Strategic Management and

Entrepreneurship
Compiled by
Salu Yekela
What is strategy?
 The set of goal-directed actions a firm takes
to gain and sustain superior performance
relative to competitors.
 To achieve superior performance, companies
compete for resources: New ventures
compete for financial and human capital.
Existing companies compete for profitable
growth. Charities compete for donations, and
social networks compete for members. In any
competitive situation, a good strategy
enables a firm to achieve superior
performance.
Strategic Management
 The ongoing planning, monitoring, analysis
and assessment of all necessities an
organisation needs to meet its goals and
objectives. Changes in business environments
will require organisations to constantly assess
their strategies for success.
A good strategy consists of three elements:

 1. A diagnosis of the competitive challenge. This

element is accomplished through strategy analysis
of the firm’s external and internal environments.
 2. A guiding policy to address the competitive
challenge. This element is accomplished through
strategy formulation, resulting in the firm’s
corporate, business, and functional strategies.
 3. A set of coherent actions to implement the
firm’s guiding policy. This element is
accomplished through strategy implementation.
Competitive Advantage
Defined:
Superior performance relative to other competitors
in the same industry or the industry average.
A firm that achieves superior performance relative to
other competitors in the same industry or the
industry average has a competitive advantage.
Apple, for instance, has achieved a competitive
advantage over Google, Samsung, Nokia, and
BlackBerry in the smartphone industry and over
Microsoft, Amazon, Samsung, and HP in the tablet
computer industry.
Sustainable Competitive Advantage
 A firm that is able to outperform its
competitors or the industry average over a
prolonged period of time has a sustainable
competitive advantage.
Competitive Disadvantage
 If a firm underperforms its rivals or the
industry average, it has a competitive
disadvantage. For example, a 15% return on
invested capital may sound like superior firm
performance. In the energy industry, though,
where the average return on invested capital
is often above 20%, such a return puts a firm
at a competitive disadvantage.
 The important point here is that strategy is
about creating superior value, while
containing the cost to create it.
Stakeholders and Competitive
Advantage
Stakeholder defined:
Organizations, groups, and individuals that can
affect or are affected by a firm’s actions. They
make specific contributions for which they expect
rewards in return.
-Internal stakeholders include stockholders,
employees (for instance, executives, managers,
and workers), and board members.
-External stakeholders include customers,
suppliers, alliance partners, creditors, unions,
communities, and governments at various levels.
Stakeholder Management
 The effective management of stakeholders,
the organization, groups, or individuals that
can materially affect or are affected by the
action of a firm, is necessary to ensure the
continued survival of the firm and to sustain
any competitive advantage.
Strategic Management Process
Next, we turn to the process or method by
which strategic leaders formulate and
implement strategy. When strategizing for
competitive advantage, managers rely on three
different approaches:
(1) strategic planning,
(2) scenario planning, and
(3) strategy as planned emergence.
Top-down strategic planning
 Top-down strategic planning: A rational, top-
down process through which management
can program future success; typically
concentrates strategic intelligence and
decision-making responsibilities in the office
of the CEO.
Scenario planning
 Scenario planning: Strategy-planning activity
in which managers envision different “what-
if” scenarios to anticipate plausible futures.
Emergent strategic planning
 An Emergent Strategy describes any
unplanned strategic initiative undertaken by
mid-level employees of their own volition. If
successful, emergent strategies have the
potential to influence and shape a firm’s
strategy. (When new ideas come into play,
and they become part of the realised
strategy).
Strategy Formulation
 External Analysis:
 PESTEL
 The PESTEL model groups the forces in the firm’s general
environment into six segments: political, economic,
sociocultural, technological, ecological, and legal, which
together form the acronym PESTEL.

A PESTLE analysis studies the key external factors (Political,

Economic, Sociological, Technological, Legal and
Environmental) that influence an organisation. It can be used
in a range of different scenarios, and can guide people
professionals and senior managers in strategic decision-
making.
PESTEL
 A tool used to gain a macro picture of an
industry environment.
 Analyses external forces that might impinge

upon a firm.
PESTEL Analysis
Political Economic Sociocultural Technological Environmental Legal
Political Exchange Norms Level of Global warming Mandat
Stability Rate innovation es
Values Natural
Tax Interest R & D Activity environment Regulati
Policies rates Cultures ons
Technological Pollution
Regulati Inflation Cultural Change E.g.
ons rate barriers E.g. Shell Oil Covid
Technological situaion
Trade Unemploy Lifestyles Awareness Banking
tariffs ment rate (vegan, Recycling Fuel
healthy) Food
Disposable Going green in industri
Income Population organisations es
growth rate
Porter’s 5 Forces
Michael Porter developed the highly influential
five forces model to help managers understand
the profit potential of different industries and
how they can position their respective firms to
gain and sustain competitive advantage.
Porter’s 5 Forces
 Buyer Power
 Supplier Power
 Threat of New Entrants
 Threat of Substitues
 Competitive Rivalry
Internal Analysis
 Looking inside the firm to analyze its resources,
capabilities, and core competencies allows us to
understand the firm’s strengths and
weaknesses. Linking these insights from a firm’s
internal analysis to the ones derived in the prior
chapter on external analysis allows managers to
determine their strategic options. Ideally, firms
want to leverage their internal strengths to
exploit external opportunities, and to mitigate
internal weaknesses and external threats.
 Since core competencies are critical to
gaining and sustaining competitive
advantage, it is important to understand how
they are created. Core competencies are built
through the interplay of resources and
capabilities.
 Differentiate among a firm’s resources, capabilities, core
competencies, and activities.
 ■ Core competencies are unique, deeply embedded, firm-specific
strengths that allow companies to differentiate their products and
services and thus create more value for customers than their rivals,
or offer products and services of acceptable value at lower cost.
(What makes us different?)
 ■ Resources are any assets that a company can draw on when
crafting and executing strategy. (What do we have?)
 ■ Capabilities are the organizational and managerial skills
necessary to orchestrate a diverse set of resources to deploy them
strategically. (What do we do well?)
 ■ Activities are distinct and fine-grained business processes that
enable firms to add incremental value by transforming input into
goods and services.