Strategic Management

1
Strategic Management

• Chapter 1

2
Objectives

• On completion of this chapter, you should be able
  to
• Recognize the need for more than one view of
  strategic management
• Understand the importance of strategy at
  different levels in an organization
• Analyse and explain situations using the many
  tools of strategic management
• Be aware of processes involved in developing and
  implementing strategy

3
Framework of Strategic Management

• Stems from the concept of developing and
  implementing strategy which means making
  decisions about the future
• Answering important questions such as
• What business we are in? What business we should
  be in?
• What are our basic directions for the future?
• What is our culture and leadership style?
• What is our attitude to strategic change? What
  should it be?
• How do we compete successfully? What is our
  sustainable competitive advantage?
• How can we innovate?
• Who are our customers?
• What value do we add? Where? Why? How?

4
Roles

• Top management has the perspective needed to
  understand the broad implications of such
  decisions and the power to authorize the
  necessary resource allocations.
• Business managers plays a crucial role in
  exploring, developing and implementing the
  suitable business strategy for an organization.

5

• Quote
• Business week Pearce Robinson, 2003 top
  manager of Volvo Gm Heavy Truck Corporation, Karl
  Erling Trogen, president, wanted to push the
  company closer to the customer by overarching
  operations with service and customer relations
  empowering the work force closest to the customer
  with greater knowledge and authority. This
  called for a major commitment to the parts and
  service end of the business where customer
  relations were first priority. Trogens
  philosophy was to empower the work force that
  more operating questions were handled on the line
  where workers worked directly with customers. He
  believed that the corporate headquarters should
  be more focused on strategic issues, such as
  engineering, production, quality and marketing.
  This in essence is strategic management.

6
What is Strategy?

• No universal definition.
• Andrews (1971) Strategy is the pattern of
  major objectives or goals and essential policies
  or plans for achieving those goals, stated in
  such a way as to define what business the company
  is in or is to be in and the kind of company is
  it or is to be.
• Haberberg and Rieple 2001 Strategy is the set
  of actions through which an organization, by
  accident or design, develops resources and uses
  them to deliver services and products in a way
  which users find valuable, while meeting the
  financial and other objectives and constraints
  imposed by key stakeholders.

7
Core areas of Strategy

• Strategic Analysis
• Environment
• Resources
• Vision, mission objectives
• Strategic Development
• Options
• Rational selection
• Finding strategic route
• Strategic Implementation
• Resource Allocation
• Strategic planning control
• People issues change

8

• Strategy covers the range and depth of the
  organisations activities as it directs the
  changing and evolving relationships of the
  organization with its environment.
• An effective strategy is one that creates
  competitive advantages for the business that are
  sustainable over time.

9
Sustainable competitive advantages (SCA)

• Resources possessed by an organization that is
  innovative, unique, durable and not easily
  imitable.
• Comes by striving to exploit the relevant
  resources of the individual organization when
  compared with its competitors.
• Relevance means the identification of resources
  that are better than those of competitors,
  persuasive to the customer and available from the
  range of strengths contained inside the
  organization. May include the way an
  organization combines its activities and resource
  to add value to the products/ services offered to
  customers.

10
Strategies adopted to establish SCA

• Cost reduction low cost production/service
  operations enables to offer products/services
  at lower price than competitors.
• Differentiation unique features of
  product/services that appeal to part or whole
  market
• Niche marketing focus to meet specified needs
  of customers
• Being truly competitive high innovative levels
  of performance, quality, services or technology
  that cannot be easily matched by competitors.
• Culture and style of organization the way
  organization leads, trains and supports its staff
• Synergy combination of parts of a business to
  create an end result worth more that the
  individual parts alone.

11

• No single route to achieving SCA but 3 possible
  test to check to see if advantages are achieved.
  Advantages
• Sufficiently significant to make a difference i.e
  hold REAL benefits to the organization and the
  customer.
• Sustainable against environmental change and
  competitor attack i.e. not easily emulated.
• Recognizable and linked to customer benefits i.e.
  something consumers can relate to.

12

• Organisations strategy concerned with matching
  the external environment to the organisations
  internal environment its resources, skills and
  activities in order to add value to its
  products/service and enable it to beat the
  competition.

13
Pearce Robinson, 2003

• Essence of strategic management comprises 9
  critical tasks
• Formulate the companys mission, including broad
  statements about its purpose, philosophy and
  goals.
• Conduct and analysis that reflects the companys
  internal conditions and capabilities.
• Assess the companys external environment,
  including both the competitive and the general
  contextual factors.
• Analyse the companys options by matching its
  resources with the external environment.
• Identify the most desirable options by evaluating
  each option in light of the companys mission.
• Select a set of long-term objectives and grand
  strategies that will achieve the most desirable
  options.
• Develop annual objectives and short-term
  strategies that are compatible with the selected
  set of long-term objectives and grand strategies.
• Implement the strategic choices by means of
  budgeted resource allocations in which the
  matching of tasks, people structures,
  technologies and reward systems is emphasized.
• Evaluate the success of the strategic process as
  an input for future decision-making.

14
Strategic Management

• Process of specifying an organisations
  objectives, developing policies and plans to
  achieve these objectives and allocating resources
  so as to implement the plans.
• Recognizes that formulation and implementation of
  strategies are related parts of the same process
  and that operational manages should be involved
  in the whole process.
• Highest level of managerial activity provides
  overall direction to the whole enterprise.

15
Corporate Strategy

• To put the organization into a position to carry
  out its mission effectively and efficiently.
• Good corporate strategy should integrate an
  organisations goals, policies and action
  sequences (tactics) into a cohesive whole and
  must be based on business realities.

16
Historical Perspective

• 1950s and 1960s strategy was seen largely as a
  deliberate process of analysis and long-term
  planning, controlled by the CEO.
• Alfred Chandler (1962) and Igor Ansoff (1965)
• As organizations and their operating environment
  became more comples, strategy development became
  part of the organisations corporate planning
  function.
• 1983 GE dismantled planning department of over
  200 highly paid experts. John F Welch, GE
  Chairman, reported that planners were too
  concerned with financial and operating details
  instead of competitive positions and the creation
  of future markets and too divorced from the
  day-to-day reality of line managers.
• 1970s and 1980s, Boston Consulting Group,
  advocated strategy as positioning the
  organization with the implementation of their
  very own BCG matrix - organizations can analyse
  their position in relation to their competitors
  and their industry, select which strategies would
  work best for their circumstances.
• 1980s Japanese were able to offer both lower
  cost and superior quality than their rivals UK
  and US turned their attention to the internal
  resources of the organization quality,
  continuous improvement and operational
  effectiveness.
• 1990 search for competitive advantage fuelled
  by rapid change adaptable and innovative and
  able to spearhead change, not merely to respond
  to change. Emphasis on learning organization,
  core competencies, innovation, making alliances
  and partnerships and on global issues.

17
Process, Content, Context

• Context environment within which the strategy
  operates and is developed.
• Content main actions of the proposed strategy.
• Process linking of actions to interact with
  each other as the strategy unfolds against what
  may be a changing environment.
• Context and content are reasonable clear. It
  is the way in which strategy is developed and
  enacted (process) that usually causes most
  problems. Process requires investigation and are
  vague and impractical because they involve people
  and rapidly changing environments.

18
Perspective Approach

• Core areas are linked together sequentially thus
  possible to use the analysis to develop a
  strategy which is then implemented.
• One whose objective has been defined in advance
  and whose main elements have been developed
  before the strategy commences.
• Strategy is formulated and chosen by thorough and
  detailed analysis of the external environment and
  internal capabilities using various tools and
  techniques.
• Choice of strategy will depend on the
  organisations situation and circumstances in
  relation to its industry.

19
Emergent Process

• It is impossible to plan strategy in a turbulent
  environment conditions change before any plan
  can be implemented.
• Emergent approach have taken the view that
  corporate strategy emerges, adapting to human
  needs and continues to develop over time.
• Emergent strategy is one whose final objective
  unclear and whose elements are developed during
  the course of its life, as the strategy proceeds.
• Enables organistion to be flexible and responsive
  to new opportunities. Trial and error can be
  expensive with resources being used in an
  unfocused way and strategies may be slow to
  emerge.
• Emergent approaches may mean that the
  organization has no clear direction and no sound
  basis for decision-making.

20
Combined Approach

• Different approaches may be suitable at different
  times, depending on the context or situation and
  an organization may pursue a combination of
  approaches.

21
Developing Models of Strategy

• Analysis of the environment examining external
  environment PESTLE
• Analysis of resources exploring internal
  environment
• Identification of vision, mission and objectives
  developing and reviewing the strategic
  direction and more specific objectives

22
Strategy Development and Implementation

• Perspective Approach
• Options rational selection from the options
  according to identified criteria. Choice is
  subject to 2 further considerations
• Finding the strategic route forward taking into
  account new and emerging information to see how
  it might impact on the choice, with some
  adjustment being made if necessary.
• Considering strategy, structure and style
  taking into account the way the organization is
  managed and structured and its style of
  operation.
• These factors may need to be considered before a
  final decision is made on the strategy to pursue.
  Essential to reconsider the impact of these
  choice on the basic mission and objectives of the
  organization. Once chosen, it is then
  implemented.

23
Emergent Approach

• Takes more experimental view of strategic choice
  and its implementation
• Seeks to learn by trial, experimentation and
  discussion as strategies are developed.
• No single view of a process that emerges within
  an organization as each one will be different.

24
Levels of Strategy

• Corporate strategy
• Concerned with the overall purpose and scope of
  business to meet stakeholder expectations
• Heavily influenced by investors in the business
  and acts to guide strategic decision-making
  throughout the business.
• Often stated explicitly in mission statement
• Decisions tend to be more value oriented, more
  conceptual and less concrete than decisions at
  the business or operational level.
• Decisions are often characterized by greater
  risk, cost and profit potential causing a greater
  need for flexibility and longer time horizons.
• Business unit Level
• Concerned with how a business competes
  successfully in a particular market.
• Concerns strategic decisions about choice of
  products, meeting needs of customers, gaining
  advantage over competitors, exploiting or
  creating new opportunities etc.
• Operational level
• Divided into operational areas marketing, HR
  etc
• Constitutes resources, processes and skills that
  will deliver the organisations strategy and
  there must be a close integration between
  corporate level strategy and decisions taken at
  operational levels.
• Aligned with corporate level strategy

25
Your Role in Strategic Management

• Strategy making no longer the preserve of
  senior managers in their ivory towers.
• Strategic management is increasingly part of the
  role and responsibility of managers involved in
  the day-to-day running of the business.
• Managers involved in strategy formulation, not
  just implementing top-down decisions, are likely
  to be motivated and committed to implementing
  changes that they have been involved in creating
  but there are other important advantages
• An organization has access to much broader
  sources of creativity and ideas
• Likely to be more diversity throughout the
  organization
• Manager and employees may have a wider range of
  cultural and educational backgrounds and their
  assumptions and perspectives about the future are
  likely to vary widely makes strategic
  management to be richer.

26
What makes a Good Strategy?

• Definition one that delivers the purpose set
  out for the strategy in the beginning.
• Two areas tested
• Application-related related to the real world
  of the organization and its activities
• Academic rigour related to originality, logical
  thought and scientific method.
• Tests of Good Strategy
• Application-related
• Value-added
• Consistency
• Competitive advantage
•  
• Academic rigour
• 5 tests
• Originality
• Purpose
• Flexibility