Session 1 Strategic Management 2023

▪ Strategic management can be defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives.
▪ The term strategic management is used synonymously with strategic planning.
▪ The purpose of strategic management is to exploit and create new and different opportunities for
tomorrow while long-range planning tries to optimize for tomorrow the trends of today. of at least five
years' duration,
▪ Characteristics of Strategic Management
1. Strategic management is focused on long-term objectives and is underpinned by the vision and
mission of the company
2. Strategic planning is a qualitative exercise and a charted roadmap requiring sound judgment with a
realistic imagination of how the future should look
3. strategic planning addresses issues related to structure, system, and culture, allowing for the
uncertainties and ambiguities that can be expected when looking several years ahead

Stages of Strategic Management

1. Strategy formulation includes developing a vision and mission, identifying an organization's external
opportunities and threats determining internal strengths and weaknesses, establishing long-term objectives,
generating alternative strategies, and choosing particular strategies to pursue.

2. Strategy implementation requires à firm to establish annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be executed; developing a strategy-
supportive culture, creating a effective organizational structure, redirecting marketing efforts, preparing
budgets, developing and utilizing information systems, and linking employee compensation to organizational
performance. AFM

3. Strategy evaluation is the final stage in strategic management. Managers desperately need to know when
particular strategies are not working well; strategy evaluation is the primary means for obtaining this
information.

▪ Three fundamental strategy evaluation activities are: a. reviewing external and internal factors that
are the bases for current strategies b. measuring performance c. Taking corrective actions.
▪ Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels in a
large organization: corporate, divisional, and functional. Smaller businesses may only have the
corporate and functional levels.

Integrating Intuition and Analysis: The strategy-management process can be described as an objective,
logical, systematic approach for making major decisions in an organization. It attempts to organize qualitative
and quantitative information in a way that allows effective decisions to be made under conditions of
uncertainty
Adapting to Change:

✓ The strategic-management process is based on the belief that organizations should continually monitor
internal and external events and trends so that timely changes can be made as needed. The rate and
magnitude of changes that affect organizations are increasing dramatically.

✓ The need to adapt to change leads organizations to key strategic management questions, such as, "What
kind of business should we become?", "Are we in the right field?", "Should we reshape our business?".
"What new competitors are entering our industry?"

Competitive advantage is defined as anything that a firm does especially well compared to

rival firms.

▪ Firms should seek a sustained competitive advantage by: i) continually adapting to changes in
external trends and internal capabilities, and ii) formulating, implementing and evaluating strategies
that capitalize on those factors.
▪ Strategists are individuals who are most responsible for the success or failure of an organization.
(gather, analyze, and organize information track industry and competitive trends, develop forecasting
models and scenario analyses, evaluate corporate and divisional performance, spot emerging market
opportunities, identify business threats, and develop creative action plans.)
▪ Strategists hold various job titles, such as chief executive officers, president, and owner, chair of the
board, executive director, chancellor, dean, or entrepreneur.
▪ Vision statements answer the question: "What do we want to become"
▪ Mission statements are "enduring statements of purpose that distinguish one business from other
similar firms. A mission statement identifies the scope of a firm's operations in product and market
terms." It addresses the basic question that faces all strategists: "What is our business?" It should
include the values and priorities of an organization.
▪ External opportunities and external threats refer to economic, social, cultural, demographic,
environmental, political, legal, governmental, technological and competitive trends and events that
could significantly benefit or harm an organization in the future.
▪ Opportunities and threats are largely beyond the control of a single organization, thus the term
external.
▪ A basic tenet of strategic management is that firms need to formulate strategies to take advantage of
external opportunities and to avoid or reduce the impact of external threats.
▪ Environmental scanning or industry analysis is the process of conducting research and gathering and
assimilating external information
▪ Internal strengths and internal weaknesses are an organization's controllable activities that are
performed especially well or poorly.
▪ Identifying and evaluating organizational strengths and weaknesses in the functional areas of a
business is an essential strategic-management activity.
▪ Strengths and weaknesses are determined relative to competitors and may be determined by both
performance and elements of being,
▪ Long-Term Objectives: as specific results that an organization seeks to achieve in pursuing its basic
mission. Long term means more one year.
▪ Objectives state direction, aid in evaluation create synergy, reveal priorities, focus coordination, and
provide a basis for effective planning, organizing, motivating and controlling activities.
▪ Objectives should be challenging, sable, consistent, reasonable, and clear.
▪ Strategies are the means by which long-term objectives will be achieved. Business strategies may
include geographic expansion, diversification, acquisition, product development, market penetration,
retrenchment, divestiture, liquidation, and joint ventures.
▪ Annual objectives are short-term milestones that organizations must achieve to reach long- term
objectives.
▪ Policies are the means by which annual objectives will be achieved. Policies include guidelines, rules,
and procedures established to support efforts to achieve stated objectives. Policies are most often
stated in terms of management, marketing, finance/accounting, production/operations, research and
development, and computer information systems activities.