Strategic Management

BUS 409

Explanation notes:
Introducing strategy

https://lms.lc.ac.ae/ultra/stream
Objectives of this course

CLO1: Define different strategic

management concepts and describe
the strategic management process

2
Learning objectives

 What is strategy?
 Defining strategy
 The purpose of strategy: mission, vision, values, and
objectives
 Strategy statements
 Levels of strategy

3
Strategic Management?
“If you don’t have a strategy you
will be . . . part of somebody
else’s strategy.”

- Alvin Toffler

1-5
 Definitions of strategy

Sources: A.D. Chandler, Strategy and Structure: Chapters in the History of American Enterprise, MIT Press, 1963, p. 13; M.E. Porter, ‘What is strategy?’,
Harvard Business Review, November–December 1996, p. 60; P.F. Drucker, ‘The theory of business’, Harvard Business Review, September–October
1994, pp. 95–106; H. Mintzberg, Tracking Strategies: Towards a General Theory, Oxford University Press, 2007, p. 3.
 Strategic decisions

Source: From G. Johnson, K. Scholes and R. Whittington. Exploring Corporate Strategy, 8th edn, Pearson Education 2008.

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
1-8
 Definitions of strategy

Strategy- is an integrated and coordinated set of

commitments and actions designed to exploit core
competences and gain a competitive advantage.

1-9
Strategic Management –Defined

Art & science of formulating,

implementing, and evaluating, cross-
functional decisions that enable an
organization to achieve its objectives

Ch 1 -10
 What managers do to develop an organization’s
strategies
• Strategies
–The decisions and actions that determine the long-run performance of
an organization.
• Business Model
–Is a strategic design for how a company intends to profit from its
strategies, work processes, and work activities.
–Focuses on two things:
• Whether customers will value what the company is providing.
• Whether the company can make any money doing that.
Why Is Strategic Management Important?

1. It results in higher organizational

performance.
2. It requires that managers examine and adapt
to business environment changes.
3. It coordinates diverse organizational units,
helping them focus on organizational goals.
The purpose of starategy
o Vision – Some desired future state:What
Do We Want to Become?
o Mission – Reason for existence – what an
organization does
o Values – Key values an organization is
committed to
o Major Goals – Measurable desired future
state an organization attempts to realize

1-14
 Vision statements
What Do We Want to Become?
A vision statement is concerned with the future
the organisation seeks to create.
•‘What do we want to achieve?’
•‘If we were here in twenty years what do we want
to have created or achieved?’

A good vision is meant to stretch a

company by articulating an ambitious
but attainable future state.
Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
• The vision statement should be short,
preferably one sentence, and as many
managers as possible should have input
into developing the statement.

2-16
1-17
1-18
Examples of Vision Statements

• General Motors’ vision is to be the world leader in

transportation products and related services.
(Good Statements)
• Procter & Gamble’s vision is to be and be
recognized as, the best consumer products
company in the world. ( statement is too vague
and readability is not good )
• Pepsi Co’s responsibility is to continually improve
all aspects of the world in which we operate -
environment, social, economic – creating a better
tomorrow than today. ( statement is too vague) It
should reveal beverage and food business.

1-19
 Mission statements
A mission statement provides employees
and stakeholders with clarity about what
the organisation is fundamentally there to
do.
•‘What business are we in?’
•‘What would be lost if the organisation did not
exist?’
•‘How do we make a difference?’

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
• What is it the company does?
Who is being satisfied- What customer groups?
What is being satisfied- What customer needs?
How customer needs are being satisfied- by what
skills, knowledge, or distinctive competencies?

A company’s mission is best

approached from a customer-oriented
business definition.

1-21
1-22
1-23
Example of Mission Statement

• Dell’s mission is to be the most

successful computer company in the
world at delivering the best customer
experience in markets we serve. In doing
so, Dell will meet customer expectations
of highest quality; leading technology;
competitive pricing; individual and
company accountability; best-in-class
service and support; flexible
customization capability; superior
corporate citizenship; financial stability.

1-24
Components of a Mission Statement
 Importance of Vision and
Mission Statements
1. To ensure unanimity of purpose
within the organization
2. To provide a basis, or standard, for
allocating organizational resources
3. To establish a general tone or
organizational climate

1-26
4. To serve as a focal point for
individuals to identify with the
organization’s purpose and
direction
5. To facilitate the translation of
objectives into a work structure
6. To specify organizational purposes
 Statement of objectives
Objectives are statements of specific
outcomes that are to be achieved.
•Often stated in financial terms (e.g. Profit).
•May also be market-based objectives (e.g.
Market Share).
•May emphasise basis of competitive
advantage.
•‘Triple Bottom Line’ – economic, social and
environmental objectives.

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
Long-Term Objectives

Specific results that an organization

seeks to achieve in pursuing its basic
mission

Long-term means more than one year

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Essential for ensuring the firm’s success
 Provide direction

 Aid in evaluation

 Create synergy

 Reveal priorities

 Focus coordination

 Provide basis for planning, organizing,

motivating, and controlling

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Statement of values

Statements of corporate values communicate the

underlying and enduring core ‘principles’ that guide
an organisation’s strategy and define the way that
the organisation should operate.
These values do NOT change with circumstances.

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
• Set of values, norms, and standards that
control how employees work to achieve
organization’s mission and goals.
• Often seen as an important source of
competitive advantage

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
1-33
1-34
o How managers and employees should conduct
themselves?
o How they should do business?
o What kind of organization they need to build to
help achieve company’s mission?
o Organizational culture?

https://www.wordstream.com/blog/ws/2021/07/02/how-to-write-a-business-mission-statement

https://www.batonglobal.com/post/how-to-write-mission-vision-and-values-statements-with-
examples#:~:text=The%20mission%20statement%20communicates%20the,organization's%20core
%20principles%20and%20ethics.
Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
The Strategic Management Process
The Strategic Management Process

8–37
Strategy Management Process
 Select corporate mission & major corporate goals.
 Analyze external competitive environment to
identify opportunities/threats.
 Analyze organization’s internal environment to
identify strengths/weaknesses.
 Select strategies that:
• Build on organization’s strengths and correct weaknesses– to
take advantage of external opportunities & counter external
threats
• Are consistent with organization’s mission and major goals
• Are congruent and constitute a viable business model
 Implement the strategies.

1-38
• Step 1: Identifying the organization’s current
mission, goals, and strategies
 Mission: a statement of the purpose of an
organization
 The scope of its products and services
 Goals: the foundation for further planning
 Measurable performance targets

• Step 2: Doing an external analysis

 The environmental scanning of specific and general
environments
 Focuses on identifying opportunities and threats

8–39
• Step 3: Doing an internal analysis
 Assessing organizational resources, capabilities, and activities:
 Strengths create value for the customer and strengthen the
competitive position of the firm.
 Weaknesses can place the firm at a competitive disadvantage.

 Analyzing financial and physical assets is fairly easy, but

assessing intangible assets (employee’s skills, culture, corporate
reputation, and so forth) isn’t as easy.

• Steps 2 and 3 combined are called a SWOT analysis.

(Strengths, Weaknesses, Opportunities, and Threats)

8–40
• Step 4: Formulating strategies
 Develop and evaluate strategic alternatives
 Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
 Match organizational strengths to environmental
opportunities
 Correct weaknesses and guard against threats

8–41
• Step 5: Implementing strategies
 Implementation: effectively fitting organizational
structure and activities to the environment.
 The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its requirements.
• Step 6: Evaluating results
 How effective have strategies been?
 What adjustments, if any, are necessary?

8–42
Strategic Management Process
• Study the external and internal environments.
• Identify marketplace opportunities and threats.
• Determine how to use core competencies.
• Use strategic intent to leverage resources,
capabilities and core competencies and win
competitive battles.
• Integrate formulation and implementation of
strategies.
• Seek feedback to improve strategies.

© 2007 Thomson/South-Western. All rights reserved. 1–43

Levels of strategy
Levels of strategy (1 of 2)
Diversifying from the
organisation’s original activities
Corporate- into other activities
level e.g. Tesla selling batteries for home use.

strategy
Marketing and product
improvement strategies
Business-level e.g. Developing a lower cost, volume car for
Tesla.
strategy

Tesla’s functional
strategies are
Functional strategies geared to meeting
its investment
needs and
raising finance.

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Levels of strategy (2 of 2)

• Corporate-level strategy is concerned with the

overall scope of an organisation and how value
is added to the constituent business units.
• Business-level strategy is concerned with the
way a business seeks to compete successfully
in its particular market.
• Functional strategy is concerned with how
different parts of the organisation deliver the
strategy effectively in terms of managing
resources, processes and people.

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Exhibit 8–3 Types of Organizational
Strategies

Copyright © 2010 Pearson Education, 8–47

Inc. Publishing as Prentice Hall Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
Working with strategy
 Working with strategy (1 of 2)
All managers are concerned with strategy:
• Top managers frequently formulate and control
strategy but may also involve others in the
process.
• Middle- and lower-level managers have to
meet strategic objectives and deal with
constraints.
• All managers have to communicate
strategy to their teams and can contribute
to the formation of strategy through ideas
and feedback.

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Working with strategy (2 of 2)

Organisations may also use strategy specialists:

• Many large organisations have in-house
strategic planning or analyst roles.
• Strategy consultants can be engaged from
management consulting firms (e.g. Accenture,
IBM Consulting, PwC).
• There are a growing number of specialist
strategy consulting firms (e.g. McKinsey &
Co., The Boston Consulting Group).

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
Strategy’s three branches (1 of 2)

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Exploring strategy in different
contexts
The Exploring Strategy Framework can be applied in many contexts.

In each context the balance of strategic issues differs:

•Small businesses (e.g. strategic purpose, growth issues and retaining
independence).
•Multinational corporations (e.g. geographical scope; cultural issues and
structure/control issues).
•Family Businesses: family concerns, strategic change and leadership.
•Public sector organisations (e.g. service/quality and
managing change issues).
•Not-for-profit organisations (e.g. purpose and funding
issues).

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
Why Some Firms Do No Strategic
Planning
• Lack of knowledge of strategic planning
• Poor reward structures
• Fire fighting
• Waste of time
• Too expensive
• Laziness
• Content with success

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
Why Some Firms Do No Strategic
Planning (continued)
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Honest difference of opinion
• Suspicion

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved
 Comparing Business and Military
Strategy
• Strategic planning started in the military
• Similarity
– Both business and military organizations must
adapt to change and constantly improve
• Difference
– Business strategy assumes competition
– Military strategy assumes conflict

Copyright © 2020, 2017, 2014 Pearson Education, Inc. All Rights Reserved