01. an overview of strategic management

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An Overview of

Strategic Management

Chapter # 1



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Strategy«!

A strategy is an integrated

plan of action designed to

achieve a particular goal.

The word strategy has

military connotations,

because it is der ives from the

Greek word for army ("leader

or commander of an army,

general´).



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Strategy is different from tactic. Inmilitary terms, tactic is concerned

with the conduct of an engagementwhile strategy is concerned withhow different engagements arelinked.

Tactics are the actual means usedto gain an objective, while strategyis the overall campaign plan, which may involve complex

operational patterns, activity, anddecision-mak ing.

a method of employing forces in

combat



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Strategic ManagementStrategic Management

Strategic or Institutionalmanagement is comprehensive

and ongoing management

process aimed at the conduct of

drafting, implementing andevaluating crosscross- -functional functional

decisionsdecisions that will enable an

organization to achieve its

objectives

Art and science of formulating, implementing, and

evaluating crosscross--functional decisionsfunctional decisions that enable an

organization to achieve its objectives.



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Strategic management is a f ield that

deals with the major intended and

emergent initiatives taken by general

manager s on behalf of owner s,

involving utilization of resources, to

enhance the performance of ¿rms intheir external environments.

It entails s pecifying the organization's mission, vision

and objectives, developing policies and plans, often interms of projects and programs, which are designed to

achieve these objectives, and then allocating resources

to implement the policies and plans, projects and

programs.



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Intuition is based on:

Past exper iences

Judgment

Feelings

SM Integrates Intuition & Analysis

Intuition is useful for decision making in conditions of:

Great uncertainty

Little precedent

Highly interrelated var iables

Several plausi ble alternatives



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Strategic Management AchievesStrategic Management Achieves

Organizational SuccessOrganizational Success

Process of Integrating:

Marketing

HRM

Finance/Accounting

Production/Operations

R & D

Computer information

systems



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General Terminology

General Terminology

³S trategic Management ́

Synonymous with

³S trategic Planning ́

� Strategic management

U

sed more often in academia

� Strategic planning

Used more often in the business world



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Specif ically

Specif ically

S trategic management

Refer s to: Strategy formulation Strategy implementation

Strategy evaluation

S trategic planning Refer s to:

Strategy formulation



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StrategicStrategic--Management ProcessManagement Process

Strategy Formulation

Strategy Implementation

Strategy Evaluation



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Strategy formulation: the set of processes involved

in creating or determining the strategies of the

organization; it focuses on the content of strategies.

Strategy implementation: the methods by which

strategies are operational or executed within the

organization; it focuses on the processes through

which strategies are achieved. Strategy evaluation: Process by which strategies

are evaluated & rectif ied

StrategicStrategic--Management ProcessManagement Process



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Strategy Formulation

Vision & Mission

Alternative Strategies

Long-Term Objectives

Strengths & Weaknesses

Opportunities & Threats

Strategy Selection



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Strategy Implementation

Motivate Employees

Policies

Annual Objectives

R esource Allocation



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Strategy Evaluation

Corrective Action

Measure Performance

R eview

External & Internal



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Strategic Planning vs. LongStrategic Planning vs. Long--rangerange

PlanningPlanning

Long-range planning is considered to mean the

development of a plan for accomplishing a goal or setof goals over a per iod of several year s, with theassumption that current

knowledge about futureconditions is suff icientlyreliable to ensure the plan's reliability over the duration

of its implementation.

Strategic planning assumes

that an organization must be res ponsive to a dynamic, changing environment



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Adaptation to Change Adaptation to Change

Organizations must monitor events

On-going process

Internal and external events

Timely changes

R ate and magnitude of changes

Increasing dramatically

E-commerceDemographics

Technology

Merger-mania



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Importance of Strategic Management

1. Provides a sense of long-term direction for

organisation member s.2. Enhanced awareness of SWOT

3. Under standing of competitor s¶ strategies

4. Increased employee productivity & involvement

5. R educed resistance to change

6. Clear performance-reward relationshi ps

7. Order and disci pline to the f irm

8. View change as opportunity9. Proactive vs. R eactive

10. More prof itable and successful

11. Formulate better strategies (Systematic, logical, and

rational approach)



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Importance of Strategic Management

Competitive AdvantageDirection for

the Organisation

Supports InnovationBuilds

Commitment



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Poor reward structures- Fire-fighting- Embroiled in cr ises management

Waste of time-

Too expensive-

Laziness- Content with success- We are successful so what's need of SM

Fear of failure-

Overconfidence on experience-

Prior bad experience Self-interest- viewing new plans as threat

Fear of the unknown- uncertainty regarding new plans, system, new role, new sk ills

Suspicion- distrust upon management

Why Some Firms DoWhy Some Firms Do NoNo Strategic PlanningStrategic Planning



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Comprehensive Strategic Management ModelComprehensive Strategic Management Model

External

Audit

Internal

Audit

Long-TermObjectives

Generate,

Evaluate,SelectStrategies

Implement

Strategies:Mgmt Issues

ImplementStrategies:Marketing,Fin/Acct,R&D, CIS

Measure &

EvaluatePerformance

Vision

&Mission



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Strategic Management TermsStrategic Management Terms

Competitive Advantage

Anything that a firm does specially well as compared to rival firms.

A f irm can sustain CA for only a certain per iod due to r ival f irms

imitating & undermining that advantages. A competitive advantage exists when the f irm is able to deliver

the same benef its as competitor s but at a lower cost (costadvantage), or deliver benef its that exceed those of competingproducts (differentiation advantage). Thus, a competitive

advantage enables the f irm to create super ior value for its customer s and super ior prof its for itself .

Cost and differentiation advantages are known as positional advantages since they descr ibe the f irm's position in theindustr y as a leader in either cost or differentiation.



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Long-Term Objectives

� Long-term objectives are results that an

organization seeks over a multiyear period.

Common categories for business long-term

objectives include profitability, employee

development, productivity, technology development,employee relations & competitive position etc.

Challenging

Measurable

Consistent Reasonable

Focus coordination

Provide basis for effective management



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Five Years Economic Plans of Pakistan

Fir st Five-Year Plan (1955-60). In practice, this plan was not implemented, however , mainly because political instability led to a neglect of economic

policy

The Second Five-Year Plan (1960-65) surpassed its major goals when allsector s showed substantial growth.

Third Five-Year Plan (1965-70), designed along the lines of its immediate predecessor , produced only modest growth.

The Fourth Five-Year Plan (1970-75) was abandoned as East Pak istan became

independent Bangladesh. Under Bhutto, only annual plans were prepared, andthey were largely ignored.

The Fifth Five-Year Plan (1978-83) was an attempt to stabilize the economyand improve the standard of living of the poorest segment of the population.

The Sixth Five-Year Plan (1983-88) represented a signif icant shift toward the pr ivate sector.

The Seventh Five-Year Plan (1988-93) provided for total public-sector s pending of Rs350 billion

Eighth Five-Year Plan (1993-98)- Had not yet been announced, mainly because the successive changes of government in 1993 forced minister s tofocus on short-term issues. Instead, economic policy for FY 1994 was being

guided by an annual plan.



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Strategies

� Strategies are mean by which long-term objectives arerealized

Geographic Expansion-

Diversification- A technique that mixes a wide var iety of investments in different f ields to on average, yield higher returns and

pose a lower r isk than any individual investment found within thef ield.

New Product Development-

Market Penetration- Increasing market share of an

existing product as compare to competitor s. R etrenchment- Cutting back and downsizing to reduce

expenses.

Mergers & joint Ventures



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Annual Objectives

� S hort-term milestones necessary to achieve long-term

objectives. Represent the basis for allocating resources

Established at corporate, divisional, and functionallevels

Stated in terms of accomplishments for:

management

marketing

f inance/accounting production/operations

research and development

information systems accomplishments



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Policies

� I mportant in strategy implementation as the meansby which annual objectives will be achieved

Guide to decision making and address repetitive

situations Established at corporate, divisional, or functional levels

Allow consistency & coordination within and between

organizational departments

01. an overview of strategic management

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