MODULE 1

What is Strategic Management?

• Strategic management is exciting and challenging. It makes fundamental
decisions about the future direction of an organization: its purpose, its
resources and how it interacts with the world in which it operates.
• SM can be described as the identification of the purpose of the
organization and the plans and actions to achieve that purpose.
• SM can be described as finding market opportunities, experimenting and
developing competitive advantage over time.
• SM is the management of an organization’s resources to achieve its goals
and objectives.
• SM involves setting objectives, analyzing the competitive environment,
analyzing the internal organization, evaluating strategies, and ensuring
that management rolls out the strategies across the organization.
Essence contd.
• At the general corporate or headquarters level: Strategic
management is the pattern of major objectives, purposes or goals
and essential policies or plans for achieving those goals, stated in
such a way as to define what business the company is in or is to be
in and the kind of company it is or is to be.

• At the business level: The strategy of the firm is the match

between its internal capabilities and its external relationships.

• It describes how it responds to its suppliers, its customers, its

competitors and the social and economic environment within
which it operates.
Major areas of Business Strategies
• every organization has to manage its strategies in three main
areas:
1. the organization's internal resources ;
2. the external environment within which the organization
operates;
3. the organization's ability to add value to what it does.
• Strategic management can be seen as the linking process between
the management of the organization's internal resources and its
external relationships with its customers, suppliers, competitors
and the economic and social environment in which it exists.
Contd.
Resource strategy
• The resources and capabilities of an organization include its
human resource skills, the investment and the capital in every
part of the organization.
• Organizations need to develop strategies to optimize the use of
these resources.
• In particular, it is essential to investigate the sustainable
competitive advantage that will allow the organization to
survive and prosper against competition.
Contd.
Environmental strategy
• In this context, environment encompasses every aspect
external to the organization itself: not only the economic and
political circumstances, which may vary widely around the
world, but also competitors, customers and suppliers, who
may vary in being aggressive to a greater or lesser degree.

• Customers and competitors are particularly important here.

Contd.

Adding value
• There is a need to explore further the purpose of strategic management beyond the
requirements of environmental change and management of resources.
• In essence, the need is to add value to the supplies brought into the organization. To ensure
its long-term survival, an organization must take the supplies it brings in, add value to these
through its operations and then deliver its output to the customer.
• For example, Facebook takes the supplies it buys in – such as software, energy, skills and
computer equipment – and then uses its own resources and expertise to create a product
from these supplies – essentially the contents of the Facebook page – that has a value
which is higher than the combined value of all the supplies which have been used to make
the product. Facebook adds value and then makes the service available to its customers.
Core Areas

• The three core areas of strategic management are strategic

analysis, strategy development and strategy implementation.
• Strategic analysis: The organization, its mission and objectives
have to be examined and analyzed.
• Strategic management provides value for the people involved in
the organization – its stakeholders– but it is often the senior
managers who develop the view of the organization's overall
objectives in the broadest possible terms.
• They conduct an examination of the objectives and the
organization’s relationship with its environment.
Core Areas contd.
• Strategy development- The strategy options have to be
developed and then selected.
• To be successful, the strategy is likely to be built on the
particular skills of the organization and the special
relationships that it has or can develop with those outside –
suppliers, customers, distributors and government.
• For many organizations, this will mean developing advantages
over competitors that are sustainable over time.
Core Areas Contd.
• Strategy implementation- The selected options now have to
be implemented.

• There may be major difficulties in terms of motivation, power

relationships, government negotiations, company
acquisitions and many other matters.

• A strategy that cannot be implemented is not worth the

paper it is written on.
 Satrategic Management Process

• SMP is a blanket terminology that refers to a process by which managers come up with and
implement an operational strategy that grants the organization a competitive advantage.

So, what is strategic management process?

• Strategic management process is a continuous culture of appraisal that a business adopts to

outdo the competitors. Simple as it may sound, this is a complex process that also covers
formulating the organization’s overall vision for present and future objectives.

• The way different organizations create and realize their management strategies differ. As a
result, there are different models of SMP that the organization can adopt.
Process Contd.
The right model depends on various factors including:

• The existing culture of the organization.

• Market dominance of the organization.
• Leadership style.
• The organization’s experience in creating and
implementing SMPs.
• Industry and competition.
Steps of Strategic Management Process
There are five SMP steps that must be followed in their chronological order.

Goal setting
• This is essentially clarifying the organization’s vision. The vision will include short-term
and long-term objectives, the processes by which they can be accomplished, and the
persons responsible for implementing each task that culminates in the set goals.
Analysis
• Analysis involves gathering the data and information that is relevant to accomplishing the
set goals. It also covers understanding the needs of the business in the market and
examining any internal and external data that may affect the organization’s goals.
Strategy Formulation
• A business will only succeed if it has the resources required to reach the goals set in the
first step. The process of formulating a strategy to achieve this may involve identifying
which external resources the business needs to succeed, and which goals must be
prioritized.
Process Contd.
Strategy Implementation
• Since the purpose of strategic management process is to propel an organization to
its objectives, an implementation plan must be put in place before the process is
considered viable. Everyone in the organization must understand the process and
know what their duties and responsibilities are in order to fit in with the
organization’s overall goal.
Evaluation and Control
• The evaluation and control actions for the strategic management process include
performance appraisal as well constant review of both internal and external
issues. Where necessary, the management of the organization can implement
corrective actions to ensure success of the SMP.
• In order for a business’ efforts to have the most impact on a business, bottom
line, strategic management process must be employed. This will also go a long
way in helping a business to survive stiff competition in the market.
Contd.

The Strategic Management Process consists of:

• 1. Defining the Mission & Vision Statement

• 2. Analyzing the Environment
• 3. Organizational Self-Assessment
• 4. Establishing Goals and Objectives
• 5. Formulating Strategy.
 • Strategic planning is the process of documenting and
establishing a direction of your business—by assessing both
where you are and where you’re going.
• The strategic plan gives you a place to record your mission,
vision, and values, as well as your long-term goals and the action
plans, you’ll use to reach them.
Strategic • A well-written strategic plan can play a pivotal role in your
business’s growth and success because it tells you and your
Planning employees how best to respond to opportunities and challenges.
• Strategic planning is the art of creating specific business
strategies, implementing them, and evaluating the results of
executing the plan, in regard to company’s overall long-term
goals or desires.
• It is a concept that focuses on integrating various departments
(such as accounting and finance, marketing, and human
resources) within a company to accomplish its strategic goals.
 Benefits of Strategic Planning

Communicating Your Strategic Plan The strategic planning process should In addition to your employees, it’s beneficial
involve your employees. Your employees are to reach out to people outside of your
involved in the day-to-day operations and company to get their opinions. Like your
can provide you with a unique view of the vendors have a unique perspective on your
company. Employees can share with you industry. Talk to them about the business
what they think is and isn’t working with the and get their thoughts on how they think
business today, which can inform your the business landscape can change in the
planning for the future. future.
 Increased Productivity

Involving your employees in the strategic planning process also means they receive a
sense of accountability that can increase productivity. Whether they contribute to the
process or were informed of the business’s goals and objectives after the strategic plan
was created, they’ll be more likely to want to help you achieve those targets.
 Identifying Strengths and Weaknesses
As part of the strategic planning process, you’ll examine and analyze your
entire business. You’ll take a look at what your business does well and the
areas where it still needs to improve. By identifying your business’s current
strengths and weaknesses, the process gives you and your employees an
opportunity to improve in the future and become a durable business by
minimizing risks.

Although you may have a good idea about what your business excels at and
areas that need to be improved upon, don’t forget to involve your
employees. They may tell you something you didn’t think of.
 By the end of the strategic planning process, you
and your employees should have a clear direction of
where you want the business to go in the future.

Setting the Direction

of the Business and
These discussions and the planning process itself
Fostering a Proactive help put the business in the best position to
Business succeed in the future.
 This is often the most important
benefit. Some studies show that the
Helps formulate better strategic planning process itself
strategies using a logical, makes a significant contribution to
systematic approach improving a company’s overall
performance, regardless of the
success of a specific strategy.
Strategic Planning Phases.

Discussion Phase (Analysis)

• The discussion phase is meant to gather as much
information, opinions, and input as possible. Set up a
regularly scheduled meeting with the employees and any
other staff in your business who will be involved with
strategic planning.
Strategic Planning Phases
Development Phase
• After you’ve collected all the information, it’s time for the
development phase. This is when you’ll start putting together
your business’s strategic plan.
• A strategic plan consists of five key components: a vision
statement, a mission statement, goals and objectives, an action
plan, and details on how often the strategic plan will be
reviewed and updated.
Strategic Planning Phases Contd.
Review and Updating Phase
• A critical part of the strategic plan should address how often
it will be reviewed and updated.
• Designate someone to be responsible for reviewing, updating,
and sharing any changes with the rest of the company.
• Whether it’s you or another employee, you’ll want to make
sure everyone in the business is aware of the changes and
how they affect the overall strategic plan.
Strategic Planning Process (Steps)
Strategic Planning Process Steps
• Determine your strategic position.
• Prioritize your objectives.
• Develop a strategic plan.
• Execute and manage your plan.
• Review and revise the plan.

* From the three phases we discussed in previous slides

Decision Making
• Strategic decision making is about choosing the best path to success.
• For instance, if you’re starting a new business, you need to consider factors
like cost, time and the target market.
• How do you classify decisions to reach the ideal solution? Strategic decision
making will help you formulate a plan of action and align your small-term
goals with the big picture.
• From a management perspective, strategic decision-making is different
from the routine choices you make every day.
• As a manager, for instance, you have to delegate roles, communicate goals
to your teammates or external stakeholders and account for uncertainties.
• The decisions you make not only affect you but the organization as a whole.
It’s a good practice to cultivate objective decision-making abilities, free
from bias and prejudice.
Decision Making

Strong decision-making skills are essential for newly appointed and seasoned managers
alike. The ability to navigate complex challenges and develop a plan for moving forward
can not only lead to more effective team management but drive key organizational
change initiatives and objectives.
Strategic decision-making is the process of charting a course based on long-term goals
and a longer-term vision. By clarifying your company's big picture aims, you'll have the
opportunity to align your shorter-term plans with this deeper, broader mission – giving
your operations clarity and consistency.
Key elements of strategic decisions
• Existing and new customers.
• Implementation processes to deliver the strategy.
• Off er sustainable competitive advantage .
• Exploit linkages between the organization and its
environment.
• Vision and purpose
 Strategic decision-making Process
Identify the decision (Problem)
• To make a decision, you must first identify the problem you need to
solve or the question you need to answer.
• Clearly define your decision. If you misidentify the problem to solve,
or if the problem you’ve chosen is too broad, you’ll knock the
decision train off the track before it even leaves the station.
Gather relevant information
• Once you have identified your decision, it’s time to gather the
information relevant to that choice. Do an internal assessment,
seeing where your organization has succeeded and failed in areas
related to your decision.
• Seek information from external sources, including studies, market
research, and, in some cases, evaluation from paid consultants
 Strategic decision-making Process Contd.
Identify the alternatives
• With relevant information now at your fingertips, identify possible solutions to
your problem.
• There is usually more than one option to consider when trying to meet a goal.
You can also use your imagination and additional information to construct new
alternatives. In this step, you will list all possible and desirable alternatives.
Weigh the evidence
• Draw on your information and emotions to imagine what it would be like if you
carried out each of the alternatives to the end.
• Once you have identified multiple alternatives, weigh the evidence for or against
said alternatives. See what companies have done in the past to succeed in these
areas, and take a good hard look at your own organization’s wins and losses.
Identify potential pitfalls for each of your alternatives, and weigh those against
the possible rewards.
Strategic decision-making Process Contd.
Choose among alternatives
• Once you have weighed all the evidence, you are ready to select the
alternative that seems to be best one for you. You may even choose a
combination of alternatives.
Take action
• Once you’ve made your decision, act on it! Develop a plan to make your
decision tangible and achievable. Develop a project plan related to your
decision, and then set the team loose on their tasks once the plan is in
place.
Review your decision
• After a predetermined amount of time—which you defined in step one of
the decision-making process—take an honest look back at your decision.
Did you solve the problem? Did you answer the question? Did you meet
your goals?
Corporate Governance
• Corporate governance is to steer an organization in the desired
direction. The responsibility to steer lies with the board of
directors/ governing board.
• Corporate governance refers to the influence and power of the
stakeholders to control the strategic direction of the organization
in general, especially the authority of the chief executive and
other senior officers of the organization.
• Corporate governance has become important because the
interests of the stakeholders in recent years have not always
coincided with the interests of the directors.
 Corporate Governance Contd.
• Corporate Governance would mean placing down a set of systems,
procedures, policies, practices, standards put in place by a corporate
to ensure that relationship with various stakeholders is maintained
in transparent and honest manner.
• In simple terms, Corporate governance is the system of rules,
practices and processes by which a company is directed and
controlled.
• Corporate Governance identifies who has power and accountability,
and who makes decisions.
• Corporate governance ensures that businesses have appropriate
decision-making processes and controls in place so that the interests
of all stakeholders (shareholders, employees, suppliers, customers
and the community) are balanced.
 Corporate Governance Contd.
• A company's board of directors is the primary force influencing
corporate governance.
• Bad corporate governance can cast doubt on a company's
operations and its ultimate profitability.
• Corporate governance entails the areas of environmental
awareness, ethical behavior, corporate strategy, compensation,
and risk management.
• The basic principles of corporate governance are
accountability, transparency, fairness, and responsibility.
Corporate Governance Contd.

• A company’s corporate governance is important to investors since it shows a company's

direction and business integrity.
• Good corporate governance helps companies build trust with investors and the
community.
• As a result, corporate governance helps promote financial viability by creating a long-
term investment opportunity for market participants.
 Board of Directors
• The board of directors is the primary direct stakeholder influencing corporate
governance.
• Directors are elected by shareholders or appointed by other board members,
and they represent shareholders of the company.
• A board of directors (B of D) is an elected group of individuals that represent
shareholders. The board is a governing body that typically meets at regular
intervals to set corporate management and oversight policies. Every public
company must have a board of directors. Some private and nonprofit
organizations also have a board of directors.
• The board is tasked with making important decisions, such as corporate
officer appointments, executive compensation, and dividend policy.
• In some instances, board obligations stretch beyond financial optimization, as
when shareholder resolutions call for certain social or environmental
concerns to be prioritized.
BOD Contd.
• Boards are often made up of inside and independent members.
• Insiders are major shareholders, founders, and executives.
• Independent directors do not share the ties of the insiders, but
they are chosen because of their experience managing or directing
other large companies.
• Independents are considered helpful for governance because they
dilute the concentration of power and help align shareholder
interests with those of the insiders.
• The board of directors must ensure that the company's corporate
governance policies incorporate the corporate strategy, risk
management, accountability, transparency, and ethical business
practices.
 Summary

• The board of directors is elected to represent shareholders’ interests.

• Internal board members are not usually monetarily compensated for their work,
but outside board members are paid.
• The board makes decisions concerning the hiring and firing of personnel,
dividend policies and payouts, and executive compensation.
• A board member is likely to be removed if they break foundational rules, for
example, engaging in a transaction that is a conflict of interest or striking a deal
with a third party to influence a board vote.
• A board of directors is elected by shareholders but nominated by a nominations
committee.