MNGT – ED32 (STRATEGIC MANAGEMENT) customers, suppliers, competitors, and
the economic and social environment in
which it exists.
CHAPTER 1
Strategic Management consists of two main elements:
WHAT IS STRATEGIC MANAGEMENT?
corporate-level strategy and business-level
strategy.
Strategic management - can be described business-level strategy - every
as the identification of the purpose of the organisation must manage its strategies in
organisation and the plans and actions to three main areas:
achieve that purpose. 1. the organisation’s internal resources;
- is the pattern of major objectives, 2. the external environment within
purposes, or goals and essential policies which the organisation operates;
or plans for achieving those goals, stated 3. the organisation’s ability to add value
in such a way as to define what business to what it does.
the company is in or is to be in and the corporate level strategy - In large
kind of company it is or is to be. organisations, there are additional
- Prescriptive strategy - This definition aspects of strategy that occur at their
clearly carries the implication that it is headquarters.
possible to plan a strategy in advance and
then carry out that strategy over time: Resource Strategy
rather like a doctor writing out a resources and capabilities of an
prescription with the aim of curing an organisation - including its human
illness. resource skills, the investment, and the
- At the business level, it is concerned with capital in every part of the organisation.
competing for customers, generating In particular, it is essential to investigate
value from the resources, and the the sustainable competitive advantage
underlying principle of the sustainable that will allow the organisation to survive
competitive advantages of those and prosper against competition.
resources over rival companies.
- Strategic management can be described Environmental Strategy
as finding market opportunities,
- environment encompasses every aspect
experimenting, and developing
external to the organisation itself: not
competitive advantage over time. This
only the economic and political
suggests that strategy evolves as the
circumstances, which may vary widely
events both inside and outside the
around the world but also competitors,
organisation change over time – hence the
customers, and suppliers, who may vary
word emergent strategy.
in being aggressive to a greater or lesser
- The field of strategic management degree.
deals with the major intended and
emergent initiatives taken by general Adding Value
managers on behalf of owners,
involving the utilization of resources, - There is a need to explore further the
to enhance the performance of firms in purpose of strategic management beyond
their external environments. the requirements of environmental
change and management of resources. In
- Strategic management can be seen as the
essence, the need is to add value to the
linking process between the management
supplies brought into the organisation.
of the organisation’s internal resources
and its external relationships with its
Key elements of strategic decisions or policies and action sequences into a
cohesive whole. Usually deals with the
1. Existing and new customers - Customers are general principles for achieving the
crucial to strategic management because they objectives: why the organisation has
make the buying decision, not competitors. chosen this particular route.
2. Implementation processes to deliver the Plans (or programmes) - The specific
strategy - Strategy is at least partly about actions that then follow from the
how to develop organisations or allow them strategies. They specify the step-by-step
to evolve towards their chosen purpose. sequence of actions to achieve the major
3. Offer sustainable competitive advantage - objectives.
One way of developing competitive advantage Controls - The process of monitoring the
is through innovation. proposed plans as they proceed and
4. Exploit linkages between the organisation adjusting where necessary. There may
and its environment - links that cannot easily well be some modification of the
be duplicated and will contribute to superior strategies as they proceed.
performance. Reward - The result of the successful
5. Vision and purpose - the ability to move the strategy, adding value to the organisation
organisation forward in a significant way and to the individual.
beyond the current environment.
CONTEXT, CONTENT AND PROCESS
CORE AREAS OF STRATEGIC MANAGEMENT
- most situations strategic management is
I. Strategic analysis – The organisation, its not simply a matter of taking a strategic
mission, and objectives have to be examined decision and then implementing it. There
and analysed. are two reasons for this.
II. Strategy development - The strategy options First, people are involved – managers,
have to be developed and then selected. employees, suppliers and customers, for
III. Strategy implementation - The selected example. Any of these people may choose
options now have to be implemented. to apply their own business judgement to
the chosen strategy. They may influence
Two important qualifications to the three core
both the initial decision and the
areas:
subsequent actions that will implement it.
A. the influence of judgment and values; Second, the environment may change
B. the high level of speculation involved in major radically as the strategy is being
predictions. implemented. This will invalidate the
chosen strategy and mean that the
process of strategy development needs to
Mission statement - Defines the business start again.
that the organisation is in against the
values and expectations of the
stakeholders. Every strategic decision involves:
Objectives (or goals) - State more 1. Context – the environment within which the
precisely what is to be achieved and when strategy operates and is developed.
the results are to be accomplished. Often 2. Content – the main actions of the proposed
quantified. (Note that there is no strategy.
statement of how the results are to be
3. Process – how the actions link together or
attained.)
interact with each other as the strategy
Strategies - The pattern or plan that unfolds against what may be a changing
integrates an organisation’s major goals environment.
PROCESS: LINKING THE THREE CORE AREAS return on capital, or in some cases a social
service).
Two different approaches to the process:
1. The prescriptive approach - takes the view
that the three core areas – strategic analysis,
strategic development, and strategy
implementation – are linked together
sequentially. Thus, it is possible to use the
analysis area to develop a strategy which is
then implemented. The strategy is prescribed
in advance.
A prescriptive strategy - is one whose
objective has been defined in advance
and whose main elements have been
developed before the strategy
commences.
2. The emergent approach - takes the view that
the three core areas are essentially
interrelated. Because strategy is then
developed by an experimental process that
involves trial and error, it is not appropriate
to make a clear distinction between the
strategy development and implementation
phases: they are closely linked, one
responding to the results obtained by the
other.
An emergent strategy - is one whose
final objective is unclear and whose
elements are developed during the
course of its life, as the strategy
proceeds.
The analytical phase of both the prescriptive and the
emergent approach can be divided into two parts:
1. Analysis of the environment – examining what is
happening or likely to happen outside the
organisation (e.g. economic and political
developments, competition).
2. Analysis of resources – exploring the skills and
resources available inside the organisation (e.g.
human resources, plant, finance).
These are followed by a third element:
3. Identification of vision, mission, and
objectives – developing and reviewing the
strategic direction and the more specific
objectives (e.g. the maximisation of profit or
