Chapter # 1

An Overview of
Strategic Management

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 Strategy…!
A strategy is an integrated
plan of action designed to
achieve a particular goal.
 The word strategy has
military connotations,
because it is derives from the
Greek word for army
("leader or commander of
an army, general“).
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 Strategy is different from tactic. In
military terms, tactic is concerned
with the conduct of an engagement
while strategy is concerned with
how different engagements are
linked.
 Tactics are the actual means used
to gain an objective, while strategy
is the overall campaign plan,
which may involve complex
operational patterns, activity, and
decision-making.

 a method of employing forces in

combat 3
 Strategic Management
 Strategic or Institutional
management is comprehensive
and ongoing management
process aimed at the conduct of
drafting, implementing and
evaluating cross-functional
decisions that will enable an
organization to achieve its
objectives

 Art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an
organization to achieve its objectives. 4
  Strategic management is a field that
deals with the major intended and
emergent initiatives taken by general
managers on behalf of owners,
involving utilization of resources, to
enhance the performance of firms in
their external environments.

It entails specifying the organization's mission, vision

and objectives, developing policies and plans, often in
terms of projects and programs, which are designed to
achieve these objectives, and then allocating resources
to implement the policies and plans, projects and
programs. 5
 SM Integrates Intuition & Analysis
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 6
 Strategic Management Achieves
Organizational Success
 Process of Integrating:
 Marketing
 HRM
 Finance/Accounting
 Production/Operations
 R&D
 Computer information
systems
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General Terminology
“Strategic Management”
Synonymous with
“Strategic Planning”

• Strategic management
 Used more often in academia

• Strategic planning
 Used more often in the business world

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Specifically
 Strategic management
 Refers to:
 Strategy formulation
 Strategy implementation
 Strategy evaluation

 Strategic planning
 Refers to:
 Strategy formulation

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Strategic-Management Process

Strategy Formulation

Strategy Implementation

Strategy Evaluation
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 Strategic-Management Process
 Strategy formulation: the set of processes involved
in creating or determining the strategies of the
organization; it focuses on the content of strategies.
 Strategy implementation: the methods by which
strategies are operational or executed within the
organization; it focuses on the processes through
which strategies are achieved.
 Strategy evaluation: Process by which strategies
are evaluated & rectified
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Strategy Formulation

Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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Strategy Implementation

Annual Objectives

Policies

Motivate Employees

Resource Allocation

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Strategy Evaluation

Review
External & Internal

Measure Performance

Corrective Action

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 Strategic Planning vs. Long-range
Planning
 Long-range planning is
considered to mean the  Strategic planning assumes
development of a plan for that an organization must
accomplishing a goal or set be responsive to a dynamic,
of goals over a period of changing environment
several years, with the
assumption that current
knowledge about future
conditions is sufficiently
reliable to ensure the plan's
reliability over the duration
of its implementation. 15
 Adaptation to Change
Organizations must monitor events
 On-going process
 Internal and external events
 Timely changes
Rate and magnitude of changes
 Increasing dramatically
 E-commerce

 Demographics

 Technology

 Merger-mania
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 Importance of Strategic Management
1. Provides a sense of long-term direction for
organisation members.
2. Enhanced awareness of SWOT
3. Understanding of competitors’ strategies
4. Increased employee productivity & involvement
5. Reduced resistance to change
6. Clear performance-reward relationships
7. Order and discipline to the firm
8. View change as opportunity
9. Proactive vs. Reactive
10. More profitable and successful
11. Formulate better strategies (Systematic, logical, and
rational approach) 17
Importance of Strategic Management

Direction for
Competitive Advantage
the Organisation

Builds
Supports Innovation
Commitment

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 Why Some Firms Do No Strategic Planning
 Poor reward structures-
 Fire-fighting- Embroiled in crises management
 Waste of time-
 Too expensive-
 Laziness-
 Content with success- We are successful so what's need of SM
 Fear of failure-
 Overconfidence on experience-
 Prior bad experience
 Self-interest- viewing new plans as threat
 Fear of the unknown- uncertainty regarding new plans,
system, new role, new skills
 Suspicion- distrust upon management 19
 Comprehensive Strategic Management Model

External
Audit

Generate, Measure &

Vision Implement Implement
Long-Term Evaluate, Evaluate
& Strategies: Strategies:
Objectives Select Performance
Mission Mgmt Issues Marketing,
Strategies
Fin/Acct,
R&D, CIS

Internal
Audit

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 Strategic Management Terms
 Competitive Advantage
 Anything that a firm does specially well as compared to rival
firms.
 A firm can sustain CA for only a certain period due to rival firms
imitating & undermining that advantages.
 A competitive advantage exists when the firm is able to deliver
the same benefits as competitors but at a lower cost (cost
advantage), or deliver benefits that exceed those of competing
products (differentiation advantage). Thus, a competitive
advantage enables the firm to create superior value for its
customers and superior profits for itself.
 Cost and differentiation advantages are known as positional
advantages since they describe the firm's position in the
industry as a leader in either cost or differentiation.
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Long-Term Objectives
• Long-term objectives are results that an
organization seeks over a multiyear period.
Common categories for business long-term
objectives include profitability, employee
development, productivity, technology development,
employee relations & competitive position etc.
 Challenging
 Measurable

 Consistent

 Reasonable

 Focus coordination

 Provide basis for effective management

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 Five Years Economic Plans of Pakistan
 First Five-Year Plan (1955-60). In practice, this plan was not implemented,
however, mainly because political instability led to a neglect of economic
policy
 The Second Five-Year Plan (1960-65) surpassed its major goals when all
sectors showed substantial growth.
 Third Five-Year Plan (1965-70), designed along the lines of its immediate
predecessor, produced only modest growth.
 The Fourth Five-Year Plan (1970-75) was abandoned as East Pakistan became
independent Bangladesh. Under Bhutto, only annual plans were prepared, and
they were largely ignored.
 The Fifth Five-Year Plan (1978-83) was an attempt to stabilize the economy
and improve the standard of living of the poorest segment of the population.
 The Sixth Five-Year Plan (1983-88) represented a significant shift toward the
private sector.
 The Seventh Five-Year Plan (1988-93) provided for total public-sector
spending of Rs350 billion
 Eighth Five-Year Plan (1993-98)- Had not yet been announced, mainly
because the successive changes of government in 1993 forced ministers to
focus on short-term issues. Instead, economic policy for FY 1994 was being
guided by an annual plan. 23
 Strategies
• Strategies are mean by which long-term objectives are
realized
 Geographic Expansion-
 Diversification- A technique that mixes a wide variety of
investments in different fields to on average, yield higher returns and
pose a lower risk than any individual investment found within the
field.
 New Product Development-
 Market Penetration- Increasing market share of an
existing product as compare to competitors.
 Retrenchment- Cutting back and downsizing to reduce
expenses.
 Mergers & joint Ventures
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 Annual Objectives
• Short-term milestones necessary to achieve long-term
objectives.
 Represent the basis for allocating resources
 Established at corporate, divisional, and functional
levels
 Stated in terms of accomplishments for:
 management
 marketing
 finance/accounting
 production/operations
 research and development
 information systems accomplishments
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Policies
• Important in strategy implementation as the means
by which annual objectives will be achieved

 Guide to decision making and address repetitive

situations
 Established at corporate, divisional, or functional levels

 Allow consistency & coordination within and between

organizational departments

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