Outline

1. The concepts of strategy and strategic

Topic 1 management;
2. Characteristic of strategic decisions

Conceptual Issues of Strategic 3. The Benefits of good strategic

Management planning
4. Levels of strategic planning;
5. The strategic management process.
2020/2021 GS602: Strategic Management 2

Eye Openers Overview

❑ The business environment is not static but in

“Without a strategy, an organization is like a constant change.
ship without a rudder, going around in ◼ In this dynamic environment an organization
circles” cannot be successful by doing business the
Joel Ross and Michael Kami traditional way.
❑ Managers have to position the organization to its
environment in a way that ensures its success.
“He who will not worry about what is far off
will soon find something worse than worry” ❑ It has to find ways of taking advantage of
opportunities and addressing challenges brought by
Confucius Institute changes in the environment.
❑ A fit must be attained between firm’s environment
and its strategy, resources, structure, and processes.
2020/2021 GS602: Strategic Management 3
2020/2021 GS602: Strategic Management 4

Page 1
1
 Meaning of Strategic Management Meaning of Strategic Management

❑ There is no universally accepted definition of ◼ A company’s strategy comprises of competitive

strategic management. moves and approaches that managers employ to
❑ The term strategic management sterms from compete successfully and achieve its
the word strategy. organizational objectives.
❑ The concept of strategy originated in the study
◼ A strategy is an idea about the future and how it
can be realized. of success in war in military activities.
◼ It is a set of goal-directed actions a firm takes to ◼ The aim of strategy is defeating the enemy by
gain and sustain superior performance relative to fighting as few battles as possible.
competitors. ◼ The priority is to frustrate the enemy's plots,
◼ It consists the management decisions about the ruin his alliances, attack his armies, and besiege
future direction and the scope of the business. his castles (forts).
2020/2021 GS602: Strategic Management 5 2020/2021 GS602: Strategic Management 6

Meaning of Strategic Management Meaning of Strategic Management

❑ The military model of strategy is applicable in ◼ Making a set of managerial decisions and actions
business strategy because business is a war in that determines the long-run corporate
which firms need to outperform their rivals. performance - Wheelen & Hunger (2017).
◼ A set of decisions ans actions resulting in
◼ Enables an organization to keep ahead of the
formulation and implementation of strategies
competitors in an industry.
designed to achieve organizational objectives – P.
◼ Through strategies managers prepare their firms to K. Ghosh.
meet the uncertainty of the future. ❑ Generally, strategic management may be
❑ Different scholars define strategic management understood as:
in different ways: “a continous process of making, implementing, and
◼ The process by which the management deliberately evaluating cross-functional decisions that enable an
choose a different set of activities to deliver a organization to achieve its long term organizational
unique mix of value – Michael Porter (1996). goals and/or development of competitive advantage.
2020/2021 GS602: Strategic Management 7 2020/2021 GS602: Strategic Management 8

Page 2
2
 Meaning of Strategic Management Characteristics of Strategic Decisions

❑ Managing strategically means formulating and ❑ From the above description strategic decisions
implementing strategies that allow an can be characterized as follows:
organization to develop and maintain i. Are meant to develop competitive advantage
competitive advantage. for the organization;
❑ Competitive advantage is what sets an ii. Are concerned with long term direction of an
organization apart from rivals. organization;
◼ Having something that competitors don't have. iii. They set the scope (boundaries) of
◼ Doing something that other organizations can't do. organization’s activities;
◼ Doing something better than how other iv. They match resources and activities of an
organizations do. organization to the environment (strategic fit);
2020/2021 GS602: Strategic Management 9 2020/2021 GS602: Strategic Management 10

Characteristics of Strategic Decisions Meaning of Strategic Management

v. Are affected by environmental forces and ❑ Strategic management decisions are different
resource availability; from operating and administrative decisions.
vi. Aim at capitalizing on opportunities based ◼ Operating decisions – relate to day to day activities
upon organization’s resources and capabilities; or operations e.g. resource allocation, scheduling,
vii. Are a reflection of values, expectations, and monitoring and controlling performance aimed
attitudes and beliefs of those who have the at maximizing profitability of the .
most influence in the organization. ◼ Administrative decisions – are concerned with
structuring the firm’s resources so as to create a
viii. Have implications for most functional units in
maximum performance potential e.g. establishing
the organization (multifunctional). authority/responsibility relationships, work flows,
communication, distribution channels, and
acquisition and development of resources.
2020/2021 GS602: Strategic Management 11 2020/2021 GS602: Strategic Management 12

Page 3
3
 Approaches to Strategic Planning Approaches to Strategic Planning
❑ A number of management principles exist to ❑ Views the organization’s positioning as the critical
guide the development, implementation and factor for attaining competitive advantage.
evaluation of strategies. ◼ The I/O perspective is based on the following
major assumptions:
❑ The most relevant and commonly applied are
the, the Industry-Organization (I/O) approach, ❑ The external environment imposes pressures
and constraints on firms and determines
the Resource Based View (RBV) and the strategies that will result in superior returns.
Guerrilla View;
❑ Most firms competing in an industry control
◼ Industry-Organization (I/O) - Assumes that the similar sets of strategically-relevant resources
external environment determines the actions a and thus pursue similar strategies.
firm must take to develop competitive
advantage (Michael Porter, 1985). ❑ Resources used to implement strategies are
highly mobile across firms.
2020/2021 GS602: Strategic Management 13 2020/2021 GS602: Strategic Management 14

Approaches to Strategic Planning Approaches to Strategic Planning

◼ According to I/O, what managers have to do is: ◼ Resource Based View (RBV) – the approach
❑ Study the external environment; that the source of firms’ competitive advantage
lies in their internal resources and capabilities,
❑ Locate an industry with high potential for above
average returns; than its position in the external environment
(Barney, 1995).
❑ Identify the strategy appropriate for the industry
which brings the returns sought; ◼ The model is based on three assumptions:
❑ Develop or acquire assets and skills needed to ❑ A firm is a collection of unique resources and
implement the strategy; capabilities that are the source of firm returns.
❑ Use the firm's developed strengths to implement the ❑ Over time, firms acquire different resources and
strategy. develop different or unique capabilities.
◼ The I/O offers strategic management a systematic ❑ Resources may not be highly mobile across
model for assessing competition within an industry. firms.
2020/2021 GS602: Strategic Management 15 2020/2021 GS602: Strategic Management 16

Page 4
4
 Approaches to Strategic Planning Approaches to Strategic Planning
◼ Internal resources and capabilities lead to a ❑ Determine the firm’s distinctive capabilities - What
competitive advantage when they are: does the firm do better than its competitors?
❑ Valuable – they are a source of greater value, in terms of ❑ Determine the potential of the firm’s resources and
relative costs and benefits, than similar resources in capabilities in terms of a competitive advantage -
competing firms. Ability of a firm to outperform its rivals.
❑ Rare – they are scarce relative to demand for its use or ❑ Locate an industry with opportunities that can be
what it produces (not easily acquired by competitors). exploited by the firm’s resources and capabilities.
❑ Inimitable – difficult or costly to imitate or copy, and ❑ Select a strategy that best allows the firm to utilize
❑ Non-substitutable - other different types of resources its resources and capabilities relative to
cannot be functional substitutes. opportunities in the external environment.
◼ With the RBV managers have to: ◼ The Guerilla View – views competitive advantage
❑ Identify the firm’s resources and study their strengths as only temporary and that it can be sustained
and weaknesses compared with those of competitors. through rapid radical surprises.
2020/2021 GS602: Strategic Management 17 2020/2021 GS602: Strategic Management 18

Approaches to Strategic Planning Approaches to Strategic Planning

◼ Scholars like Henry Mintzberg believe that the ❑ All three views complement one another.
business environment is far from predictable thus
◼ Each brings a unique perspective to understanding
limiting our ability for analysis.
and developing competitive advantage.
❑ According to these scholars, because the business
environment is characterized by continual, radical ❑ I/O view addresses the need to look at the external
and revolutionary changes strategic decisions are environment (emphasizes competitive positioning).
rarely based on optimal rationality . ❑ The RBV considers the need to look inside the firm
❑ For an organization to be successful managers must for unique resources and capabilities that can be
come up with radical strategic actions that keep exploited.
rivals off balance. ❑ The Guerrilla view forces strategic decision makers
❑Exercise: Which one of the approaches is to recognize that the chaotic nature of the external
environment can affect what is considered a
most appropriate and why? competitive advantage.
2020/2021 GS602: Strategic Management 19 2020/2021 GS602: Strategic Management 20

Page 5
5
 Benefits of strategic Management Benefits of strategic Management
❑ Strategic management offers the following v. Provides rationale for management in
benefits to the firm: evaluating competing requests for
investment of capital;
i. Provides the organization with a sense of
purpose and direction; vi. It represents a framework for improved
coordination and control of activities.
ii. It minimizes the effects of adverse conditions
and changes - ensures the future success of the vii. It improves the understanding of a rapidly
organization; changing environment;
iii. It allows for identification, prioritization, and viii. It allows fewer resources and less time to
exploitation of opportunities; be devoted to correcting erroneous or ad
hoc decisions.
iv. It provides an objective view of management
problems; ix. It encourages forward thinking.
2020/2021 GS602: Strategic Management 21 2020/2021 GS602: Strategic Management 22

Benefits of strategic Management The Benefits of strategic Management

❑ If strategic management offers such benefits ◼ Laziness — A manager may be knowledgeable but
why is it that some firms do not engage in does not put forth the effort needed to formulate a
strategic planning? plan due to negligence and irresponsibility.

◼ Cost avoidance – Strategic planning costs the ◼ Content with success — Particularly if a firm is
company in terms of time and financial resources successful, individuals may feel there is no need to
such that organizations may decide to avoid. plan because things are fine as they stand.

◼ Lack of knowledge or experience in strategic ◼ Overconfidence — As managers amass experience,

planning — No training in strategic planning. they may rely less on formalized planning.
However, this can bring demise.
◼ Poor reward structures — Managers may decide
not to undertake strategic planning due to failure ◼ Fear of the unknown — People may be uncertain
of an organization to recognize/appreciate the of their abilities to learn new skills.
contribution to their success.
2020/2021 GS602: Strategic Management 23 2020/2021 GS602: Strategic Management 24

Page 6
6
 Levels of Strategic Planning Levels of strategy
❑ Corporate level strategy consist of the following
❑ Generally, strategic planning occurs at three decisions:
hierarchical levels in an organization:
◼ Determination of business portfolio – what
corporate level, business level and functional industry to enter, how to start new business,
level. which of the existing businesses to continue and
which ones should go out, etc.
◼ Corporate level strategy - specifies the overall
purpose and scope of an organization. ◼ Ways to improve results of the business portfolio
– decisions on how to strengthen the long-term
❑ Concerned with growth and survival of the competitive position and profitability of the
organization. businesses the company is engaged in.
❑ Corporate level strategy is top management game ◼ Means to synergy organizational efforts –
plan for directing and running the organization. exploit opportunities to utilize fully the existing
skills, expertise and infrastructure.
2020/2021 GS602: Strategic Management 25 2020/2021 GS602: Strategic Management 26

Levels of strategy Levels of strategy

◼ Establishing priorities for allocation of resources ◼ Business level strategy - specifies how each
– businesses having high market potential have to strategic business unit (SBU) attempts to achieve its
be allocated more resources than those with lower mission within its chosen area of activity.
market earning potential.
❑ The business level strategy deals with:
◼ Choice of market – domestic, regional, ◼ How the organization intends to compete in each
international for expansion. specific business (area).
◼ Choice of products to be produced or marketed. ◼ The role of each key strategic business unit (SBU) in
contributing to the success of the organization.
◼ Scope and sources of funds.
◼ How resources will be allocated within the strategic
business unit.
◼ For companies that produce one product or offer
one service in one country, corporate strategy and
2020/2021 GS602: Strategic Management 27
business strategy are one and the same.
2020/2021 GS602: Strategic Management 28

Page 7
7
 Levels of strategy Levels of strategy
◼ Functional level strategy - are concerned with
how the various functions of the organization
contribute to the achievement of the corporate Corporate
and business objectives. Strategy
❑ These are action plans for managing the
subordinate activities within a business. SBU 1 SBU 2
❑ It is concerned with developing and nurturing a
Strategy Strategy
distinctive competence to provide a business unit
or company with a competitive advantage. Operations Marketing HR Financial
❑ The functions or operations include Production,
Strategy Strategy Strategy Strategy
Marketing, Finance, Human resources, Research
and Development, etc..
2020/2021 GS602: Strategic Management 29 2020/2021 GS602: Strategic Management 30

Levels of strategy The Strategic Management Process

Corporate ❑ Organizations vary in the processes they use to

formulate their strategic plans.
Business
◼ Complex organizations like the UDSM develop
Influence
more detailed processes as compared to less formal
Function/ organizations.
Operating
◼ SMEs that have limited skills and time thus exhibit
more basic planning features.
▪ Corporate - what business?
❑ Despite the differences in details and the degree
▪ Business - how to compete in each business
of formalization the basic components are very
▪ Functional - in support of business level
similar.
2020/2021 GS602: Strategic Management 32

Page 8
8
 The Strategic Management Process The Strategic Management Process
❑ Strategic management involves the following ❑ Analyzing the External Environment -
generic managerial tasks and responsibilities: Managers must monitor and scan the general
environment and the industry environment to
◼ Strategic analysis is the starting point identify opportunities and challenges.
consisting of careful analysis of the firm’s ❑ Assessing the Internal Environment - Analyzing
overarching goals and a thorough analysis of its the strengths and relationships among the
business environment. activities that constitute a firm’s value chain
❑ Analyzing Organizational Goals and Objectives (e.g., operations, marketing, and human
–Developing a hierarchy of goals that range resource management) to uncover potential
from broad statements of intent to specific, sources of competitive advantage for the firm;
measurable strategic objectives (firm’s vision, ◼ Strategy formulation - developing strategies at
mission, and strategic objectives) that form the several levels such as business-level strategy,
bases for competitive advantage; corporate-level and international strategies.
2020/2021 GS602: Strategic Management 33 2020/2021 GS602: Strategic Management 34

The Strategic Management Process The Strategic Management Process

❑ Formulating Business-Level Strategy – ❑ Formulating International Strategy - deciding
Involves seeking answers to the question of how on the most appropriate entry strategy and how
a firm can compete and outperform its rivals and to attain competitive advantages in international
how can achieve and sustain competitive markets;
advantages. ◼ Implementing strategies - involves establishing
◼ Answers may include cost leadership, effective means to coordinate and integrate
differentiation or focusing on a narrow market activities within the firm as well as with its
segment;
suppliers, customers, and alliance partners as
❑ Formulating Corporate-Level Strategy – well as providing leadership to ensure that the
Addressing the questions of what business(s) organization is committed to excellence and
should we compete in and how can we manage ethical behavior;
this portfolio to create synergies among the ❑ Promoting continuous improvement through learning
businesses; and taking entrepreneurial actions.
2020/2021 GS602: Strategic Management 35 2020/2021 GS602: Strategic Management 36

Page 9
9
The Strategic Management Process The Strategic Management Process
❑ Creating Effective Organizational Designs -
making organizational structures and designs
Strategic Strategic Strategic
consistent with the adopted strategy. Analysis Formulation Implementation

❑ Providing effective leadership - developing a

workforce that is committed to excellence and
ethical behavior.
Formulating Creating
❑ Strategic Control and Corporate Governance - Analyzing Goals
& Objectives
Corporate Organizational
Designs
Strategies
organizations must continually evaluate the way
strategic activities are carried out, monitor and Analyzing the Formulating
Business
Strategic
Leadership
External
scan the environment and respond to threats and Environment Strategies Excellence

opportunities and ensure proper balance of

Analyzing the Formulating Strategic
rewards and incentives. Internal International Monitoring &
Environment Strategies Control
2020/2021 GS602: Strategic Management 37
2020/2021 GS602: Strategic Management 38

Take Home Exercise

◼Briefly explain why strategic

management/ planning has
become an inescapable
management activity in the
contemporary business world.

2020/2021 GS602: Strategic Management 39

Page 10
10