Strategic Management: Concepts & Practices

Copyright © 2017 by Luke Ike.

ISBN:      Softcover      978-1-5245-9758-0

      eBook         978-1-5245-9757-3

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Rev. date: 02/03/2017

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CONTENTS

Introduction to the Book

Part 1

An Introduction To Strategic Management

Introduction

Chapter 1

The Nature Of Strategic Management

1.1 Strategic Management - Definitions

1.2 Strategic Management As Ongoing Process

1.3 Performing Strategic Management Tasks

1.4 Approaches to Performing Strategy-Making Tasks

1.5 The Role of Strategic Planning Department

1.6 The Benefits of Strategic Approach to Management

Further Reading

Chapter 2

Strategy And The Strategic Management Process

2.1 Strategy - Introduction

2.2 Corporate Strategy

2.3 Business Strategy

2.4 Functional Strategy

2.5 Operational Strategy

2.6 Why Company Strategy Evolves

2.7 Strategy and Strategic Plan

2.8 The Strategic Management Process

Case Study

Further Reading

Part 2

Strategy Formulation

Introduction

Chapter 3

Developing A Strategic Vision And Business Mission

3.1 Defining Corporate Vision and Mission

3.1.1 The Business Vision

3.1.2 Mission or Purpose

3.1.3 Forming a Well Conceived Strategic Vision and Mission

3.1.4 Mission Statement

3.1.5 The Process of Developing a Mission Statement

3.1.6 Some Examples of Company Vision /Mission

Case Study

Further Reading

Chapter 4

Converting Strategic Vision And Mission

Into Measurable Goals /Obbjectives

4.1. Understanding Business Goals

4.2 Setting Objectives

4.3 The Concept of Strategic Intent

Case Study

Further Reading

Chapter 5

Identifying Environmental Factors

That Shape Business Strategy

5.1 The Meaning and Study of Business Environment

5.2 The General Business Environment- PESTELI

5.2.1 Political Factors and Analysis

5.2.2 Economic Factors and Analysis

5.2.3 Social Factors and Analysis

5.2.4 Cultural Factors and Analysis

5.2.5 Technological Factors and Analysis

5.2.6 Environmental Factors and Analysis

5.2.7 Legal Factors and Analysis

5.2.8 International Factors and Analysis

5.2.9 Business Stakeholders

5.3 Industry/Competitive Environment

5.3.1 Introduction

5.3.2 The Industry

5.3.3 The Porter’s Five Forces Model

5.3.4 Strategic Group Analysis

5.3.5 Analysis of Key Success Factors (KSF)

5.4 The Company Situation Analysis

5.4.1 Business strategy Analysis

5.4.2 SWOT Analysis

5.4.3 The Value Chain Analysis

5.4.4 Analysis of Core Competences

5.4.5 Analysis of Management Philosophy

Case Study

Further Reading

Chapter 6

Crafting Business Strategy

6.1 Introduction

6.2 The Process of Crafting Corporate or Diversified Business Strategy

Case Study

Further Reading

Part 3

Strategy Options/Evaluation/Choice

Chapter 7

Strategy Options/Choice

7.1 Generic Strategies

7.2 Offensive Strategies

7.3 Defensive Strategies

7.4 Growth Strategies

7.4.1 Internal Growth Strategies

7.4.2 External Growth Strategies

7.5 External Mechanisms of Growth

7.6 External Growth without Merger & Acquisitions

7.7 Adaptive Strategies

7.8 Corporate Retrenchment Strategy

7.9 Divestiture Strategy

7.10 Disposals

7.11 Corporate Turnaround Strategy

7.12 Portfolio Restructuring Strategy

7.13 Matching Strategy to Company Situation

7.14 Evaluating Strategic Options/Selections

Case Study

Further Reading

Part 4

Strategy Implementation & Performance Feedback

Chapter 8

The Nature Of Strategy Implementation

8.1 Introduction

8.2 Resource Base

8.3 Leadership

8.4 Policies

8.5 Organisation Structure

8.6 Corporate Culture

8.7 Information Communication and Control Systems

8.8 Supporting HRM and Reward Systems or Programmes

8.9 Budgeting

8.10 Stakeholders

8.11 Corporate Social Responsibility

8.12 Change and Conflict Management

Further Reading

Chapter 9

Strategy Performance Feeback

9.1 Introduction

9.2 Strategy Performance Monitoring

9.3 Strategy Performance Review

9.4 Strategy Performance Control

9.5 Strategy Performance Improvement

Case Study

Further Reading

References

Acknowledgements

I am highly indebted to Almighty God for the wisdom behind this book, and dedicate this book to the glory of God in Jesus name –Amen.

Special thanks to my wife and children for providing a supportive and caring environment for this undertaking.

Luke Ike

Introduction to the Book

In today’s highly competitive and fast moving business environment, the importance of strategic management cannot be overemphasised.

Today’s managers need to think strategically about their firm’s position and about the impact of the changing condition in the environment to their firms.

Strategic management provides the answer to dealing with the fast changing business environment and its challenges to survival and expected performance of many organisations.

Managers need to monitor the external situations closely enough to know when to institute strategic change. They also have to know their firms so well enough to know what kinds of strategic changes to initiate.

The fundamentals of strategic management need to drive the whole approach to managing organisation and there is a strong case for linking good management to how well managers understand basic concepts and principles of strategic management that will help them craft and execute strategy effectively.

This book produces a clear and concise introduction to principles and concepts of strategic management, as required by practicing managers and those in Colleges and Universities who are aspiring to be strategic managers. It will help reader develop the necessary skills and understanding required to carry out effective strategic management in any organisation.

Part 1

An Introduction To Strategic Management

Introduction

To be able to apply strategic management effectively, the reader needs to conceive the essential concepts and principles of strategic management.

The better conceived the reader is with the concepts and principles of strategic management, the more proficient the reader will be in its execution.

Doing a good job of managing requires good strategic thinking and good strategic management. Good strategy and good strategy execution are more trustworthy signs of good management.

Crafting and executing strategy are core management functions. Among all the things managers do, few affect company performance more fundamentally than how well its management team charts the company’s long term direction, develop competitively effective strategic moves and business approaches and executes the strategy in ways that produce the targeted results

Strategy is usually described as management game plan for strengthening the organisation position, pleasing customers and achieving performance target.

Management devise strategy to guide how the company business will be conducted and to help them make resins cohesive choices among alternatives course of action.

Without strategy a manager has no thought out course to follow, no road map to manage by, no useful action programme to produce intended result.

This part includes chapter 1 of the book. The chapter introduces the nature of strategic management that helps the reader understand the meaning of strategic management and explain what managers do in this respect.

The chapter also outlines various strategic management roles, their significance to management activities, and explains how strategic management is an ongoing process. It also includes ways of performing strategic management tasks, different approaches to performing strategy-making tasks, as well as benefits of strategic approach to management.

Chapter 1

The Nature Of Strategic Management

Aim

To introduce the nature of strategic management.

Objectives

After studying this chapter you should be able to:

• Understand the meaning of strategic management and explain what managers do.

• Describe how strategic management is an ongoing process.

• Describe ways of performing strategic management tasks.

• Understand various approaches to performing strategy-making tasks.

• Outline various strategic management roles of a Strategic planning department.

• Outline the benefits of strategic approach to management.

1.1 Strategic Management - Definitions

Any discussion of the ways in which managers might use strategic management to improve performance of their firms, leads inevitably to what would seem to be a very basic question- what is strategic management?

There are many definitions that have been put forward by many management scholars, researchers and professionals to describe the concept of strategic management (David 2003, Jones 2014, Thompson 2015, Philips 2014, Smith 2016), as:

• The analysis, planning, implementing and control of long term business goals /objectives, and strategies with environmental fit.

• A set of decisions and actions to formulate and implement strategies that will provide a competitive superior fit between the organisation and its environment so as to achieve business objectives.

• The activities associated with planning" including setting goals, objective, developing plans and achieving them.

• A process used to help managers answer strategic questions such as:

✓ Where is the organisation now?

✓ Where does the organisation want to be?

✓ What changes and trends are occurring in the business external environment?

• The art of formulating, implementing, and evaluating cross-functional decisions that enable an organisation to achieve its objectives.

• Is about management task of crafting, implementing, and executing company strategies.

• A process directed by top management to determine the fundamental aim and goals of organisation, and ensure a range of decisions which allow for attainment of these goals in long run, while providing for adequate response in short run.

• Simply is about strategic formulation and implementation.

A close look at all these approaches to the explanation of what strategic management is, show the difficulty in pointing at a particular definition as the universally accepted term which is generally applied.

The fact that there are various perspectives to explaining strategic management need to be recognised. However, one thing is common among them - the notion of the business and its environment is inherent in each of the definitions; that expected performance of a business outcome is determined by how well a firm relates to its business environment which is expected to be continuous and thorough, in order to achieve superior performance, relative to competition.

In this book strategic management is defined simply as:

The process of formulating and implementing strategic management tasks to achieve superior organisational performance.

As this definition implies, strategic management focuses on organisational performance in relation to its business environment, through systematic application of strategic management tasks - strategy formulation and implementation.

1.2 Strategic Management As Ongoing Process

It is right to describe strategic management as an on-going process.

In practice, the process of carrying out effective strategic management involves different stages. (The process of strategic management is discussed in detail in later section of the book).

As each stage relates to each other, there is the need for the process to be on-gang, to ensure continuous and constant evaluation needed for achieving desired performance.

There is also the need for the process to be on-going since all prior strategic actions are subject to modification as conditions in the business environment change and ideas for improvement emerge.

It is important to understand that strategic management is not a pure science that lends itself to a nice one-two-three approach. Intuition is also essential to making strategic decisions. Intuition is particularly useful for making decisions in situations of great uncertainty or little precedent.

The task of evaluating performance and initiating corrective adjustments is therefore, both the end and the beginning of the strategic management cycle - the on-going process of strategy.

The on-going process of strategy formulation and implementation is designed to help guarantee the match of external and internal strategic events.

Many firms are now decentralising the strategic management process, to take advantage of lower level hierarchy in the organisation, recognising that the process of strategic management must involve and allow the lower level hierarchy make valuable contributions to strategy management process.

1.3 Performing Strategic Management Tasks

As described earlier, strategic management simply has to do with formulating and implementing strategic management tasks to achieve superior performance.

In smaller firms, strategic management formulation and implementation of strategic management tasks is usually controlled by a single individual who is normally the owner/manager- who sets the direction, areas, and basis for strategic formulation and implementation.

In large firms, this is not the case. The ultimate responsibility for leading the task of formulating and implementing a strategic plan for the whole organisation usually rests with the top management at the top of the strategic management hierarchy, responsible for the entire organisation. Those responsible for strategy formulation in large firms may have such titles as president, chairman or chairperson, executive director, chief executive director, and executive vice president. They are usually members of the board of directors elected by the shareholders in a limited liability company.

Managing the business is the work of a relatively small group of people, usually called the board of directors, who are responsible for the overall direction and performance of the organisation. They establish policy and have a particular responsibility for managing relations with people and institutions in the world outside the organisation, such as shareholders, media or elected representatives. Members of the board are expected to understand internal details of the organisation, but spend most of their time looking for the future or dealing with external affairs. The board usually include several non-executive directors- senior managers from other companies who are intended to bring a wider more independent view to the discussions, supplementing the internal views of the executive directors.

The title CEO is usually used to address the chief executive director of an organisation that includes the mantles of chief direction setter, chief objective setter, chief strategy setter, and chief implementer for the total organisation even though many other members of the top management team normally have a hand in the process. The making of strategy is not just the task for the CEO only. In large firms, decisions about what approaches to take and what new moves to initiate usually involves the CEO in the corporate office of the business units and product divisions, the heads of major functional areas within a business or division, and operational managers such as plant managers, product managers, district and regional sales managers and lower level supervisors. The position of CEO is the highest executive position at the strategic management level under the advisory, guidance and supervision of the Board of Directors. The CEO’s view is strategically important as the last authority usually who customarily puts a personal stamp of approval on big strategic decisions and actions.

Board of Directors rarely play a direct role in formulating strategy. The immediate task of directors is to ensure that all proposals have been adequately analysed and considered and that the proposed strategic actions are superior to available alternatives, flawed proposals are customarily withdrawn for revision by management. The board sees that overall task of managing strategy is adequately done by carrying out reviews of important strategic moves and officially approving the strategic plans submitted by the CEO and the senior management – a procedure that makes the board ultimately responsible for strategic actions taken. The long range task of directors is to evaluate the calibre of senior executives in strategy making and strategy implementing skills. The board must determine whether the current CEO is doing good job of strategic management.

1.4 Approaches to Performing Strategy-Making Tasks

A number of approaches could be applied by a firm to ensure that the strategy- making task is carried out effectively. Such approaches may take the form of any or combination of:

• The master strategist approach.

• The delegate to others approach.

• The collaborative approach.

• The champion approach.

• The master strategist approach

The master strategist approach demands that the manager should take up the function of a master or chief strategist - an entrepreneurial role that involves the initiation of change – exercising strong influence over assessments of the situation, over the strategy alternatives that are exploited and over the details of the strategy, when the manager becomes aware of problems or opportunities, and search for improvement or avenues that will help deal with them.

These roles are evident when managers introduce new products, process or create a major change programme.

This does not mean that the manager personally does all the work.

It means that the manager personally becomes the chief architect of strategy and wields a proactive hand in shaping some of or all of the major pieces of strategy. The manager acts as a strategy commander and has a big ownership in the chosen strategy.

• The delegate to others approach

This approach allows the strategic management executives in charge of the corporate strategic direction to delegate the exercise of strategy making to others, perhaps a strategy planning staff, department, or a task force of trusted subordinates. The management executives under the leadership of the CEO, keeps in touch with the progressing of the strategic management activities via reports, oral conversations, offering guidance if needed, and then putting a stamp of approval on the strategy plan after it has been formally presented, discussed and accepted through consensus.

• The collaborative approach

This is a middle approach whereby the manager enlists the help of key subordinated in hammering out a consensus strategy that all key players will back and do their best to implement successfully. The biggest strength of this strategy making style is that those who are charged with crafting the strategy also are charged with implementing it.

• The champion approach

With this approach, the CEO tries to capitalise on having manages in the firm who can see strategic opportunities, and delegates the initiative for strategy making to them at the business level units.

The aim is to encourage subordinate managers to develop, champion, and implement sound strategies.

The CEO with the executive management will now serve as judges, evaluating the strategy proposals reaching their desks.

This approach works best in large diversified corporations when CEOs cannot personally orchestrate strategy making in each of many business. CEOs can capitalise on having people in the enterprise that can see strategic opportunities that they cannot see, and delegate the initiative for strategy making to managers at the business level units.

1.5 The Role of Strategic Planning Department

Many large firms have a planning department. If the firm is very small, one person might do all the strategic planning and implementing work. As firms expands, a strategic planning department emerges to plan and carry out strategic planning activities entrusted with the designing and running of a strategic planning - carrying out strategic analysis, implementation and control.

In large firms, the strategic planning department are staffed with specialists in planning and strategic analysis. Some firms also make use of consultants.

The strategic planning department can help managers at all levels crystallise the strategic issues that ought to be addressed. In addition they can provide data, help analyse industry and competitive conditions, and distribute information on company’s strategic performance.

This strategic planning department usually reports to the president or chief executive officer (CEO) of the firm. Plans are assigned to divisions from the planning departments only after approval by the president or the CEO at the head office.

This approach is not without limitations. Functional managers usually lose their right to do their own planning, taken away by specialist planning consultants brought in to do this job and leaving them to feel like second class citizens in their own rights. Specialists planning consultants may also lack detail knowledge and understanding of all operating units activities required for effective planning performance that satisfies departmental managers.

1.6 The Benefits of Strategic Approach to Management

The advantage of first rate strategic thinking and conscious strategic management as opposed to freewheeling improvisation, gut and drifting along include:

• Providing better guidance for the entire organisation on the crucial point of what it is we are trying to do and to achieve

• Making managers more alert to the winds of change, new opportunities, and threatening developments.

• Providing managers with a rationale for evaluating competing budget requests for investments capital and new staff- a rational that argues for steering resources into strategy, supporting results producing areas.

• Helping to unify the numerous strategy related decisions by managers across the organisation.

• Creating a more proactive management posture and counteracting tendencies for decision to be reactive and defensive. The advantage of being proactive is that trailblazing strategies can be keys to better long run performance.

• Business history shows