Learning Unit 6

BMNG5122
Introduction to Strategic Management
 Learning Content:
Theme 1: Importance of Strategic Management

LO1: Explain the concept of strategic thinking and strategic management.

Theme 2: The Strategic Management Process

LO2: Discuss the importance of and activities involved in each step in the
strategic management process.
LO3: Explain the importance of alignment in strategic management.
LO4: Identify the strategy of an organisation using Porter’s generic strategy
framework.
LO5: Evaluate a vision and mission statement of an organisation.
What is Strategic Management?
 Introduction
• The word strategy has been derived from Greek word “Strategia”, which
means troop leader, office of general, command, generalship or art and
science of directing military forces.
• Strategy has its origin in military science. The head of military forces,
“general” has to deploy his resources in such a manner which ultimately
results into a success in a competitive warfare.
• Strategy is a high level plan to achieve one or more goals under condition
of uncertainty.
• In military theory, strategy is the utilisation during both peace and war, of
all the nation’s forces, through large scale, long range planning and
development, to ensure security and victory.
• In management theory, strategy is the determination of the basic long-
term goals of an enterprise, and adoption of courses of an actions and the
allocation of resources necessary for carrying out these goals.
 Definitions
What is Strategic Management?

Strategic management is defined as dynamic process of

formulation, implementation and control of strategies to
realize the organisation strategic intent.

Strategic management is continual evolving iterative

process which is repeated over the time as situation
demands
 Definitions
What is Strategic Management?

Strategic management is the set of managerial decision and action

that determines the long-run performance of a corporation.

It includes environmental scanning (both external and internal),

strategy formulation (strategic or 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
lights of a corporation’s strengths and weaknesses.
Importance of Strategic Management
• Shapes the Future of Business:
• Strategic management helps organisations anticipate trends, seize opportunities, and
adapt to changes, shaping the direction and future of the business.
• Effective Strategic Ideas:
• Facilitates the generation of innovative and forward-thinking ideas, aligning them with
the organisation’s long-term goals.
• Encourages Innovation and Creativity:
• Inspires managers and employees to be innovative, creative, and proactive in problem-
solving and strategy formulation.
• Decentralised Management:
• Encourages a more decentralised approach, empowering managers at different levels to
make decisions, fostering agility and responsiveness.
• Increases Productivity:
• Ensures resources are used efficiently, improving overall productivity and ensuring that
efforts contribute directly to the organisation’s strategic goals.
• Ensures Discipline:
• Establishes a framework for discipline, helping to align daily operations with the broader
strategic objectives of the organisation.
Importance of Strategic Management
• Guides Organisational Direction:
• Provides a clear roadmap for where the organisation is heading and how it plans to get
there.
• Enhances Decision-Making:
• Improves the quality of decisions by aligning them with long-term objectives and
external opportunities.
• Optimises Resources:
• Helps allocate resources effectively, ensuring that time, money, and effort are invested
where they will have the greatest impact.
• Facilitates Adaptation to Change:
• Enables organisations to respond to external changes, such as market shifts,
technological advances, or regulatory updates.
• Improves Competitive Advantage:
• Strengthens an organisation’s position in the market by identifying unique opportunities
and leveraging core strengths.
• Controls Effort:
• Provides a structure for monitoring progress, ensuring efforts are directed towards
achieving strategic goals and maintaining focus.
 Elements of Strategy
• The strategy has following four elements:
• Defining mission, for example the long term
objective which rational for the enterprise existence.
• Competitive advantage, to emerge as a powerful
player in the competitive environment.
• Synergy, making efforts of everybody in the
organisation.
• Vector, development of backward and forward
relationships in the business environment.
Importance of Strategic Management
 Strategic Direction
• Strategic direction refers to the overarching framework that
guides an organisation's long-term goals and objectives. It
encompasses the vision, mission, and core values that
shape decision-making processes.
• A clear strategic direction is essential for sustainable
growth and competitive advantage.
• Key Components:
• Vision Statement: Articulates the ultimate goal of the
organisation.
• Mission Statement: Defines the purpose and primary objectives.
• Core Values: Principles that guide behaviour and culture.
 Importance of
Strategic Direction
• Provides clarity and focus for all stakeholders.
• Aligns resources and efforts towards common
objectives.
• Facilitates effective decision-making and
prioritisation.
 Vision Statement
• The vision statement provides a long term perspective on where
the organisation is headed
• A vision statement is a concise declaration of an organisation's
long-term aspirations.
• It outlines what the organisation aims to achieve in the future,
serving as a source of inspiration.
• Purpose:
• Guides strategic planning and decision-making.
• Helps align organisational efforts towards a common goal.
• Enhances organisational identity and culture.
• A strong vision statement is crucial for fostering unity and purpose
within an organisation, driving it towards its ultimate aspirations.
 Mission Statement
• A mission statement is a formal summary of the aims and values
of an organisation.
• It articulates the organisation's purpose and its primary
objectives.
• Purpose:
• Guides daily operations and decision-making.
• Communicates the organisation's intentions to stakeholders.
• Enhances employee engagement and alignment.
• An effective mission statement is essential for establishing a
clear organisational identity and direction, helping to motivate
employees and build stakeholder trust.
Vision & Mission Statement
Vision & Mission Statement
 Strategic objectives
• The vision and mission provide an overall strategic
direction but quantifiable goals are necessary to direct
activities within the organisation.

• Strategic objectives or goals are long term and are

derived from the mission and vision statements.

• Strategic objectives are specific, measurable goals that

an organisation sets to achieve its long-term vision and
mission. They provide a clear roadmap for success.
The hierarchy of objectives
 Strategic objectives
• Well-defined strategic objectives are crucial for driving
organisational success and ensuring that all efforts are aligned with
the ultimate goals
• Key Characteristics:
• SMART Criteria: Specific, Measurable, Achievable, Relevant,
Time-bound.
• Aligned with Vision: Supports the overall strategic direction.
• Focused: Targets key areas for improvement and growth.
• Purpose:
• Guides resource allocation and prioritisation.
• Facilitates performance measurement and accountability.
• Enhances organisational focus and cohesion.
 External environmental analysis
• External environmental analysis involves assessing external
factors that can impact an organisation's performance and
strategy.
• This includes examining industry trends, market dynamics, and
broader socio-economic influences.
• Conducting a thorough external environmental analysis is
essential for understanding the context in which an organisation
operates, enabling informed strategic choices and competitive
advantage.
• The business environment is made-up of two external
environments these are:
• The macro environment.
• The market environment.
 External environmental analysis
• PESTLE Analysis:
• Political: Government policies, regulations, and stability.
• Economic: Economic trends, inflation, and market growth.
• Social: Demographic shifts, consumer behaviour, and cultural
trends.
• Technological: Innovations, R&D developments, and
technological disruptions.
• Legal: Laws and regulations affecting the industry.
• Environmental: Sustainability concerns and ecological
impacts.
 Internal environmental analysis
• Internal environmental analysis involves evaluating an
organisation's internal resources, capabilities, and processes to
identify strengths and weaknesses that impact its strategic
direction.
• A comprehensive internal environmental analysis is vital for
leveraging strengths and addressing weaknesses, ultimately
driving effective strategic management and organisational
success.
• Identifies areas for improvement and strategic investment.
• Enhances understanding of competitive positioning.
• Facilitates alignment of resources with strategic objectives.
 Internal environmental analysis
• The Internal environmental analysis looks at:
• Resource Assessment:
• Human Resources: Skills, expertise, and workforce capabilities.
• Financial Resources: Funding, revenue streams, and financial
stability.
• Physical Resources: Infrastructure, technology, and equipment.
• Intellectual Property: Patents, trademarks, and proprietary
knowledge.
• Capabilities and Competencies:
• Core competencies that provide competitive advantage.
• Organisational culture and structure that influence
performance.
 SWOT Analysis
• SWOT analysis is a strategic planning tool used to evaluate
an organisation's internal Strengths and Weaknesses,
alongside external Opportunities and Threats.

• SWOT (strengths, weaknesses, opportunities, and threats)

analysis is a framework used to evaluate a company's
competitive position and to develop strategic planning.

• A SWOT analysis is designed to facilitate a realistic, fact-

based, data-driven look at the strengths and weaknesses of
an organisation, initiatives, or within its industry.
SWOT Analysis
 SWOT Analysis
• Key Components:
• Strengths:
• Internal attributes that enhance performance (e.g., skilled
workforce, strong brand).
• Weaknesses:
• Internal factors that hinder performance (e.g., resource
limitations, lack of innovation).
• Opportunities:
• External factors that can be leveraged for growth (e.g., market
trends, emerging technologies).
• Threats:
• External challenges that could impact success (e.g., economic
downturns, increased competition).
 Selection of Strategies
• According to Porter's Generic Strategies model, there are three
basic strategic options available to organizations for gaining
competitive advantage.

• They were first set out by Michael Porter in 1985

• Porter's three generic strategies provide a framework for

organisations to establish a competitive edge, guiding strategic
choices that align with their strengths and market opportunities.

• These are: Cost Leadership, Differentiation and Focus.

Porter's Generic Strategies
 Cost Leadership
• Definition: Achieving the lowest operational costs in the industry.

• Key Focus: Efficiency, economies of scale, and cost minimisation.

• Organisations have access to capital or technology.
• Organisations have access to effective distribution channels leading to less cost.
• Organisations show a high level of productivity with higher effectiveness in
capacity utilisation

• Objective: Offer products or services at the lowest price to attract a broad

customer base.

• Example: Walmart employs cost leadership by leveraging economies of scale and

efficient supply chain management, allowing it to offer low prices to customers.
 Differentiation
• Definition: Providing unique products or services that stand out from
competitors.

• Key Focus: Innovation, quality, and brand reputation.

• Successful differentiation is characterised by superior product quality
and effective branding.

• Objective: Charge premium prices due to perceived value and distinct

features.

• Example: Nike offers unique, high-quality athletic shoes and apparel

with innovative designs and strong branding, allowing them to charge
higher prices.
 Focus
• Definition: Targeting a specific market segment or niche.

• Key Focus: Tailored offerings that meet the unique needs of a particular
group.

• Objective: Achieve either cost leadership or differentiation within that

niche

• Example: Rolls-Royce targets the luxury automobile segment, focusing on

high-end customers seeking bespoke vehicles, thus employing a focused
differentiation strategy.
• The focus strategy has two variants.
• (a) In cost focus a firm seeks a cost advantage in its target segment,
• (b) differentiation focus a firm seeks differentiation in its target segment.
 Cost Focus Strategy
• The Cost Focus Strategy involves targeting a specific market segment while
striving to achieve the lowest operational costs within that niche.

• Enables organisations to dominate a specific segment by providing cost-

effective solutions, appealing to customers who prioritise value.

• Key Characteristics:
• Niche Market: Concentrates on a specific customer group with distinct needs.
• Cost Efficiency: Utilises cost-saving measures to maintain competitive pricing.
• Limited Scope: Focuses on a narrow range of products or services tailored to the
chosen segment.

• Purpose:
• To attract price-sensitive customers within the targeted market.
• To establish a competitive advantage by being the low-cost provider in that niche.
 Differentiation focus Strategy
• The Differentiation Focus Strategy involves targeting a specific market segment
while offering unique products or services that stand out from competitors within
that niche.

• Key Characteristics:
• Niche Market: Concentrates on a defined customer group with specific preferences or
needs.
• Unique Offerings: Emphasises innovation, quality, and distinct features tailored to the
segment.
• Brand Loyalty: Builds strong customer relationships through perceived value and
differentiation.

• Purpose:
• To attract customers who seek unique solutions and are willing to pay a premium.
• To establish a competitive advantage by being the preferred choice within the targeted
niche.
 Strategic Implementation
• Strategic implementation is the process of
executing an organisation’s strategic plan by
translating objectives into actionable steps
and aligning resources effectively.

• Implementing a strategy is not easy. You can

crack the best vision mission but if you do not
align the business with it you will not succeed.
Strategic Implementation- Class discussion
 Strategic Implementation
• When implementing a strategy the various levels of organization and the
factional areas have to be aligned.

• According to research by Collins (2001) the leaders of the most successful

organizations exhibit 5 levels of leadership which are:-

• Level 1 - make productive contributions through skills, talent and knowledge.

• Level 2 - contribute towards the success of groups and work effectively in a
team.
• Level 3 - organize people in a way that achieves objectives in a productive way.
• Level 4 - obtain commitments to a clear and compelling vision and stimulate a
group to perform at a high standard.
• Level 5 - build enduring success through professional will and personal humility
 Corporate culture
• The shared values, beliefs, and norms that influence how employees
behave and interact within an organisation.
• Every organisation has it’s own unique culture.

• Why Corporate Culture Matters in Strategy?

• Aligns with Strategic Objectives: Culture helps ensure that employees'
actions are in harmony with the company's goals.
• Supports Innovation and Change: A positive, adaptable culture
encourages creativity and responsiveness to market shifts.
• Influences Competitive Advantage: Strong, distinctive cultures can
differentiate a company and foster loyalty among employees and
customers.
• Impacts Performance: A healthy culture leads to higher employee
satisfaction, productivity, and retention.
 Corporate culture
• This culture has to support the chosen strategy.

• This is supported by
• Organisational values and ethics
• Communication styles
• Leadership practices
• Workplace environment and behaviour

• Corporate culture is a fundamental driver of strategic success, influencing

everything from internal dynamics to external competitive positioning.

• The culture and organisation can be looked at through the culture web.
Culture web
 Culture web
• Stories: Narratives about the organisation’s history,
achievements, and heroes that shape perceptions and
behaviour.
• Rituals & Routines: The daily practices, ceremonies, and
habitual ways of working within the organisation.
• Symbols: Logos, office layouts, dress codes, and other visual
representations of the company’s identity.
• Power Structures: Who holds the power and how it’s
distributed within the organisation (formal and informal
hierarchies).
 Culture web
• Organisational Structures: How the organisation is
arranged, including reporting lines, departments, and team
dynamics.
• Control Systems: The methods and processes used to
monitor and evaluate performance, including rewards,
incentives, and policies.
• Paradigms: The underlying beliefs and assumptions that
guide decision-making and behaviour within the
organisation.
 Strategic Control
• The process of monitoring and evaluating the implementation of a
company's strategy to ensure alignment with long-term objectives.
• Focuses on correcting deviations, managing performance, and
adapting to changes in the internal and external environment.
• Ensures the assumptions or premises upon which the strategy is
based remain valid over time.
• Monitors the execution of specific strategic initiatives or projects,
checking if they are being carried out as planned.
• Involves monitoring broad external trends (e.g., market shifts,
competitor behaviour) that could affect the strategy.
• Focuses on immediate action in response to significant, unexpected
events or crises that could impact the strategy.
 Strategic Alignment
• The process of ensuring that an organisation’s structure, culture,
resources, and activities are all aligned with its strategic goals and
objectives.Key to ensuring that strategy and operations work in
harmony for long-term success.
THE END