INTRODUCTION TO STRATEGIC MANAGEMENT

Lesson I

LEARNING OBJECTIVES:
(1) Define Strategy and explain its role in a firm’s quest for competitive advantage.
(2) Define Management and its functions
(3) Define Strategic Management and its Stages
(4) Formulate the Strategic Vision and Mission of the Company
(5) Explain the need for integrating analysis and intuition in strategic management
(6) Define and Give examples of Key terms in Strategic Management
(7) Describe the benefits of engaging in Strategic Management
(8) Describe the Pitfalls of why other businesses do no strategic planning.

STRATEGIC/ STRATEGY
❖ Comes from the Greek term “Strategos” or “Strategia” which means Generalship.
- the art of the general to fight in war or direct military forces. The Latin terms for
Strategos are Stratos and Agos which means Army and Spread. (etymology)

❖ Describes the goal-oriented actions a firm intends to take in its quest to gain and
sustain competitive advantage. (entrepreneurs)

❖ Is creating a superior value. (Financial strategists)

❖ Is about understanding where you are now, where you are heading, and how you
will get there. (Common Tao)

❖ Includes the determination and evaluation of alternative paths to an already

established mission or objectives. (Researchers)
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MANAGEMENT- the term "management" has its roots in the Latin word "manus agere,"
where "manus" means "hand" and "agere" means "to lead" or "to drive." which refers
to the act of handling or controlling something with the hands.

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FUNCTIONS OF MANAGEMENT:
1. PLANNING
➢ It is the basic function of management. It deals with chalking out a future course
of action & deciding in advance the most appropriate course of action for the
achievement of pre-determined goals.
➢ Planning is deciding in advance - what to do, when to do & how to do it. It bridges
the gap from where we are & where we want to be” -HAROLD KOONTZ, UCLA
2. ORGANIZING
➢ is the process of bringing together physical, financial, and human resources and
developing productive relationships among them for the achievement of
organizational goals
➢ To organize a business is to provide it with everything useful or its functioning i.e.
raw material, tools, capital, and personnel”. Henry Fayol
3. DIRECTING
➢ It is that part of the managerial function that actuates the organizational methods
to work efficiently for the achievement of organizational purposes.
4. STAFFING
➢ Recruiting and selecting employees for positions within the company.
5. CONTROLLING/ EVALUATING
➢ It implies measurement of accomplishment against the standards and correction
of deviation if any to ensure the achievement of organizational goals. This is to
ensure that everything occurs in conformity with the standards
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STRATEGIC MANAGEMENT DEFINED:
- Is the ongoing planning, monitoring, analysis, and assessment of all necessities an
organization needs to meet its goals and objectives.

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 - Is the art and science of Formulating, Implementing, and Evaluating cross-
functional decisions that enable the organization to achieve its objectives.
The Purpose of Strategic Planning is to exploit and create new and different
opportunities for tomorrow.
STRATEGIC PLAN is the company’s game plan. Hence, the product of the strategic
management process. In developing a Strategic Plan, it is essential to anticipate future
environmental challenges to an organization and draw up an appropriate strategic plan
for responding to these challenges. (Igor Ansoff)
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STAGES OF STRATEGIC MANAGEMENT

(1) STRATEGY FORMULATION – the process of developing a vision and mission
statement, identifying the organization’s SWOT, and establishing long-term
objectives.

ISSUES IN STRATEGY FORMULATION

1. Businesses to enter
2. Businesses to Abandon
3. Allocation of resources
4. Expansion or Diversification
5. International Markets
6. mergers or Joint Ventures
7. Avoidance of Hostile Takeover
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(2) STRATEGY IMPLEMENTATION (ACTION STAGE)– requires a firm to establish
annual objectives, devise policies, motivate employees, and allocate resources.

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 This pertains to mobilizing employees and managers to put formulated strategies
into action.
STRATEGY IMPLEMENTATION STEPS
1. Developing a strategy-supportive culture.
2. Creating an effective Organizational Structure
3. Redirecting Marketing Efforts
4. Preparing budgets
5. Developing and utilizing information systems
6. Linking employee compensation to organizational performance.
LEVELS OF STRATEGY:
(1) Corporate-level strategies are formulated strategies according to the
organization’s wise policies. These are futuristic, innovative, and pervasive.
(Chairman and Board of Directors, CEO, COO)

(2) Business Level Strategy – are strategies formulated by SBU (Strategic Business
Units). This includes comprehensive plans and allocation of resources. (Chairman
of Division).
(3) Functional Level Strategy – these strategies are those that deal with a relatively
restricted plan providing objectives for specific functions of the major functions.
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STRATEGY EVALUATION – knowing what strategies are not working well.

Three Fundamental Strategy Evaluation Activities:

(1) Reviewing external and internal factors that are the basis for current strategies.
(2) Measuring Performance
(3) Taking Corrective actions
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KEY TERMS IN STRATEGIC MANAGEMENT

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 (1) COMPETITIVE ADVANTAGE - any activity a firm does specifically well compared
to activities of other companies.
STRATEGIES OF COMPETITIVE ADVANTAGE:
(1) Industry-Based Model – searching and scanning the most profitable
business activities that would give the best investment return.

(2) Resource-Based Model – this refers to the analyses of the prevailing

resources available to the firm that are present in the internal environment
which could be utilized in the development of competitive advantage.

HOW TO SUSTAIN COMPETITIVE ADVANTAGE:

(a) Continually adapting to changes in external trends and events and internal
capabilities, competencies, and resources.
(b) Effectively formulating, implementing and evaluating, Implementing and
evaluating strategies that capitalize on those factors.

(2) STRATEGISTS - are the individuals responsible for an organization's success or

failure.

(3) LONG-TERM OBJECTIVES –the specific results that the organization seeks in
pursuing its basic mission.

(4) GOALS – are achievable outcomes that are generally broad and longer-term.

(5) OBJECTIVES- are short-term measurable actions to achieve an overall goal.

This includes the list of documented steps that assist in fulfilling the goal of the
strategy. This follows the paradigm of SMART (Specific, Measurable, Attainable,
Realistic, and time-bound)

(6) ANNUAL STRATEGIES – these are short-term milestones that an organization

must achieve to reach long-term objectives.

(7) POLICIES – these are standards on how annual objectives will be achieved.
BENEFITS OF ENGAGING IN STRATEGIC MANAGEMENT
(1) Financial Benefits
(2) Non-Financial Benefits

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WHY DO SOME FIRMS DO NO STRATEGIC PLANNING?
1. No formal training in strategic management
2. No understanding of or appreciation for the benefits of planning
3. No monetary rewards for doing planning
4. No punishment for no planning
5. Too busy ‘firefighting” (resolving internal crisis) to plan.
6. View planning as a waste of time since no product or service is made
7. Laziness, effective planning takes time and effort
8. Content with current success; failure to realize that success today is no guarantee
for tomorrow.
9. Overconfident
10. Prior bad experience with strategic planning done sometime/somewhere
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PITFALLS IN STRATEGIC PLANNING
These are the pitfalls to watch out for and avoid in strategic planning:

1. Using strategic planning to gain control over decisions and resources

2. Doing strategic planning only to satisfy accreditation or regulatory requirements.
3. Too hastily moving from mission development to strategy formulation
4. Failing to communicate the plans to employees
5. Top managers make 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 planning to a planner 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 as 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.

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