Chapter 1

Strategic management: model

Importance
Benefits
Challenges

 Strategy: This is your big plan or the steps you will take to reach your goals.
It’s like planning a trip where the destination is your goal, and the strategy is
the route you choose to get there.
 Strategic Management: This combines "strategy" and "management." It’s like
making sure you’re still on the right road during your trip and that your car is
working well. It helps you reach your goals effectively.
 Strategic management is the process of planning, monitoring, analyzing, and
assessing everything that is necessary for an organization to meet its goals
and objectives. An example is a business identifying its strengths and
weaknesses, then creating a plan to improve sales by capitalizing on those
strengths and addressing weaknesses.
 Parts of the Image:
1. Market Opportunity: It's like finding a good place to sell your
lemonade where lots of thirsty people walk by.
2. Formulation: This is where you make your plan. You decide how to
make your lemonade, what price to sell it for, and how to tell people
about it.
3. Plan: The detailed steps of your strategy. You might decide to make
fresh lemonade early every morning and put up signs for people to see.
4. Execution: This is when you start selling your lemonade. You follow
your plan and make adjustments if needed.
5. Implementation: Making sure your lemonade stand runs every day
and solves any problems like running out of sugar.

All these parts support the "STRATEGY" table-top, which is your overall plan to
succeed in your lemonade stand business.

1. Translate Strategic Decisions into Actions:

o What it means: Take your big ideas and turn them into step-by-step
tasks.
o Lemonade stand: If you decide to increase sales, start by creating a
new lemonade flavor each week.
2. Track Progress:
 o What it means: Regularly check if you’re meeting your goals.
o Lemonade stand: Count how many cups you sell daily to see if the new
flavors are popular.
3. Manage Changes:
o What it means: If something unexpected happens, adjust your plan
quickly.
o Lemonade stand: If it rains, you might sell hot lemon tea instead of
cold lemonade.
4. Deliver Information:
o What it means: Give updates to anyone involved with your business.
o Lemonade stand: Tell your family how the stand is doing if they help
you with it.

Objectives for Developing Strategies:

1. Financial (Market Share):

o What it means: Aim to sell more than your competitors.
o Lemonade stand: Try to be the most popular lemonade stand in your
neighborhood.
2. Customer (Quality/Value):
o What it means: Make sure your customers feel they’re getting great
lemonade for their money.
o Lemonade stand: Use fresh lemons and sell big cups of lemonade at a
good price.
3. Internal (Innovation):
o What it means: Find new and better ways to do things.
o Lemonade stand: Use a faster juicer to make lemonade quicker.
4. Customer Service/Satisfaction (After Sale Service):
o What it means: Make customers happy, even after they buy from you.
o Lemonade stand: Smile and say thank you, maybe give a loyalty card
for a free lemonade after they buy a few.
5. Operational Excellence (Reduce Cost/TQM):
o What it means: Make your lemonade stand run very well and at the
lowest cost without losing quality.
o Lemonade stand: Buy lemons in bulk to save money and make sure
every lemon is used well.
6. Regulatory (Ensure/Increase Recycling):
o What it means: Follow the rules, like recycling and keeping your stand
clean.
o Lemonade stand: Use recyclable cups and have a bin for customers to
recycle them.
7. Learning and Growth (Learn and Improve):
 o What it means: Keep learning new things to make your stand better.
o Lemonade stand: Learn from what works each day to make your stand
better tomorrow.

1. IKEA's Business: IKEA sells furniture that’s easy to put together. It also sells
home items like kitchen tools and decorations. It’s a big name in furniture
since 2008.
2. IKEA’s Start: A 17-year-old named Ingvar Kamprad started IKEA in Sweden in
1943. He became very rich. The name IKEA comes from his initials plus the
places he’s from.
3. Strategy Basics:
o IKEA makes products that fit what people need in their daily lives.
o They keep prices low.
o They focus on making things that look good and work well.
o Being kind to the environment is important in everything they do.
4. Key Success Factors:
o Solving Furniture Buying Stress: IKEA changed the idea that furniture
is for life. They made furniture for right now, which you can change
when your style changes.
o Targeting Young People: IKEA is popular with younger adults. They
like the modern look and fun product names. IKEA treats workers well
and is open about how things are made.
o Making Stores a Fun Place: IKEA’s stores are more than just shops.
They have showrooms and places to eat. People go to IKEA for the
experience, not just to buy something.

Using these ideas, IKEA has built a strong business that stands out in the furniture
world.

Strategy Pyramid:

1. Mission/Vision:
o Simple meaning: Your big dream for your lemonade stand.
o Example: To be the neighborhood's favorite lemonade provider.
2. Strategies:
o Simple meaning: The main ways you'll make your dream come true.
o Example: Offer unique lemonade flavors; provide quick and friendly
service.
 3. Smart Goals:
o Simple meaning: Specific targets you set to help you follow your
strategy.
o Example: Sell 50 cups a day; introduce a new flavor every week.
4. Objectives:
o Simple meaning: Clear steps to hit your targets.
o Example: Use social media to tell people about the new flavors; get
feedback to improve.
5. Action Plan:
o Simple meaning: Detailed tasks you need to do each day or week.
o Example: Make 10 posts a week on social media; buy fresh lemons
twice a week.

Role of Strategy:

1. Vision:
o Simple meaning: The big picture of what you want your lemonade
stand to be known for.
o Example: A fun place where everyone can enjoy fresh, tasty lemonade.
2. Product Strategy:
o Simple meaning: Decisions about what you sell and how it's different
from others.
o Example: Your lemonade uses a secret recipe that makes it extra
refreshing.

These diagrams show how every small task at your lemonade stand is part of a
bigger plan to make your stand successful and loved by your customers.

1. Strategic Management:
o Used in schools and universities (academia).
o Involves creating plans (formulation), putting them into action
(implementation), and checking to see if they work (evaluation).
2. Strategic Planning:
o Used in businesses.
o Involves making plans (formulation) and studying them (analysis).
o Started in the 1950s, was very common until the 1980s, and became
popular again in the 1990s.

So, strategic management is like the whole process of running your lemonade stand,
from planning to selling lemonade and seeing if your plans work. Strategic planning
is more about making the plans for your stand and looking at them closely to make
sure they make sense.
 1. External Audit: Look outside your business to see what’s happening in the
market. For the lemonade stand, it’s like checking out what other lemonade
stands are doing.
2. Develop Vision and Mission Statements: Decide what your lemonade
stand’s big goal is (vision) and what it’s here to do (mission).
3. Internal Audit: Look inside your business to see what you’re good at and
what you need to improve. Like, finding out if you’re making lemonade as
tasty and fast as you can.
4. Establish Long-Term Objectives: Set big goals for the future. Maybe you
want to be the best lemonade stand in town in five years.
5. Generate, Evaluate, and Select Strategies: Think of different ways to reach
your goals, choose the best ones, and decide which to use. You might want to
add snacks to your menu or start a delivery service.
6. Implement Strategies – Management Issues: Start doing the strategies
you’ve chosen, like training a friend to help with the stand.
7. Implement Strategies - Marketing, Finance, R&D, and MIS Issues: Work
on specific areas like telling people about your stand (marketing), managing
money (finance), making better lemonade (R&D), and keeping track of sales
(MIS).
8. Measure and Evaluate Performance: Check if your strategies are working. If
more people are buying your lemonade, things are going well.

This model helps you plan, do, and check your business strategy in steps to make
your lemonade stand successful.
  Einstein on Intuition: Even Einstein thought feelings and imagination are key,
sometimes even more than knowledge.
 Why Strategic Management Matters:
o Helps you plan your work or business with reason.
o You study it because situations always change, and you must adapt.
 Challenges in Strategic Management:
o Growth: The main goal is to get bigger and better.
o Value: To grow, you need a strong base, which means offering
something valuable.
o Focus: To increase value, you need clear focus—knowing what to do
well.
o Change: Growth and value lead to change; design your business ready
for it.
o Predicting the Future: Investing in change means guessing what will
happen next.
o Knowledge: Use what you know to make good plans.
o Time: It’s important to use the time of leaders wisely—they can’t do
everything.

 Strategic Management:
o Helps organize business choices.
o Learning it helps managers solve problems and make good choices
when they need to.
 Complex Business World:
o Businesses face many challenges and directions.
o Quick, short-term planning and good organization of resources (like
time and money) need strategic management.

In simple terms, learning strategic management helps you handle a fast-changing

business world, understand tough problems, and make smart decisions. It connects
technology, education, and business trends so companies can succeed even when
things are complicated.

Why strategic management information is important ?

Studying strategic management is important because:

 It's a new area of study that gives a fresh perspective on business.

 It combines traditional business subjects to show how they work together in
real business situations.
 It's like a final class that brings together everything learned in other business
courses.
 It teaches how different parts of a business can work together to make the
company stronger.
 It helps managers understand how all parts of a business depend on each
other.
 It builds skills for working with people from different areas and backgrounds.
 It prepares current and future managers for the fast-paced and ever-changing
business world.