The Nature of

Strategic Management

Chapter One
General information
Course: Strategic Management (MGMT 4201)
Cr/hr 3= 48hrs
Office : B76/R002
Targeted to: 4th year regular accounting& Finance
Techniques of Evaluation Weight

Quiz 5%
Test 20%
Group assignment 15%
Individual assignment (presentation) 10%
Final Exam 50%
Total 100%
March, 2023, Debretabor University
Prepared by: Feyisa D
 Course contents
Chapter 1. Overview of Strategic Management

Chapter 2. Vision, Mission, Objectives and Goals

Chapter 3. Environmental Analysis (external)

Chapter 4. Environmental Analysis (internal)

Chapter 5. Strategy Formulation

Chapter 6. Strategy Implementation

Chapter 7. Strategic Evaluation and Control

 1.1Definition of Strategic Management
 Strategy
 Originally the term applied to warfare
 Derived from the Greek word “strategos” which means generalship
 First used around 360 BC, when the chinese military strategist Sun
tzu wrote the art of war
 In the business parlance, strategy may be defined as a set of related
actions that managers take to increase their company’s performance.
 Different scholars define strategy differently
 According to Fred Nikols strategy refers to a general plan of action
for achieving one’s goals and objectives
 A strategy is a means used to achieve the ends(objectives)
end
 Strategic management definition…

 Is the art and science of formulating, implementing, and

evaluating and controlling cross-functional decisions that
enable an organization to achieve its objectives
 Defining Strategic Management

 Strategic management is used synonymously with the term

strategic planning.

 Sometimes the term strategic management is used to refer to

strategy formulation, implementation, and evaluation.

 With strategic planning referring only to strategy formulation.

 Strategic planning is more used in business world whereas,

strategic management is used in academia.
academia
 Defining Strategic Management
 A strategic plan is a company’s game plan.
A strategic plan results from tough managerial
choices among numerous good alternatives, and

 it signals commitment to specific markets, policies,

procedures, and operations.
1.2 Stages of Strategic Management
 Stages of Strategic Management
1. Strategy formulation includes,
 Includes developing a vision and mission

 Identifying an organization’s external opportunities & threats

 Determining internal strengths and weaknesses

 Establishing long-term objectives

 Generating alternative strategies

 Choosing particular strategies to pursue

 Deciding what new businesses to enter

 Deciding What businesses to abandon

 How to allocate resources

 Whether to enter international markets

 Whether to merge or form a joint venture

 How to avoid a hostile takeover.

 Stages of Strategic Management…
2. Strategy implementation
-Action stage
 Requires a firm to establish annual objectives,
 Devise policies,
 Motivate employees, and
 Allocate resources
 Developing a strategy supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts
 Preparing budgets
 Developing and utilizing information systems
 Stages of Strategic Management…
3. Strategy evaluation
The three fundamental strategy evaluation activities are:

1. Reviewing external and internal factors that are the bases

for current strategies,

2. Measuring performance,

3. Taking corrective actions

 Stages of Strategic Management…

 Strategy formulation, implementation, and evaluation activities

occur at three hierarchical levels in a large organization:

 Corporate,

 Divisional or strategic business unit

 Functional

 Strategic management helps a firm function as a

competitive team
 Key terms in strategic management…
1. Competitive advantage
 Anything that a firm does especially well compared to rival
firms
-Sustainable competitive advantage
 Is an advantage over competitors that can not be easily be
imitated
2. Strategies
-strategies are the means by which long term objectives will be
achieved

3. Strategists
 The individuals who are most responsible for the success or
failure of an organization
 Key Terms ……
4. Vision and Mission statements
Vision can be defined as ‘a mental image of possible and desirable future state of
the organization’.

•A vision statement should answer the basic question, “What do we want to become?”
•Often considered the first step in strategic planning
Mission statements are Enduring statements of purpose that distinguish one
business from other similar firms

•A mission statement is a statement defining what business is in, who its customers are,
and how its core beliefs shape its business.

•Addresses the basic question “What is our business?”

 Key Terms …
5. 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.
 Key Terms …
6. Internal strengths and internal weaknesses
 An organization’s controllable activities that are performed
especially well or poorly.

7. Long term objectives:

 Objectives can be defined a specific results that an
organization seeks to achieve in pursuing its basic
mission.
 Key Terms …

8. Annual objectives
 short-term milestones that organizations must achieve to
reach long-term objectives
 should be measurable, quantitative, challenging, realistic,
consistent, and prioritized
 should be established at the corporate, divisional, and
functional levels in a large organization
 Key Terms …

9. Policies
 The means by which annual objectives will be achieved

 Include guidelines, rules, and procedures established to

support efforts to achieve stated objectives.
 Guides to decision making and address repetitive or recurring
situations.
 1.4 overview of types of strategy
There could be corporate , business and functional level strategies
1.Corporate level strategies
•Corporate strategy describes a company’s overall direction in terms of its
general attitude toward growth and management of its various business and
product lines.
2. Business level strategies
•This type of strategies usually occurs at the business unit of product level and
it emphasizes improvement of the competitive position of a corporations of
products or services in the specific industry or market segment.
3. Functional Level strategies
•This is the approach taken by a functional area to achieve corporate and
business unit objectives and strategies by maximizing resource productivity.
•Finance & Accounting
•Research & Development
•Personnel(HRM)
•Marketing
•production
 Benefits of Strategic Management

 Historically, the principal benefit of strategic

management has been to help organizations
formulate better strategies through the use of a more
systematic, logical, and rational approach to strategic
choice.
 Benefits of Strategic Management

 It enhance Communication: is a key to successful

strategic management

 Through dialogue and participation, managers and

employees become committed to supporting the
organization
Benefits to a Firm That Does Strategic Planning
 Financial Benefits
 Businesses using strategic-management
concepts show significant improvement in sales,
profitability, and productivity compared to firms
without systematic planning activities

 High-performing firms seem to make more

informed decisions with good anticipation of both
short- and long-term consequences.
 Non-financial Benefits
 It allows for identification, prioritization, and exploitation of
opportunities.

 It provides an objective view of management problems.

 It represents a framework for improved coordination and
control of activities.

 It minimizes the effects of adverse conditions & changes.

 Non-financial Benefits…

 It allows major decisions to better support

established objectives.

 It allows more effective allocation of time and

resources to identified opportunities.

 It allows fewer resources and less time to be devoted

to correcting erroneous or ad hoc decisions.

 It creates a framework for internal communication

among personnel.
Why Some Firms Do No Strategic Planning?

 Lack of knowledge in strategic planning

 Poor reward structures
 Too expensive
 Laziness
 Fear of failure
 Overconfidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion (doubt )
 Pitfalls in Strategic Planning

 Using strategic planning to gain control over decisions and

resources
 Doing strategic planning only to satisfy accreditation or
regulatory requirements
 Too hastily moving from mission development to strategy
formulation
 Failing to communicate the plan to employees, who continue
working in the dark
 Top managers making many intuitive decisions that conflict
with the formal plan
 Pitfalls in Strategic Planning

 Top managers not actively supporting the strategic-

planning process

 Failing to use plans as a standard for measuring

performance

 Delegating planning to a “planner” rather than involving

all managers

 Failing to involve key employees in all phases of planning

 Failing to create a collaborative climate supportive of

Guidelines for Effective Strategic Management