Strategic Management

Dr. Hamed Hassaan-PhD

Professor of Strategic Management

Weller IBS, Paris-France
 Chapter one
Basic Concepts
 Introduction
• Business World of today is mainly characterized by:
Continuous Fast Changing (Dynamic) Environ.
High Uncertainty of the Environments.
Globalization of the Market.
 How does a company become Successful and
stay Successful for long in this dynamic uncertain
global situation?
 Certainly, not by the traditional way of management
what so ever but through ….
Strategic Management Process; why?
 Introduction…

• Strategic Management becomes

now more essential to both Small
and Large firms for Effective and
Efficient management, to be
Successful and Stay Successful
not only in the today’s business, but
in tomorrow’s as well and For Long.
 Background
Case 1; IBM
During1970 -1980, IBM dominated computer industry
worldwide for both mainframes and PCs.
By 1990s New Comers; HP, Dell, Gateway, Compaq
were invading market with high quality & cheaper price.
By 1993, IBM lost $14 B. & its stock price dropped.
What Strategic Management Process IBM have to follow
to survive?.(Turn around-Retrenchment Strategy)
From 1994-2000, IBM transformed itself from computer
maker to service provider and dominating this market.
By 2000, its global service unit grew from 0- $ 30B.
By 2004, it divested PC business to Lenovo.
 Background…
Case 2; Kodak
• Kodak; a Photographic US co., Est. since 1892
2007 2008
• Total Assets 13.659 $M 9.179
• Total Equity 3.029 961
• Revenue 10.301 9.416
• Net Income 676 (711)
New Technology; Digital Tech., while Kodak
had a wrong concept that consumers would be
slow to adopt it. Its core business became
obsolete. Huge investment required to change.
 Background…
Conclusion:
Giant Corporations would be out of business, i
it can’t timely manage the change.
In today’s business, as we are living in uncertain
and fast dynamic environments (more than in any
preceding era) the only constant is change.
All organizations must be capable of indentifying
and adapting to change to survive (L&S), How?
Strategic Management is aimed at allowing
organizations to adapt to change over long run to
be successful and stay successful.
 Strategic Management
 At the present time and in our today’s business:
It is not the strongest Species that survive
Nor the most intelligent…
But the one most Responsive to Change
 Strategic Management will learn us How to
timely manage the changes.
 Conclusion: St. M. is the Long run Management
of the corporation effectively and efficiently to be
successful and to stay successful in an uncertain
dynamic environments.
 Definitions
What is Management?
It is a Decision Making Process of
Planning,
Organizing,
Leading,
Controlling and
Allocating the Scarce Resources
to achieve the Organization Goals.
The scarce resources are: people, money and time.
Management is the managing of peoples to
achieve certain goals.
 Definitions…
 What is Strategic Management? and
 What is its Benefits and Value?
What is Management? and
What is Strategy?
• Management: is a Decision Making
Process to achieve the corporation goal.
• Strategy is a long run plan to achieve a
certain goal.
 Definition
 Strategic Management
is a set of Managerial Decisions and
Actions that determines the Long-Run
Performance of a Corporation.
Strategic Management integrates all the
business modules (Management, Marketing,
Accounting, Finance, HRM, Operation &
Logistics, R&D, ISM….) to develop strategies
that meet the Corporation Mission and
Objectives.
Benefits of Strategic Management

1-It supports Top Managements to manage their

companies:
• Effectively and Efficiently
• To become successful and to stay successful
• For Long
• Managing the change; Managing the
dynamic uncertain surrounding environment-
e.g. New comer and/or new technology.
Benefits of Strategic Management

2-It helps corporation to fit between the

surrounding environment and its strategy,
structure & resources effectively and efficiently.
3-Strategic Management also, gives:
Clearer sense of strategic vision for the firm.
Sharper focus on what is strategically
important.
Improved understanding of a rapidly changing
environment (IBM & Kodak cases).
 It begins by A few simple
questions:
It can begin by a few simple questions:
1. Where is the organization now ? (not where do we
hope it is).
2. Where will the organization be in 1 year ? 2
years ? 5 years ? 10 years, … If No changes are
made?
Are the answers acceptable ?
3. If the answers are not acceptable; what specific
actions should management undertake ?
What are the risks and payoffs
involved ?
 Basic Model of Strategic Manag.

 It consists of four basic elements:

1- Environmental Scanning (analyzing, monitoring
and evaluating; SWOT analysis).
2- Strategy Formulation (Long range plans;
defining mission, specifying objectives,
developing strategy and setting policy).
3- Strategy Implementation.
4- Evaluation and Control.
 Basic Elements of the Strategic
Management Process

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control
Strategic Management Model
Environmental Strategy Strategy Evaluation
Scanning Formulation Implementation and Control

External
Mission

Societal Objectives
Environment: Reason for
General Forces Existence Strategies
What
Task Results to
Policies
Environment: accomplish Plan to
Industry Analysis by When achieve the
mission & Programs
objectives Broad
guidelines Budgets
for decision Activities
Internal
making needed to Procedures
accomplish Cost of the
Structure:
a plan programs
Chain of Performance
Sequence of
command
steps needed
to do the job
Culture:
Beliefs,
Actual Results
expectations,
values

Resources:
Assets, skills,
competences
Knowledge
 1- Environmental Scanning

Its purpose is to identify the strategic factors

(internal & external) that will determine the
future of the corporation.
The simplest way to conduct Environmental
Scanning is through SWOT analysis.
SWOT is an acronym used to describe those
particular Strengths, Weaknesses (internal),
Opportunities, and Threats (external) that are
Strategic Factors for a specific company.
 A-The External Environment

Consists of variables (Opportunities and

Threats) that are outside the organization.
These variables form the context within which
the corporation exists.
They are the General Forces and Trends
within the overall Societal Environment
(Politico-Legal, Economical, Socio-cultural and
Technological; PEST Analysis) and
Task Environment which form its Industry.
 B-The Internal Environment

Consists of variables (Strengths and

Weaknesses) that are within the organization.
These variables form the context in which
work is done.
They include the Corporation's
1-Structure,
2-Culture, and
3-Resources.
Environmental Variables
Societal
Environment

Sociocultural Task Economic

Forces Environment Forces
(Industry)

Shareholders

Governments Suppliers

Special Internal Employees/

Interest Groups Environment Labor Unions

Structure
Customers Culture Competitors
Resources
Creditors Trade Associations

Communities

Political-Legal Technological
Forces Forces
 2- Strategy Formulation

• It is the development of long-range plans

for the effective and efficient
management of the External Opportunities
& Threats, in light of Internal corporate
Strengths & Weaknesses.
How to take advantage of the
Opportunity utilizing your Strengths while
avoiding Threats and overcoming your
Weakness.
 2- Strategy Formulation

It includes:
A) Defining the corporate Mission &
Vision.
B) Specifying achievable Objectives,
C) Developing Strategies and
D) Setting Policy guidelines.
 A) Mission and Vision Statement
• The Mission answers the question "What is our
business?" while The Vision statement answers
the question "What do we want to become?"
• Developing a clear business mission and vision is
the "first responsibility of strategists ."
• The vision and mission statements provide
direction for all planning activities and promotes a
sense of shared expectations in employees and
communicates a public image to the customers.
• They are essential for formulating, implementing,
and evaluating strategy.
 Mission and Vision Statement...

• Mission is the most important step in strategy

formulation.
• Mission is the purpose or reason for the
organization's existence. It tells what the
company is providing to the society either a
service or a product.
• It defines the fundamental, unique purpose that
sets a company apart from the competitors and
identifies the scope of the company's operations.
 Mission and Vision Statement…

• It may be define in a narrow scope or broad scope

- Medical Equip./Health care & Oil & Gas/Energy.
- Railroad/Transportation & Teleph./Communication.
Communication
• It may include the company’s value and philosophy.
1- Maytag: To improve the quality of home life by
designing, building, marketing, and servicing the
best appliances in the world.
2- Dell: To be the most successful computer company
in the world at delivering the best customer
experience at the market we serve.
 Mission and Vision Statement
• A good Mission statement is:
• 1- Describes an organization's purpose, customers,
products or services, markets, philosophy & technology.

• 2- Define what the organization is and what the

organization aspires to be.
• 3- Be limited enough to exclude some ventures and
broad enough to allow for future activities.
• 4- Distinguish a given organization from all others.
• 5- Serve as a framework for evaluating both Current
and Prospective Activities, and
• 6- Be stated in terms sufficiently clear to be widely
 B) Objectives
• Objectives are the end results of planned activity.
They state what results to be accomplished by
when. So, it should be quantified and achievable
Goal is an open-ended statement of what one wants
to accomplish with no quantification of what is to be
achieved and no time criteria for completion.
• Objective is a quantified time framed Goal.
“increased profitability" …is a goal.
"increase profits by 10% over last year.“ …is an
objective.
Areas for goals and objectives:
• Profitability (net profits).
• Efficiency (low costs, etc.).
• Growth (increase in total assets, sales, etc.).
• Shareholder wealth (dividends plus stock price
appreciation).
• Utilization of resources (ROI).
• Reputation (being considered a "top" firm).
• Contributions to employees (employment security,
wages).
• Contributions to society (taxes paid, charities).
• Market leadership ( > 40% market share).
• Technological leadership (innovations).
• Survival (avoiding bankruptcy).
 C) Strategies

• A strategy of a corporation forms a

comprehensive master plan stating how the
corporation will achieve its mission and
objectives. It maximizes competitive
advantage and minimizes competitive
disadvantage.
• The typical business firm usually considers
three types of strategy:
Corporate, Business, and
Functional.
1. Corporate strategy

• Describes a company's overall direction in

terms of its general attitude toward growth
and the management of its various businesses
and product lines.
• Corporate strategies typically fit within the
three main categories of:
– Growth,
– Stability and
– Retrenchment.
 2. Business strategy

• Occurs at the business unit or product level,

and it emphasizes improvement of the
competitive position of a corporation's
products or services in the specific industry or
market segment served by that business unit.
• Business strategies may fit within the two
overall categories of :
– Competitive or
– Cooperative Strategies.
 3. Functional Strategy
• The approach taken by a functional;department
(Manufacturing, Market., Fina.) area to achieve
corporate and business unit objectives and
strategies by maximizing resource productivity.
• It is concerned with developing a distinctive
competence to provide a company or business
unit with a competitive advantage.
- Examples of R & D functional strategies are
technological Followership (imitate the products
of other companies) and technological
Leadership (pioneer an innovation).
Hierarchy of Strategy

Corporate Strategy
Business
(Division Level)
Strategy
Functional
Strategy
 D) Policies:

• A policy is a broad guideline for decision

making that links the formulation of strategy
with its implementation.
• Companies use policies to make sure that
employees throughout the firm make decisions
and take actions that support the corporation's
mission, objectives, and strategies.
• Polices supporting Strategies-Objectives:
 Development of Policies…
• Polices supporting Strategies-Objectives:
• Maytag: will not approve any cost reduction
proposal, if it reduces quality.
• 3M: Researchers should spend 15% of their
time working on something other than their
primary projects.
• GE: Must be No.1 or 2 whenever it competes.
• Intel: Cannibalizes its own product line with
better products before competitor does so.
• "The customer is always right “
3- Strategy Implementation

• Strategy implementation is the process by

which strategies and policies are put into
action through the development of:
– Programs,
– Budgets, and
– Procedures.
Programs:
• A program is a statement of the activities or
steps needed to accomplish a single -use
plan.

• Budgets: A
budget is a statement of a corporation's
programs in terms of Money.
Procedures:

• Procedures: are a system of sequential steps

or techniques needed to do the job or task.
• It describes in details:
How a particular task or job is to be done,
By whom and
Within a time frame; (Action Plan).
• Standard Operating Procedures – SOP.
4- Evaluation and Control

• The process in which the end results of

corporate activities (the performance) are
monitored and evaluated, so that
Actual performance can be compared
with Desired performance.
Strategic Decision-Making Process

• As organizations grow larger and more

complex with more uncertain environments,
decisions become increasingly complicated
and difficult to make.
• It is 8 steps process.
Strategic Decision-Making Process

1-Evaluate Current Performance

A- Return on investment (ROI), profitability, …

B- The current mission, objectives, strategies, and policies.

2-Review Corporate Governance
The performance of the firm's board of directors and top
management.
3-Scan and Assess the Ext. Environment (EFAS)
To determine the Ex. Strategic Factors (Opportunities &
Threats) by scanning Societal and Task Environments.
Strategic Decision-Making Process
4-Scan and Assess the Inter. Environment (IFAS)
To determine the Internal Strategic Factors (Strengths and
Weaknesses) from scanning Structure, Culture and Resources.
5-Analyze Strategic Factors (SFAS)
• Summarize the Strategic Factors that affecting its current and
future performance .
• Review and revise the corporate mission and objectives as
necessary.
6-Generate, Evaluate, and Select the Best Alternative
Strategy
- TOWS Matrix and SPACE Matrix.
Strategic Decision-Making Process

7-Implement Selected Strategies

Via programs, budgets, and procedures.
8-Evaluate and Control Implemented Strategies
Via feedback systems and control of activities to ensure
their minimum deviation from plans.
This rational approach to Strategic Decision
Making Process has been used successfully.
It is made operational through the Strategic
Audit, a complete Case Analysis Methodology.
Strategic Decision-Making Process
3(a) 3(b)

Scan and Analyze

Asses External
External Factors:
Environment: Opportun-
Societal ities
Task Threats

1(a) 1(b) 2 5(a) 5(b) 6(a) 6(b) 7 8

Evaluate Examine and Review Select
Current evaluate the Corporate Strategic Review and Implement Evaluate and
Performance current: Governance: Factors Revise as Generate and Select and Strategies: Control.
Result Mission Board of (SOWT) in Necessary: Evaluate Recommend Programs.
Objectives Directors Light of Mission Strategic Best Budgets.
Strategies Top Man- Current Objectives Alternatives Alternative Procedures.
Policies agement Situation

4(a) 4(b)

Scan and
Assess Analyze
Internal Internal
Environment: Factors:
Structure Strengths
Culture Weaknesses
Resources

Environmental Scanning and Strategy Evaluation

Strategy Formulation: Implementation: And Control:
Steps 1-6 Step 7 Step 8
Thank You
 Decision Making Process
Identify the
Objective, Target,
Problem

Identify the possible

Alternative Solutions

Consider Consider
Select the best
Input Outside
Alternative
constrains constrains

Implement the
Decision