Republic of the Philippines

GUIMARAS STATE COLLEGE

Mc Lain, Buenavista, Guimaras

Module 1: Introduction to Strategic Management

This module deals with strategy, nature and importance of strategic management. It
identifies and discusses dimensions and benefits, risk involved and process of strategic
management.

At the end of this module students will be able to:

1. State the meaning, nature and importance of strategic management
2. Explain the dimensions and benefits of strategic management
3. Identify the risks involved in strategic management
4. Discuss the strategic management process.

In its simplest conception strategy is regarded as a unifying idea which links purpose and
action. For De Wit and Meyer (1998), in an intelligent treatment of the subject, strategy is any
course of action for achieving an organization’s purpose(s).

In the words of Alfred Chandler, the first modern business strategy theorist, strategy in the
area of business is defined as ‘the determination of the basic, long-term goals and objectives of
an enterprise, and the adoption of courses of action and the allocation of resources necessary
for those goals’ (Chandler, 1962: 13). Strategy combines the articulation of human goals and
the organization of human activity to achieve those goals. The setting of goals involves the
identification of opportunity. Strategy is a process of translating perceived opportunity into
successful outcomes, by means of purposive action sustained over a significant period of time.

Every aspect of the organisation plays a role in strategy – its people, its finances, its
production methods, and its customers and so on. Thus, Strategic Management is that set of
managerial decisions and actions that involves formulating and implementing strategies that will
help in aligning the organisation and its environment to achieve organisational goals . Strategic
management includes those management processes in organisations through which future
impact of change is determined and current decisions are taken to reach a desired future. In
short, strategic management is about visualising the future and recognizing it.

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 Republic of the Philippines
GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

Strategic Management: Defined

To understand more on strategic management, it is important to begin with its
definitions from various authors;

1. To Alfred Chandler (1962), “Strategic management is concerned with the determination

of the basic long-term goals and the objectives of an enterprise, and the adoption of
courses of action and allocation of resources necessary for carrying out these goals”.
2. Glueck and Jauch (1984) defined Strategic management “as a stream of decisions and
actions which lead to the development of an effective strategy or strategies to help
achieve corporate objectives”.
3. Pearce and Robinson (1988) defined Strategic management “as the set of decisions and
actions resulting in the formulation and implementation of plans designed to achieve a
company’s objectives.”
4. Fed R David (1997) defined “Strategic management “ as a process of formulating,
implementing and evaluating cross-functional decisions that enable an organisation to
achieve its objective”.
5. To Johnson and Sholes ( 2002 ), “Strategic management includes understanding the
strategic position of an organisation, making strategic choices for the future and turning
strategy into action.”
6. According to Dess, Lumpkin & Taylor ( 2005 ) “Strategic management consists of the
analysis, decisions, and actions an organisation undertakes in order to create and
sustain competitive advantages.”

Chandler that we have quoted above is from the early 1960s, the period when strategic
management was being recognized as a separate discipline.
This definition consists of three basic elements:
1. Determination of long-term goals
2. Adoption of courses of action
3. Allocation of resources to achieve those goals

The definitions of Fred R. David, Pearce and Robinson, Johnson and Sholes and Dell,
Lumpkin and Taylor are some of the definitions of recent origin. Taken together, these definitions
capture three main elements that go to the heart of strategic management. The three on-going
processes are strategic analysis, strategic formulation and strategic implementation. These three
components parallel the processes of analysis, decisions and actions. That is, strategic management
is basically concerned with:

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Mc Lain, Buenavista, Guimaras

1. Analysis of strategic goals (vision, mission and objectives) along with the analysis of the
external and internal environment of the organisation.
2. Decisions about two basic questions:

● What businesses should we compete in?

● How should we compete in those businesses to implement strategies?

3. Actions to implement strategies. This requires leaders to allocate the necessary resources
and to design the organisation to bring the intended strategies to reality. This also
involves evaluation and control to ensure that the strategies are effectively implemented.

The essence of strategic management is that how managers in the global environment
decide on strategies that can provide competitive advantage and can sustained over time to their
organizations.

Strategic Management can be defined as the art & science of formulating, implementing,
and evaluating, cross-functional decisions that enable an organisation to achieve its objectives.
Strategic management is different in nature from other aspects of management. An individual
manager is most often required to deal with problems of operational nature. He generally focuses
on day-to-day problems such as the efficient production of goods, the management of a sales force,
the monitoring of financial performance or the design of some new system that will improve the
level of customer service.
Attention!
These are all very important tasks. But they are essentially concerned with
effectively managing resources already deployed, within the context of an existing strategy.
In other words, operational control is what managers are involved in most of their time. It is
vital to the effective implementation of strategy, but it is not the same as strategic
management.

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

Strategic management involves elements geared toward a firm's long term survival and
achievement of management goals. The components of the content of a strategy making process
include a desirable future, resource allocation, management of the firm-environment and a
competitive business ethics. However, some conflicts may result in defining the content of strategy
such as differences in interaction patterns among associates, inadequacy of available resources and
conflicts between the firm's objectives and its environment.

Dimensions of Strategic Management

The characteristics of strategic management are as follows:
1. Top management involvement: Strategic management relates to several areas of a firm’s
operations. So, it requires top management’s involvement. Generally, only the top
management has the perspective needed to understand the broad implications of its
decisions and the power to authorize the necessary resource allocations.

2. Requirement of large amounts of resources: Strategic management requires commitment of

the firm to actions over an extended period of time. So they require substantial resources,
such as, physical assets, money, manpower etc.
Example: Decisions to expand geographically would have significant financial
implications in terms of the need to build and support a new customer base.

3. Affect the firm’s long-term prosperity: Once a firm has committed itself to a particular
strategy, its image and competitive advantage are tied to that strategy; its prosperity is
dependent upon such a strategy for a long time.

4. Future-oriented: Strategic management encompasses forecasts, what is anticipated by the

managers. In such decisions, emphasis is placed on the development of projections that will
enable the firm to select the most promising strategic options. In the turbulent environment,
a firm will succeed only if it takes a proactive stance towards change.

5. Multi-functional or multi-business consequences: Strategic management has complex

implications for most areas of the firm. They impact various strategic business units
especially in areas relating to customer-mix, competitive focus, organisational structure etc.
All these areas will be affected by allocations or reallocations of responsibilities and
resources that result from these decisions.

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

6. Non-self-generative decisions: While strategic management may involve making decisions

relatively infrequently, the organisation must have the preparedness to make strategic
decisions at any point of time. That is why Ansoff calls them “non-self-generative decisions.”

Need for Strategic Management

Strategic management provides the route map for the firm. It makes it possible for the firm
to take decisions concerning the future with a greater awareness of their implications. It provides
direction to the company; it indicates how growth could be achieved.
The external environment influences the management practices within any organization.
Strategy links the organization to this external world. Changes in these external forces create both
opportunities and threats to an organization’s position – but above all, they create uncertainty.
Strategic planning offers a systematic means of coping with uncertainty and adapting to
change. It enables managers to consider how to grasp opportunities and avoid problems, to
establish and coordinate appropriate courses of action and to set targets for achievement.
Lastly, strategic management helps to formulate better strategies through the use of a more
systematic, logical and rational approach. Through involvement in the process, managers and
employees become committed to supporting the organization. The process is learning, helping,
educating and supporting activity.

An increasing number of firms are using strategic management for the following reasons:

1. It helps the firm to be more proactive than reactive in shaping its own future.
2. It provides the roadmap for the firm. It helps the firm utilize its resources in the
best possible manner.
3. It allows the firm to anticipate change and be prepared to manage it.
4. It helps the firm to respond to environmental changes in a better way.
5. It minimizes the chances of mistakes and unpleasant surprises.
6. It provides clear objectives and direction for employees.

Benefits of Strategic Management

Today’s enterprises need strategic management to reap the benefits of business
opportunities, overcome the threats and stay ahead in the race. The purpose of strategic
management is to exploit and create new and different opportunities for tomorrow; while long-term
planning, in contrast, tries to optimize for tomorrow the trends of today.
In the global environment top companies are involved in strategic management. They are
finding ways to respond to competitors, cope with difficult environmental changes, meet changing
customer needs and effectively use available resources. At a time when the business environment is
changing rapidly, even established firms are paying more attention to strategy because they may

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

face new competitors who threaten their core business. Should a firm compete in all areas or
concentrate on one area? Should a company try to extend the brand to even more diverse areas of
activity, or would it gain more by building profits in the existing areas, and achieving more
synergies across the group? Should the company continue the current strategy as it is now, or
would it initiate a radical review of its strategy? These are just a few examples of the strategic part
of the management tasks.

It is important to note that strategic planning goes far beyond the planning
process. Unlike traditional planning, strategic planning involves a long-range planning
Notes : under conditions of uncertainty and complexity such a planning involves:
l. Strategic thinking
2. Strategic decision-making
3. Strategic approach

A structured approach to strategy planning brings several benefits (Smith, 1995; Robbins, 2000)
1. It reduces uncertainty: Planning forces managers to look ahead anticipate change and
develop appropriate responses. It also encourages managers to consider the risks
associated with alternative responses or options.
2. It provides a link between long and short terms: Planning establishes a means of
coordination between strategic objectives and the operational activities that support the
objectives.
3. It facilitates control: By setting out the organisation’s overall strategic objectives and
ensuring that these are replicated at operational level, planning helps departments to move
in the same direction towards the same set of goals.
4. It facilitates measurement: By setting out objectives and standards, planning provides a
basis for measuring actual performance.

Strategic management has thus both financial and non-financial benefits:

1. Financial Benefits: Research indicates that organisations that engage in strategic

management are more profitable and successful than those that do not. Businesses that
followed strategic management concepts have shown significant improvements in sales,
profitability and productivity compared to firms without systematic planning activities.
2. Non-financial benefits: Besides financial benefits, strategic management offers other
intangible benefits to a firm. They are;

● Enhanced awareness of external threats

● Improved understanding of competitors’ strategies

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

● Reduced resistance to change

● Clearer understanding of performance-reward relationship

● Enhanced problem-prevention capabilities of organisation

● Increased interaction among managers at all divisional and functional levels

● Increased order and discipline.

According to Gordon Greenley, strategic management offers the following benefits:

1. It allows for identification, prioritization and exploitation of opportunities.
2. It provides objective view of management problems.
3. It provides a framework for improved coordination and control of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows decision-making to 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
and ad hoc decisions.
8. It creates a framework for internal communication among personnel.
9. It helps integrate the behaviour 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 enthusiastic approach to tackling problems
and opportunities.
13. It encourages a favourable attitude towards change.
14. It gives a degree of discipline and formality to the management of a business.

Risks involved in Strategic Management

Strategic management is an intricate and complex process that takes an organisation into
unchartered territory. It does not provide a ready-to-use prescription for success. Instead, it takes
the organisation through a journey and offers a framework for addressing questions and solving
problems.
Strategic management is not, therefore, a guarantee for success; it can be dysfunctional
if conducted haphazardly. The following are its limitations:
1. It is a costly exercise in terms of the time that needs to be devoted to it by
managers. The negative effect of managers spending time away from their normal
tasks may be quite serious.
2. A negative effect may arise due to the non-fulfilment of the expectations of the
participating managers, leading to frustration and disappointment.
3. Another negative effect of strategic management may arise if those associated
with the formulation of strategy are not intimately involved in the implementation
of strategies.

The participants in formulation of the policy may shirk their responsibility for the decisions taken.

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

As quoted by Fred R. David, some pitfalls to watch for and avoid in strategic planning are:
1. Using strategic planning to control over decisions and resources
2. Doing strategic planning only to satisfy accreditation or regulatory requirements
3. Moving too hastily from mission development to strategy formulation
4. Failing to communicate the strategic plan to the employees, who continue working
in the dark
5. Top managers making many intuitive decisions that conflict with the formal plan
6. Top managers not actively supporting the strategic planning process
7. Failing to use plans as a standard for measuring performance
8. Delegating strategic planning to a consultant rather than involving all managers
9. Failing to involve key employees in all phases of planning
10. Failing to create a collaborative climate supportive of change
11. Viewing planning to be unnecessary or unimportant
12. Becoming so engrossed in current problems that insufficient or no planning is done
13. Being so formal in planning that flexibility and creativity are stifled.

Strategic Management Process

Developing an organisational strategy involves four main elements – strategic analysis,
strategic choice, strategy implementation and strategy evaluation and control. Each of these
contains further steps, corresponding to a series of decisions and actions that form the basis of
strategic management process.

1. Strategic Analysis: The foundation of strategy is a definition of organisational purpose.

This defines the business of an organisation and what type of organisation it wants to be.Many
organisations develop broad statements of purpose, in the form of vision and mission statements.
These form the spring – boards for the development of more specific objectives and the choice of
strategies to achieve them.
Environmental analysis – assessing both the external and internal environments is the next step in
the strategy process. Managers need to assess the opportunities and threats of the external
environment in the light of the organisation’s strengths and weaknesses keeping in view the
expectations of the stakeholders. This analysis allows the organisation to set more specific goals or
objectives which might specify where people are expected to focus their efforts. With a more
specific set of objectives in hand, managers can then plan how to achieve them.

2. Strategic Choice: The analysis stage provides the basis for strategic choice. It allows

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 Republic of the Philippines
GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

managers to consider what the organisation could do given the mission, environment and
capabilities – a choice which also reflects the values of managers and other stakeholders.
(Dobson et al. 2004). These choices are about the overall scope and direction of the business.
Since managers usually face several strategic options, they often need to analyze these in
terms of their feasibility, suitability and acceptability before finally deciding on their direction.

3. Strategy Implementation: Implementation depends on ensuring that the organisation has

a suitable structure, the right resources and competencies (skills, finance, technology etc.),
right leadership and culture. Strategy implementation depends on operational factors being
put into place.
4. Strategy Evaluation and Control: Organisations set up appropriate monitoring and control
systems, develop standards and targets to judge performance.

Steps in Strategic Management Process

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 Republic of the Philippines
GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

The above steps can also be depicted as a series of processes involved in strategic
management.

A General Framework of Strategic Management Process

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

The seven steps in the above model of strategy process fall into three broad phases –
formulation, implementation and evaluation – though in practice the three phases interact
closely. Good strategists know that formulation and implementation of strategy rarely proceed
according to plan, partly because the constantly changing external environment brings new
opportunities or threats, and partly because there may also be inadequate internal competence.
Since these may lead the management to change the plan, there will be frequent interaction
between the activities of formulating and implementing strategy, and management may need to
return and reformulate the plan.

MODULE 1 : Introduction to Strategic Management

MATERIALS : Activity Sheets
REFERENCES:
Books:
1. Rao,Paravathiswara Rao and Sivaramakrishna (2011), Strategic Management LPU Phgwara,
Produced & Printed by Excel Books Private Limited New Delhi-110028

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 Republic of the Philippines
GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

2. Kumar, Suresh Department of Management Sciences

Sasurie College of Engineering Vijayamangalam – 638 056 BA 7032, Strategic Management PDF
File Adapted from Pearce JA and Robinson RB, Strategic Management, McGraw Hill, NY, 2000.
3. Fed R David, Strategic Management, New Jersey, Prentice Hall, 1997.
Hugh MacMillan and Mahen Tampoe, Strategic Management, Oxford University Press, 2000.
4. Johnson Gerry and Sholes Kevan, Exploring Corporate Strategy, 6th Edition, Pearson Education
Ltd., 2002.
5. Richard Lynch, Corporate Strategy, Essex, Pearson Education Ltd., 2006.
6. Wheelen Thomas L, David Hunger J, Krish Rangarajan, Concepts in Strategic
Management and Business Policy, New Delhi, Pearson Education, 2006.
Online links:

● www.csuchico.edu/mgmt/strategy

● www.netmba.com/strategy

● www.quickmba.com/strategy

● www.wisegeek.com/what-is-the-strategic-management

Name:___________________________ Year & Section____________Date__________Score:_____

Performance Task

Activity # 1 Comprehension: Using your own words,

explain the following: (5 points each item). Write your answer on the space
provided.

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GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

1. Strategy:

2.Environmental
Analysis

3.Financial Benefits:

Name:___________________________ Year & Section____________Date__________Score:_____

Performance Task
A
ctivity
#2–
Hook

1. P O F E R R A C N E M

Answer: __________________________________________________
2. N G A L P I N N

Answer: __________________________________________________

3. L E T E X R A N

Answer: __________________________________________________

4. T I R D I E C N O

Answer: __________________________________________________

5. N O O F R U M L A I T

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 Republic of the Philippines
GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

Answer: _________________________________________________

Name:___________________________ Year & Section____________Date__________Score:_____

Performance Task
Activity # 3 Fill in the blanks.
Write your answer on the space provided.

1. Strategic management provides overall ________________ to the enterprise.

2. Strategic management is a question of interpreting, and continuously ______________, the
possibilities presented by______________ circumstances for advancing an organization’s
objectives.
3. The foundation of strategy is a definition of organizational________________.
4. Organizations set up appropriate monitoring and control systems, develop standards and targets
to judge ________________.
5__________________and__________________ of strategy rarely proceed according to plan.
6. The first step in the strategic management process is to develop the corporate__________ and
__________________________.
7. Once a firm has committed itself to a particular strategy, its ______________
and_______________ are tied to it.
8. A _________________ can be defined as the overall goal of an organization that all business
activities and processes should contribute toward achieving.
9. Formulation and implementation of strategy must occur side-by-side rather than ___________.
10. When a strategy becomes internalized into a corporate culture, it can lead to_____________.
11. Strategic planning goes far beyond the___________________ process.
12. Generally, only the ________________ has the perspective needed to understand the broad
implications behind the strategic plans.
13. The real strategic goals are realized only along with the analysis of the______________ and
________________ environment of the organization.
14. Developing an organisational strategy involves ______________________ main elements.
15. Strategic planning is a ______________ exercise in terms of the time that needs to be devoted
to it by managers.

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 Republic of the Philippines
GUIMARAS STATE COLLEGE
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Name:___________________________ Year & Section____________Date__________Score:_____

Activity # 4 - Model Question (30 points)

Performance Task Illustrate the model of strategic management and
explain its components.
Write your answer on the space provided.

Name:___________________________ Year & Section____________Date__________Score:_____

Performance Task Activity # 5 Reflections; Write on the space provided.

Two (2) things I found interesting

3 important things I
learned in Module I.

1.

One thing I wish to learn.

2.

How can I maintain or improve my class rank?

3. ______________________________________
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 Republic of the Philippines
GUIMARAS STATE COLLEGE
Mc Lain, Buenavista, Guimaras

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