Madawalabu University

College Of Business and

Economics
Management Course Team

Strategic Management :

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 PART ONE: OVERVIEW OF STRATEGIC
MANAGEMENT
Chapter One: The Nature of Strategic
Management
Chapter outline
Defining strategic management
Stages of strategic management
Key terms in strategic management
The strategic management model
Benefits of strategic management
Business ethics and strategic management

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 What is strategy?
Strategy___Greek term __strategos, meaning a
carefully formulated military style (plan of campaign).
Strategy is the creation of a unique and valuable

position, involving a different set of activities.

Strategy requires you to make trade-offs in

competing—to choose what not to do.

Strategy involves creating “fit” among a
company’s activities.
In sum, strategy is all about how to win the

situation at hand.
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 What is strategic management ?
SM-“the art and science of formulating,
implementing and evaluating cross-functional
decisions that enable an organization to
achieve its objective.”
SM is “The on-going process of formulating,

implementing and controlling broad plans that

guide the organizational in achieving the
strategic goods given its internal and external
environment”.
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 In sum,
Strategic management is a set of managerial
decisions and actions that determines the long run
performance of a corporation.
It includes environmental scanning (both external and

internal), strategy formulation (strategic or long-range

planning), strategy implementation, and evaluation
and control.
Therefore, the study of SM, emphasizes the monitoring

and evaluating of external opportunities and threats in

light of a corporation’s strengths and weaknesses.

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 Stages of strategic management
The strategic management
process consists of three
stages:
 Strategy Formulation
(strategy planning)
Strategy Implementations
 Strategy Evaluation

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 1. Strategy Formulation
It is the development of long-range plans for the

effective management of environmental

opportunities and threats, in light of corporate
strengths and weaknesses (SWOT).
It includes defining the corporate mission,
specifying achievable objectives, developing
strategies, and setting policy guidelines.
Strategic formulation means a strategy
formulated to execute the business activities.

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 1. Strategy Formulation …..
Strategy formulation includes developing:-
 Vision and Mission
Strength and weakness
Opportunities and threats
The considerations for the best strategy
formulation should be as follows:
 Allocation of resources
 Business to enter or retain
Business to divest or liquidate
Joint ventures or mergers
 Whether to expand or not
 Moving into foreign markets

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2. Strategy Implementation
It is a process by which strategies and policies are put into

action through the development of programs, budgets, and

procedures.
Involves changes within the overall culture, structure, and/or

management system of the entire organization.

Strategy implementation includes:
 developing strategy supportive culture,
 creating an effective organizational structure,

 redirecting marketing efforts,

 preparing budgets,

 developing and utilizing information system and

 linking employee compensation to organizational performance.

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 Strategy implementation…….
It Requires a firm to establish annual objectives, devise

policies, motivating employees and allocate resources so that

formulated strategies can be executed.
Strategy implementation is often called the action stage of

strategic management.
Implementing means mobilizing employees and managers in

order to put formulated strategies into action.

It is often considered to be most difficult stage of strategic

management.
It requires personal discipline, commitment and
sacrifice.
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3. Strategy evaluation
It is a process in which corporate activities

and performance results are monitored so

that actual performance can be compared
with desired performance.
Although evaluation and control is the final

major element of strategic management, it

can also pinpoint weaknesses in previously
implemented strategic plans and thus
stimulate the entire process to begin again.
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Key terms in strategic management
Competitive Advantage
Strategists
Vision Statements
Mission Statements
External Opportunities and Threats
Internal Strengths and

Weaknesses/Internal assessments
Long-Term Objectives
Strategies
Annual Objectives
Policies
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 Key terms …
Competitive advantage: anything that a firm
does especially well compared to rival firms.
When a firm can do something that rival firms cannot
do, or owns something that rival firm’s desire, that
can represent a competitive advantage.
Strategists: Strategists are individuals who are
most responsible for the success or failure of an
organization.
Strategists are individuals who form strategies.
Vision Statements : a "vision statement" answers
the question, what do we want to become?
the first step in strategic planning, preceding even
development of a mission statement.
Many vision statements are a single sentence.

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 Key terms …
Mission Statements: Mission statements are
"enduring statements of purpose” that distinguish
one business from other similar firms.
 identifies the scope of a firm's operations in product
and market terms.
 It addresses the basic question that faces all
strategists: What is our business?
 describes the values and priorities of an organization.
External Opportunities and Threats: External
O & T refer to economic, social, cultural,
demographic, environmental, political, legal,
governmental, technological, and competitive
trends and events that could significantly benefit
or harm an organization in the future
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 Key terms …
Internal assessments(S & W): Internal strengths and
internal weaknesses are an organization's controllable
activities that are performed especially well or poorly.
It arise in the management, marketing,
finance/accounting, production/operations, research
and development, and computer information systems
activities of a business.
Long-Term Objectives: a specific results that an
organization seeks to achieve in pursuing its basic
mission.
 Long-term objectives represent the results expected from
pursuing certain strategies.
 Strategies represent the actions to be taken to accomplish
long-term objectives.
 The time frame for objectives and strategies should be
consistent, usually from two to five years
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 Key terms …
Objectives are essential for organizational
success because they:
 state direction
aid in evaluation
create synergy
reveal priorities
focus coordination
provide a basis for effective planning,
organizing, motivating and controlling
activities.
Objectives should be challenging, measurable,
consistent, reasonable, and clear.

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 Key terms …
 Annual Objectives: are short-term milestones that organizations

must achieve to reach long-term objectives.

 Like long-term objectives, annual objectives should be measurable,

quantitative, challenging, realistic, consistent, and prioritized.

 They should be established at the corporate, divisional, and

functional levels in a large organization.

 Annual objectives should be stated in terms of management,

marketing, finance/accounting, production/operations, research

and development, and information systems accomplishments
 Annual objectives are especially important in strategy
implementation, whereas long-term objectives are particularly
important in strategy formulation
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 Key terms …
Strategies: are the means by which long-term

objectives will be achieved.

Strategies are potential actions that require top

management decisions and large amounts of the

firm's resources.
In addition, strategies affect an organization's

long-term prosperity, typically for at least five

years, and thus are future-oriented

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 Key terms …..
 Policies: are the means by which annual objectives will be

achieved.
 Policies include guidelines, rules, and procedures established

to support efforts to achieve stated objectives.

 Policies are guides to decision making and address repetitive

or recurring situations.
 Policies can be established at the corporate level and apply to

an entire organization

 Policies, like annual objectives, are especially important in

strategy implementation because they outline an

organization's expectations of its employees and managers.
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 1.4 The Strategic-Management
Feedback
Model
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Evaluat strategie re and
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select s acct, e
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strategi manage finance, perfor
and objectiv
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issues issues
n Perfor
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Strategy Strategy evaluat
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A Comprehensive strategic management model
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Benefits of strategic management
 It allows for identification, prioritization, and
exploitation of opportunities.
 It provides an objective view of management
problems.
 It represents a framework for improved
coordination and control of activities.
 It minimizes the effects of adverse conditions and
changes.
 It allows major decisions to better support
established objectives.
 It allows more effective allocation of time and
resources to identified opportunities.
 It allows fewer resources and less time to be
devoted to correcting erroneous or ad hoc decisions.

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 Benefits of strategic management
 It creates a framework for internal communication
among personnel.
 It helps integrate the behavior of individuals into a
total effort.
 It provides a basis for clarifying individual
responsibilities.
 It encourages forward thinking.
 It provides a cooperative, integrated, and
enthusiastic approach to tackling problems and
opportunities.
 It encourages a favorable attitude toward change.
 It gives a degree of discipline and formality to the
management of a business.
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Business ethics and strategic management
Business ethics are the accepted principles of right or
wrong governing the conduct of businesspeople or
defined as
It is principles of conduct within organizations that
guide decision making and behavior.
Ethical decisions are those that are in accordance with
accepted principles of right and wrong, whereas an
unethical decision is one that violates accepted
principles.
 Good business ethics is a prerequisite for good strategic
management; good ethics is just good business.
Strategists are the individuals primarily responsible for

ensuring that high ethical principles are espoused and

practiced in an organization.
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