Chapter One

Introduction to Strategic Management

Chapter Objectives:
After discussing this chapter, students are expected to:

Define strategy and strategic management;

Describe the different levels of strategy and their

importance;

Discuss the nature and values of strategic management;

Explain the strategic management process

1.1 Definitions of Strategy and Strategic
Management
Strategy Defined:
•Originate from Greek word “Strategia” meaning ‘ Plan to defeat
enemy’.
•Currently, used as an instrument to achieve organizational goals and
objectives.
•It ( Strategy) is the formulation of organizational mission, vision,
purpose, policy , program to realize goals and objectives of an
organization.
•Comprehensive definition:
•Strategy is a pattern or plan used to integrate organizational mission,
vision, goals, policies and resources into cohesive whole.
•It is a tool used to organize and allocate organizational resources in a
viable way based on its internal competence and weakness,
environmental challenges and competitors direction.
Generally:
•Strategy is a means to achieve ends.
•Links all parts of the organization.
•It is long term plan.
•Covers the major aspects of the organization.
•Identify basic issues by answering three important
questions. These are: what is our business?, How will we
compete? By what means the strategy implemented?
Nature And Value of Strategic Management

•In the past, Mangers

•The reasons for failure of using
responsibility was limited to
their management knowledge to
internal activities of the
solve external environment
organization.
challenges was:
•They didn't respond to external
Absence of clear goals
environmental challenges. They
Luck of assessing effects of long
didn’t use their management
term environmental trends.
ability to solve these challenges.
Poor strategic planning process .
Strategic Management

•Defined differently by different

•It is the process of aligning
scholars.
• It is senior management internal capability (resource) with

responsibility for defining and external environment opportunities

formulations of organizational and threats.

mission, vision, policy , strategy •It defines a set of decisions and

and guiding long term activities actions that result in formulation

consistent with internal and and implementation of plans that

external environment. achieve organizational ends.

 Critical Tasks

•Strategic management involves 6. Select long term objectives and

nine critical tasks. grand strategies that achieve the
1.Design mission, vision, purpose
, goals . desirable option.
2.Develop organizational profile.
7. Develop annual objectives and
3.Examine the external
environment. short term strategy that are
4.Analyze alternative options
compatible with step six.
comparing internal capability
with the external environment. 8. Implement strategic choices.
5.Identify the desirable option
9. Evaluating the success or failure
that go with missions of the org/n.
of the strategy.
 1.2 Levels of Strategy
Three levels
•Corporate level ( portfolio level)
•Business level.
•Functional level
1)Corporate Level
•Mainly concerned with top
management decisions such as
merger, acquisitions, major
expansions tec.
•Identifies the business activities
of the organization.
Levels…
•Concerned with the overall
purposes and scopes of the
business.
2. Business Level
•Found in the middle of the
hierarchy.
•Mainly concerned about single
strategic business unit (SUB) and
how each unit achieves its own
mission.
•Translate major corporate level
decisions and directions into
objectives and strategies of each
SUB.
 1.3 Chrxns of Strategic
Levels… Decisions
•Identify products or service that
should be produced and offered to •Decision is about selecting one
selected markets and take care of
among a set of alternatives.
their needs.
•Strategic decisions differ from
3. Functional Level other management decision in that:
•Found at the bottom mainly They are rare
lower level managers. They are directive
•Functional level decisions Consequential
involve; how to implement new
technologies, develop new
products, open new market and
institute new human resource.
Unique features of Strategic Decision
•Strategic decisions have their
own Unique features. These
includes:
Made by top mgt.
Future oriented.
Require huge resource.
Affect long term fate of the firm
Have many consequences.
Issues that need strategic
Decision
•Issues involving elusive problems.
•Issues that need higher
understanding to get proper
solution.
•Issues that don’t have one best
solution.
•Trade-off and priorities appear
in the solutions.
•Ambiguity and uncertainty
exists with the solutions.
Chrxns of Strategic Decisions

•Absence of structure (
programing and non-programing).
•Risk
•Uncertainty
•Conflict 2.Generate alternative solutions.
3.Evaluate alternatives.
Stages of Decision 4.Make choice.
5.Implement choice.
Making
1.Identify & diagnose the
problem.
Nature of Decisions in Relation to Levels of
Strategies
•Corporate level Decisions
 More broad & general
Decisions are value oriented,
conceptual & less concrete.
The decision involve high risk,
profit potential, high cost , high
flexibility, long time.
Decision includes: choice of
business, developing policy, long
term finance, priority growth.
•Business level decision
Bridging
These decisions include: plant
location, market segmentation,
coverage and distribution
channel.
•Functional Level Decision
Implement the formulated
strategy.
Decisions involve low rage and
less risk, modest cost, concrete &
quantifiable
1.4 Merits and Demerits of Strategic Mgt

•Merits
Mitigate or prevent risk.
Makes clear responsibilities of
managers. Helps to control change.
Promote alternative courses of Used as basis to measure
action evaluation. performance.
Provide framework for decision
Help the org/n to tie with its
making & resource allocation.
Introduce & clarify SWOT customers.
analysis. Help the org/n to be learning
Used as means of org/n.
communication.
 Demerits

•Difficult to forecast accurately.

•Limitations of data available &
distrust with mgt techniques.
•It is costly.
•Rapid environmental changes.
1.5 Strategic management process model

1. Design 5.
2. Set goals or 3. Strategic 4. Strategy
mission, Monitoring
objectives Choice Implementation
vision & evaluation