Basic Concepts in Strategic Management

Strategy
Strategy is about deciding where you want to go and how you mean to get there. A strategy is a
declaration of intent: ‘This is what we want to do and this is how we intend to do it.’ Strategies
define longer-term goals but they are more concerned with how those goals should be achieved.
Strategy is the means to create value. A good strategy is one that works, one that guides purposeful
action to deliver the required result (Armstrong,2006; Ritson,2013)

What is strategy?
It is a combination of two Greek words:-
Stratos-which means army
Agein-meaning to lead.
……Greek language(6th century BC)

Mintzberg (1987) proposed five different definitions of strategy.

 As a plan- strategy specifies courses of actions.
 As a ploy, strategy is seen as a maneuver to outwit a competitor.
 As a pattern, it emerges from a stream of actions.
 As a position, a means of locating an organization in its environment.
 As a perspective it consists of a position giving an organization the identity

Johnson and Scholes (2005) defined strategy as the direction and scope of an organization over
the long term which achieves advantage for the organization through its configuration of resources
within a changing environment and fulfillment of stakeholders’ expectations.

Scope and Meaning of Strategic Management

Strategic management is about; Success of an organization, the future of an organization, present

position of an organization, Development of superior strategy of an organization, competent
implementation of the strategy.

Strategic management is the process of formulating, implementing and evaluating business

strategies to achieve future objectives (Harvey 1988).

Strategic management is a set of decisions and actions resulting in the formulation and
implementation of strategies designed to achieve the objectives of an organization (Pearce and
Robinson 2015).
Further Reading: Strategy and strategic management definitions in detail:
https://nptel.ac.in/courses/122106031/Pdfs/9_1.pdf

Overview of Strategic Management

Basically, strategic management is about describing intentions (strategic intent) and attaining
strategic fit by allocating resources to opportunities (resource-based strategy). The effective
development and implementation of strategy depends on the strategic capability of the
organization, which will include the ability not only to formulate strategic goals but also to develop
and implement strategic plans through the processes of strategic management and strategic
planning (Armstrong, 2006).

The purpose of strategic management has been expressed by Rosabeth Moss Kanter (1984) as
being to ‘elicit the present actions for the future’ and become ‘action vehicles – integrating and
institutionalizing mechanisms for change’. Strategic management has been defined by Pearce and
Robinson (1988) as follows: ‘Strategic management is the set of decisions and actions resulting in
the formulation and implementation of strategies designed to achieve the objectives of an
organization.’
Strategic management has been described by Burns (1992) as being primarily concerned with the
full scope of an organization’s activities, including corporate objectives and organizational
boundaries;
 matching the activities of an organization to the environment in which it operates;
 ensuring that the internal structures, practices and procedures enable the organization to
achieve its objectives;
 matching the activities of an organization to its resource capability, assessing the extent to
which sufficient resources can be provided to take advantage of opportunities or to avoid
threats in the organization’s environment;
 acquiring, divesting and reallocating resources;
 Translating the complex and dynamic set of external and internal variables that an
organization faces into a structured set of clear future objectives, which can then be
implemented on a day-to-day basis.
 Chaffee E. (1985) summarized what he thought were the main elements of strategic management
theory. They are:
• Strategic management involves adapting the organization to its business environment.
• Strategic management is fluid and complex. Change creates novel combinations of
circumstances requiring unstructured non-repetitive responses.
• Strategic management affects the entire organization by providing direction.
• Strategic management involves both strategy formation (called it content) and also
strategy implementation (called it process).
• Strategic management is partially planned and partially unplanned.
• Strategic management is done at several levels: overall corporate strategy, and individual
business strategies.
• Strategic management involves both conceptual and analytical thought processes.

Approaches to Strategic Management

According to Hashim M.K ( 2016)
Since the concept of business strategy was introduced, it has attracted tremendous attention among
strategic management theorists, consultants and practitioners. The literature reveals that from the
1970s to the present, theorists, consultants and practitioners have attempted to identify, capture
and learn the strategic approaches adopted by organizations. Based on the findings of their works,
different approaches to strategy formulation have been established, presented as well as promoted
in the literature.
Approach Meaning

The strategy process and strategy content approaches appear to be not only the
earliest but also view as the two most commonly adopted approaches to develop
Process vs. business strategy in organizations.
content
approaches According to the process approach, business strategy can be formulated through a
series of activities. The focus and scope of the strategy process approach include all
the related activities leading to the identification of the strategy as well as choosing
the right strategy. Simply put, this particular approach involves a specific method
that consists of related steps important for identifying, selecting and implementing
strategy
Economic vs. Experts and scholars who view business strategy as a process that is very wide and
organizational complex. As a wide and complex process, they believe effective business strategy
approaches cannot be formulated by using simpler approaches such as the process and content
approaches. These experts and scholars proposed other different approaches be used
to conceptualize and formulate business strategy. According to them, the strategic
focus and scope of

business strategy should include:

• The whole organization;

• The industry in which it operates;

• The competitive environment in which it competes;

• Long term direction;

• Organizational resources;

• The distinctive capabilities of the organization; and

• The prospect for success.

Since the process of business strategy is more complex and having wider focus as
well as scope in the economic context, experts and scholars introduced another two
distinctive approaches. The two include the economic and the organizational
approaches.

The economic approach primarily emphasizes on the need for organizations to

develop their business strategy based on economic conditions and opportunities.

External vs. These two approaches, the external approach has a wider focus and scope. The
internal external approach emphasizes that firms should develop their organizational
approaches strategies based on the of their external business environment that consists of various
environmental factors (such as political, economic, social, cultural, technology,
ecology, government, legal, etc.). However, the internal approach suggests that firms
should formulate their strategy based on the analysis of their internal environment
(such as resources, structure and culture).

Prescriptive vs. Thought processes. In the approach, the process of formulating strategy is defined in
descriptive advance and its specific components being decided before implementation. In other
approaches words, the prescriptive approach proposes the one “best” way to develop and
implement organizational strategies for all types of organizations.
 According to the guidelines and procedures used in this approach were obtained from
the synthesis of case studies and organization theory research. More specifically,
according to the process of the prescriptive approach involves eight related
components [42-43].

The eight components include:

a. establishing the mission of an organization

b. Setting the objectives of the organization

c. Conducting the environmental scanning

d. Identifying the organization's internal strengths and weaknesses

e. Formulating alternative strategies

f. Choosing a strategy

g. Implementing the strategy

a. h. Evaluating and controlling the strategy.

Competitive The competitive advantage approach specifically focuses on the firm's resources and
advantage distinctive capabilities as the basis for developing business strategy. Proponents of
approach this approach view a successful firm as a bundle of unique resources and capabilities.
According to them, if a firm's resources and capabilities are scare, durable, defensible
or hard to imitate, they can form the basis for sustainable competitive advantage and
surplus profit, provided they aligned well with the key success factors of the industry
[40, 44,45].

Specifically, this competitive advantage approach emphasizes on the need for

organizations to develop their business strategy based on their competitive
advantage. This approach suggests that organizations should first identify their
sources of competitive advantage before developing any business strategy.
According to the approach, firms can obtain their competitive advantage from their
organizational resources and distinctive capabilities.

Strategic Strategic thinking has been recognized as one of the important approaches to develop
thinking business strategy.
approach
This approach helps managers to make more effective decisions by keeping and
making them more alert of the threats and opportunities. By doing so, the strategic
thinking approach helps them to formulate more effective strategy that can enhance
their organizational performance.
 promoters of the strategic thinking approach believed

that creating effective business strategy in uncertain and dynamic

business environment required less of rationality and systematic analysis,

According to Masifern et al. [47], this approach offers the following benefits to
organizations:

1. The organization day-to-day activities become more aligned with strategy as

managers shared a common framework developed from the strategic thinking
process;

2. The common framework allows for a better coordination among different

departments and levels;

3. Decision making takes place at a much faster rate as the strategic thinking process
enhances speed, flexibility, and facilitates decision making;

4. Strategic thinking process allows employees at every level to engage in strategic

conversation that helps to foster a ‘common language’ and align mental models
within the organization.

5. Strategic thinking also facilitates delegation as expectations are more aligned

between managers and subordinates.

6. Strategic thinking encourages the company to be more innovative through the

development of ambitious objectives and innovative strategies

Strategic According to this approach, leaders have to play an important part in formulating
leadership business strategy because they are primarily responsible for the success or failure of
approach organizations. Given this, strategic leaders are expected to inspire, guide, energize,
set standards and mobilize people to make extraordinary things happen in
organizations, to overcome uncertainty, turn visions into realities and to move
organizations forward. Without

strategic leadership, there would not be any extraordinary efforts

needed to solve existing problems, capitalize on existing as well as

potential opportunities and adapting to radical change [

Strategic leadership
 involves:

a. Providing the management leadership and direction

b. Maintaining effective relationships within the organization.

c. Introducing action plans to put the programs in place (actions

to be taken, by who, during what timeframe, and with what expected results).

d. Gaining the commitment and cooperation of his team

e. Getting the group into action to achieve the agreed objectives.

f. Make the best use of the skills, energies and talents of the team.

g. Build up morale of the employees.

Origin/Development of Strategic Management

The word strategy is derived from greek words;“Strategia” which means to” lead an army” and
Sun Szu – which means the “art of war”.
The concept emanates from the military way of synchronizing to achieve war based goals.
The rise of institutions like governments, churches enabled the enabled strategy to rise beyond the
military.

The most famous early excursions into political strategy is an Italian nobleman named Machiaveli;
with the strategic approach in the book entitled “the Prince”. It is therefore evident that strategy
has its origin in the 1950s in USA.
Drucker (1954) is one of the scholars who wrote about strategic management. His goal was to
identify the business of the company.
Chandler (1962) focused on definitions and outlined how the processes could be outlined-
(Environment-structure-strategy).
By the late 1960s to early1970s there was widespread adoption of strategic planning practices,
relatively stable business environment, Rapid expansion of business and the industries,
Disenchantment with strategic planning and increased environmental turbulence.
These challenges, coupled with the energy crisis, it became necessary to change the planning
processes.
Both academicians and practitioners started to question strategic management.
Strategic management did not deliver what it had promised. Therefore, Scholars called for
flexibility and adaptability. More emphasis was put on implementation.
The process had been rigid, inflexible and was not linked to the resources and implementation.
Additionally, the planning systems were not linked to innovation, and creativity.
This led to advent of the Rediscovery of period encompassing Rethinking and recasting of strategic
management.
Porter (1987) emphasized that strategic management needed to be rediscovered and not discarded.
He posited that formulation and implementation were to be linked. In fact he argued that
instrumentalism, intuition and informality needed to be included in strategic management.
A must Read Article: strategic management concepts and history of the strategic
management filed:
http://www.fucape.br/_public/producao_cientifica/2/Strategy%20And%20Strategic.pdf

Relationship between strategic management and other disciplines

 Marketing
Philosophical, conceptual and methodological.
Customer orientation
Competitor analysis
Environmental analysis
Marketing concepts like positioning, segmentation and mapping.
Product life cycle.
 Administrative behaviour
Adm. Behaviour focuses on managerial effort and action which enhance the achievement
of the goals.
Context of environment.
Managerial actions in the organization
Strategic alignment and subsequent methods.
Organization is seen as open systems.

Meaning of Environment Serving Organizations (ESOs) and the need for strategic
management
Environment Serving Organizations (ESOs)
According to Igor Ansoff (2007), these are organizations whose primary function is to supply
goods and/or services to society. Other writers have called such organizations 'purposive' or
'purposeful', for the obvious reason that their goods production process is a joint purposeful activity
of its members. The 'purposiveness' of such organizations varies widely, ranging from aggressive
optimization to passive maintenance of the status quo. For this reason, the term 'environment-
serving' appears as a more appropriate
The class of ESOs includes the business firm, the hospital, the university, the church, and services
rendering branches of the government, such as the post office, or an automotive license registration
bureau. In today's society, organizations of this type employ a majority of the work force. Excluded
from the class are organizations such as informal social clubs, and legislative, judicial and
regulatory branches of the government which have no concrete product or service addressed to
outside customers.
We now state a basic hypothesis which unites the ESO into a distinctive class.
Hypothesis: Survival Drive
When any ESO is confronted with the prospects of extinction, it focuses all of its energy on a
search for a survival strategy.
The survival drive has psychological, sociological and systemic roots. It reflects the individual's
drive for personal security, the tribal interdependence and allegiance of social groups, and the
inertial tendency of complex bureaucratic systems to continue functioning in a previously
established mode.
In the absence of a survival threat, ESOs exhibit a wide range of differences in their interaction
with the environment: some (the classical business firm) seek to maximize their net resources
through commercial transactions, others (the predominant number of 'real-world' firms) are
consistent seekers of a positive exchange, while still others (the typical not-for-profits) depend
largely on subsidies and incur a chronic deficit in their commercial transactions.
The commercial work of an ESO can be divided into three distinctive categories:
1. Entrepreneurial work concerned with divesting from obsolete products/services; creating new
products/services, identifying customers for them, finding ways to make the products attractive to
the potential customers, and establishing the new products/services on the market;
2. Operations work concerned with converting input resources into finished products/services;
3. Marketing work concerned with selling and delivery of the products/services to the customers.
The workings and efficiency of the ESO. The entrepreneurial and marketing work, although
performed 'inside' in the sense that it is done by individuals belonging to the organizations, is
extroverted.
The important transactions take place either directly in the environment (such as selling), or with
major awareness of the needs of the environment (such as development of new products).
We shall jointly call entrepreneurial and marketing work the strategic work of the ESO.
The classification of entrepreneurial, operations and marketing work is equally applicable to the
subsidy interactions with the environment. For example, a federal agency seeking a subsidy will
first engage in developing a proposal which is attractive to the grantor; then it will engage in a
proposal-selling effort of influencing the right officials and anticipating moves by competitive
bidders; and, having secured the grant, it will focus on administering it.
The same classification of work is equally applicable to a third important type of transaction
between the ESO and its environment.
These are political transactions which legitimize an ESO's position in society:
Entrepreneurial political work is concerned with identifying the purpose of the ESOs existence
(its raison d'etre), as well as the freedoms and constraints under which it shall operate (the rules
of the game), and negotiating the raison d'etre and the rules of the game with the powerful
members of the
ESOs environment. In the language of politics entrepreneurial work is called 'statesmanship'.
2. Marketing political work consists in maintaining and promoting social activity (such as laws,
public attitudes) which are consistent with the desired raison d'etre and the rules of the game. In
the United States political marketing is called 'lobbying or public relations'.
3. Operating political work consists of developing the information and other materials essential
for the marketing activity.
Arguably, these classifications drive us to appreciate the need for strategic thinking in these
contexts.