Strategic

Management

Welcome!
 Course Outline

CHAPTER 1 - Overview of Strategy

CHAPTER 2 - Strategy Formulation
CHAPTER 3- External and Environmental Analysis
CHAPTER 4- Internal Environmental Analysis
CHAPTER 5-Strategy Analysis and selection
CHAPTER 6- Strategy Implementation
CHAPTER 7- Strategy Evaluation and Control
O Evaluation Scheme
 Continuous Assessment…..………….. ….50%
 Final Exam ……………………………....50%
 Chapter one

Overview of strategy
 Introduction to strategy

O The term ‘strategy’ is derived from the Greek

word strategos, which means generalship – the
actual direction of military force, as directed
from the policy governing its deployment or
military action.
 What is a Strategy?
O Michael Porter (1996) argues that strategy is about
competitive position, about differentiating yourself in
the eyes of the customer, about adding value through a
mix of activities different from those used by
competitors.
O - Alfred D Chandler, defined strategy as: “the
determination of basic long-term goals and objectives
of an enterprise and the adoption (implementation)
of the courses of action and the allocation of resources
necessary for carrying out these goals”.
O Strategy is the bridge high-order goals on the one hand
and tactics or concrete actions on the other.
 Definition of strategic
management
O Fred R. David defined strategic
management, as it is the art and science of
formulating, implementing, and evaluating
cross-functional decisions that enable an
organization to achieve its objectives.
O According to David Hunger and Thomas,
Strategic management is that set of
managerial decisions and actions that
determines the long-run performance of a
corporation. It includes environmental
scanning, strategy formulation, strategy
implementation, and evaluation and control.
 Stages of Strategic Management
O The strategic-management process consists of three
stages:
1.Strategy formulation
O Strategy Formulation is the process of developing
strategy.
O The process by which an organization chooses the most
appropriate courses of action to achieve its defined goals.
O It 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.
O Top managers have the best perspective to understand fully the
ramifications of strategy-formulation decisions; they have the
authority to assign the resources necessary for implementation.
 Stages of Strategic Management…….

2. Strategy implementation
O Developing a strategy is only effective if it is put into
practice.
O Strategy implementation is the process by which
strategies and policies are put into action through the
development of programs, budgets and
procedures.
O It is the most difficult stage.
-It requires personal discipline, commitment, and
sacrifice.
O Every division and department must decide on answers
to questions, such as
- “What must we do to implement our part of the
organization’s strategy?”
-“How best can we get the job done
 Stages of Strategic Management…….

3. Strategy evaluation and control

O It is the final stage in strategic management.
O Actual performance can be compared with desired
performance.
O All strategies are subject to future modification because
external and internal factors are constantly changing.
O There are three fundamental strategy-evaluation
activities :
(1) Reviewing external and internal factors that are the
bases for current strategies,
(2) Measuring performance, and
(3) Taking corrective actions.
O Strategy evaluation is needed because success today is
no guarantee of success tomorrow!
The Strategic Management process Model
O The strategic-management process is dynamic and
continuous b/c A change in any one of the major
components in the model can necessitate a change in
any or all of the other components.
 Key Terms in Strategic Management

There are nine key terms in Strategic Management

1. Competitive advantage
O Competitive advantage can be defined as “anything that
a firm does especially well compare to rival firm”
- When a firm can do something that rival firms
cannot do
O Strategic management is all about gaining and
maintaining competitive advantage
O A firm must strive to achieve sustained competitive
advantage by:
1. Continually adapting to changes in external trends and
events and internal capabilities, competencies, and
resources; and
2. effectively formulating, implementing, and evaluating
strategies that capitalizes upon those factors
 Key Terms in Strategic Management…..

2. Strategists
O Strategists are the individuals who are most
responsible for the success or failure of an
organization.
O Strategists have various job titles, such as chief
executive officer, president, chair of the board,
executive director, chancellor, dean, or entrepreneur.
O Strategists differ in their attitudes, values, ethics,
willingness to take risks, concern for social
responsibility, concern for profitability, concern for
short-run versus long-run aims, and management
style.
 Key Terms in Strategic Management…

3.Vision and Mission Statements

O Many organizations today develop a vision statement that
answers the question, “What do we want to become?”
E.g. vision of CBE To become a world-class commercial bank
by the year 2025.
O Developing a vision statement is often considered the first
step in strategic planning, preceding even development of a
mission statement.
4. External Opportunities and Threats
O OT 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.
O Firms need to formulate strategies to take advantage of
external opportunities and to reduce the impact of external
threats.
 Key Terms in Strategic Management…

5. Internal Strengths and Weaknesses

O Internal SW are an organization’s controllable action
that is performed especially well or poorly.
O They arise from d/t functional areas
O Organizations strive to pursue strategies that capitalize on
internal strengths and eliminate internal weaknesses.
6. Long-term Objectives
O Objectives can be defined as specific results that an
organization seeks to achieve in pursuing its mission.
O Objectives are essential for organizational success because
they
- state direction; aid in the evaluation; create synergy; reveal
priorities etc
7. Annual Objectives
O Annual objectives are short-term milestones that organizations
must achieve to reach long-term objectives.
 Key Terms in Strategic Management…

8. Strategies
O Strategies are the means by which long-term
objectives will be achieved.
O Strategies affect an organization’s long-term
prosperity typically for at least five years.
9.Policies
O Policies are the means by which annual objectives
will be achieved.
O Policies are guides to decision making and address
repetitive or recurring situations.
O Policies allow consistency and coordination within
and between organizational departments.
 Levels of Strategy
O The scope and scale of our plans, thinking, and
managerial activity varies.
O Therefore, strategies are developed at several
levels in an organization.
O The three key levels of strategy are:
1.Corporate-level strategy
2. Business-level strategy
3. Operational -level strategy
 Levels of Strategy…….
1. Corporate-level strategy
O Is the management of the organization’s activities as a
corporation, to gain maximum benefit from the
combination of related or unrelated business.
O Governs the entire corporation
O Corporate strategies typically fit within the three main
categories of stability, growth, and retrenchment.
O Example EFFORT (Endowment Fund For Rehabilitation of
Tigray) is committed to contribute to the sustainable
development efforts in the region.
O EFFORT is engaging in different business at different
product markets for instance Sheba Tannery P.L.C,
Almeda Textile Factory P.L.C, Trans Ethiopia P.L.C.,
Messebo Building Materials Production P.L.C, Addis
Pharmaceutical Factory (APF), Mesfin Industrial
Engineering .
 Levels of Strategy…….
2. Business Level Strategies
O Governs only the single business of the corporation
and it is subordinated to the corporate strategy.
O e.g. Mesfin Industrial Engineering can be considered as
one business unit for the EFFORT business group.
O Is strategy of one business devoted to competing
with a particular related product group, or using specific
resources and capabilities.
O Determines the way in which the firm
O can successfully compete in specific markets, or
O should provide effective services in the public
services.
O They can choose from three basic generic competitive
approaches: cost leadership, differentiation and focus.
 Levels of Strategy…….
3. Functional Level Strategies
O Is the approach taken by a functional area to
achieve corporate and business unit objectives and
strategies by maximizing resource productivity.
O Strategies, which are designed by different functions
of a company; Finance, Accounting, Research and
Development, Personnel, Marketing and Production.
O E.g. Mesfin Industrial Engineering has strategies
concerning with the abovementioned functional
areas to support its business level strategies as well
as EFFORT’s corporate level strategies.
O Contributes to the success of business and corporate strategy
The strategic management approach /Models of
Above-Average Return/
O There are different approaches in strategic
management that explain how firms can earn above-
average returns.
O Above-Average Returns is returns that are in excess of
what an investor expects to earn from other
investments with a similar amount of risk.
O Now we will focus only on the resource based view
and the industrial organization view.
1. The Resource-Based View (RBV)
O RBV assumes that each organization is a collection of
unique resources and capabilities.
O RB model focus on developing or obtaining valuable
resources and capabilities which are difficult or impossible
for rivals to imitate. (Physical resources , human resources
& organizational resources )
The strategic management approach /Models of
Above-Average Return/….
2. The Industrial Organization (I/O) View
O This model largely focuses on industry structure or
attractiveness of the external environment rather than
internal characteristics of the firm.
O Is primarily more focused on industrial properties, such
as economies of scale, barriers to market entry,
product differentiation, the economy, and level of
competitiveness than on internal resources,
capabilities, structure, and operations.
O Both RBV and IOV are enhance our understanding of
strategic management.
O Therefore, effective integration and understanding of
both external and internal factors is the key to
securing and keeping a competitive advantage.
 Benefits of Strategic management

O Gives guidelines
O gives guidelines to employer regarding what the
organization expecting them to do.
O assist the attainment of objectives.
O Chances of good performance
O companies which do strategic planning will have more
chances to succeed than companies who don’t do
strategic planning.
O Facilitates communication
O facilitates free flow of information form bottom to
middle to top level managers.
O Allocation of resources
O assists in selecting achievable and realistic projects and
enhances the allocation of resources to realistic projects.
 Benefits of Strategic management……

O Allows forecasting of change(to be proactive to change)

O Change makes planning a complicated task.
O permit firms to take decisions based on long-term forecasts.
O Assist managers in getting a holistic approach
O Systematic decision making
O give information to mangers regarding various business
transactions which assists in making business decisions in a
systematic manner.
O Enhances coordination
O among various functional areas of management and among
individual projects.
 Business Ethics and corporate social
responsibility
O Good business ethics are a prerequisite for
good strategic management.
O Business ethics is concerned with good and
bad or right and wrong behavior and practices
that take place in business.
Social Responsibility
O Is the obligation of any business to protect and
serve public interest.
e.g. - protect from
- pollution (waste disposal)
- Harming natural resource etc
 Business Ethics and corporate social
responsibility……
O Why should business be socially
responsible?
O Survival and growth
O Public image
O Government Regulation
O Employee satisfaction etc
THANK YOU