Arsi University

College of Business and economics

Department of Management
MBA Program
Course Title: STRATEGIC MANAGEMENT
Course Code: MBA 733
Credit Hours: 3
Course Content
Chapter-1: Concepts of Strategy and Strategic Management
Chapter-2: Stakeholders Analysis and Strategic Intent
Chapter-3: Environmental/Strategic Analysis
Chapter-4: Strategy Analysis and Choice
Chapter-5: Strategy Implementation
Chapter-6: Strategic Evaluation and Control

Instructor: Messele Kumilachew (Assistant Professor and PhD Candidate)

Address: Cell phone: 0912060596
E-mail: [email protected]
 Tentative Evaluation Scheme
1. Individual class attendance and Participation............................10%
2. Case Analysis/Article Review…………………………………………….…….10%
3. Mid exam……………………………………………………………………………....20%
3. Company Strategic Analysis (Group Assignment)………………….…20%
4. Final Examination………………………………………………………………......40%

Total………………………………………………………………………………………100%
 “Notable Quotes”
1. "Without a strategy, an organization is like a ship
without a rudder, going around in circles. It’s like a
tramp; it has no place to go.’’

—Joel Ross and Michael Kami.

2. "Most of us fear change. Even when our minds say
change is normal, our stomachs quiver at the prospect.
But for strategists and managers today, there is no choice
but to change."
—Robert Waterman Jr.
 CHAPTER-ONE

CONCEPTS OF STRATEGY AND STRATEGIC

MANAGEMENT
 Brain Storming

• What do you understand/think

strategy mean?
 Concepts of Strategy

 Strategy was originally a term applied to warfare

 The term ‘strategy’ is derived from the Greek word

Strategos, which means generalship-the actual
direction of military force, as directed from the policy
governing to its deployment.

 No single universal accepted definitions of strategy

since different people viewed in different way.

 Let us see few definitions of strategy given by

different authors.
 Definitions of Strategy
1) Chandler defined strategy as: “The determination of the
basic long-term goals and objectives of an enterprise and
adoption of the course of action and the allocation of
resources necessary for caring out these goals”

Note three important aspects from Chandler’s definition:

 Determination of basic long-term goals and objectives

 Adoption of course of actions to achieve these goals
and objectives
 Allocation of resources necessary for adopting these
course of actions
 Definitions….Cont’d
2) Andrew defines strategy as “The pattern of
objectives, goals, and the major policies and plans
for achieving these goals stated in such a way so as
to define what business a company is in or is to be
and the kind of company is or is to be.”

3) Thompson and Strickland, defines strategy as, ‘a specific

pattern of actions and business approaches managers
employ to please customers, build an attractive market
position, and achieve organizational objectives; a
company’s actual strategy is partly planned and partly
reactive to changing circumstances.’
 Summary of the Definitions
Looking at these definitions, we can say that strategy
is about:
 A game plan or course of action or pattern of action
or competitive moves or business approaches that
managers’ employ in running a company.
 A Strategy is the means used to achieve the ends
(objectives)
 A strategy is both proactive (intended) and reactive
(adaptive)
 Strategies are partly visible and partly hidden to
outside public
 Summary….Cont’d
 Managers develop strategies to guide how an organization
conducts its business and how it will achieve its target
objectives.

 Without strategy, there is no established course to follow,

no road map to manage by, no cohesive action plan to
produce the intended results.

 Good strategy and good implementation are the most

trust worthy signs of good management.

 To qualify as excellently- managed an organization must

exhibit excellent execution of an excellent strategy.
Henry Mintzberg Model of Strategy
Emergent and Deliberate Strategies

Intended Deliberate Realized

Strategy Strategy Strategy

Unrealized Emergent
Strategy Strategy
 Michael E. Porter
 He is the founder of the modern strategy field and one of the world's
most influential thinkers on management and competitiveness.
 Michael Porter is professor of management in Harvard Business
School.
 His contribution in management includes the:
 idea of competitive advantage,
 five-force model of competition,
 generic strategies, and
 value chain.

 He emphasized that the core duty of general management is

strategy design and communication. In this sense he defined
strategy as “… developing and communicating the company’s
unique position, making trade-offs, and forging fit among
activities.”
 5- Elements of Good Strategy

1. Arenas – Where?
2. Vehicles – How to get there?
3. Differentiators – How to win?
4. Staging – Speed and sequence - tactics
5. Economic logic – How will we gain a return?
 Levels at which Strategy Operates
 Corporate level: board of directors, CEO &
administration [Highest]

 Business level: business and corporate managers

[Middle]

 Functional level: Product, geographic, and

functional area managers [Lowest]
 Level Structure Strategy

Corporate Office
Corporate
Corporate
Level

SBU SBU 3 SBU 1 SBU 2 Business Unit Level

Functional
Finance Marketing Operations Personnel Information level

Figure 1.2: Different Levels of Strategy

 Levels at which Strategy Operates….
 Many companies work in different business lines
with regard to either products/services, markets
or technology. Here are few illustrations: MIDROC
Ethiopia is in several businesses such as:

1) Construction
2) Mining
3) Banking
4) Hotel and tourism
5) Agro industry
Strategic Management Decisions: Corporate level
 Domain Definition: Where to Compete?
Defines Scope of Firm
 In Which Industries Will We Compete?
Must Be Reflected in Mission
 Choice of businesses, entry (diversification) and
exit (divestiture) decisions, resource allocation/
priorities for growth
 Corporate Financial: Dividend Policies, Sources of
Long-term Financing
 Strategic Management Decisions: Business
 Domain Navigation: How to Compete?
Competitive Strategy
 Help bridge decisions at the corporate and
functional levels
 Less costly, risky, and potentially profitable than
corporate-level decisions
 More costly, risky, and potentially profitable than
functional-level decisions
 Include decisions on plant location, marketing
segmentation, and distribution
 Strategic Management Decisions: Functional
 Implement the overall strategy formulated at the
corporate and business levels
 AKA Tactics
 Involve specific action-oriented and operational
issues
 Relatively short range (typically within the
coming year) and low risk
 Modest costs: depend upon available resources
 Relatively concrete and quantifiable
 Defining Strategic Management
 Strategic management can be defined as the art
and science of formulating, implementing, and
evaluating cross-functional decisions that enable
an organization to achieve its objectives.
 Set of managerial decisions and actions that
determines the long-run performance of a firm
to achieve its objectives.
 Glueck (1984) defines strategic management as
“a stream of decisions and actions which leads to
the development of an effective strategy or
strategies to help achieve corporate objectives.”
 Defining Strategic Management….
 Harrison and St. John (1998) define strategic
management as “the process through which
organizations analyze and learn from their internal and
external environments establish strategic direction,
create strategies that are intended to help achieve
established goals, and execute these strategies, all in
an effort to satisfy key organization stakeholders.”

 Strategic management – involves various

departments and levels across the organization. An
ongoing process that includes implementation,
evaluation and control issues.
 Strategic Management…Cont’d
 These definitions implies, strategic management
focuses on integrating management, marketing,
finance/accounting, production/operations,
research and development, computer information
systems to achieve organizational success.

 Strategic management allows an organization to be

more proactive than reactive in shaping its own
future; it allows an organization to initiate and
influence (rather than just respond to) activities,
and thus to exert control over its own destiny.
 Key Terms in Strategic Management

 To survive all organizations must be capable of

astutely/wisely identifying and adapting to
change.
 The need to adapt to change leads organizations
to key strategic management questions, such as

1) “What kind of business should we become?”

2) “Are we in right field?”
3) “Should we reshape our business?”
4) “Are new technologies being developed that could put
us out of business?”
 Key Terms in Strategic Management…Cont’d
Before we further discuss strategic management, we should
define nine key terms:

1) Competitive advantage
2) Strategists
3) Vision and mission statements,
4) External opportunities and threats,
5) Internal strengths and weaknesses,
6) Long-term objectives,
7) Annual objectives,
8) Strategies and
9) Policies.
 Strategic Decision Making
 Decision making is the most important function
of any manager.

 Strategic decision making is the prominent task

of the senior management.

 While decision-making pertains to all

managerial functions, strategic decision-making
largely relates to the responsibilities of the
senior management.
 Strategic Decision Making…Cont’d

 In the process of strategic management the basic thrust

of strategic decision-making is to make a choice
regarding the courses of action to adopt.
 Thus, most aspects of strategy formulation rest on
strategic decision-making.
 The fundamental strategic decision relates to the choice
of a mission. In other word, the answers to questions:
1) What is our business?
2) What will it be? and
3) What should it be?
The answers to these questions are the basic concerns in
strategic management
 The Strategic-Management Process/ Model
 The strategic-management process best can be studied and
applied using a model.
 Every model represents some kind of process. The
framework illustrated in Figure below is a widely accepted,
comprehensive model of the strategic-management process.
 This model does not guarantee success, but it does
represent a clear and practical approach for formulating,
implementing, and evaluating strategies.
 Strategic management is a process—a flow of information
through interrelated stages of analysis toward the
achievement of some goal.

 Relationships among major components of the strategic-

management process are shown in the model.
 Feedback

Feedback
Feedback

Feedback
III. Strategy
II. Strategy Formulation Implementation
Establishing Strategic Intent Project
Project IV. Strategic
IV. Strategic
(Develop of Vision, Mission, Procedural Evaluation
Procedural Evaluation
business
business definitions
definitions and
and External Environment Internal Environment Resource
Resource allocation
allocation
objectives) Appraisal Appraisal Structural
Structural implementation
implementation
Behavioural
Behavioural implementation
implementation
Functional
Functional and
and operational
operational
implementation
implementation

SWOT Analysis

Corporate level strategies

Business
Business level
level strategies
strategies
Strategic choice
Strategic
Strategic plan
plan
 

Fig 1.3 Strategic Management Model

 Benefits of Strategic Management

Following are the major benefits of Strategic

management:
1) Proactive in shaping firm’s future
2) Initiate and influence actions
3) Formulate better strategies (Systematic, logical,
rational approach)
 Benefits of Strategic Management….Continued

Benefits to a Firm That Does Strategic Planning

Greater The Result

Deeper/Improve Commitment All Managers
d . To achieve
Enhanced and
Understanding objectives
Communication Employees on
.of other’s view . To implement
. Dialogue a
. Of what the firm strategies
. Participation Mission to
is doing/planning . To work hard Help the
and way
Firm Succeed
Benefits of Strategic Management….Continued
Financial benefits:

i) Improved productivity
ii) Improved sales
iii) Improved profitability

Non-Financial benefits
i) Increased employee productivity
ii) Improved understanding of competitors’ strategies
iii) Greater awareness of external threats
iv) Understanding of performance reward relationships
v) Better problem-avoidance
 Benefits of Strategic Management….Continued
Greenley stated that strategic management offers the following
benefits:

1. It allows for identification, prioritization, and exploitation of

opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control
of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to
identified opportunities.
7. It allows fewer resources and less time to be devoted to
correcting erroneous or ad hoc decisions.
 Benefits of Strategic Management….Continued
8. It creates a framework for internal communication
among personnel.
9. It helps integrate the behavior of individuals into a total
effort.
10. It provides a basis for clarifying individual
responsibilities.
11. It encourages forward thinking.
12. It provides a cooperative, integrated, and enthusiastic
approach to tackling problems and opportunities.
13. It encourages a favorable attitude toward change.
14. It gives a degree of discipline and formality to the
management of a business