ADVANCED STRATEGIC

MANAGEMENT

BY Alemu A. (PhD
candidate)

1
 Course Description
• This course explores a wide range of
strategic issues facing businesses,
focusing particularly on the sources of
sustainable competitive advantage and
the interaction between industry structure
and organizational capabilities.
• It introduces variety of modern strategy
frameworks and methodologies and builds
upon material from core topics such as
economics, organizational processes,
operations and marketing.
• It deals with internal and external
2
 Course Objective
This course intends to make the students be able
to:
•Advance their understanding on strategy, levels
of strategy& strategic management process
•Identify environmental factors that affect
strategy formation, implementation, evaluation &
control
•Practice strategic management skills through
real world case analyses
•Understand the nature and dynamics of the
strategy formulation and implementation
processes
Content of the course mentioned hereafter
3
 Unite One: Introduction
• Definition of strategic management
• Historical birth of strategic management
• Phases in strategic management
• Strategic competitiveness
• Components of strategic management
process
• Levels of strategy
• Forcing factors to adopt a strategic
perspective

4
 Unite two:
Environmental Scanning and Industry
Analysis
• Environmental influences on
business
• Characteristics of business
environment
• Environmental scanning
• Strategic groups and strategic types

5
 Unite three:
Internal Scanning& Organizational
Analysis
• Resource based approach to
organizational/company analysis
• Steps/process in the development of an
organizational / a company profile
• Functional approach/Scanning the functional
resources
• Organization of general management: basic
organizational structures / corporate culture

6
 Unite four: Strategy Formulation
• Corporate strategy
• Directional strategy
• Diversification strategy
• Divestment / retrenchment strategy
• Combination strategy
• Boston consulting group matrix
• Corporate parenting

7
 Unite Five: Strategy
Implementation
• Developing programs, budgets and
procedures
• How is strategy to be implemented?
• Stages of corporate structure
development
• Reengineering and strategy
implementation
• Management by objectives (MBO)
• Total quality management (TQM)
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 Unite Six: Evaluation and Control
• Organizational control
• Evaluation and control process
• Strategic control
• Financial control techniques
• Operational control techniques
• Primary measures of divisional and
functional performance
• Capacity management
• Guidelines for proper control
• Strategic audit 9
 Evaluation Scheme
• Individual Assignment and Presentation 20%
• Group assignments and Presentations
30%
• Final Exam
50%
• Total
100%

10
 References
• Fred R. David, strategic management, sixth edition,
Prentice Hall, New York, 1997
• McCarthy, Monticello & Curran Business policy and
strategy, concepts and readings; Richard D. Irwin
Inc.
• Thompson, Jr & Strickland III; Strategic
management, concepts and cases, Irwin McGraw-
Hill.
• Pearce II& Robinson Jr. Strategic management,
strategy formulation and implementation; AITBS
Publishers and distributors, Delhi.
• Peers/Robinson, strategic management and any
other business policy and Strategy book can 11be
 Unit - I
Introduction
To understand the term “strategy “ and “strategic
Management” it is imperative to get understanding of the
following terms in advance.
 Vision: Describes what a company desires to achieve in
the specific time frame
Mission: Organizations are a part of society. They exist
b/c they perform an important function for members of the
society. Many organizations define the role they wish to play
in terms of a mission statement.
A mission statement can help an organization to link its
activities to the needs of society and legitimize its existence.
It describes: who it serves, what it does, its objectives, and its
approach to reaching those vision.
Purpose: The purpose is an issue the company should be
able to achieve in the long-run. The purpose can include
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anything that an organization strives for.
Objectives:
Objectives and goals are controversial terms.
Some times they are used interchangeably. In
this case, objectives are the open-ended
attributes denoting a future state or outcome
that an organization strives for.
The objectives are sought to be achieved in
order to take an organization towards its purpose
and to fulfill its mission.
A mission and purpose may lead to several
objectives which are stated in general terms. A
company may state its objectives in terms of
increasing its market share. When objectives are
stated in specific terms, they become goals to be
attained. 13
Goal: A goal is a closed-ended attribute
which is precise and expressed in specific
terms.
The objective of increase in market share
may be stated thus:
•To raise the existing market share of 25% to
35% of the total over period of two years.
•In order to attain goals. Short-term goals
expressed in precise terms and used for time
bound programs are known as targets.
Mission, purpose, objectives and goals are
vital for the determination of strategy.
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Policies, procedures and rules:
Policy is considered to be general guideline for
action. It channelizes organizational efforts in a
pre-determined direction and leads to the
achievement of goals, objectives, purpose and
mission of the company.
Policies are subdivided and stated in terms of
procedures (a series of related steps or tasks
expressed in a chronological order) and rules
(prescribed courses of action that explicitly state
what is to be done under a given set of
circumstances).
 E.g A company may state one of its many
policies as : products which are going to become
obsolete will be offered for sale with a certain15
 The procedure may explain how to decide which
product is obsolete and what percentage of
discount is to be offered. A rule may specify the
way in which a discount plan is going to operate.

 Plans and Programs: A program is a broad

term which includes goals, policies, procedures,
rules and steps to be taken in putting a plan into
action.
 Programs are usually supported by funds
allocated for plan implementation. They are also
known as action plans and when expressed in
highly concrete and specific terms become
projects.
 A plan may be implemented through a series16 of
 An example of a plan could be the growth plan
of a pharmaceutical company consisting of
expansion, modernization and diversification
programs requiring an investment of, say, USD
10,000 over the next five years. Each of the
different programs under growth plan
constitutes a major program. Thus, there
could be major as well as minor programs. An
example of minor programs includes a one
week training program for supervisory
development.
 Tactics: tactics are considered as action plans
through which strategies are implemented. To
implement strategy, an organization may
require different types of tactics or maneuvers.
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Forecasts: are estimates of future based on
an extrapolation of the past and present
trends.
Budgets: Budget is a plan statement for a
given period of time in future, expressed in
financial or physical units. Based on goals and
programs, budgets are used as tools in
planning and controlling functions.
What is strategy?
Professor Igor Ansoff explained the term
strategy as: “The common thread among the
organization’s activities and product markets
as above that defines the essential nature of
business that the organization was or planned
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to be in future.”
According to W. F. Glueck (1972),
“strategy is a unified, comprehensive and
integrated plan designed to assure that
the basic objectives of the enterprise are
achieved.” According to the definition
given by Glueck here above:
1.a unified means that the plan joins all
the parts of an enterprise together,
2.comprehensive means it covers all the
major aspects of the enterprise, and
3.integrated means that the parts are
compatible with each other.
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According to Ansoff, “strategy is a set of
decision-making rules for guidance of
organizational behavior.”
Arthur Sharplin (1985) defines strategy as
“A plan or course of action which is of
vital, pervasive, or continuing
importance to the organization as a
whole.”
Combining all the above definitions, we
will try to understand the meaning of
strategy. Accordingly strategy is:
A plan or course of action or a set of
decision rules making a pattern or 20
2)The pattern or common thread related to
the organization’s activities which are
derived from the policies, objectives and
goals,
3) Concerned with pursuing/following those
activities which move an organization
from its current position to a desired
future state, and
4) Concerned with the resources necessary
for implementing a plan or following a
course of action.
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 Historical birth of strategic
management
Strategic management as a discipline
originated in the 1950s and 60s.
Although there were numerous early
contributors to the literature, the most
influential pioneers were Alfred D.
Chandler, Philip Selznick, Igor Ansoff,
and Peter Drucker. The discipline draws
from earlier thinking and texts on '
strategy' dating back thousands of
years.
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• Glueck defines strategic management as “A
stream of decisions and actions which lead to
the dev’t of an effective strategy or strategies
to help achieve corporate objectives.” The end
result of strategic management, as visualized
by Glueck, is a strategy or a set of strategies
for the organization.
• Hofer and others consider strategic
management, as “the process which deals with
fundamental organizational renewal and
growth with the dev’t of the strategies,
structures and systems necessary to achieve
such renewal and growth, and with the
organizational systems needed to effectively
manage the strategy formulation and
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 Chandler stressed the importance of taking a
long term perspective when looking to the future.
In his 1962 groundbreaking work “Strategy and
Structure”, Chandler showed that a long-term
coordinated strategy was necessary to give a
company structure, direction, and focus. He
says it concisely, “structure follows strategy.”
 In 1957, Philip Selznick introduced the idea of
matching the organization's internal factors with
external environmental circumstances. This core
idea was developed into what we now call SWOT
analysis. When SWOT analysis is conducted,
Strengths and weaknesses of the firm are
assessed in light of the opportunities and
threats from the business environment.
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 Cont’d
Peter Drucker was a prolific strategy
theorist, author of dozens of
management books, with a career
spanning five decades. His contributions
to strategic management were many out
which his more stress was on the
importance of objectives. According to
him, an organization without clear
objectives is like a ship without a rudder.
As early as 1954 he developed a theory
of management based on objectives,
which later on devolved into his theory
of management by objectives (MBO) 25
 Cont’d
In 1985, Ellen-Earle Chaffee summarized
what she thought were the main elements
of strategic management theory by the
1970s:
Strategic management involves adapting
the organization to its business
environment.
Strategic management is fluid and
complex. Change creates novel
combinations of circumstances requiring
unstructured non-repetitive responses.
Strategic management affects the entire
organization by providing direction. 26
 Cont’d

Strategic management involves both

strategy- formation (she called it content)
and also strategy-implementation (she
called it process).
Strategic management is partially planned
and partially unplanned.
Strategic management is done at several
levels: overall corporate strategy, and
individual business strategies.
Strategic management involves both
conceptual and analytical thought
processes. 27
 What is strategic management?
 It is goal-oriented management in which
the mission and planned achievements of
an organization are clearly set out and
all management processes are designed
and monitored toward reaching the
organization's overall goals.
 Steps that have already been taken to reach
the goals of the organization are carefully
evaluated to make sure that they have been
carried out in the most efficient manner
possible and that they were indeed in line with
the overall goals as set forth in the mission
statement which governs the strategic
management process 28
 Definition of strategic
management
Strategic management is all about the
strategic coordination of efforts. It
communicates with all the stakeholders
involved in a project so that they understand
and accept its goals.
It creates atmosphere for a better teamwork
as team members know what they are meant
to achieve both as a team and in carrying out
their individual roles on that team.
• If an employee or consultant is not able to
work toward the goal in question, for
whatever reason, he/she needs retraining or
other support to make the necessary
adjustments to the team.
29
 Being able to answer the question "What is
Strategic Management" means being able to
set the goals which a firm or project needs
to achieve, and making sure that everyone
in the organization understands his
responsibility toward achieving those goals.
 Strategic management is a field that deals with
the major intended and emergent initiatives taken
by general managers on behalf of owners,
involving utilization of resources to enhance the
performance of firms in their external
environments.
 Strategic management includes not only the
management team. It can also include the Board
of Directors and other stakeholders of the
organization. It depends on the organizational 30
“Strategic management is an ongoing
process that evaluates and controls the
business and the industry in which the
company is involved; assesses its competitors
and sets goals and strategies to meet all
existing and potential competitors; and then
reassesses each strategy annually or
quarterly [i.e. regularly] to determine how it
has been implemented and whether it has
succeeded or needs replacement by a new
strategy to meet changed circumstances,
new technology, new competitors, a new
economic environment., or a new social,
financial, or political environment.” (Lamb,
1984:ix). 31
Strategic management is the systematic
analysis of the factors associated with
customers and competitors (the external
environment) and the organization itself (the
internal environment ) to provide the basis
for maintaining optimum management
practices.
The objective of strategic management is to
achieve better alignment of corporate
policies and strategic priorities.
Strategic management is defined as the
set of decisions and actions resulting in
formulation and implementation of strategies
designed to achieve the objectives of 32an
 Phases in strategic
management
1) Defining business mission, purpose and
objectives
2) Formulation of strategies
3) Implementation of strategies, and
4) Evaluation of strategies
These four phases are considered as
sequentially linked to each other and each
successive phase provides a feedback to
the previous phases. However, in practice,
the different phases of strategic
management may not be clearly
differentiable from each other. These four
phases have about 12 elements, namely, 33
1. Defining business
2. Setting mission
3. Determining purpose
4. Establishing objectives
5. Performing environmental appraisal
6. Doing corporate appraisal
7. Evolving strategic alternatives
8. Exercising strategic choice
9. Formulating strategies
10.Preparing strategic plan
11.Implementing strategies, and
12. Evaluating strategies
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A diagram of phases in strategic management
Business definition, mission, purpose and
objectives

Environmental appraisal
Organizational appraisal

Strategic alternatives and choice

Implementation of strategy
Project implementation
Procedural implementation
Structural implementation
Functional implementation
Behavioral implementation

Evaluation of strategy

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 Strategic competitiveness
The actions taken by the firms are
intended to achieve strategic
competitiveness and earn above-
average returns.
Strategic competitiveness is achieved
when a firm successfully formulates and
implements a value-creating strategy.
When a firm implements such a strategy
and other companies are unable to
duplicate or find it too costly to imitate,
the firm is said to have a sustained or
sustainable competitive advantage. 36
 Competitive advantage cont’d
• A sustained or sustainable competitive
advantage occurs when a firm implements a
value-creating strategy and other companies
are unable to duplicate it or find it too costly
to imitate.
• An organization is assured of a competitive
advantage only after others’ efforts to
duplicate its strategy have ceased or failed.
• In addition, when a firm achieves a
competitive advantage, it normally can
sustain it, not forever, but only for a certain
period of time until others are able to copy it
economically using the latest technology. 37
 Comp. adv. Cont’d
The speed with which competitors are
able to acquire the skills needed to
duplicate benefits of a firm’s value-
creating strategy determines how long
the competitive advantage will last.
Understanding how to exploit a
competitive advantage is important for
firms to earn above-average returns.
Above-average returns are returns in
excess of what an investor expects to
earn from other investments with a
similar amount of risk. 38
 Cont’d
• Risk is an investor’s uncertainty about
the economic gains or losses that will
result from a particular investment.
• Average returns are equal to those an
investor expects to earn from other
investments with a similar amount of
risks.
The strategic management process is
the full set of commitments, decisions,
and actions required for a firm to
achieve strategic competitiveness and
earn above-average return. 39
COMPONENTS OF STRATEGIC MANAGEMENT
PROCESS

40
A lifeline of survival in business is
innovation. To maintain sustainable
competitive advantage, the firm is required
to become innovator.
 The winners are the innovators who are
making bold thinking on everyday part of
doing business.
The current competitive landscape demands
innovation. As noted by Gary Hamel, a well-
known writer and management consultant,
the firms can not rely on past successes to
perform well today. He also suggests that
current success will not carry firms into the
future. Thus, the firms’ strategy must 41
Example, the large conglomerate
Samsung has continued its success
largely through innovation.
Because of innovation Samsung is
leader in many markets. The firm
has to innovate new products to
replace its old products that have
entered to declining stage in the PLC
model. If the firm is not designing
strategies for innovation, that firm is
at the edge of failure in the
competitive market. 42
 STRATEGIC ANALYSIS

Analyzing the strength of businesses' position

Understanding the important external factors

influencing that position

PEST Analysis : To understand the “external

environment” it is necessary to analyze
political, economic, social and technological
environments.

Five Forces Analysis : To identify the forces

which can affect the level of competition in an
industry. These forces model can be seen in the
following power point.
43
44
Market Segmentation : dividing the market into
different segments in order to select target market
and serve it more aggressively than any other
competitors.
Competitor Analysis : Likely Strategic Moves of
Rivals
 Firms are always watching what their competitors
are doing in market. If firms neglect their
competitors, they can open unexpected
competitive battle on firm’s businesses, profit, and
growth rate in market.
 A company cannot identify the competitors moves
and results without proper monitoring of their
actions, understanding their strategies and future
anticipating moves.
 Company watches its competitor just like a spy.45
Company watch competitors latest
strategies, moves , forces, growth,
development, alliances, joint venture,
technology innovations, strategic alliances
with partners, core competencies, core
resources, core strengths and weakness of
their competitors.
Critical Success Factor Analysis: To
identify those areas in which a business
must outperform the competition in order
to succeed.
SWOT Analysis: scanning internal and
external environment to see their impact on
the operation of the business organization.
46
 II. STRATEGIC CHOICE

This process involves:

1)understanding the nature of
stakeholder expectations (the
"ground rules"),
2)identifying strategic options, and
then
3) evaluating and selecting strategic
options.
47
 III. STRATEGY IMPLEMENTATION

When a strategy has been analyzed

and selected, the task is then to
translate it into organizational
action.
Translating the strategy into the
organizational action is called
implementation.

48
 LEVELS OF STRATEGY
I. Corporate Strategy

 Concerned with the overall purpose and scope of the

business to meet stakeholder expectations

 It is heavily influenced by investors in the

business

 It acts to guide strategic decision-making

 Often stated in "mission-statement"

49
II. Business Unit Strategy

Concerned more with how a

business competes successfully in a
particular market

Concerns with strategic decisions

about choice of products, meeting
needs of customers, gaining
advantage over competitors,
exploiting or creating new
opportunities etc. 50
III. Operational Strategy

 Concerned with how each part of

the business is organized to deliver
the corporate and business-unit level
strategic direction

Focuses on issues of resources,

processes, people etc.,

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 CORPORATE STRATEGIC PLANNING
• A Managerial task

• Concerned with the growth and future of the

business enterprise

• A corporation takes long term decisions

• It clearly defines objectives and assesses both

internal and external situation to formulate
strategy for achieving those objectives

• It ensures that the enterprise keeps on moving in

the right direction
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• Serves as a route map for the corporation
• Ensures that the firm’s businesses, products
and markets are chosen wisely

• Ensures the best utilization of the firm’s

resources

• Serves as hedge against the uncertainty.

• Provides best possible fit between the firm and

external environment

• Helps build competitive advantage and core

competences

• Helps the firm understand trends in advance 53

 FORCING FACTORS TO ADOPT A STRATEGIC
PERSPECTIVE
 Changes in technology

 Proliferation (increase) of new products

 Faster commercialization

 Socio-political changes

 Emergence of global firms, global brands and

markets.

 The changing tastes and preferences of the

consumer. 54
 BASIC MODEL OF STRATEGIC
MANAGEMNT
MISSION AND OBJECTIVES
• The mission statement describes the
company's business vision
• Forward-looking visionary goals that guide the
pursuit of future opportunities,
• Guided by the business vision, the firm's
leaders can define measurable financial and
strategic objectives
• Financial objectives involve measures such as
sales targets and earnings growth

• Strategic objectives are related to the firm's

business position, and may include measures
such as market share and reputation.
55
 ENVIRONMENTAL SCANNING
• The environmental scan includes Internal
analysis of the firm, Analysis of the firm's
industry (task environment) and External
macro environment (PEST) analysis

• The internal analysis can identify the firm's

strengths and weaknesses
• The external analysis reveals opportunities
and threats. A profile of the strengths,
weaknesses, opportunities, and threats is
generated by means of a SWOT analysis
• An industry analysis can be performed using
a framework developed by Michael Porter
known as Porter's five forces. This
framework evaluates entry barriers,
suppliers, customers, substitute products, 56
 STRATEGY FORMULATION
• Once a clear picture of the firm and its
environment is in hand, specific strategic
alternatives can be developed.

• While different firms have different alternatives

depending on their situation, there also exist
generic strategies that can be applied across a
wide range of firms.
• Michael Porter identified cost leadership,
differentiation, and focus as three generic
strategies that may be considered when defining
strategic alternatives.

• Porter advised against implementing a

combination of these strategies for a given
product; rather, he argued that only one of the
57
 STRATEGY IMPLEMENTATION
• The selected strategy is implemented by means
of programs, budgets, and procedures.

• Implementation involves organization of the

firm's resources and motivation of the
staff to achieve objectives.

• The strategy should be translated into specific

policies for functional areas such as:
Marketing
Research and development
Procurement
Production
Human resources
Information systems
58
 EVALUATION & CONTROL
• Once implemented, the results of the strategy
need to be measured and evaluated, with
changes made as required to keep the plan on
track.
• Control systems should be developed and
implemented to facilitate this monitoring.
• Evaluation and control consists of the following
steps:
Define parameters to be measured
Define target values for those parameters
Perform measurements
Compare measured results to the pre-defined
standard
Make necessary changes 59
 DRAWBACKS OF THIS PROCESS
• It may not be responsive enough for rapidly
changing competitive environments.
• In times of change, some of the more successful
strategies emerge informally from lower levels of
the organization, where managers are closer to
customers on a day-to-day basis.
• It assumes fairly accurate forecasting and does
not take into account unexpected events.

• In an uncertain world, long-term forecasts cannot

be relied upon with a high level of confidence.

• In this respect, many firms have turned to

scenario planning as a tool for dealing with
multiple contingencies.
60
THANK YOU

61