Strategic Management and Total Quality Management (RMEC 412)

AN OVERVIEW

INTRODUCTION

Given the many challenges and opportunities in the global marketplace,

today's managers must do more than set long-term strategies and hope for the best.
They must go beyond what some have called "incremental management," whereby
they view their job as making a series of small, minor changes to improve the
efficiency of their firm's operations. Rather than seeing their role as merely custodians
of the status quo, today's leaders must be proactive, anticipate change, and continually
refine and, when necessary, make dramatic changes to their strategies. The strategic
management of the organization must become both a process and a way of thinking
throughout the organization. This module will further discuss the concept of Strategic
Management focusing on its definition, key attributes and processes.

LEARNING OUTCOMES

At the end of this module, you should be able to:

1. Define strategic management and its four key attributes.
2. Understands the strategic management process and its three interrelated and
principal activities.

LEARNING RESOURCES

Dess, Eisner, Lee, McNamara, (2021) Strategic Management: Text and Cases,
McGraw- Hill Education, New York, USA.

LEARNING INPUTS

LESSON 1
WHAT IS STRATEGIC MANAGEMENT?
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 that go to the heart of the field of strategic management.

First, the strategic management of an organization entails three ongoing processes:

analyses, decisions, and actions. Strategic management is concerned with the analysis
of strategic goals (vision, mission, and strategic objectives) along with the analysis of
the internal and external environments of the organization. Next, leaders must make
strategic decisions. These decisions, broadly speaking, address two basic questions:
What industries should we compete in? How should we compete in those industries?
These questions also often involve an organization's domestic and international
operations. And last are the actions that must be taken. Decisions are of little use, of
course, unless they are acted on. Firms must take the necessary actions to implement
their strategies. This requires leaders to allocate the necessary resources and to design
the organization to bring the intended strategies to reality.

Second, the essence of strategic management is the study of why some firms
outperform others. Thus, managers need to determine how a firm is to compete so that
it can obtain advantages that are sustainable over a lengthy period of time. That means
focusing on two fundamental questions:

 How should we compete in order to create competitive advantages in the

marketplace? Managers need to determine if the firm should position itself as the
low-cost producer or develop products and services that are unique and will
enable the firm to charge premium prices. Or should they do some combination
of both?

 How can we create competitive advantages in the marketplace that are unique,
valuable, and difficult for rivals to copy or substitute? That is, managers need to
make such advantages sustainable, instead of temporary.

Sustainable competitive advantage cannot be achieved through operational

effectiveness alone. The popular management innovations of the last two decades-
total quality, just-in time, benchmarking, business process reengineering, outsourcing-
are all about operational effectiveness. Operational effectiveness means performing
similar activities better than rivals. Each of these innovations is important, but none
lead to sustainable competitive advantage because everyone is doing them.

LESSON 2

KEY ATTRIBUTES OF STRATEGIC MANAGEMENT

4 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

First, strategic Management is directed toward overall organizational goals and

objectives. That is, effort must be directed at what is best for the total organization,
not just a single functional area. Some authors have referred to this perspective as
"organizational versus individual rationality." That is, what might look "rational" or
most appropriate for one functional area, such as operations, may not be in the best
interest of the overall firm. For example, operations may decide to schedule long
production runs of similar products in order to lower unit cost. However, the
standardized output may be counter to what the marketing department needs in order
to appeal to a sophisticated and demanding target market. Similarly, research and
development may "overengineer" the product in order to develop a far superior
offering, but the design may make the product so expensive that market demand is
minimal. Therefore, you will look strategic issues from the perspective of the
organization rather than that of the functional area(s) in which you have had the most
training and experience.
 Second, strategic management includes multiple stakeholders in decision
making.Managers must incorporate the demands of many stakeholders when making
decision.Stakeholders are those individuals, groups, and organizations who have a
"stake" in thesuccess of the organization, including owners (shareholders in a publicly
heldcorporation), employees, customers, suppliers, the community at large, and so on.

Managers will not be successful if they continually focus on a single stakeholder. For
example, if the overwhelming emphasis is on generating profits for the owners,
employees may become alienated, customer service may suffer, and the suppliers may
become resentful of continual demands for pricing concessions. As we will see,
however, many organizations have been able to satisfy multiple stakeholder needs.
simultaneously. For example, financial performance may actually be greater because
employees who are satisfied with their jobs make a greater effort to enhance customer
satisfaction, thus leading to higher profits.

Third, Strategic management requires incorporating both short-term and long-term

perspective. Peter Senge, a leading strategic management author at the Massachusetts.
Institute of Technology, has referred to this need as a "creative tension." That is,
managers must maintain both a vision for the future of the organization as well as a
focus on its present operating needs. However, as one descends the hierarchy of the
organization from extends to be a narrower, short-term perspective. Nonetheless, all
managers throughout the organization must maintain a strategic management
perspective and assess how their actions impact the overall attainment of
organizational objectives. For example, laying off several valuable employees may
help to cut costs and improve profits in the short term but the long-term implications
for employee morale and customer relationships may suffer-leading to subsequent
performance declines.

Fourth, strategic management involves the recognition of trade-offs between

effectiveness and efficiency. Closely related to the third point above, this recognition
means being aware of the need for organizations to strive to act effectively and
efficiently. Some authors have referred to this as the difference between "doing the
right thing" (effectiveness) and "doing things right" (efficiency). While managers
must allocate and use resources wisely, they must still direct their efforts toward the
attainment of overall organizational objectives. Managers who are totally focused on
meeting short-term budgets and targets may fail to attain the broader goals of the
organization.

LESSON 3

THE STRATEGIC MANAGEMENT PROCESS

A strategic management process is a documented set of steps that you'll go through to

turn the concept of strategic management into reality for your organization. Three
ongoing processes that are central to strategic management are analyses, decisions and
actions. These three processes, referred to as strategy analysis, formulation and
implementation, are highly interdependent.
A. Strategy Analysis

Strategy analysis may be looked upon as the starting point of the strategic
management process. It consists of the "advance work" that must be done in order to
effectively formulate and implement strategies. Many strategies fail because managers
may want to formulate and implement strategies without a careful analysis of the
overarching goals of the organization and without a thorough analysis of its external
and internal environments.

a. Analyzing Organizational Goals and Objectives. A firm's vision, mission, and

strategic objectives form a hierarchy of goals that range from broad statements of
intent and bases for competitive advantage to specific, measurable strategic
objectives.

b. Analyzing the External Environment of the Firm. Managers must monitor and
scan the environment as well as analyze competitors. Two. frameworks are
provided:

1. The general environment consists of several elements, such as demographic

and economic segments, and

2. the industry environment consists of competitors and other organizations

that may threaten the success of a firm's products and services.

c. Assessing the Internal Environment of the Firm. Analyzing the strengths and
relationships among the activities that constitute a firm's value chain (e.g.,
operations, marketing and sales, and human resource management) can be a
means of uncovering potential sources of competitive advantage for the firm.

d. Assessing a Firm's Intellectual Assets. The knowledge worker and a firm's other
intellectual assets (e.g., patents) are important drivers of competitive advantages
and wealth creation. We also assess how well the organization creates networks
and relationships as well as how technology can enhance collaboration among
employees and provide a means of accumulating and storing knowledge.

B. Strategy Formulation

Strategy formulation is developed at several levels. First, business-level strategy

addresses the issue of how to compete in a given business to attain competitive
advantage. Second, corporate-level strategy focuses on two issues: (a) what
businesses to compete in and (b) how businesses can be managed to achieve synergy;
that is, they create more value by working together than by operating as standalone
businesses. Third, a firm must develop international strategies as it ventures beyond
its national boundaries. Fourth, managers must formulate effective entrepreneurial
initiatives.

a. Formulating Business-Level Strategy. The question of how firms compete and

outperform their rivals and how they achieve and sustain competitive advantages goes
to the heart of strategic management. Successful firms strive to develop bases for
competitive advantage, which can be achieved through cost leadership and/or
differentiation as well as by focusing on a narrow or industrywide market segment.

b. Formulating Corporate-Level Strategy. Corporate-level strategy addresses a firm's

portfolio (or group) of businesses. It asks: (1) What business (or businesses) should
we compete in? and (2) How can we manage this portfolio of businesses to create
synergies among the businesses?

c. Formulating International Strategy. When firms enter foreign markets, they face
both opportunities and pitfalls. Managers must decide not only on the most
appropriate entry strategy but also how they will go about attaining competitive
advantages in international markets..

C. Strategy Implementation

Strategy implementation involves ensuring proper strategic controls and

organizational designs, which includes establishing effective means to coordinate and
integrate activities within the firm as well as with its suppliers, customers, and
alliance partners. Leadership plays a central role to ensure that the organization is
committed to excellence and ethical behavior. It also promotes learning and
continuous improvement and acts entrepreneurially in creating new opportunities.

a. Strategic Control and Corporate Governance. Firms must exercise two types of
strategic control. First, informational control requires that organizations
continually monitor and scan the environment and respond to threats and
opportunities. Second, behavioral control involves the proper balance of rewards
and incentives as well as cultures and boundaries (or constraints). Further,
successful firms (those that are incorporated) practice effective corporate
governance.

b. Creating Effective Organizational Designs. Firms must have organizational

structures and designs that are consistent with their strategy. In today's rapidly
changing competitive environments, firms must ensure that their organizational
boundaries-those internal to the firm and external-are more flexible and
permeable.41 Often, organizations develop strategic alliances to capitalize on the
capabilities of other organizations.

c. Creating a Learning Organization and an Ethical Organization. Effective. leaders

set a direction, design the organization, and develop an organization that is
committed to excellence and ethical behavior. In addition, given rapid and
unpredictable change, leaders must create a "learning organization" so that the
entire organization can benefit from individual and collective talents.

d. Fostering Corporate Entrepreneurship. Firms must continually improve and grow

as well as find new ways to renew their organizations. Corporate
entrepreneurship and innovation provide firms with new opportunities, and
strategies should be formulated that enhance a firm's innovative capacity.
 LESSON 4
ENSURING COHERENCE IN STRATEGIC DIRECTION

Organizations express priorities best through stated goals and objectives that form a
hierarchy of goals, which includes the firm's vision, mission, and strategic objectives.
What visions may lack in specificity, they make up for in their ability to evoke
powerful and compelling mental images. On the other hand, strategic objectives tend
to be more specific and provide a more direct means of determining if the
organization is moving toward broader, overall goals. Visions, as one would expect,
also have longer time horizons than either mission statements or strategic objectives.

Long Time
Horizon
General
Vision

Mission
Statement
Specific
Strategic Short Time
Objectives Horizon

 Organizational Vision

A vision is a goal that is "massively inspiring, overarching, and long term."87 It

represents a destination that is driven by and evokes passion. For example, Wendy
Kopp, founder of Teach for America, notes that her vision for the organization, which
strives to improve the quality of inner-city schools, draws many applicants: "We're
looking for people who are magnetized to this notion, this vision, that one day all
children in our nation should have the opportunity to attain an excellent. education."

Leaders must develop and implement a vision. A vision may or may not succeed; it
depends on whether or not everything else happens according to an organization's
strategy.

 Mission Statements

A company's mission statement differs from its vision in that it encompasses both the
purpose of the company and the basis of competition and competitive advantage.

Effective mission statements incorporate the concept of stakeholder management,

suggesting that organizations must respond to multiple constituencies. Customers,
employees, suppliers, and owners are the primary stakeholders, but others may also
play an important role. Mission statements also have the greatest impact when they
reflect an organization's enduring, overarching strategic priorities, and competitive
positioning. Mission statements also can vary in length and specificity.
 Strategic Objectives

Strategic objectives are used to operationalize the mission statement.96 That is, they
help to provide guidance on how the organization can fulfill or move toward the
"higher goals" in the goal hierarchy-the mission and vision. Thus, they are more.
specific and cover a more well-defined time frame. Setting objectives demands a
yardstick to measure the fulfillment of the objectives.