Afework Getachew

(Asst. Professor )
PhD; MBA; BA-Management

Oct, 2016
An Overview of Strategic
Management
1. Definitions of Strategy
2. Essence of strategic management
3. Levels of Strategy (briefly)
4. Characteristics of Strategic decisions
5. Benefits and challenges/pitfalls of Strategic
Management
6. Strategic Management Process Model
 Define strategy and strategic management;
 Describe the different levels of strategy and their
importance;
 Discuss the nature and values of strategic
management;
 Explain the strategic management process
 Identify benefits of strategic management
 In ancient Greek, ‘stratos’ was the term for the
army and so in military terms, ‘strategy’ referred
to ‘the act of the general’.
 So, the origins of ‘strategy’ – the ‘art of the
general’ – comes from the military arena – from
China came “The Art of War” by Sun Tzu, from
Prussia came “On War’ by Carl von Clausewitz.

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 Strategy is formulation of future plan of action,
usually understood as being undertaken by
senior management at a high level of leadership
and management.

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A strategy is
“The art of war*, especially the planning of
movements of troops and ships etc., into
favorable positions; plan of action or policy in
business or politics etc.”
(Oxford Pocket Dictionary)
*You can refer to The Art of War by Sun Tzu

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 Hoferand Schendel define it as “the
mediating force or ‘match’ between
the organization and the
environment.” (Hofer and Schendel
1979)

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 Strategic Management – Defined
 Art & science of formulating, implementing,
and evaluating, cross-functional decisions that
enable an organization to achieve its objectives
 an important plan to deploy the available
resources in a manner to win the ever increasing
competition
 plan to integrate the organization’s major goals,
policies, and action sequences into a cohesive
whole
 To exploit and create new and different opportunities for
tomorrow
 In essence, the strategic plan is a company’s game
plan
 vector … synergy …focus … Organization
 Strategy formulation

 Strategy implementation

 Strategy evaluation
Strategy Formulation Components

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Issues in Strategy
Formulation

Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation
 Developing a strategy-supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts
 Preparing budgets
 Developing and utilizing information systems
 Linking employee compensation to organizational
performance
Issues in Strategy Implementation

Action Stage of Strategic

Management

Mobilization of employees
& managers
Most difficult stage
Interpersonal skills critical
Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

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 Integrating Intuition & Analysis
The strategic management process attempts to organize
quantitative and qualitative information under conditions
of uncertainty
Intuition is based on:
◦ Past experiences
◦ Judgment
◦ Feelings

Intuition is useful for decision making in

conditions of:
 Great uncertainty

 Little precedent
 Highly interrelated variables

 Several plausible alternatives

Cont’d …

Intuition & Judgment

Involve management at all levels

Influence all analyses

 Competitive advantage
 Strategists
 Vision and mission statements
 External opportunities and threats
 Internal strengths and weaknesses
 Long-term objectives
 Strategies
 Annual objectives
 Policies
Figure 1-1 Basic elements of strategic management process
Figure 1-2
strategic
managem
ent model
Benefits of Strategic Management
 Nonfinancial Benefits
◦ Enhanced awareness of threats
◦ Improved understanding of competitors’ strategies
◦ Increased employee productivity
◦ Reduced resistance to change
◦ Clearer understanding of performance-reward
relationship
◦ Enhanced problem-prevention capabilities
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success
 Fear of failure
 Overconfidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion
 A people process more than a paper process
 A learning process
 Words supported by numbers
 Simple and non-routine
 Varying assignments, team membership, meeting
formats, and planning calendars
 Challenging assumptions underlying corporate strategy
 Welcomes bad news
 Requires open-mindedness and a spirit of inquiry
 Is not a bureaucratic mechanism
 Is not ritualistic or stilted
 Is not too formal, predictable, or rigid
 Does not contain jargon or arcane language
 Is not a formal system for control
 Does not disregard qualitative information
 Is not controlled by “technicians”
 Does not pursue too many strategies at once
 Continually strengthens the “good ethics is good
business” policy
 Strategic audit
◦ provides a checklist of questions, by area or issue, that
enables a systematic analysis to be made of various
corporate functions and activities
◦ Beginning with an evaluation of current performance,
the audit continues with environmental scanning,
strategy formulation, and strategy implementation, and
it concludes with evaluation and control.
◦ Used as a diagnostic tool to pinpoint corporate wide
problem areas and to highlight organizational
strengths and weaknesses.
Thank You