Strategic management ●​ Actions

-​ consists of the analysis, decisions, ➔​ Allocate necessary resources

and actions an organization ➔​ Design the organization to
undertakes in order to create and bring intended strategies to
sustain competitive advantages.​ reality

-​ also refers to the managerial CONCEPT of Strategy

process of developing strategic -​ Strategy has something to do with
vision, setting objectives, crafting war and how to win over the enemy.
strategy, implementing and -​ Businesses have to respond with the
monitoring a strategy and initiating dynamic complex environment while
corrective adjustments where pursuing their mission and
deemed appropriate. objectives.

-​ is the study of why some firms Importance / Attributes of Strategic

outperform others. Management
➔​ How to create a competitive -​ Directs the organization toward
advantage in the market overall goals and objectives which
place that is unique, are in line with the mission / vison of
valuable, and difficult to copy the organization.
-​ Organization to be proactive instead
-​ “Total organization” perspective, of reactive in shaping its future.
integrating across functional areas. -​ Provides framework for all the
-​ Two perspectives of leadership: decision (product markets,
➔​ romantic view expansion, investments, structure,
➔​ external control perspective. etc.)
-​ Strategies put together an -​ Includes multiple stakeholders in
understanding of the external decision making.
environment with an understanding -​ Helps the organization to develop
of internal strengths and certain core competency and
weaknesses. competitive advantage.
-​ Recognizes trade-offs between
Scope of Strategic Management efficiency and effectiveness.

●​ Analysis Limitations of Strategic Management

➔​ Strategic goals (vision, -​ Environment is highly complex and
mission, strategic objectives) turbulent, it is difficult to predict the
➔​ Internal and external environment and how it will shape
environment of the firm up in the future.
●​ Decisions -​ It is a time consuming process.
➔​ What industries should we Preparation of activities that would
compete in? impede the activities of the
➔​ How should we compete in organization.
those industries?
 -​ It is costly to the organization. Importance of setting objectives as
(experts, planning the activity, place part of the strategic planning
of brainstorming, etc) process Emergence of concept of
-​ It is difficult to clearly estimate the core competences Emergency of
competitive responses of the concept of competitive advantage
competitor against the organizations ●​ Rediscovery and recasting (1980-
strategies. 1990)
●​ Porter (1987): Although strategic
The Strategy of Wars planning had gone out of fashion in
-​ people may result in them bringing the late 1970s, it needed to be
up Sun Tzu re-discovered. It would have to be
➔​ He was a successful warrior, “re-thought” and “recast”
but today he is mostly known Competitive strategy (1980)
for authoring “The Art of Competitive advantage (1985)
War,” ●​ The second pivotal event in 1980
➔​ The most widely referenced was the publication of Competitive
piece of work in this area is Strategy: Techniques for Analyzing
Sun Tzu’s text. Industries and Competitors by
Harvard professor Michael Porter.
●​ Origin and Development This book offers concepts such as
(1950-1973) five forces analysis and generic
●​ Formal strategic planning began in strategies that continue to strongly
the 1950s in the United States of influence how executives choose
America Drucker (1954): What is our strategies more than thirty years
business and what should it be? after the book’s publication
●​ Chandler (1962): What is strategy? ●​ Formation of the Strategic
Structure follows strategy (how Management Society (1981) Launch
strategy and organizational structure of the Strategic Management
need to be consistent with each Journal (1982)
other to ensure strong firm
performance) Institutionalization of Strategic Planning
●​ Andrews (1965) – corporate strategy - 1990
Ansoff (1965) – corporate strategy -​ Strategic planning becomes an
Boston consulting group (1965) – integral part of business operations
Henderson B. Further developments in the theory
and technology of strategic
HISTORICAL DEVELOPMENT OF management Consistency between
STRATEGIC MANAGEMENT strategic plans, annual plans and
●​ Strategic management recognized budgets Greater attention to
as an important element in corporate stakeholder interests Greater
success attention to corporate social
●​ Strategic planning was differentiated responsibility Greater involvement in
from budgeting The strategic the strategic planning process
planning process could be managed
Web-based Strategy ●​ Formulation
-​ Many consumers today take ➔​ What business(es) should we
web-based shopping for granted, but be in?
this channel for commerce was ➔​ For each, what is the basis
created less than two decades ago. for competitive advantage
The 1995 launch of Amazon by (low cost, differentiation,
founder Jeff Bezos was perhaps the focus)?
pivotal event in creating ●​ Implementation
Internet-based commerce. In pursuit ➔​ Functional tactics
of its vision “to be earth’s most ➔​ Culture and organization
customer-centric company,” Amazon structure
has diversified far beyond its original
focus on selling books and has Coherence in Strategic Direction
evolved into a dominant retailer. *Company vision
-​ Massively inspiring
Mintzberg’s Views of Strategy -​ Overarching
●​ Plan - consciously intended course -​ Long-term
of action -​ Driven by and evokes passion
●​ Ploy - maneuver to outwit opponent -​ Fundamental statement of the
●​ Pattern - consistency in behavior organization’s
●​ Position - location in environment ➔​ Values
●​ Perspective - way of perceiving the ➔​ Aspiration
world ➔​ Goals
*Mission statements
Forms of Strategy -​ Purpose of the company
●​ Formal versus informal -​ Basis of competition and competitive
➔​ associated with size of firm advantages
and stage of development. -​ More specific than vision
Mintzberg’s distinction -​ Focused on the means by which the
between entrepreneurial and firm will compete
planning mode. *Strategic objectives
●​ Intended versus realized -​ Operationalize the mission
➔​ intended strategies are the statement
plans managers develop; -​ Measurable, specific, appropriate,
realized strategies are the realistic, timely, challenging, resolve
actions that actually take conflicts that arise, and yardstick for
place over time. rewards and incentives

Strategic Management Process CORPORATE LEVEL STRATEGY

●​ Analysis -​ refers to the overall plan or direction
➔​ Hierarchy of goals of an organization in pursuit of its
➔​ Analysis of external and long-term objectives. It includes
internal environments defining the company's mission,
vision, values, and goals, as well as
 identifying the markets and products to gain a competitive advantage and
it will focus on, the competitive create customer value in the specific
advantages it aims to build, and the market the business unit operates in.
resources and capabilities it needs
to achieve its objectives.​ -​ As a result, organizations with only
one distinct business will often
-​ involves developing a strategic combine business strategy with
roadmap for the organization to corporate strategy as a single
guide its actions. By doing so, the strategy level.
organization stays focused on its
long-term strategic objectives while FUNCTIONAL LEVEL STRATEGY
remaining agile enough to respond -​ are those put in place at the
to changes in the business operational level of an organization
environment. and will facilitate the corporate (or
business) level strategy
4 Components of Corporate implementation.
Strategy
●​ Visioning -​ In terms of strategic planning, a
●​ Objective Setting functional strategy should be the last
●​ Resource Allocation strategy level created during the
●​ Strategic Trade - Offs strategic management process as it
defines the 'HOW are we going to
BUSINESS LEVEL STRATEGY support business objective on the
-​ Many leaders put a lot of effort into departmental level?’.
strategic planning, but their grand
strategies fall short. More often than ___________________________________
not, the issue lies not in the strategy
they formulate, but in the strategy Vision statements
they overlook —the business level -​ are short phrases or sentences that
strategy. convey your community's hopes for
the future.
-​ This strategy concentrates on the -​ By developing a vision statement or
execution of initiatives tailored statements, your farm clarifies the
specifically to a business unit. It's beliefs and governing principles of
like “the middle level” of strategy and your organization, first for
as it often happens with middle-level yourselves, and then for the greater
things, it remains overlooked in the community.
shadow of the bigger picture.​ -​ don't always have a defined time
period, but they will be aimed toward
-​ is a sum of the strategic planning the future. Because they cover big,
and implementation activities that abstract goals like societal change,
set and steer the direction of an they'll potentially imply work that
individual business unit. These takes a decade or more.
activities will generally include how
 -​ A future-oriented declaration of the Significance of Vision and Mission
organization’s purpose and Statements?
aspirations. (guiding philosophy)
-​ Addresses what the business / entity 1. Direction and Focus:
wants to become -​ A vision and mission statement
-​ Vision statements are influenced by provide a clear direction for an
the STRENGTHS and organization.
WEAKNESSES of the entity -​ It helps to align everyone within the
organization towards a common
Mission Statements goal, which leads to improved
-​ explain what the company is doing productivity and efficiency.
right now, and what it plans to do in 2. Communication:
the next few years, to achieve its -​ A well-crafted vision and mission
goals. statement communicates an
-​ Many mission statements give a organization's goals, values, and
particular year the business plans to purpose to employees, stakeholders,
meet its goals. and customers.
-​ An organization's mission statement -​ It helps to create a shared
describes what the group is going to understanding of what the
do and why it's going to do that. It is organization stands for, and what it
“action oriented”. aims to achieve.
-​ Mission statement rolls your values, 3. Strategic Decision Making:
current situation into a set of guiding -​ A clear vision and mission statement
principles that describe your farming provide a framework for
activities. decision-making within an
➔​ Why your business exists? organization.
➔​ For customers? -​ It helps to ensure that decisions are
➔​ For the community? aligned with the organization's goals
-​ An action oriented and values, and that they contribute
-​ Communicates the organization’s towards the achievement of its
reason for being, and how it aims to long-term vision.
serve its key stakeholders 4. Employee Motivation:
-​ What an organization is all about -​ A strong vision and mission
-​ KEY QUESTIONS statement can inspire employees to
➔​ What do we do? work towards a common goal.
➔​ For whom do we do it? -​ It provides a sense of purpose and
➔​ What is the benefit? direction, which can increase
employee motivation and
engagement.
Goals & Objectives S W O T represents:
-​ Goals are the outcomes you intend -​ Strengths
to achieve, whereas objectives are -​ Weaknesses
the specific actions and measurable -​ Opportunities
steps that you need to take to -​ Threats
achieve a goal. For an organization’s strategy to be
-​ Goals and objectives work in tandem well-conceived, it must be matched to both
to achieve success. If you create Taking advantage of its internal strengths
goals without clear objectives, you while defending against its weaknesses
run the risk of not accomplishing Identifying the best market opportunities
your goals. and minimizing external threats to its
well-being
Benefits of Setting Goals
-​ Goals give direction to your efforts. How do you use your SWOT analysis?
Goals are like a destination. Unless -​ Identify the issues or problems you
you know your destination, you do intend to change.
not know what direction to move -​ Set or reaffirm goals.
toward. -​ Create an action plan.
-​ Goals help you set your priorities.
While setting goals, you consider STRENGTH
various accomplishments for your -​ is something a firm does well or a
future and reflect on what characteristic that enhances its
achievements are more important to competitiveness
you. Once you have a clear idea ➔​ Valuable competencies or
about what is more important, and know-how
what is less important, it becomes ➔​ Valuable physical assets
easy to set your priorities. ➔​ Valuable human assets
➔​ Valuable organizational
___________________________________ assets
➔​ Valuable intangible assets-
Strategic Management e.g. “Image”
-​ The set of managerial decisions and ➔​ Important competitive
actions that determines the capabilities
performance of an organization in ➔​ An attribute that places an
the long-run. organization in a position of
competitive advantage
Why SWOT Analysis Is Important? ➔​ Alliances with capable
-​ SWOT Analysis is an important partners
planning tool that helps an institution -​ Resource strengths and competitive
identify, in a systematic and capabilities are competitive assets !
organized way, its internal strengths
and helps it match those strengths
with the best opportunities in the
environment.
WEAKNESS -​ Strengthening of existing
-​ is something a firm lacks, does competitors
poorly, or a condition placing it at a -​ Substitute products or services
disadvantage (e-Learning)
➔​ Deficiencies in know-how or -​ Economic & Political situation in the
expertise or competencies country
➔​ Lack of important physical, -​ Reduced buyer needs for product or
organizational, or intangible services
assets -​ Demographic changes
➔​ Missing capabilities in key
areas ___________________________________
-​ Resource weaknesses and
deficiencies are competitive liabilities PESTLE Analysis
-​ It is very important that an
Potential Opportunities organization considers its
-​ Serving additional “customer” environment before beginning the
groups marketing process. In fact,
-​ Expanding to new geographic areas environmental analysis should be
-​ Expanding product line continuous and feed all aspects of
-​ Transferring skills to new products planning. The organization's
or services marketing environment is made up
-​ Vertical integration from:
-​ Take market share from rivals ➔​ 1. The internal environment
-​ Alliances or acquisitions ➔​ 2. The micro-environment
-​ Openings to exploit new ➔​ 3. The macro-environment
technologies e.g. Political (and legal)
-​ Openings to extend brand forces, Economic forces,
name/image Sociocultural forces, and
-​ Expanding “customer” base Technological forces. These
-​ Expanding product line (New are known as PEST factors.
schools, new programs) ➔​ 4. PESTLE is an analytical
-​ Alliances and accreditations tool which considers external
-​ Exploiting new technologies factors and helps you to think
about their impacts ​
Potential External Threats
-​ Entry of potent new competitors -​ Is a useful tool for understanding the
-​ Substitute products or services “big picture” of the environment in
-​ Slowing market growth which you are operating
-​ Adverse shifts in political or -​ By understanding your environment,
economic conditions you can take advantage of the
-​ Costly new regulations opportunities and minimize the
-​ Growing leverage of customers or threats.​
suppliers
-​ Entry of new competitors
 -​ This provides the context within -​ The data used may be based on
which more detailed planning can assumptions that later prove to be
take place to take full advantage of unfounded.
the opportunities that present -​ The pace of change makes it
themselves. increasingly difficult to anticipate
developments that may affect an
PESTLE vs. SWOT organisation in the future.
-​ In contrast to a SWOT, PESTLE -​ To be effective, the process needs to
encourages you to think about the be repeated on a regular basis.
wider environment and what might
be happening now and in the future Political Factors
which will either benefit or be of -​ The political arena has a huge
disadvantage to the organization, influence upon the regulation of
individual etc businesses, and the spending power
➔​ a kind of radar which picks of consumers and other businesses.
up trends and developments -​ Government type and stability
in the external environment -​ Freedom of the press, rule of law
which can be used to inform and levels of bureaucracy and
longer term planning and corruption
strategy making -​ Regulation and de-regulation trends
-​ Social and employment legislation
-​ Tax policy, and trade and tariff
Advantages Of PESTLE Analysis controls
-​ It’s a simple framework. -​ Environmental and
-​ It facilitates an understanding of the consumer-protection legislation
wider business environment. -​ Likely changes in the political
-​ It encourages the development of environment
external and strategic thinking.
-​ It can enable an organisation to Economic Factors
anticipate future business threats -​ Marketers need to consider the state
and take action to avoid or minimise of a trading economy in the short
their impact. and long-terms. This is especially
-​ It can enable an organisation to spot true when planning for international
business opportunities and exploit marketing.
them fully. -​ Stage of a business cycle
-​ Current and projected economic
Disadvantages Of PESTLE Analysis growth, inflation and interest rates
-​ Some PESTLE analysis users -​ Unemployment and supply of labor
oversimplify the amount of data used -​ Labor costs
for decisions – it’s easy to use -​ Levels of disposable income and
insufficient data. income distribution
-​ The risk of capturing too much data -​ Impact of globalization
may lead to ‘paralysis by analysis’. -​ Likely impact of technological or
other changes on the economy
 -​ Likely changes in the economic -​ Transportation, energy
environment uses/sources/fuels,
associated/dependent technologies,
Sociocultural Factors rates of obsolescence, waste
-​ The social and cultural influences on removal/recycling
business vary from country to
country. It is very important that such Legal Factors
factors are considered. -​ current home market legislation,
-​ Cultural aspects, health future legislation
consciousness, population growth -​ European/international legislation
rate, age distribution, -​ regulatory bodies and processes
-​ Organizational culture, attitudes to -​ environmental regulations,
work, management style, staff employment law, consumer
attitudes protection
-​ Education, occupations, earning -​ industry-specific regulations,
capacity, living standards competitive regulations
-​ Ethical issues, diversity,
immigration/emigration, Environmental Factors
ethnic/religious factors -​ Ecological
-​ Media views, law changes affecting -​ environmental issues, environmental
social factors, trends, regulations
advertisements, publicity -​ customer values, market values,
-​ Demographics: stakeholder/ investor values
➔​ Age -​ management style, staff attitudes,
➔​ Gender organizational culture, staff
➔​ Race engagement
➔​ family size

Technological Factors Benefits of PESTLE Analysis

-​ Technology is vital for competitive -​ There are numerous benefits of
advantage, and is a major driver of conducting a PEST analysis, which
globalization. can reap dividends for your
-​ Maturity of technology, competing business. The more significant
technological developments, benefits include:
research funding, technology ➔​ A greater understanding of
legislation, new discoveries your company
-​ Information technology, internet, ➔​ More effective long-term
global and local communications strategic planning
-​ Technology access, licensing, ➔​ Heightened attention to
patents, potential innovation, potential threats and dangers
replacement technology/solutions, ➔​ Insight for valuable business
inventions, research, intellectual opportunities
property issues, advances in
manufacturing
Limitations of PESTLE Analysis
-​ Even though [you] analyze all the
factors, there is a chance that they
might change within an hour or day
due to its dynamic nature,
-​ Some factors are based on
assumptions, so they may not be
accurate.
-​ As the data collect[ed] is huge, one
needs to carefully utilize it in a better
way, and as it is from external
sources, one is not sure about the
accuracy.
-​ For a PEST analysis to truly be
valuable, it should be used in
conjunction with SWOT (strengths,
weaknesses, opportunities and
threats), MOST (mission, objective,
strategies, tactics) or SCRS
(strategy, current state,
requirements, solution) analyses.