structure, allocating resources, and evaluating performance.
3. Provide direction.
4. Provide a focal point for all stakeholders of the firm.
5. Resolve divergent views among managers.

12/30/2020 By Dr. Bogale A. 54

 Continued…
6. Promote a sense of shared expectations
among all managers and employees.
7. Project a sense of worth and intent to all
stakeholders.
8. Project an organized, motivated organization
worthy of support.
9. Achieve higher organizational performance.
10. Achieve synergy among all managers and
employees.

12/30/2020 By Dr. Bogale A. 55

 Goals, Objectives and Strategies
• Goals and objectives play an important role in translating
the vision and mission into outcomes or manifestations.
• Goals and objectives provide the foundation for
measurement.
 Goals are the outcome statements that define what an
organization is trying to accomplish, both
programmatically and organizationally.
• Goals are usually ;
 a collection of related programs,
 a reflection of major actions of the organization, and
 provide rallying points for managers.

12/30/2020 By Dr. Bogale A. 56

 Continued…
• In contrast to goals, objectives are very precise, time-
based, and measurable actions that support the
completion of a goal.
• Objectives typically must ;
1) be related directly to the goal;
2) be clear, concise, and understandable;
3) be stated in terms of results;
4) begin with an action verb;
5) specify a date for accomplishment; and
6) be measurable.

12/30/2020 By Dr. Bogale A. 57

 Cont’d…
• Objectives are often ‘SMART’ :
 Specific,
 Measureable,
 Achievable,
 Relevant/Realistic and
 Time-bounded

12/30/2020 By Dr. Bogale A. 58

 Strategies, Tactics and Actions
 Strategies – relate to broad areas of an enterprise’s operations.
Their purpose is to furnish a framework for more detailed tactical
planning and action.
 Tactics – are actions carried out to put into effect the details of a
strategic decision – tactics can therefore be seen as the detailed
implementation of a strategy.
 Actions, programmes and rules – are the operational practices
that will translate the intention of the tactics into action by
individuals and are therefore detailed, short term and subject to
immediate control.

12/30/2020 By Dr. Bogale A. 59

 Continued…
• Generally, goals are typically outcome statements, while
objectives are very precise, time-based, and measurable actions
that support the completion of goals.
• Goals and objectives are an essential element in planning and are
a key referent point in many aspects of organizing, leading, and
controlling.
• Broadly speaking, within the P-O-L-C framework, goals and
objectives serve to;
1) Gauge and report performance,
2) Improve performance,
3) Align effort and
4) Manage accountabilities.

12/30/2020 By Dr. Bogale A. 60