Strategic Management

Mahmud A. Shareef
Professor
Post Doctoral

(McMaster University), PhD

(Business Administration, Carleton University, Ottawa,
Canada), M. Engg. (Structural Engg., Carleton

MBA (IBA, Dhaka University),

B.Sc. Engg. (Civil Engg., BUET)

University, Canada),

Management Concept

This course integrates

Theoretical Concept of Management and

Applied Concept of Strategy

Management Concept
In this course, we will
Explore the meaning of organisational strategy
and Investigate the processes by which strategy is
formulated within the organisation.
Summarise the strength, weakness, opportunity,
and threat related issues and relate this to the
issue of strategy through a self-assessment
activity.
Generic Strategies and Strategy for Diversification
3

Management Concept

Analyse various concepts of strategy and

critically consider which is more appropriate
to your organisation.
Organizational Capability and Promote
Strategy

Corporate Culture and Leadership

4

What is Business Strategy?

Organization has a limited set of resources (e.g.
time, people, money, physical resources) and they
must decide how to use those resources.
Example: You have the following resources:

$500,000
A building
10 employees
A patent on a new product A

What is Business Strategy?

Strategy is deciding

what the organization is going to do

how it will use its resources to capitalize on
maximum benefits
gain competitive advantage and
fulfill objectives
6

Examples of Strategies
Strategy 1: buy equipment and other required assets with the
money and use resources including human resources to
manufacture product A.
Strategy 2: Outsource the production of product A and use
the resources including human resources to market and
distribute the product.
Strategy 3: Sell patent to a larger firm, sell resources, fire
employees, and do other business
Example: once the organization decides that it wants to be a
manufacturer of product A, there are many decisions that
must be made about how to profitably manufacture product A
and gain competitive advantage.
7

Strategy
Strategy is the process by which individuals
and organisations make choices about
scarce resources so as to satisfy wants over
time in an environment of uncertainty. They
are aided in this process by market and nonmarket forces.
A strategy is defined as a pattern of
purposes, policies, programmes, actions,
decisions, or resource allocations that
focuses essentially on deciding on what the
organization is trying to do, what it is trying
to become within its business environment. 8

Strategy
Strategy is the direction and scope of
an organisation over the long term:
which achieves advantage for the
organisation through its configuration of
resources within a changing
environment, to meet the needs of
markets and to fulfil stakeholder
expectations
9

Strategic Decisions
Strategic decisions address questions such
as:
What products or services will be provided?
Will we focus on providing low cost
goods/services?
Will we focus on providing unique
goods/services?
Where will we sell our goods/services?
To whom?
10

Strategic Decisions
A good strategy will take into account
Resources (people, money, knowledge,
technology, reputation, power, materials,
etc.).
Existing barrier
Market competition
Overall vision, mission, and objectives of
the company.
11

Competitive Advantage
What makes strategy difficult is that most
business environments are competitive.
Need to try to "second guess" the
competition.
Competitive advantage: what sets the firm
superior from the rest of its competitors.
Basis for competition: cost (Walton), quality
(Sony), variety (Chadni Chalk for clothes),
level of service (Singapore Airlines),...
12

Strategic Management
Strategic management is a means of understanding
strategic position of organisation; formulating courses of
action, evaluating them and choosing between them; as
well as planning how choice of strategy can be put into
effect and managing resultant changes
It is art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve desired goals

Strategic management process

The process by which managers choose a set of
strategies that will allow a company to achieve superior
performance
13

Implications: Strategic Management Processes

A Manager needs to understand:

Strategic direction reflecting organizational goal
Formulation processes
Strategic change

Managing strategic change means managing

changes to the realised strategy - not just the
intended strategy.
14

Steps of Strategic management

Task 1: Select the corporate Vision and Mission
Task 2: Setting Objectives
Task 3: Select strategies that build on the organizations
strengths and correct its weaknesses in order to take
advantage of external opportunities and counter external
threats

Analyze the external competitive environment to identify

opportunities and threats
Analyze the organizations internal environment to identify its
strengths and weaknesses

Task 4: Implement the strategy

Task 5: Evaluating performance, monitoring new development,
and initiating corrective actions
15

Task 1: Vision and Mission

Vision: Develop a vision statement is the first
step in strategic planning
It answers: What do we want to become in
future?
Ultimate Picture
The Boeing Company in 2016:
People working together as a global enterprise for
aerospace leadership

Microsoft:
To empower people through great software, any time,
any place, on any device
16

Task 1: Vision and Mission

animating the dream. These statements

offer aspirations about the future strategic
direction of the organisation and are often
incorporated in Mission statements.
In this stage the organisation is developing
a view of what it should look like once its
strategies are achieved and developed to
their full potential.
17

Task 1: Vision and Mission

Mission: defined in the mission statement

which is a broad declaration of the overriding
purpose.

Mission statement identifies product, customers

and how firm differs from competitors.

It answers: What is our business?

A description or declaration of why a
company is in operation
18

Task 1: Vision and Mission

Provides the framework or context within

which strategies are formulated
What company is trying to achieve over
medium to long term
A. Defining the business: seeks to identify our
customers and the needs we can and should
satisfy.

This also pinpoints competitors.

B. Establishing major goals: states who will

compete in the business.

Should stretch the organization to new heights.

Goals must also be realistic and have a time period in
which they are achieved.
19

Guiding principles for Mission

It takes years not months
True consensus is necessary within the top
team
Action is a better communicator than words
Top team visibility is essential
Top team continuity helps
Strategy and Values should be formulated
together
Management should focus on the link between
behaviour and values.
Make the mission inspirational but not
20
unrealistic

Mission Statements
North South University
Produce highly skilled manpower, visionary
professional leaders and responsible and enlightened
citizens.

In addition to creation and dissemination of

knowledge, its mission includes promotion of
humanism and peace through higher education.

As a social institution, NSU endeavors to induce

changes for betterment of the society as a whole
through public services, and through promotion of
ethical behavior and social justice.

21

Abells Framework for Defining the Business

22

Task 2:Setting Objectives

What the specific targets and results you
want to achieve
Characteristics of setting objectives
Time horizon: refers to how far in the future
the objective applies.

Long-term plans are usually 5 years or more.

Intermediate-term plans are 1 to 5 years.

Corporate and business level plans specify long and

intermediate term.

Short-term plans are less than 1 year.

Functional plans focus on short to intermediate term.

23

Task 2:Setting Objectives

Object must be SMART
S= Specific
M= Measurable
A= Achievable
R= Reasonable
T= Time bound

24

Task 3: Strategy Formulation

Formulating strategy: managers analyze current
situation and develop strategies needed to achieve
the mission.
Objective is the end result and strategy is the
means to achieve that
Strategy formulation answers

concentrate a single business or build diversification

target broad range of customers or specific segment
Product superiority or low cost
Respond to changing buyer preference
React to emerging market
25

Planning & Strategy Formulation

Corporate-level strategy
develop a plan of action
maximizing long-run value
SWOT analysis
identifies strengths &
weaknesses inside the
firm and opportunities
& threats in the
environment.

Business-level strategy
a plan of action to take
advantage of opportunities
and minimize threats
Functional-level strategy
a plan of action improving
departments ability to
create value
26

Task 4:Strategy Implementation

Implementing strategy: managers must
decide how to allocate resources between
groups to ensure the strategy is achieved.
Building an organization capable to carry out
the strategy
Allocate resources
Establish strategy supported policy
Motivating people
Leading
27

Developing an Effective Implementation Process

Developing a document is not enough. For strategy
to be realised there are some considerations:
Individuals, teams etc. must know their roles and
responsibilities
action plans have to be developed
timescale has to be considered (a planning cycle might
develop).
resources have to be committed, particularly to training
communication processes have to be developed (and
these have to be effective)
Review and monitoring procedures have to be considered
(This may involve, performance indicators, benchmarking)
Accountability procedures must be put in place
28

Task 5:Evaluating
Establish standards of performance, goals, or
The process is 1.targets
against which performance is evaluated.
on going. But
remember,
Measure actual performance
new strategies 2.
emerge and
some old ones
Compare actual performance
are discarded 3.
against chosen standards
whilst others
remain.

4.

Evaluate results and take corrective action

when the standard is not being achieved.

29

Steps of Strategic management

Suppose you want
to start a new
pharmaceutical
business

Vision: Develop a
disease free
Bangladesh

Mission: Drugs

with better quality

and reasonable price
must be available for
all people at anytime
anywhere

Objective: We

want to capture 10%

market share in
Bangladesh for all
drugs on an average
30

Strategy and Competitive Advantage

Competitive advantage
A firms profitability is greater than the
average profitability for all firms in its industry
Sustained competitive advantage
A firm maintains competitive advantage for a
number of years

31

Strategy and Competitive Advantage

32