INTRODUCTION TO STRATEGIC

MANAGEMENT

Alex Chanza
April 2021
1
 INTRODUCTION

• Contact Hours & Assessment

• Aim & course outcomes
• Topics of Study
• References

Topic 0: Introduction

2
 CONTACT HOURS AND
ASSESSMENT
• Contact hours:
– Lecture Hours per week :3
– Tutorial hours per week :1
• Assessment:
– Course work: 40%
• Assignments 20%
• Mid-Semester Exam 20%
– End-Semester Exam 60%

3
 REFERENCES

• Prescribed Books
• David F. R. (2010): Strategic Management:
Concepts, (13th edition), Prentice Hall, Upper
Saddle River, NJ.
• Recommended Books
• Hitt Michael A., et al. (2006): Strategic
Management competitiveness and
Globalization: Concepts and cases, 7th
edition, Thomson South - Western. Johnson
Jerry,
• Kevan Scholes et al. (2006): Exploring
4
 OBJECTIVES

1. Distinguish between strategic management and

operational management
2. Explore the advantages and disadvantages of
different approaches to strategic management
3. Describe the processes and routines used in
your organisation to handle strategic
management.
4. Describe the way in which strategic
management is supported at different levels in
the organisation
5. Explain your role in strategic management and
how this role can be developed.
5
 “Notable Quotes”

• "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

6
 “Notable Quotes”

• "If a man takes no thought about what is

distant, he will find sorrow near at hand. He
who will not worry about what is far off will
soon find something worse than worry."
• —Confucius

7
 INTRODUCTION

• Organisation like families, are groups of people

who systematically coordinate their activities in
pursuit of a common objective.
• The strategic theme of any organisation is
concerned with the effective adaptation of the
organisation to its environment through time.

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 CURRENT PREDICTIONS

• Current predictions world-over (Including

Malawi) are that the environment will
become even more complex and turbulent
in the years to come, more so with
globalisation and technology changes.
• For organisations to survive this turbulent
(rapidly changing) environment managers
must address three key strategic questions:

9
 CURRENT PREDICTIONS cont..

1. Where is the organisation now?

2. If no changes are made, where will the
organisation be in one, two, five or even ten
years?
3. If the answers are not acceptable, what specific
action should management undertake?

10
 CURRENT PREDICTIONS cont..

▪ In addressing the above questions, managers are

trying to respond to environmental turbulence
strategic decisions. These are the underlying
issues in strategic management.
▪ In addressing the above questions, managers are
trying to respond to environmental turbulence
strategic decisions. These are the underlying
issues in strategic management.

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 What is Strategic Management?

• Strategic management - the art and science of

formulating, implementing, and evaluating cross-
functional decisions that enable an organization to
achieve its objectives.
• Strategic management focuses on integrating
management, marketing, finance/accounting,
production/operations, research and development,
and information systems to achieve organizational
success.

12
 What is Strategic Management?

• The term strategic management in this text is used

synonymously with the term strategic planning.
• strategic planning is more often used in the
business world, whereas strategic management is
often used in academia.
• Sometimes the term strategic management is used
to refer to strategy formulation, implementation,
and evaluation, with strategic planning referring
only to strategy formulation.
13
 What is Strategic Management?

• Strategic management is applied by managers

to align an organisation’s direction with its
aims.
• This alignment will take place when needed
changes in the environment i.e. Clients,
customers, services, procedures policies etc
are devised and implemented.
• Strategic Management: decisions and
actions that result in the formulation and
implementation of strategies designed to
achieve the objectives of an organization
14
 What is Strategic Management?

• Therefore, strategic management is that set of

managerial decisions and actions that determine
the performance of an organisation in the long
run. This includes:
• Environmental scanning
• Formulation of strategy or strategic planning
• Implementation of strategy
• Evaluation and control

15
 What is Strategic Management?

▪ Strategic management therefore emphasises

monitoring and evaluation of environmental
opportunities and threats taking into account
the organisation’s strengths and weaknesses.

▪ Developing and implementing strategy means

making decisions about the future of the
organisation.

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Stages of Strategic Management

• strategy formulation, strategy,

implementation, and strategy evaluation.
• Strategy formulation
– includes developing a vision and mission,
– identifying an organization’s external
opportunities and threats,
– Determining internal strengths and
weaknesses, establishing long-term
objectives, generating alternative strategies

17
Stages of Strategic Management

• choosing strategies to pursue

• deciding what new businesses to enter, what businesses to
abandon, how to allocate resources, whether to expand
operations or diversify, whether to enter international
markets, whether to merge or form a joint venture
• deciding which alternative strategies will benefit the firm
most.
• Strategy-formulation decisions commit an organization to
specific products, markets, resources, and technologies over
an extended period.
• Strategies determine long-term competitive advantages.
• For better or worse, strategic decisions have major
multifunctional consequences and enduring effects on an
organization.
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 Strategy implementation
• Strategy implementation requires a firm to establish annual
objectives, devise policies, motivate employees, and
allocate resources so that formulated strategies can be
executed.
• Strategy implementation includes developing a strategy-
supportive culture, effective organizational structure,
redirecting marketing efforts, preparing budgets, developing
and utilizing IS and linking employee compensation to
organizational performance.
• Mobilizing employees and managers to put formulated
strategies into action. Often considered to be the most
difficult stage in strategic management,
• strategy implementation requires personal discipline,
commitment, and sacrifice. Successful strategy
implementation hinges upon managers’ ability to motivate
employees
19
 Strategy evaluation

• Strategy evaluation is the final stage in strategic

management. Managers desperately need to know
when strategies are not working well;
• Strategy evaluation is the primary means for obtaining
this information. All strategies are subject to future
modification because external and internal factors are
constantly changing.
• Three fundamental strategy-evaluation activities are
(1) reviewing external and internal factors that are the bases for
current strategies,
(2) measuring performance, and
(3) taking corrective actions.

• Strategy evaluation is needed because success today is

no guarantee of success tomorrow!

20
 Key terms

• Competitive Advantage
• Strategic management is all about gaining
and maintaining competitive advantage.
• Competitive Advantage - “anything that a
firm does especially well compared to rival
firms.”
• When a firm can do something that rival
firms cannot do, or owns something that
rival firms desire, that can represent a
competitive advantage.
21
 Strategists

• Strategists are the individuals who are most

responsible for the success or failure of an
organization.
• Strategists have various job titles, such as chief
executive officer, president, owner, chair of the board,
executive director, chancellor, dean, or entrepreneur.
• Strategists help an organization gather, analyze, and
organize information.
• Strategists track industry and competitive trends,
develop forecasting models and scenario analyses,
evaluate corporate and divisional performance, spot
emerging market opportunities, identify business
threats, and develop creative action plans

22
 visioning

• Vision is the art of seeing what is invisible to others.

• A vision is a dream, a source of direction and a first step in planning
and setting goals
• Vision and Mission Statements
• A vision statement answers the question “What do we want to
become?”
• Developing a vision statement is often considered the first step in
strategic planning, preceding even development of a mission statement.
• Many vision statements are a single sentence.
• Famous visions include that of Martin Luther King Jr shared in his “I
have a dream” speech; John F. Kennedy’s dream to put a man on the
moon or Bill Gates’ dream to put a computer in every home
• As such, a vision should be clear, inspiring, challenging and compelling.

23
 Mission statements

• A vision should not be confused with a mission. A

vision looks to the future.
• A mission is about day-to-day operations. A mission
often states what the primary business of the or-
ganization is, what products and services it offers and
what the short to medium term goals or results will be.
It is about the “here and now.”
• Mission statements are “enduring statements of
purpose that distinguish one business from other
similar firms. A mission statement identifies the scope
of a firm’s operations in product and market terms.”12
It addresses the basic question that faces all
strategists: “What is our business?” A clear mission
statement describes the values and priorities of an
organization. 24
External opportunities and external
threats
• External opportunities and external threats refer to economic,
social, cultural, demographic, environmental, political, legal,
governmental, technological, and competitive trends and
events that could significantly benefit or harm an
organization in the future.
• Opportunities and threats are largely beyond the control of a
single organization—thus the word external.
• A basic principle of strategic management is that firms need
to formulate strategies to take advantage of external
opportunities and to avoid or reduce the impact of external
threats.
• For this reason, identifying, monitoring, and evaluating
external opportunities and threats are essential for success.
This process of conducting research and gathering and
assimilating external information is sometimes called
environmental scanning or industry analysis.

25
 Internal Strengths and Weaknesses

• Internal strengths and internal weaknesses are an organization’s

controllable activities that are performed especially well or
poorly.
• They arise in the management, marketing,
• finance/accounting, production/operations, research and
development, and management information systems activities of
a business.
• Identifying and evaluating organizational strengths and
weaknesses in the functional areas of a business is an essential
strategic management activity.
• Organizations strive to pursue strategies that capitalize on
internal strengths and eliminate internal weaknesses.
• Strengths and weaknesses are determined relative to
competitors. Relative deficiency or superiority is important
information.

26
 Objectives

• Objectives can be defined as specific results that an

organization seeks to achieve in pursuing its basic
mission. Long-term means more than one year.
• Objectives are essential for organizational success
because they state direction; aid in evaluation; create
synergy; reveal priorities; focus coordination; and
provide a basis for effective planning, organizing,
motivating, and controlling activities.
• Objectives should be challenging, measurable,
consistent, reasonable, and clear. In a multidimensional
firm, objectives should be established for the overall
company and for each division.
27
 Strategies
• Strategies are the means by which long-term
objectives will be achieved.
• Business strategies may include geographic
expansion, diversification, acquisition, product
development, market penetration,
retrenchment, divestiture, liquidation, and joint
ventures.
• strategies affect an organization’s long-term
prosperity, typically for at least five years, and
thus are future-oriented. Strategies have
multifunctional or multidivisional consequences
and require consideration of both the external
and internal factors facing the firm.
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 Why no strategic planning

❖Lack of knowledge or experience in

strategic planning
❖Poor reward structures
❖Firefighting.
❖Waste of time
❖Too expensive
❖Laziness.

29
 FIVE TASKS OF
STRATEGIC MANAGEMENT

• Defining business, stating a mission, and

forming a strategic vision.
• Setting measurable objectives
• Crafting a strategy to achieve objectives
• Implementing the strategy
• Evaluating performance, reviewing new
developments and initiating corrective
adjustments.

30
 Strategic Management and
Operational Management

Strategic Management Operational Management

Is the process of understanding the Involves executing the strategy on the
business environment, developing the day to day basis to achieve the desired
desired state of performance and performance in the long run.
implementing strategies to achieve it.

Long- term process where it identifies Short- term focused and handles day to
the long term desired level of day operations of an entity.
performance and tries to achieve it.
Involves non- routinized tasks where Involves day to day activities of a
there is very ambiguous and dynamic business organization at the operations
nature. level which is very routinized and
mechanical. It does not involve any
ambiguity.

31
 Strategic Management and
Operational Management cont..

A complex process which requires Is a fairly simple process and a

heavy management skills to manager with average skills can
handle. handle the daily operations of the
organization.
It identifies the factors that has Operation management is not
direct link to the survival of an directly related to the survival of
organization and manage them to the organization rather it indirectly
optimize performance. influences the survival through
cumulative performance on a day
to day basis.

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Evolution of Strategic Management

Intuitive strategies have not been successful

where the following
conditions prevail:
1 organisation becoming large
2 Layers of management increasing or
3 Environment changing substantially

33
 What is strategy?
(Concept and Definitions)

• Strategy is the direction and scope of an

organisation over the long term, which achieves
advantage in a changing environment through its
configuration of resources and competences with
the aim of fulfilling stakeholder expectations.
• Strategy is an organisation plans or actions
which, over the medium or long term, enables it
to achieve its goals.
• An effective strategy is one that creates
competitive advantages for the business that are
sustainable ever time.

34
 Examples of strategies that companies may adopt to
establish sustainable competitive advantage

• Differentiation
• Low cost
• Niche marketing
• High performance, quality services or
technology
• Culture and style of an organisation

35
To identify appropriate forms of competitive
advantage

• You need to understand the environment.

- Customers
- Suppliers
- Competitors
- Political
- Economic
- Socio-cultural
- Technological
There is also need to understand what your
organisation is capable of achieving.
36
• So organisational strategy is concerned with
matching the external environment to
organisations internal environment in order to
add value to its products/services and enable
it to beat the competition.

37
• Strategy and strategic decisions are likely to
be concerned with :
– Long term direction of the organisation
– Achieve advantage for the organisation
– Matching the activities of the organisation to the
environment in which it operates.
- in search of a ‘Strategic fit’

38
• Strategic fit expresses the degree to which an
organization is matching its resources and
capabilities with the opportunities in the
external environment.
• The matching takes place
through strategy and it is therefore vital that
the company has the actual resources and
capabilities to execute and support
the strategy.
• Strategic management recognises that
formulating and implementation of strategies
are related parts of the same process.
39
 Historical perspective

• According to Ansoff, Strategic management is

an elusive an abstract concept.
• A strategy emerged as a business concept in
the United States after second world war.

40
Approaches to strategic management

• There are two distinct approaches to strategic

management:
– The prescriptive approaches
– Emergent approaches

41
Prescriptive Emergent approach
approach • Responsive to
• Planned in advance changes in the
• Analytical tools environment
• Depends on stability • Learning, culture
• Top down • Suitable in
uncertainty
• anywhere
42
 Arguments for and against the two
approaches

• Planning is not thinking

– It does not lead to innovation
– Prescriptive approaches involve analysis of large
amounts of hard data
– Emergent approaches involve experimentation by
people at different levels in an organisation.

43
 Combined approach

• Use of different approaches may be suitable

at different times.
• Combined approaches help organisations to
develop new skills and retain flexibility.
• There is need for balance between the
emergent and prescriptive approaches.
• This sometimes referred to as ‘umbrella
strategies’

44
 Initiation of Strategic Change

• Strategy formulation is not a regular,

continuous process but it is most often an
irregular discontinuous process, proceeding in
firsts and starts.
• This view is based on the premise that human
beings tend to continue on a certain course of
action until something goes wrong
or is forced to question his or her actions.

45
However, the stimulus for a strategic change
usually lies in one or more triggering events.
Some possible triggers are:
• New Management
• Intervention by an external institution, such as a
bank
• Threat of a change in ownership, i.e.
privatisation, commercialisation, or takeovers;
and
• Recognition by Management of a performance
gap.

46
• The emergence of new Chief Executive Officer
in an organisation may serve as a triggering
event.
• A bank’s (or donors) refusal to make new loans
• The threat of takeover may force management
to review the existing strategies.
• Another trigger is a performance gap. When
organisation performance does not meet
expectations.
47
• Even the organisation mission may be
questioned. That marks the beginning of
environmental scanning of both internal and
external variables.

48
 LEVELS OR HIERARCHY OF
STRATEGY

• The role and responsibility of individual

managers in a strategic management process
will vary depending on the size of organisation.
• In small business the owner will perform the role
of the Chief Executive and will be responsible
for various aspects of the strategic management
process.

49
• Thus he/she could be responsible for strategy
formulation as well as implementing it.
• If the organisation grows, the strategic
management role will be assigned to
managers at different levels in the
organisation.

50
In large organisations top management
assume responsibility for the entire process
with middle management concerned with the
implementation of the programmes. The
typical large, multidivisional organisation has
three levels of strategy:
1)Corporate level
2)Strategic Business Unit level
3)Functional operational level

51
 Corporate Level Strategy

• Corporate level describes organisation’s

overall direction and identifies the most
favourable and balanced portfolio of products
and services.
• Additionally, it is a pattern of decisions
regarding the type of business in which the
organisation should be involved.

52
• Corporate Strategy is concerned with the
identification of objectives for the organisation
and the best way these may be achieved
within the context of strategic orientation of
the organisation.

53
 Strategic Business Unit Level Strategy

❖Business Strategy is sometimes referred to as

competitive strategy.
❖Strategic Business is concerned with the way
in which the divisions of the organisation cope
with the industry environment in which they
operate.
❖Business Strategy emphasises improvement of
the competitive position of organisation’s
products or services in specific industry or
market segment served by that division.
54
 Functional Operational Level
Strategy
• The aim of functional strategy is to
maximise productivity of resources. Functional
departments will sometimes operate within the
constraints set by business and corporate strategies.
• In such a case functional departments must develop
strategies in which their activities and skills
(competencies) are unified to improve performance.

55
• The three levels of strategy: corporate,
business and functional form a hierarchy of
strategy within a large organisation.
• These levels interact closely and constantly
and must be integrated to ensure success of
an organisation.

56
Your role in Strategic Management

• Strategy making is no longer the preserve

of senior managers
• Strategic management is increasingly part
of the role and responsibility of managers
involved in day to day running of the
business.

57
 A FRAMEWORK FOR STRATEGIC
MANAGEMENT

• The process of Strategic Management

involves four basic elements:
(1) Environmental scanning,
(2) Strategy formulation,
(3) Strategy Implementation, and
(4) Evaluation and control

58
• At the Corporate level, the Strategic
Management process includes activities that
range from environmental scanning to
performance evaluation.
• The factors that are most important to the
organisation’s future are referred to as
strategic factors or SWOT in short.

59
• The first step in the formulation of strategy is
a statement of mission, which leads to a
determination of corporate objectives,
strategies, and policies.
• Organisations implement their strategies and
policies through programmes, budgets and
procedures.
• Finally, performance evaluation and feedback
ensure adequate control of organisational
activities.

60
 strategic management 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.
61
 Excercise

• Who are the major competitors of your

organization?
• What are their strengths and weaknesses?
• What are their strategies?
• How successful are these organizations
compared to your organization?

62
Business Vision and Mission

Vision and Mission

Statements

63
 Learning objectives

• After studying this Session you should be able to do

the following:
• Describe the nature and role of vision and mission
statements in strategic management.
• Discuss why the process of developing a mission
statement is as important as the resulting document.
• Identify the components of mission statements.
• Discuss how clear vision and mission statements
can benefit other strategic-management activities.
• Evaluate mission statements of different
64
organizations.
Vision

“What do we want to become?”

Ch 2 -65
Vision Statement Examples

General Motors’ vision is to be the

world leader in transportation
products and related services.

Ch 2 -66
Vision

Clear Business
Vision

Comprehensive
Mission Statement

Ch 2 -67
Mission Statement

• Answers the question:

– “What is our business?”

Ch 2 -68
Mission Statement

• An enduring statement of purpose

that distinguishes one organization
from other similar enterprises
• A declaration of an organization’s
“reason for being”

69
Mission Statements are also called

• Creed statement
• Statement of purpose
• Statement of philosophy
• Statement of beliefs
• Statement of business principles
• A statement “defining our business”

70
 “What is a mission?”

• An enduring statement of purpose that distinguishes one

organization from other similar enterprises, the mission
statement is a declaration of an organization’s “reason for
being.”
• It answers the pivotal question “What is our business?”
• A clear mission statement is essential for effectively
establishing objectives and formulating strategies.
• Sometimes called a creed statement, a statement of
purpose, a statement of philosophy, a statement of
beliefs, a statement of business principles, or a statement
“defining our business,” a mission statement reveals what
an organization wants to be and whom it wants to serve.
71
 What is a mission?

• Many organizations develop both a mission

statement and a vision statement.
• Mission statement answers the question
“What is our business?”
• Vision statement answers the question “What
do we want to become?”

72
 Examples

Proctor & Gamble provides branded products and

services of superior quality and value that improve the
lives of the world’s consumers. As a result, consumers
reward us with industry leadership in sales, profit, and
value creation, allowing our people, our shareholders,
and the communities in which we live and work to
prosper.

Ch 2 -73
 Dell’s mission

• Dell’s mission is to be the most successful

computer company (2) in the world (3) at
delivering the best customer experience in
markets we serve (1). In doing so, Dell will
meet customer expectations of highest
quality; leading technology (4); competitive
pricing; individual and company
accountability (6); best-in-class service and
support (7); flexible customization
capability (7); superior corporate citizenship
74
(8); financial stability
The Process of Developing Vision and Mission
Statements

• Clear vision and mission statements are needed before alternative

strategies can be formulated and implemented.
• As many managers as possible should be involved in the process of
developing these statements because through involvement, people
become committed to an organization.
• Select several articles about these statements and ask all
managers to read these as background information.
• Ask managers to prepare a vision and mission statement for the
organization.
• A facilitator, or committee of top managers, should then merge
these statements into a single document and distribute the draft
statements to all managers.
• A request for modifications, additions, and deletions is needed next,
along with a meeting to revise the document to the extent that all
managers have input into and support the final documents

75
The Process of Developing Vision and
Mission Statements cont..

• During the process of developing vision and mission

statements, some organizations use discussion groups of
managers to develop and modify existing statements.
• Some organizations hire an outside consultant or facilitator to
manage the process and help draft the language.
• Sometimes an outside person with expertise in developing
such statements, who has unbiased views, can manage the
process more effectively than an internal group or committee
of managers.
• Decisions on how best to communicate the vision and
mission to all managers, employees, and external
constituencies of an organization are needed when the
documents are in final form.

76
Importance of Vision and Mission Statements

• Firms with a formalized mission statement have twice

the average return on shareholders’ equity than those
firms without a formalized mission statement have;
• Positive relationship between mission statements and
organizational performance; BusinessWeek reports
that firms using mission statements have a 30 percent
higher return on certain financial measures than those
without such statements;
• however, some studies have found that having a
mission statement does not directly contribute
positively to financial performance.
• The extent of manager and employee involvement in
developing vision and mission statements can make a
difference in business success.
77
 Benefits of Vision and Mission
Statements cont..

• To ensure unanimity of purpose within the organization

• To provide a basis, or standard, for allocating
organizational resources
• To establish a general tone or organizational climate
• To serve as a focal point for individuals to identify with
the organization’s purpose and direction, and to deter
those who cannot from participating further in the
organization’s Activities.
• To facilitate the translation of objectives into a work
structure involving the assignment of tasks to
responsible elements within the organization.
• Another benefit of developing a comprehensive mission
statement is that divergent views among managers can
be revealed and resolved through the process.

78
 Creating a Motivating and Exciting
Vision

• Susan Heathfield, in Leadership Success Secrets,

articulated that in order to develop a compelling,
motivating and exciting vision that will make people want
to engage with it and follow it, it must:
• clearly set organizational direction and purpose
• inspire loyalty and caring through the involvement of all
employees
• display and reflect the unique strengths, culture, values,
beliefs and di-rection of the organization
• inspire enthusiasm, belief, commitment and excitement in
company members
• help employees believe that they are part of something
bigger than themselves and their daily work
• be regularly communicated79and shared
• An organization that fails to develop a
vision statement as well as a
comprehensive and inspiring mission
statement loses the opportunity to present
itself favorably to existing and potential
stakeholders.
• All organizations need customers,
employees, and managers, and most firms
need creditors, suppliers, and distributors.
• The vision and mission statements are
80
 Characteristics of a mission

• A mission statement needs to be broad to

reconcile differences effectively among
stakeholders.
• A mission statement should be
reconcilatory.
• Stakeholders include employees,
managers, stockholders, boards of
directors, customers, suppliers, distributors,
creditors, governments (local, state,
federal, and foreign), unions, competitors,
81
 Characteristics of a mission

• Stakeholders affect and are affected by an

organization’s strategies, yet the claims and concerns
of diverse constituencies vary and often conflict
• Claims on any business literally may number in the
thousands, and they often include clean air, jobs,
taxes, investment opportunities, career opportunities,
equal employment opportunities, employee benefits,
salaries, wages, clean water, and community services.
• All stakeholders’ claims on an organization cannot be
pursued with equal emphasis.
• A good mission statement indicates the relative
attention that an organization will devote to meeting the
claims of various stakeholders.

82
 Characteristics of a mission cont..

• A good mission statement describes an organization’s

purpose, customers, products or services, markets,
philosophy and basic technology.
• A mission statement should
• 1. define what the organization is and what the
organization aspires to be,
• (2) be limited enough to exclude some ventures and
broad enough to allow for creative growth,
• (3) distinguish a given organization from all others,
• (4) serve as a framework for evaluating both current and
prospective activities, and
• (5) be stated in terms sufficiently clear to be widely
understood throughout the organization.
83
 Ten Benefits of Having a Clear Mission and
Vision
• 1. Achieve clarity of purpose among all managers and
employees.
• 2. Provide a basis for all other strategic planning
activities, including the internal and external
assessment, establishing objectives, developing
strategies, choosing among alternative strategies,
devising policies, establishing organizational structure,
allocating resources, and evaluating performance.
• 3. Provide direction.
• 4. Provide a focal point for all stakeholders of the firm.
• 5. Resolve divergent views among managers.
84
Ten Benefits of Having a Clear Mission and
Vision

• 6. Promote a sense of shared expectations

among all managers and employees.
• 7. Project a sense of worth and intent to all
stakeholders.
• 8. Project an organized, motivated
organization worthy of support.
• 9. Achieve higher organizational
performance.
• 10. Achieve synergy among all managers
and employees. 85
Utility statements relevant in developing a
mission statement

• Do not offer me things.

• Do not offer me clothes. Offer me attractive looks.
• Do not offer me shoes. Offer me comfort for my feet and the
pleasure of walking.
• Do not offer me a house. Offer me security, comfort, and a
place that is clean and happy.
• Do not offer me books. Offer me hours of pleasure and the
benefit of knowledge.
• Do not offer me CDs. Offer me leisure and the sound of
music.
• Do not offer me tools. Offer me the benefits and the pleasure
that come from making
• beautiful things.
• Do not offer me furniture

86
 Products or
Services Markets
Customers

Mission Technology
Employees Components

Survival,
Growth,
Public Profits
Image
Self-Concept Philosophy
 Mission Statement Components

1. Customers—Who are the firm’s customers?

2. Products or services—What are the firm’s major products or
services?
3. Markets—Geographically, where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, and profitability—Is the firm
committed to growth and financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations, and
ethical priorities of the firm?
7. Self-concept—What is the firm’s distinctive competence or major
competitive advantage?
8. Concern for public image—Is the firm responsive to social,
community, and environmental concerns?
9. Concern for employees—Are employees a valuable asset of the
firm? 88
 Characteristics of an Effectively Worded Vision
Statement

• Graphic A well-stated vision paints a picture of the kind

of company that management is trying to create and
the market position the company is striving to stake out.

• Directional A well-stated vision says something about

the company’s journey or destination and signals the
kinds of business and strategic changes that will be
forthcoming.

• Focused A well-stated vision is specific enough to

provide managers with guidance in making decisions
and allocating resources.
89
 Characteristics of an Effectively Worded Vision
Statement

• Flexible A well-stated vision is not a once-and-for-

all-time pronouncement— visions about a
company’s future path may need to change as
events unfold and circumstances change.
• Feasible A well-stated vision is within the realm of
what the company can reasonably expect to
achieve in due time.
• Desirable A well-stated vision appeals to the long-
term interests of stakeholders— particularly
shareowners, employees, and customers.
• Easy to A well-stated vision is explainable in less
90
 Common Shortcomings in Company Vision
Statements

• 1. Incomplete—short on specifics about where the company is

headed or what kind of company management is trying to create.
• 2. Vague—doesn’t provide much indication of whether or how
management intends to alter the company’s current focus.
• 3. Bland—lacking in motivational power.
• 4. Not distinctive—could apply to most any company (or at least
several others in the same industry).
• 5. Too reliant on such superlatives as best, most successful,
recognized leader, global or worldwide leader, or first choice of
customers.
• 6. Too generic—fails to identify the business or industry to which
it is supposed to apply. The statement could apply to companies
in any of several industries.
• 7. So broad that it really doesn’t rule out most any opportunity
that management might opt to pursue.
91
Writing a Vision and Mission Statement for
your organization
• Purpose
• Most organizations have a vision and mission statement. The
purpose of this exercise is to give you practice writing a
vision and mission statement for a nonprofit organization.
• Instructions
• Step 1 Write a vision statement and a mission statement for
the organization.
• Your mission statement should include the nine
characteristics
• Step 2 Read your vision and mission statement to the class.
• Step 3 Determine whether your organization has a vision
and/or mission statement.
• Analyze your organization’s vision and mission statement in
light of the concepts presented in section

92
 VISION, MISSION AND ETHICS

The probability of forming an effective mission increases when employees

have a strong sense of the ethical standards that guide their behaviors.

Busines
s ethics ●VISION • Deciding what a firm wants to
become
are a
vital
• Deciding who it intends to
part
of:
●MISSION serve and how it wants to
serve those individuals and
groups
 Stakeholders

Are there individuals, groups, and organizations who have a stake in the
organization

● Who can affect the firm’s vision and mission?

● Are affected by the strategic outcomes achieved?

● Have enforceable claims on the firm’s performance?

Competitive Advantage
Firms effectively managing stakeholder relationships outperform those that do
not.

94
 CLASSIFICATION OF
STAKEHOLDERS
Three groups of stakeholders:
Capital market stakeholders
C

● Shareholders and the major suppliers of a

firm’s capital
Product market stakeholders
● A firm’s primary customers, suppliers, host
communities, and unions representing the
workforce
Organizational stakeholders
● Firm’s employees, including both non-
managerial and managerial personnel
 CLASSIFICATION OF
STAKEHOLDERS
FIGURE 1.4

The Three
Stakeholder
Groups

©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 CLASSIFICATION OF
STAKEHOLDERS
Trade-offs must be made in situations where the
objectives of various stakeholder groups differ or
conflict.
Conflict examples:

● Shareholders – individuals and groups who

have invested capital in a firm in the expectation of
earning a positive return on their investments. These
stakeholders’ rights are grounded in laws governing
private property and private enterprise.
● Consumers – interests are maximized when the
quality and reliability of a firm’s products are
improved, but without high prices.
● High returns to customers might come at the
expense of lower returns for capital market
stakeholders and vice-versa.
 MANAGING STAKEHOLDER
CONFLICT
• First, a firm must thoroughly identify and
understand all important stakeholders.
• Second, it must prioritize them, in case it
cannot satisfy all of them.
• Power is the most critical criterion in
prioritizing stakeholders.
• Other criteria might include the urgency of
satisfying each particular stakeholder group
and the degree of importance of each to the
firm’s above-average returns.
MANAGING STAKEHOLDER
CONFLICT

POWER

URGENCY

IMPORTANCE
 MANAGING STAKEHOLDER
CONFLICT
CHALLENGES:
When earning above-average returns, a firm can more
easily satisfy multiple stakeholders simultaneously.

When earning only average returns, a firm is unable to

maximize the interests of all stakeholders, thus
stakeholders should be at least minimally satisfied.

Cultural differences and societal values also influence

stakeholder priorities.
 CAPITAL MARKET
STAKEHOLDERS

BALANCING CONFLICTING
SHAREHOLDER GOALS
The returns that shareholders expect are commensurate with
the degree of risk accepted with those investments.
CHALLENGING FOR MANAGERS:
● Some shareholders want short-term increases in
returns
● Others desire building long-term
competitiveness
Often large shareholders prefer that the firm minimize its use
of debt because of the risk of debt, its cost, and the possibility
that debt holders have first call over shareholders on the firm’s
assets in case of default.
 PRODUCT MARKET
STAKEHOLDERS
• Though all product market stakeholders
are important, without customers, the other
product market stakeholders are of little
value.

• Customers demand reliable products at

the lowest possible prices.

• Host communities want companies

willing to be long-term employers and
providers of tax revenue without placing
excessive demands on public support
 PRODUCT MARKET
• STAKEHOLDERS
•Suppliers seek loyal customers who are willing to
pay the highest sustainable prices for the goods and
services they receive.

• Union officials are interested in secure jobs, under

highly desirable working conditions, for the
employees they represent.

• Product market stakeholders are generally satisfied

when a firm’s profit margin reflects at least a balance
between the returns to capital market stakeholders
 ORGANIZATIONAL
STAKEHOLDERS
• Employees expect the firm to provide a dynamic,
stimulating, and rewarding work environment.
• Employees are usually satisfied working for a
company that is:
● Growing
● Actively developing their skills to be effective
team members
● Meeting or exceeding global work standards
Strategy Basic Concepts

Presented by Alex Chanza

105
 The Strategic Management
Process: An overview
• A company’s strategy consists of the combination
of competitive moves and business approaches
that managers employ to please customers,
compete successfully and achieve organizational
objectives.

106
 Basic concept

• A company’s business model deals with

whether the revenue-cost-profit economics of
its strategy demonstrate the viability of the
enterprise as a whole.
• Excellent execution of an excellent strategy is
the best test of managerial excellence and
the most reliable recipe for organizational
success.

107
 Cont’d

• The term strategic management refers to the

managerial process of forming a strategic
vision, setting objectives, crafting a strategy,
implementing and executing the strategy, and
then over time initiating whatever corrective
adjustments in the vision, objectives, strategy,
and execution are deemed appropriate.

108
 Cont’d

• A strategic vision is a roadmap of a

company’s future-providing specifics about
technology and customer focus, the
geographic and product markets to be
pursued, the capabilities it plans to develop,
and the kind of company that management is
trying to create.

109
 Cont’d

• A company’s mission statement is typically

focused on its present business scope “who
we are and what we do” mission statements
broadly describe an organization’s present
capabilities, customer focus, activities and
business makeup.

110
 Cont’d

• Objectives are an organization’s performance

targets-the results and outcomes it wants to
achieve. They function as yardsticks for
tracking an organization’s performance and
progress.

111
 Cont’d

• Strategic objectives relate to outcomes that

strengthen an organization’s overall business
position and competitive vitality, financial
objectives relate to the financial performance
targets management has established for the
organization to achieve.

112
 Cont’d

• A company’s strategy consists of the

competitive efforts and business approaches
that managers employ to please customers,
compete successfully and achieve
organizational objectives.

113
 Cont’d

• The march of external and internal

developments dictate that a company’s
strategy change and evolve over time a
condition that makes strategy making an on-
going process, not a one time event.

114
 Cont’d

• A strategic plan consists of an organization’s

mission and future direction, near-term and
long-term performance targets and strategy.
• The faster a company’s external and internal
environment changes, the more frequently
that is short-run and long-run strategic plans
have to be revised and updated-annual
changes many not be adequate.
• In today’s world strategy life cycles are
growing shorter, not longer.

115
 Cont’d

• Strategy implementation concerns the

managerial exercise of putting a freshly
chosen strategy into place.
• Strategy execution deals with the managerial
exercise of supervising the ongoing pursuit of
strategy, making it work, improving the
competence with which it is executed and
showing measurable progress in achieving
the targeted results.

116
 Cont’d

• Strategy execution is fundamentally an

action-oriented, make it happen process, the
key tasks are developing competencies and
capabilities, budgeting, policy making,
motivating, culture-building and leadership.
• A company’s vision, objectives, strategy and
approach to implementation and never final,
evaluating performance, reviewing changes
in the surrounding environment and making
adjustments are normal and necessary parts
of the strategic management process.
117
 Cont’d

• Strategic management is a tightly-knit

process, the boundaries between the five
tasks are conceptual, not fences that prevent
some or all of them being done together.
• Every company manager has a strategy-
making/strategy-implementing role it is flawed
thinking to view strategic management as
solely the province of senior executives.

118
 Strategic management principle

• Effective strategy making begins with a vision

of where the organization needs to head.
• One of the roles of a mission statement is to
give the organization its own special identity,
business emphasis and path for development
– one that typically sets it apart from other
similarly situated companies.

119
 Cont’d

• A company’s business is defined by what

need it is trying to satisfy, by which customer
groups, it is targeting, and by the
technologies and competencies it uses and
the activities it performs.
• Technology, competencies and activities are
important to defining a company's business
because they indicate the boundaries on its
operations.

120
 Cont’d

• Good mission statements are highly

personalized unique to the organization for
which they are developed.
• Diversified companies have broader missions
and business definitions than single-business
enterprises.
• The entrepreneurial challenge in developing a
strategic vision is to think creatively about
how to prepare a company for the future.

121
 Cont’d

• Objectives represent a managerial

commitment to achieving specific
performance targets within a specific time-
frame they are a call for results that connect
directly to the company's strategic vision and
core values.

122
 Strategic management principle

• Every company need both strategic

objectives and financial objectives.
• Strategic objectives need to be competitor-
focused, often aiming at unseating a
competitor considered to be the industry’s
best in a particular category.

123
 Cont’d

• Building a stronger long-term competitive

position benefits shareholders more lastingly
that improving short-term profitability.

124
 Strategic management principle

• A well conceived strategy aims at capturing a

company’s best growth opportunities and
defending against external threats to its well
being and future performance.
• Winning strategies aim at capitalizing on a
company’s resource strengths and at
neutralizing its resource deficiencies.
• The personal ambitions, business,
philosophies, and ethical beliefs of managers
are usually stamped on the strategies they
craft.
125
 Cont’d

• A company’s values, policies, practices and

culture can dominate the kinds of strategic
moves it considers or rejects.
• Every strategic action a company takes
should be ethical.
• A company has ethical duties to owners,
employees, customers, suppliers, the
communities where it operates, and the
public at large.

126
 Cont’d

• The more a strategy fits the enterprise’s

external and internal situation, builds
sustainable competitive advantage and
improved company performance, the more it
qualifies as a winner.

127
Industry and competitive analysis

• Managers are not prepared to decide on

along-term direction or a strategy until they
have a keen understanding of the company's
strategic situation, the exact nature of the
industry and competitive conditions it faces
and how these conditions match up with its
resources and capabilities.
• An industry’s economic features help frame
the window of strategic approaches a
company can pursue.
128
 Cont’d

• The competitive threat posed by substitute

products is strong when substitutes are
readily available and attractively prices,
buyers believe substitutes have comparable
or better features and buyers switching costs
are low.
• The suppliers to a group of rival firms are a
strong competitive force whenever they have
sufficient bargaining power to put certain
rivals at a competitive disadvantage based on
the prices they can command, the quality and
performance of the items they supply or the
reliability of their deliveries.
129
 Cont’d

• Buyers are a strong competitive force when

they are able to exercise bargaining leverage
over price, quality, service or other terms of
sale.
• High switching costs create buyer lock-in and
weaken a buyers bargaining power.
• A company’s competitive strategy is
increasingly effective the more it provides
good defenses against the five competitive
forces, shifts competitive pressures in ways
that favour the company, and helps create
sustainable competitive advantage. 130
 Basic Concept

• Industry conditions change because important forces

are driving industry participants (competitors,
customers, or suppliers) to alter their actions, the
driving forces in an industry are the major underlying
causes of changing industry and competitive
conditions.
• The task of driving-forces analysis is to separate the
major causes of industry change from the minor
ones, usually no more than three or four factors
qualify as driving forces. Managers can use
environmental scanning to spot budding trends and
clues of change the could develop into new driving
forces.
131
 Cont’d

• Successful strategists take great pains in

gathering competitive intelligence about
competitor’s strategies, monitoring their
actions, sizing up their strengths and
weaknesses, and using what they have
learned to anticipate what moves rivals are
likely to make next.
• It is advantageous to know more about your
competitors than they know about you.
• The company that consistently has more and
better information about its competitors is
better positioned to prevail , other things 132
being equal.
 Cont’d

• Managers who fail to study competitors

closely risk being blindsided by surprise
actions on the part of rivals.
• Key success factors concern the product
attributes, competencies, competitive
capabilities, and market achievements with
the greatest direct bearing on company
profitability.

133