STRATEGIC MANAGEMENT

CHAPTER 1
1. The Evolution and Concepts of Business Policy & Strategy
2. The Evolution and Nature of Strategic Management
3. The Benefits of Strategic Management
4. The Bases and Approaches of Policies and Strategies
5. The Modalities and Process in Strategic Decision
6. The Basic Role of the Board of Directors

OBJECTIVES
The learners should be able to:
➢ Explain the evolution of business policy and strategy.
➢ Discuss the concept and relevance of strategic management.
➢ Distinguish business policy from strategy and tactics.
➢ Discuss some aspects of policy identification and development.
➢ Appreciate the role of the employees, top management and Board of Directors of the
business organization in relation to strategic management.

EVOLUTION OF BUSINESS POLICY AND STRATEGY

A little background.
For any organization to operate effectively, a sense of direction needs to be set and some sort of rules
or guidelines have to be established and observed. In the worst cases, a variety of problems arises
when a rules, guidelines or policies are never put into writing.

What is a Business Policy?

A business policies are set of rules that guides the decisions and actions of the members
of the organization.
These policies may be informal or in writing coming in the form of:
➢ Operational manual
➢ Personnel handbook
➢ Memoranda
➢ Minutes of the meeting
➢ Documentation of other forms of formal discussions including workshops and year end activities.

CONCEPT OF BUSINESS POLICY

The basic theory of the term management which evolves around the idea of planning,
organizing, staffing, directing, controlling and evaluating still holds true. Within the context of
a plan or the process of planning are a variety of plans taking the form of like;
o Budget
o Policy
 o Strategy
o Rules/Guidelines
o Procedures, etc
All of them are done ahead of time and that these terms serve as guideposts within which decisions
have to be based upon.

CONCEPTS OF STRATEGY
A strategy as essentially referring to a top management’s plan to attain the outcomes
consistent with the organizations mission and goals.

According to the authors, (Wright, Kroll, and Parnell 1996) strategy has three vantage points, namely:
❖ Strategy formulation or developing the strategy
❖ Strategy implementation (putting the strategy into action)
❖ Strategic control (modifying either the strategy or its implementation to ensure that the desired
outcomes are attained.)
 STRATEGY categorized into either: INTENDED or REALIZED strategy.
Intended Strategy – refers to the original strategy that management plans and intends to
implement; whereas
Realized Strategy – refers to the actual and eventual strategy that management actually
implements.

Among others, strategy is also a “management game plan” to achieve the following:
1. To attract and please customers;
2. Stake out a market position;
3. Conduct operations; and
4. Compete successfully.

CHARACTERISTICS OF STRATEGY
✓ Strategy is traditionally meant to be a grand plan made in the light of what it was believed an
adversary might or might not do.
✓ Strategy derives its relevance given from the existence competition in business.
✓ It also connotes a general program of action and deployment of emphasis and resources to
attain comprehensive objectives.
✓ It involves a determination of the basic long-term goals and objectives of an enterprise.
✓ A decision about how to use available resources to secure a major objective.

DEFINITION OF STRATEGIC MANAGEMENT

• It refers to the entire process of strategic decision-making that relates to its environment,
guides internal activities, and determines the long-term performance of the organization.
• Is a set of managerial decisions and actions that determines the long-term performance of a
corporation.
• It is a continuous and dynamic process.
• Will take into consideration of internal and external factors in general.
Strategy may come in the form of various types:
1.DEFENDERS. This type includes companies with a limited product line that focus on improving the
efficiency of their operations.
2.PROSPECTORS. This type of companies includes firms with fairly broad product lines that focus on
product innovation and market opportunities. They tend to emphasize creativity over efficiency.
3.ANALYZERS. This type includes business organization that operate in at least two different product-
market areas, one stable and one variable. In the stable areas, efficiency is emphasized. In the variable
areas, innovation is emphasized.
4.REACTORS. This type includes companies that lack of consistent strategy –structure-culture
relationship. Their (often ineffective) responsive to environmental pressures tend to be piecemeal
strategic changes.
THE BASES OF POLICIES AND STRATEGIES
✓ Legal Mandate. This refers to formulating policies on the basis of the provisions of the charter
or legal basis. Typically, business policies are based on the provisions of articles of incorporation
and by-laws of the organization.
✓ Vision and Mission Statement. This essentially refers to the leadership bias as well as sense
of direction and mission for which the organization was conceived or established.
✓ Specific Objectives. These are the corporate objectives purposely developed for the
organization.
✓ Programs and Policies. These are specific programs and policies set forth by the organizations
policymakers (BOD, Top Mgt) in pursuit of short and long-term goals.
APPROACHES TO IDENTIFYING POLICIES AND STRATEGIES
A brainstorming session and doing serious research about what is happening in the
industry or sector the company is operating would be extremely useful.
i. Policy/Strategy Profile. This approach involves a systematic examination of present company
policy strategy-indirect and direct.
 ii. Gap Analysis. In this approach, the stimulus is an examination of whether an end that has been
established is likely to be achieved. It means asking what is missing in the existing policy that
may have been missed resulting to non-attainment of objectives.
iii. Competitive Strategy Analysis. This calls for finding the niche or slot where the firm is deemed
competitive.

The Approach to Developing Policies and Strategies may come in any of the following:
1.Top-bottom Approach
2.Bottom-top Approach
3.Top-bottom-top
THE FOUR MODALITIES IN STRATEGIC DECISION:

1. Entrepreneurial mode. In this mode, strategy is made by one powerful individual and the focus is
on opportunities; problems are secondary. Guided by the “founders’ vision”, the dominant goal is growth
of the corporation.
2. Adaptive mode. Sometimes referred to as “muddling through” this mode is characterized by reactive
solutions to existing problems, rather than proactive search for new opportunities.
3.Planning mode. This decision-making mode involves the systematic gathering of appropriate
information for situation analysis. This includes proactive search for new opportunities and the reactive
solution of existing problems.
4.Logical mode. An interactive strategy development (Planning + Adaptive)

STRATEGIC DECISION – MAKING PROCESS

Step 1. Evaluate current performance results in terms of;
a. ROI, Profitability, etc
b. current VMGO and policies
Step 2. Review corporate governance (performance of the BOD & Top Mgt.)
Step 3. Scan and assess external environment to determine the strategic factors that pose
Opportunities & Threats.
Step 4. Scan and assess the internal corporate environment to determine the strategic factors that are
Strengths and Weaknesses.
Step 5. Analyze strategic (SWOT) factors to pinpoint problem areas and review or revise the corporate
mission and objectives if necessary.
Step 6. Generate, evaluate, and select the best alternative strategy in the light of the analysis
conducted in Step 5.
Step 7. Implement selected strategies via programs, budgets, and procedures.
Step 8. Evaluate and implement strategies via feedback systems and the control of activities to ensure
their minimum deviation from plans.

The specific role of the board of directors

1. To monitor 2. To Evaluate and Influence 3. To Initiate and Determine

 Motivators and Drivers of Strategic Management
CHAPTER 2

Learning Objectives:
➢ Explain the factors in driving and motivating business organizations to stay competitive or
adopt the concepts of strategic management.
➢ Discuss the importance of some market and economic theories relevant to strategic
management.
➢ Appreciate the importance of competencies as tool for strategic advantage.
➢ Discuss the importance of strategic management vis-à-vis the technological and global
developments;
➢ Explain and appreciate the relevance and importance of other theoretical framework
associated with change and strategic management.

WHY THE NEED FOR STRATEGIC MANAGEMENT?

Stiff Competition
- business organizations edge out or outcompete each other to take control of the market

NATURE OF MARKET & BUSINESS

❖ The ever-changing market conditions.
❖ The changing taste of the market.
❖ Socio-political changes.
❖ The impact of global developments vis-à-vis the local markets.
❖ The changes in the conduct of businesses.

TRIGGERING EVENTS
- situations or scenarios that have caused or resulted to the initiatives of the top
management to consider strategy.

2 forms of triggering events:

1. INTERMAL TRIGGERING EVENTS – these are triggering events that occur within the
organization.
 2. EXTERNAL TRIGGERING EVENTS – these are triggering events that occur outside of
the jurisdiction of an organization.

INTERNAL TRIGGERING EVENTS

➢ New CEO/president – a change in strategy may involve a newly appointed officer who forces
the people to question the reason for the company’s existence.
➢ Performance gap – a change in strategy may involve a gap that exists when performance
does not meet expectations. Sales and profits either are no longer increasing or may even be
falling.
➢ Change in ownership – a change in strategy may involve a different firm that initiates a
takeover by buying a company’s common stock.
➢ Management team shake up - A situation where senior management is replaced or
reassigned to different roles.
➢ Corporate reorganization/restructuring - Reorganization can include a change in the
structure or ownership of a company through a merger or consolidation, spinoff acquisition,
transfer, recapitalization, a change in name, or a change in management.
➢ New products or services – these are changes that happen in the marketing and sales
departments

EXTERNAL TRIGGERING EVENTS

❖ Overall economic environment
❖ Government
❖ Socio-political environment
❖ Legal environment
❖ Technological environment
❖ Global/regional environment
❖ Market factors (demand & supply)
❖ Religious environment
❖ Occurrence of calamities/other natural phenomenon
Other relevant theories influencing strategic management

▪ Evolution and revolution theories

▪ Industrial organization theory
▪ Chamberlin’s economic theories
▪ Contingency theory
▪ Resource-based theory
▪ Institution theory
▪ Organization learning theory
▪ Transaction cost economics

BUSINESS COMPETITION
The essence of “strategy formulation” is coping with COMPETITION. Although competition
makes the organization’s work difficult, intense competition is neither a co-incidence nor bad luck
since every organization has to face competition irrespective of the industry or field it is carrying out
its operations.

A better understanding of the Nature & Extent of Competition may reached by answering the
following questions:

✓ Who are the competitors?

✓ What are their products & services?
✓ What are their market share?
✓ What are their financial position?
✓ What gives them cost & price advantage?
✓ What are they likely to do next?
✓ Who are the potential competitors?
COOPERATION IN BUSINESS ENVIRONMENT (THE COOPERATIVE WAY)

CARTELISATION

➢ This cooperation method leads to formation of groups of few companies referred to as

“Cartels”.
➢ A cartel is an agreement between competing firms to collude in order to attain higher profits.
➢ Cartels usually occur in an oligopolistic industry, where the number of sellers is small & the
products being traded are homogeneous.
➢ Cartel members may agree on such matters like: Price fixing, market share, allocation of
resources, division of profits & so on.

COOPERATION ON ACCOUNT OF FAMILY OWNERSHIP

Theoretically, cooperation generates automatically in businesses owned by one same family.

The interest of the family largely influences the managerial decisions & activities of the enterprise.

Examples of such family businesses

1. Aditya Birla Group 7. Tata Group
2. Ford 8. Toyota
3. Mango 9. Wal-Mart
4. Jolly Time
5. Panda Energy International
6. Samsung
 A powerful & widely used tool for systematically diagnosing the significant competitive
pressures in a market and assessing the strength & importance of each is the “five forces
model of competition”.

SUPPLIERS
competitive pressures arising from “supplier bargaining power” & “supplier-seller collaboration”

SUBSTITUTE PRODUCTS
competitive pressures arising from companies in other industries to win buyers over to their
own “substitute products”.

NEW ENTRANTS
competitive pressures arising from the entry of new companies in the industry with more
resources & newer technologies.

CONCLUSION
The benefits of competition are also enjoyed by the society & the markets in which
firms operate. The customers are able to get the products & services at lower costs & of better
quality. They get better value for their Money because of “Competition”.