STRATEGIC PLANNING

AND MANAGEMENT
BY: MULUYE MIHRETE
 CHAPTER ONE
THE BASICS OF STRATEGIC MANAGEMENT

1.1. Meaning and the Concept of Strategic Management

1.2. Nature of Strategic Management
1.3. Key Terms in Strategic Management
1.4. Benefits of Strategic Management
 DISCUSSION QUESTIONS

1.Why do some firms/projects succeed while others fail?

2. Some say businesses/projects fail, because managers fail.
Do you agree?
1.1. MEANING AND CONCEPT OF
STRATEGIC MANAGEMENT
Defining Strategy:
▪ It is an executable plan of action that describes how an
individual or organization will achieve a stated mission.
▪ Is different by deliberately choosing to do a different set
of activities in order to deliver a unique mix of value
(Porter).
▪ Is a plan, a direction or a guide (Mintzberg)

✓ Company strategies
▪ Organizations often formulate:

✓ Product and service strategies and

✓ Strategies that drive operational, support and
management processes.
DEFINING STRATEGIC MANAGEMENT
 The term strategic management is defined in many ways by
different writers. Some of the definitions include:
➢ The formulation and implementation of the major goals and
initiatives taken by a project’s/company's top management,
based on consideration of resources and an assessment of the
internal and external environments in which the organization
competes.
➢ Making decisions about an organization’s future direction
for growth, renewal and transformation and implementing
those policies.
 CONT….
 “.....not a box of tricks or a bundle of techniques. It is
analytical thinking and commitment of resources to
action” (Peter Drucker)
 SM is the process of systematically analyzing various

opportunities and threats vis-à-vis organizational

strengths and weaknesses, formulating, and arriving at
strategic choices through critical evaluation of
alternatives and implementing them to meet the set
objectives of the organization.
 CONT…..
 SM is the set of decisions and actions resulting in formulation
and implementation of strategies designed to achieve the
objectives of an organization.
 SM is the art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an

organization to achieve its objectives.
 SM focuses on integrating management, marketing,
finance/accounting, production/operations, research and
development, and computer information systems to achieve
organizational success.
 CONT…
 From definitions of strategic management one can identify
that at least Strategic management:
 Is an art and science of choosing the alternatives from the

designed and available courses.

 Involves set of decisions and actions.

 Enable an organization to achieve its objectives.

 Is concerned with gaining and maintaining competitive

advantage.
 Strategists helps an organization in gathering, analyzing &

organizing information & responsible for the success or

failure of an organization
 CONT….
 According to Robinson and Pearce (2005),strategic
management involves attention to no less than nine critical
areas:
1. Determining the mission of the company, including broad
statements about its purpose, philosophy, and goals.
2. Developing a company profile that reflects internal
conditions and capabilities.
3. Assessment of the company’s external environment, in terms
of both competitive and general contextual factors
 CONT…
4. Analysis of possible options uncovered in the matching of
the company profile with the external environment.
5. Identifying the desired options uncovered when possibilities
are considered in light of the company mission.
6. Strategic choice of a particular set of longterm objectives and
grand strategies needed to achieve the desired options.
 CONT…
7. Development of annual objectives and short-term strategies
compatible with long-term objectives and grand strategies.
8. Implementing strategic choice decisions based on budgeted
resource allocations and emphasizing the matching of tasks,
people, structures, technologies, and reward systems.
9. Review and evaluation of the success of the strategic process
to serve as a basis for control and as an input for future decision
making.
 CONT…
 These nine areas indicate, strategic
management involves the planning,
directing, organizing, and controlling of
the strategy related decisions and
actions of the business.
1.2 THE NATURE OF STRATEGIC
MANAGEMENT
 Strategic management consists of the decisions and actions
used to formulate and implement strategies that will provide a
competitively superior fit between the organization and its
environment, to enable it to achieve organizational objectives.
 It can also be described as the process of management
needed to enable an organization to move from where it is
now to where it wants to be in the future.
 It is about a sense of direction and aligning this with an

organization’s aims
 CONT…
 Setting a strategic direction for an organization is the most
complex task facing a management team because:
 Strategy direction is established in an unknown future;

 There are a range of choices for the management team;

 Organizations operate in a volatile and dynamic

environment;
 Strategic management involves people, including the

managers and everybody else in the organization

 CONT..
 Strategic management consists of the analyses, decisions, and
actions an organization undertakes in order to create and sustain
competitive advantages
➢ Analysis
• Strategic goals
• Internal and external environment of the firm
➢ Strategic decisions
• What industries should we compete in?
• How should we compete in those industries?
➢ Actions
• Allocate necessary resources
• Design the organization to bring intended strategies to reality
 CONT…
 A central objective of strategic management is to explain
why some firms/projects succeed while others fail.
 The strategic management process can be broken into

two phases:
➢Strategic planning and
➢Strategy implementation
 CONT…
Strategic planning
• Is conscious, systematic process of making decisions
about goals and activities that an individual, group, work
unit, or organization will pursue in the future
• Is a purposeful effort that is directed and controlled by
managers and often draws on the knowledge and
experience of employees throughout the organization
 CONT……
Strategy Implementation
 Developing the organizational structure to achieve the

strategy;
 Identifying & quantifying the resources required to

support the achievement of the objectives

 Ensuring that the activities necessary to accomplish the

strategy are performed effectively

 Monitoring the effectiveness of the strategy in achieving

the organization’s objectives.

 1.3. KEY TERMS IN STRATEGIC
MANAGEMENT
The nine key terms in strategic management includes:
1. Competitive advantage,
Strategic management is all about gaining and maintaining competitive advantage.
 Competitive advantage is “anything that a firm does especially well compare to
rival firms.”
2. Strategists,
Are individuals who are most responsible for the success or failure of an organization.
 Have various job titles, such as chief executive officer, president, and owner, chair
of the board, executive director, chancellor, dean, or entrepreneur.

3. Vision and mission statements

Many organizations today develop a vision statement that 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.
4. External opportunities and threats,
External opportunities and 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
 CONT…
5. Internal strengths and weaknesses,
Internal strengths and 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.
6. Long-term objectives
Long-term takes more than one year.
7.Strategies,
Are the means by which long-term objectives will be achieved.
 Affect an organization’s long-term prosperity, typically for at least five years, and
thus are future-oriented.
8. Annual objectives, and
Are short-term milestones that organizations must achieve to reach long term
objectives.
9. Policies
 Are the means by which annual objectives will be achieved.

 Include guide-lines, rules, and procedures established to support efforts to

achieve stated objectives.

1.4. BENEFITS OF STRATEGIC
MANAGEMENT
 Allows an organization to be more proactive than
reactive in shaping its own future;
 Allows an organization to initiate and influence
activities
Help organizations formulate better strategies through the
use of a more systematic, logical, and rational approach to
strategic choice.
 CONT…
 Communication is a key to successful strategic
management.
 through dialogue and participation, managers and

employees become committed to supporting the

organization.
 Strategic-management dialogue is more important than a

nicely bound strategic management document.

 CONT….
Financial Benefits
 Organizations using strategic-management concepts:-

➢Are more profitable and successful.

➢Show significant improvement in sales, profitability, and
productivity.
➢Do systematic planning to prepare for future fluctuations
➢Exhibit superior long-term financial performance
➢Make more informed decisions
 CONT….
Non-financial Benefits
❖ Enhance awareness of external threats
❖ Improve understanding of competitors’ strategies,
❖ Increase employee productivity,
❖ Reduce resistance to change
❖ Clearer understanding of performance-reward relationships.
❖ Enhances the problem-prevention capabilities of organizations
❖ Promotes interaction among managers’ at all divisional and
functional levels.
❖ Share organizational objectives with employees
❖ Empower employees to help improve the product or service
❖ Recognize employees contributions
 CONT….
 Brings order and discipline
 Renew confidence in the current business strategy

 Point to the need for corrective actions.

 provides a basis for identifying and rationalizing the

need for change.
 Helps to view change as an opportunity rather than as a

threat
 CHAPTER TWO
SETTING STRATEGIC DIRECTION
2.1 The Process of Strategic Management
2.2 Leading Strategically: Vision, Mission and Goal/Objective

2.1. The Process of Strategic Management

 The concept of strategic management has four component

processes.
These are:
1.Strategic analysis and planning

2.Strategy formulation and strategic decision making

3.Strategic choice and
4. Strategy implementation.
1. STRATEGIC ANALYSIS AND
PLANNING:
a. Strategic analysis:
➢Is a process by which the enterprise examines its own
internal or corporate characteristics and capabilities; and
identifies the most important features of the external
environment within which it must operate.
b. The planning process:
➢Is used to inform and structure the processes
of strategy formulation, strategic decision-
making, strategic choice, and strategy
implementation.
2. STRATEGY FORMULATION AND
STRATEGIC DECISION-MAKING
▪ Are used to establish enterprise mission, objectives, and
strategy.
▪ Mission, objectives, and strategy will derive from the
vision and values of the enterprise, leaders, decision-
makers, and stakeholders.
▪ The enterprise will have to decide how to formulate its
strategies and plans.
Decision-makers:
▪ have to know how to identify and describe the alternative
courses of action available to the enterprise.
3. STRATEGY CHOICE
➢Is used to identify the alternative courses of action, given
its available resources, capability, willpower, and sources
of comparative or competitive advantage
4. STRATEGY IMPLEMENTATION
 Is the process of putting the enterprise’s chosen
strategies and plans into practice. It depends up on:
 The internal context and constraints of the people,

leadership, structure, resources, capability, and culture of

the organization.
 The context and constraints of the external, political, and

competitive environments.
2.2. LEADING STRATEGICALLY: VISION, MISSION AND
GOAL/OBJECTIVE

2.2.1.Creating a Vision
2.2.1.1. Definition of Vision
 Aspirations, expressed as strategic intent, should lead to

an end. That end is the vision of an organization.

 Vision statement writing is the first step in strategic

management.
 Managers are required to envision where the
organization should be headed in the long run and
understand how it might get there.
 Is category of intentions that are broad, all inclusive,

and forward looking.

 CONT…
 Vision statement defines what the organization want to
be in the future.
 It answers the question “What do we want to become/

what do we want to be”.

 Vision is a necessary preproduction to success.

 Many vision statements are a single sentence

2.1.2. BENEFITS OF VISION
Benefits of Good vision statement;
➢Are inspiring and exhilarating
➢Help in the creation of a common identity and a shared
sense of purpose
➢Are competitive, original and unique.
➢Foster risk-taking and experimentation
➢Foster long-term thinking.
➢Represent integrity; they are truly genuine.
➢Link core value of organization
➢Shared among employees.
2.1.3. CHARACTERISTICS OF VISIONARY
LEADERS CHARACTERISTICS OF VISIONARY
LEADERS INCLUDE:
 Search for ideas, concepts, and ways of thinking until clear
vision crystallizes;
 Persuade employees to embrace the vision.
 Actin a supportive and expressive way.
 Relate the vision to the cares and concerns of individuals;
 Concentrate on strengths within the organization.
 Remain at the center of the vision, as its prime shaper;
 Look for ways to develop further the corporate vision by
taking note of changes inside and outside the organization;
 Measure the success of the organization in terms of its
ability to fulfill the vision; and
2.2. MISSION
2.2.1. NATURE OF MISSION STATEMENT
mission:
 Is the essential purpose of the organization; why it is in

existence, the nature of the business it is in, and the customer it

seeks to serve and satisfy.
 It distinguish one business from other similar firms.

 It defines scope of firms operations in product and market terms.

 Embodies the business philosophy of strategic decision makers

 Describes the product, market, and technological areas of

emphasis for the business.

 Reflects the values and priorities of strategic decision makers.

 It relates the organization to the society in which it operates.

 Indicates exactly what activities the organization intends to

engage in now and in future.

 CONT…..
 Is the starting point for rational managerial action and
for the design of its strategies.
 Focuses on external, rather than internal.

 Mission make the vision tangible– translate it into

reality.
 It addresses the issues more explicitly and serves to

identify the care, the uniqueness of the organization.

 It is a statement of attitude, outlook, and orientation

rather than of details and measurable targets.

 Encompasses the broad aims of the organization

 The process of defining mission for any organization.

2.2.2. FUNCTIONS OF MISSION
 Defining mission statement for an organization serves
the following functions (David Fred, 2005);
 Ensure unity of purpose within the organization.

 Provide a basis for motivating the use of the

organization’s resources.
 Develop a basis, or standard, for allocating
organizational resources.
 Provides the boarding for strategy formulation.

 Helps to focus on the real strategies and secondary

issues.
 Provide guidance for strategy making

 Outlines norms of individual behavior.

 CONT…..
 Provides ethical standard for organization
 Establish a general tone or organizational climate.

 Serve as a focal point for those who can identify with

the organization’s purpose and direction.

 Facilitate the translation of objectives and goals into a

work structure.
 Acknowledge responsibilities toward various
stakeholders
 Acts as touch stone for decision making.

 Provides core principles for decision making

2.2.3. CHARACTERISTIC OF GOOD
MISSION

While framing the mission statement, the following points should be

taken into consideration;
It should be feasible. It should be neither too high to be unachievable,
nor too low to de-motivate the people for work.
It should be precise: It should be neither too narrow so as to restrict
the organization’s activities, nor too broad to make itself meaningless.
It should be clear: both in terms of intentions and words used to lead to
action.
It should be motivating: for employees , customers and society.
It should be distinctive (unique): both in terms of the organization’s
contributions to the society and how these contributions can be made.
It should indicate major components of strategy: shows major
strategies adopted.
It should indicate how objectives are to be accomplished: give clue
how to accomplish objective
 CONT….

 Customers: Who are the firm’s customers?

➢ Products or services: What are the firm’s major products
or services?
➢ Markets: Geographically, where does the firm compete?
➢ Technology: Is the firm technologically current?
➢ Concern for survival, growth, and profitability: Is the firm
committed to growth and financial soundness?
➢ Philosophy: What are the basic beliefs, values,
aspirations, and ethical priorities of the firm?
➢ Self-concept: What is the firm’s distinctive competence or
major competitive advantage?
➢ Concern for public image: Is the firm responsive to social,
community, and environmental concerns?
➢ Concern for employees: Are employees valuable asset of
the firm
2.2.4. FORMULATING MISSION
STATEMENT
 The typical business organization begins with the beliefs,
desires, and aspirations of a single entrepreneur. The sense of
mission is based on several fundamental elements:
 Belief that the product or service can provide benefits at least
equal to its price.
 Belief that the product or service can satisfy a customer need.
 Belief that the technology to be used in production will provide
a product or service that is cost and quality competitive.
 Belief that with hard work and the support of others the
business can do better than just survive.
 Belief that the management philosophy of the business will
result in a favorable public image.
 Belief that the entrepreneur’s self-concept of the business can be
communicated to and adopted by employees and stockholders.
2.3. GOALS
2.3.1 DEFINITION OF ORGANIZATIONAL GOALS
 Refer to a general statement of direction inline
with the mission.
 Could be quantitative and qualitative in nature.
 Are the reason for its existence.
 Is by which activities of an organization are
directed
 Is a future expectation.
 It is something the organization is trying to
accomplish.
 Refer to the overall purpose or general objective
of an organization
 Refer to more specific desired accomplishments
 It determine the nature of its inputs and outputs
2.3.2. FUNCTIONS OFGOALS

 The concept of organizational goals serves a number of important

functions. Goals;
 Provide a standard of performance..
 Provide a basis for planning and management
 Provide guidelines for decision making and justification for
actions taken.
 Influence the structure of the organization
 Help determine the nature of technology employed.
 Help to develop commitment of individuals and groups to the
activities of the organization.
 Give an indication organizations ’true nature and character.
 Serve as a basis for the evaluation of change and organization
development.
 Are more precise as compared to mission
2.3.3. FEATURES OF GOALS
⁕ Each organization, or group of individuals, has some goals.
⁕ Goals may be broad or specifically mentioned.
⁕ Goals have hierarchy.
⁕ An organization may have multiple goals.
⁕ Goals address financial and non–financial issue.
⁕ Goal facilitate reasoned trade-offs.
⁕ Organizational goal calls for stretching the limits
⁕ Organizational goals have social sanction, that is, they are
created within the social norms.
⁕ Goals may be clearly defined or may not be clear.
⁕ Organizational goals can be changed;
⁕ Organizational goals cut across functional areas.
2.4. OBJECTIVES
 The goals of the organization are usually translated into
objectives.
 Set out more specifically the goals of the organization, the aims

to be achieved and the desired end-results.

 Narrower than goals and are of a shorter time.

 Essential part of the decision-making process involving future

courses of action.
 Set out either in general terms or in more specific terms.

 A specific results that an organization seeks to achieve in

pursuing its mission.

 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.
 CONT.…..
 Objectives of the organizations have to be satisfy the
SMARTER
 S= Specific,
 M= Measurable,
 A= Achievable,
 R= Realistic,
 T= Time bound,
 E= Enhanceable,
 R= Rewarding principle.
BENEFIT OF OBJECTIVE
 Defines the role of the organization in the larger
environment.
 Set the standard for performance monitoring and

remedial action
 Serve to link vision, mission and goals

 Reduce conflict.

 Provide coherence.

 Acknowledge constraints.
2.5 POLICIES
 While objectives refer what is to be done, polices focus on
how organizational objectives will be achieved. Polices
provide a general guideline to action.
 It is a framework for managers to follow in decision-making

and handling problem situational.

 Polices define an area within which a decision is to be made

and ensure that the decision will be consistent with, and

contribute to an objective.
 Policies are guides to decision making and address repetitive

or recurring situations.
 Policies are the means by which annual objectives will be

achieved.
2.6. PROCEDURES
 Are specific steps required to achieve goals.
 Show chronological sequences of required action.

 Detail the exact manner in which certain activities must

be accomplished.
 Found in all functions numerous at the lower level and

help in the implementation of polices.

 Limit creativity and initiatives.

 Provide specific instructions in handling organizational

operations.
2.7. RULES
 Is a statement that tends to restrict actions or prescribe
specific activities with no discretion.
 Is a specification for actions that must be taken, or must

not be taken in particular circumstances.

 Spell out specific required actions or no actions.

 Usually the simplest type of plan.

 Designed to be clear and unambiguous.

2.8. PROGRAM
 Encompasses a complex whole of goals,
policies, rules, task, recourse required, etc.
2.9. BUDGET
 Is a statement of expected results expressed in
numerical terms.
 Relates to a specific time span in the future.

 It is used for allocation and control of resources.

 It also called financial plan.

 It addresses issues in very detail manner, and limit

freedom.
Thank you