BUSINESS POLICY AND

STRATEGIC MANAGEMENT

Ashenafi Haile (Ph.D)

ashu21haile@yahoo.com
+251913050119
 Chapter - One

Strategic Management -
An Overview
 CHAPTER OBJECTIVES
After studying this chapter, you should be able to
do the following:

4. Discuss the nature of Strategy

1.Describe the strategic
formulation, implementation, and
-management process.
evaluation activities.
2. Explain the need for
5. Describe the benefits of good
integrating analysis and
strategic management.
intuition in strategic
management. 6. Discuss the relevance of Sun
Tzu’s The Art of War to strategic
3. Define and give
examples of key terms management.
in 7. Discuss how a firm may
strategic management. achieve sustained competitive
advantage.
 "If we know where we are and something about
how we got there, we might see where we are
trending—and if the outcomes which lie
naturally in our course are unacceptable, to
make timely change.“ —Abraham Lincoln

"Without a strategy, an organization is like a

ship without a rudder, going around in circles.
It’s like a tramp; it has no place to go."
—Joel Ross and Michael Kami

 "Plans are less important than planning.“ —

Dale McConkey
Strategic Management – Concept

 History of Strategy began in the military.

 Word ‘Strategy’ comes from Greek word
‘Straegos’, that refers to military general
and combines ‘stratos’ (army) and ‘ago’
(to lead).
 1st used around 360 BC, when the
Chinese military strategist sun Tzu wrote
the art of war,
 Both Military Strategy and Business Strategy
focus how to use their own strengths to exploit
enemy’s / competitor’s weaknesses.
 Fundamental difference between Military
Strategy and Business Strategy is that Military
strategy is based on the assumption of ‘Conflict’,
whereas Business Strategy is based on the
assumption of ‘Competition’.
 Strategic Management as an academic
discipline started to develop in the 1950s.
Strategic Management –
Defined

science & Art of formulating,

implementing, and
evaluating, cross-functional
decisions that enable an
organization to achieve its
objectives
 Strategic management is a set of managerial decisions and
actions that determines the long run performance of a
corporation.

 It includes environmental scanning (both external and

internal), strategy formulation (long-range planning),
strategy implementation, and evaluation and control.

 The study of strategic management, therefore, emphasizes

the monitoring and evaluating of external opportunities and
threats in light of a corporation’s strengths and weaknesses
 strategic management is used to refer to strategy
formulation, implementation, and evaluation, with
strategic planning referring only to strategy
formulation.

 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.
Strategic Management
achieves a firm’s success
through integration ––

Management Marketing

Finance/Accounting Production/Operations

Research & Development MIS

Stages of Strategic Management

Strategic Management process

consists of 3 stages:

Strategy Strategy Strategy

formulation implementation evaluation
 Strategy formulation
 includes developing a vision and mission,
identifying an organization’s external opportunities
and threats, determining internal strengths and
weaknesses, establishing long-term objectives,
generating alternative strategies, and choosing
particular strategies to pursue
 Deciding what new businesses to enter,
 What businesses to abandon,
 How to allocate resources,
 Whether to expand operations or diversify,
 Whether to enter international markets,
 Whether to merge or form a joint venture,
 How to avoid a hostile takeover.
 Strategy implementation
 requires a firm to establish annual objectives,
devise policies, motivate employees, and allocate
resources so that formulated strategies can be
executed
 often called the action stage
 Strategy evaluation
 reviewing external and internal factors that are the
bases for current strategies, measuring
performance, and taking corrective actions
 Strategy formulation, implementation, and
evaluation activities occur at three
hierarchical levels in a large organization:
corporate, divisional or strategic business
unit, and functional
 Strategic management helps a firm function
as a competitive team
Key Terms in Strategic Management

 Competitive  Strategists
advantage the individuals who are
anything that a firm
 most responsible for
does especially well the success or failure
compared to rival firms of an organization
 Vision statement
 answers the question “What do we want to
become?”
 often considered the first step in strategic
planning
 Mission statements
 enduring statements of purpose that distinguish
one business from other similar firms
 identifies the scope of a firm’s operations in
product and market terms
 addresses the basic question that faces all
strategists: “What is our business?”
 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
 Internal strengths and internal
weaknesses
 an organization’s controllable activities that are
performed especially well or poorly
 determined relative to competitors
 Objectives
 specific results that an organization seeks to
achieve in pursuing its basic mission
 long-term means more than one year
 should be challenging, measurable, consistent,
reasonable, and clear
 Strategies
 the means by which long-term objectives will be
achieved
 may include geographic expansion,
diversification, acquisition, product development,
market penetration, retrenchment, divestiture,
liquidation, and joint ventures
 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
 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
The Strategic-Management Model

Where are we now?

Where do we want to go?

How are we going to get there?

A Comprehensive Strategic-
Management Model
Integrating Intuition and
Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under conditions of
uncertainty
Intuition is based on:
Past experiences
Judgment
Feelings

Intuition is useful for decision making in:

Conditions of great uncertainty
Conditions with little precedent
Intuition & Judgment

Involve Management at all levels

Influence all Analyses

 Intuition + Analysis

Effective Strategic Decisions

 Stages Activities
Make
formulation decisions

Establish Allocate
implementation
resources
objectives

Review internal evaluation

factors
 Take
performance corrective
action
Over view of types/levels of strategy
1 Corporate level strategies
)
 A corporate level strategy specifies actions a firm takes to
gain a competitive advantage by selecting and managing
a group of different businesses competing in
different product markets.
2) Business Level Strategies
 A business-level strategy is an integrated and
coordinated set of commitments and actions the firm uses
to gain a competitive advantage by exploiting core
competencies in specific product markets
3) Functional Level Strategies
 This is the approach taken by a functional area to achieve
corporate and business unit objectives and strategies
 They are strategies, which are designed by different
functions of a company; Finance, Accounting, Research
and Development, Personnel, Marketing and Production
 MIDROC Ethiopia
Investment Group Corporate level strategy

Business
level strategy
Abc Car Avanti Derba Hora
Rental Blue Derba- Derba Drilling Ethio-
Hawassa Food
PLC Nile MIDROC Transp and Leather
Chipwood Compl
Resort Cement Hydrology Industry ex
ort PLC PLC Factory PLC
Hotel PLC PLC PLC
(ELICO)

MARKETING FINANCE
PRODUCTION
MGT Functional level strategy
Benefits to a Firm That Does
Strategic Planning
Benefits of Strategic
Management

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement
Non-Financial Benefits

• Improved understanding of competitors strategies

• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
Benefits of Strategic
Management (Greenley)

1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
11.Encourages favorable attitude toward
change
12. Provides discipline and formality to the
management of the business
Why Some Firms Do No
Strategic Planning

Poor reward structures

Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
/ END /