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RIFT VALLEY UNIVERSITY

HAWASSA CAMPUS

Strategic Management

Instructor: Sintayehu Assefa

(PhD Candidate)

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 Chapter One

OVERVIEW OF STRATEGIC MANAGEMENT

Time allotted: 4hrs

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 OVERVIEW OF STRATEGIC MANAGEMENT
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OBJECTIVES

After studying this chapter, you will be able to:

 Elucidate the nature of strategic management

 Explain the concepts of strategic management
 State strategic management process
 Elaborate the strategic management model
LEARNING

 Describe the benefits of strategic management

Overview of Strategic Management
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 Strategy is a tactical course of action which is designed to

achieve long term objectives. It is an art and science of planning
and marshaling resources for their most efficient and effective
use in a changing environment.

 Strategy of business enterprise consisits of what management

decides about the future direction and scope of the business. It
entails managerial choice among alternative action programmes,
competitive moves and different business apporoaches to
achieve enterprise objectives.
Conti…
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 Strategy once formulated has long term implications and is

framed by top management in an organization. In short, it may
be called as the “game plan of management”
Definition of Strategy
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 Strategy is unified, comprehensive and integrated plan relating

the strategic advantage of the firm to the challenges of the
environment. It is designed to ensure that the basic objectives of
the enterprise are achieved. (Glueck)

 Strategy is “the determination of basic long-term goals and

objectives of an enterprise and the adoption of the courses of
action and the allocation of resources necessary for carrying out
these goals. (Chandler)
 Features of strategy
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 Top management responsibility

 Allocation of large amount of resources
 Impact on long-term prosperity of the firm
 Future oriented
 Multi-functional or multi-business consequences
 Consideration of factors in the external environment
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Corporate level strategy
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 At this level, strategic decisions relate to organization-wide

policies and are taken care by top-level management(BOD) with a
vision of determining “Where the company wants to be?”

 It has two main aspects:- Formulation of strategy (strategic

planning) and strategy implementation

 The nature of strategy at this level tend to be value-oriented,

conceptual and than other levels.

 There is also greater risk, cost and profit potential as well as

greater need of flexibility associated with this level.
Conti...
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 Major financial policy decisions involving acquisition,

diversification and structural redesigning belong to this level.
 Business-Level Strategy
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 Business-level strategy is more likely related to a unit within the

whole. It is concerned with competition in a market.

 The concerns are about what products or services should be

developed and offered to which markets in order to meet
customer needs and organizational objectives.

 At this level, multi-functional strategies developed at corporate

level are formulated and implemented for specific product market
in which the business operates. Thus, managers at this level
translate general directions and intent into concrete functional
objectives.
Conti...
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 Decisions at this level include policies involving new product

development, marketing mix, research and development,
personnel, etc.
Functional/Operational-level strategy
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 Functional strategy involves decision-making with respect to

specific functional areas: production, marketing, personnel, finance,
etc.

 While corporate and business level strategies are concerned with

“Doing the right things”, functional strategies stress on “Doing
things right”.

 Operational level strategy is concerned with strategic approaches

for managing frontline operating units (like plants, sales, etc) and
for handling day to day tasks of strategic significance (like
advertising campaign, purchasing materials, inventory control,
maintenance, etc.). Thus, it focuses on how the different functions of
the enterprise contribute to the other levels of strategy.
Conti…
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 Thus, functional level strategic management is the management

of relatively narrow areas of activity, which are of vital,
pervasive or continuing importance to the total organization.
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Step 1: Strategic Intent
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 Vision: Vision is the statement that expresses organization's

ultimate long-run objectives. It is what the firm ultimatly like to
become. Vision once formulated is for forever and long lasting
for years to come. Vision is closely related with strategic intent
and is a forward thinking process. Example: Microsoft - “A
computer software on every desk and in every home”.

 Mission: It tells who we are and what we do as well as what we

had like to become. Mission of a business is the fundamental,
unique purpose that set it apart from other firms of its kind and
identifies the scope of its operations in product and market terms.
Example: Microsoft- “Empower every person and every
organization on the planet to achieve more”.
Conti…
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 Objectives: These are the end results of planned activity that

state what is to be accomplished by when and should be
quantified if possible and their achievement should result in the
fulfillment of a corporation's mission. Objectives state
specifically how the goals shall be achieved. Following are the
areas for setting objectives - profit objective, marketing objective,
production objective, etc.
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Step 2: Strategy Formulation
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 Strategy formulation refers to the process of choosing the most

appropriate course of action for the realization of organizational
goals and objectives and thereby achieving the organizational
vision. For choosing most appropriate course of action, appraisal of
organization and environmental is done with the help of SWOT
analysis.

 Enviromental Appraisal: The enviroment of any organization is

“the aggregate of all conditions, events and influences that
surround and affect it”. It is dynamic and consists of External and
Internal Environment. The external environmental includes all the
factors outisde the organization which provide opportunities or
pose threats to the organization. The internal environment refers
to all the factors within an organization which imparts stengths
or cause weaknesses of a strategic nature.
Conti…
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 Organizational Appraisal: It is the prcess of observing an

organizational internal environment to identify the strengths
and weaknesses that may influence the organization's ability
to achieve goals.

 The analysis of corporate capabilities and weaknesses

becomes a pre-requisite for successful formualtion and
reformulation of corporate strategies. This analysis can be
done at various levels: functional, divisional and corporate.
Step 3: Strategy Implementation
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 Strategy implementation is the action stage of strategic man. It

refers to decisions that are made to install new strategy or
reinforce existing strategy.

 Designing structure, process and system: strategy

implementation includes the making of decisions with regard
to organizational structure, developing budgets, programs and
procedures in order to accomplish certain activities.

 Functional implementation: functional implementation is

carried out through functional plan and policies in five
different areas-marketing, finance, operation, personnel and
information management.
Conti…
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 Behavioral implementation: it denotes mobilizing employees

and managers to put and vote strategies into action and
require personal discipline, commitment and sacrifice. It
depends upon manager's ability to motivate employees.

 Operationalizing strategy: it includes establishing annual

objectives, devising policies, and allocating resoures.
Step 4: Strategy Evaluation and control
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 Strategy evaluation: it is the primary means to know when and

why particular strategies arenot working well. It is the process in
which corporate activities and performance results are monitored
so that actual performance can be compared with desired
performance.

 Thus strategic evaluation activities include reviewing external

and internal factors that are the basis for current strategies.
Conti…
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 Strategic control: in this step, organizations detemine what to

control that is which objectives the organization hopes to
accomplish, set control standards, measure performance,
compare the actual with the standard determine the reasons for
the deviations and finally taking corrective actions and review
the policies and activities if needed.
 Conti…
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 End of Chapter 1

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 Chapter Two

MISSION, VISION, GOALS AND OBJECTIVES

Sintayehu Assefa
Time allotted: 4hrs

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 MISSION, VISION, GOALS AND OBJECTIVES
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After pursuing this chapter, you should be able to:

OBJECTIVES

 State the Importance of a Clear Mission

 Explain the Nature of Business Mission
 Describe the Components of a Mission Statement
LEARNING
Introduction
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 Vision is “description of something in the future”. And it is the

mental perception of the kind of environment an individual, or an
organization, aspires to create within a broad time horizon and
the underlying conditions for the actualization of this perception”.

 Vision statement answers the question, “What will success look

like?”. The pursuit of this image of success is what motivates
people to work together.
Conti...
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 A vision provides a strong foundation for developing a

comprehensive mission statement.

 Strategic vision addresses the “where are we going” questions

and explains the course and direction chartered by management.

 A strategic vision should provide a clear understanding of what

the business should look like and provide help to take strategic
decisions.
Vision
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 Strategic intent should lead to an end and that end is the vision of
an organization or an individual.

 It is what the firm or a person would ultimately like to become.

 It should be short and specific and is based on overall purpose of

organization.
Characterstics of Vision
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 1. It is a blue print of the kind of business organization the

management is trying to create and the market position it would
occupy.

 2. It should be forward looking that provide strategic course the

management will adopt to help the company prepare the future.

 3. It is specific and provide guidelines to managers for making

decisions and allocating resources.

 4. It is flexible to changing environment and with in the realm of

companies hope to achieve.
Conti…
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 5. Appeal to emotions and motivate employees.

 6. Narrow and can focus effort and excite people.

 7. It maynot fit to present circumstance, but contributes to future

and shows picture of future.

 8. It should be easy to explain to all stakeholders and preferably

short.
Benefits of Vision
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 Good visions are inspiring and exhilarating

 Help the organization to prepare for the future

 Clarifies and crystallizes the senior executives views about the

companies long term direction

 Good vision reduces risk-taking and experimentation

 Good vision help to motivate and morale boosting of employess

Conti…
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 Good visions are competitive, original and unique.

 Good visions represent integrity, they are truly genuine and can
be used for the benefit of people.
Limitations of a vision statement
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 Vague and incomplete

 Not forward looking

 Too broad

 Uninspiring

 Not distinctive
Conti…
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 Examples

 1.BSNL Vision Statement: “To become the largest telecom

service provider in Asia.”

 2. Walt Disney vision statement: “Make people happy”

 3.Stokes Eye Clinic, Florence, South Carolina: “Our vision is

to take care of your vision.”
Mission
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 Organizations relate their existence to satisfying a particular

need of the society. They do it in terms of their mission.

 Mission is a statement which defines the role that an

organization plays in a society.

 It refers to the particular need of that society for instance, its

information needs.
Defining Mission
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 It is “essential purpose of the organization, concerning

particularily why it is in existence, the nature of the business it is
in, and the customers it seeks to serve and satisfy.”

 “Purpose or reason for the organization's existence.”

 “Mission is an enduring statement of purpose that distinguishes

one firm from other similar firm.”
Conti...
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 Different from vision by it is more focused on “What is our

business” as compared to the “where are we headed” or what
we want to become” nature of vision.
Characterstics
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 1. Declaration of attitude
 2. Customer orientation

 3. Declare of social policy

1. Declaration of attitude
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 Not designed to specific or to have a concrete end

 is declaration of attitude and outlook

 is meant to provide motivation, general direction, an image and

a philosophy to guide the organization.

 should be flexible, even vague to provide room for adapting to

changing environments and ways of operations.
2. Customer orientation
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 refletcs the anticipation of customer. Here, the operating philosophy

of the organization is to identify customer needs and then provide a
product or service that fulfill those needs.

 It defines

 1. “What organization is and what is aspiring to be”

 2. “be limited enough to exclude some exclude some ventures

and broad enough to allow for creating growth”

 3. “Have its own identity that distinguish it from others”

Conti…
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 4. “Have its own identity that distinguish it from others”

 5. It serve as a framework to evaluate both current and

prospective activities

 6. “be stated interms sufficiently clear to be widely

understood throughout the organization”
3. Declaration of social policy
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 Socially oriented policy suggest that the company takes into

consideration not only profit owed to shares and what it owes to
major stakeholders, but also seriously responds to responsibilities
towards consumer, environmentalists, minorities.
Mission statement
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 “A mission statement is an enduring statement of purpose that

distinguishes one business from other similar firms. A mission
statement identifies the scope of a firm's operations in product
and market terms.”

 For example: BSNL misssion

 “To provide world class state of art technology telecom

services to its customers on demand at competitive prices.”

 “To provide world class telecom infrastructure in its area of

operation and to contribute to the growth of country's
economy.”
Conti...
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 The mission statement of an organization is normally short, to

the point, and contains the following elements:

 Provides a concise statement of why the organization exists,

and what it is to achieve;

 States the purpose and identity of the organization;

 Defines institution's values and philosophy and

 Describes how the organization will serve those objectives

Formulating mission
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 1. What is the basic purpose of your organization?

 2. What is unique about your organization?

 3. What is in your company that will make it stand out in a

crowd?

 4. What are, and who should be, your principal customers?

 5. What are the basic beliefs, values and philosophical priorities

of your firm?
 Comp
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Conti…
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 1. Product or service: invariabily includes mention of the product

or service the company offers to customers.

 2. Customers: information in the mission statement describes the

profiles of customers and the organization it serves.

 3. Technology: components of the mission statement generally

refers to means of production, operations and organizational
functions which include elements such as equipments, materials,
techniques, processes.
Conti…
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 4. Survival, growth and profitability: make a general reference to

the company's survival and healthy functioning, which include
growth and profitability.

 5. Company philosophy: it reflects the basic believes, values,

aspirations and ethical priorities of company that guide the
employee in conditioning organizational function.
Conti...
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 6. Public image: elements of the company deals with how the

company wishes to be viewed by external constituencies and to
create a positive public image, the mission statement could
explicitly refers to the responsiveness of the company to
concerns about the company and the society.

 7. Employees: to develop a public image a company could

include concerns for recognition of the value of employees in the
statement.
Need for an explicit mission
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 To ensure agreement of purpose within the organization

 To provide a basis for motivating the use of the organizations

resources

 To develop a basis, or standard, for allocating organizational

resources

 To establish a general tone or organization climate

 To serve as a focal point for those who can identify with the
organization's purpose and direction
Conti...
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 Infosys

 Mission “To achieve our objectives in an environment of fairness,

honesty, and courtesy towards our clients, employees, vendors
and society at large.”

 A vision statement describes what the organization would like to

become.

 A mission statement describes what the organization is now.

 “What the company is providing”
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 Difference between vision and mission
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Mission statement Vision statement

• A mission statement talks about • A vision statement outlines WHERE

How you will get to where you you want to be. Communicates
want to be. Defines about the both the purpose and values of
purpose and primary objectives your business.
related to your customer needs and
team values.

• It answers the question, What do we • It answers the question, “Where do

do? What makes us different?” we aim to be?”
Conti…
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• A mission statement talks • A vision statement talks about

about the time present leading your future
to its future

• It lists the broad goals for which the • It lists where you see yourself some
organization is formed. Its prime years from now. It inspires you to
function is internal; to define the key give your best. It shapes your
measure or measures of the understanding of why you are
organization's success and its prime working here.
audience is the leadership, team and
stockholders.
 Conti...
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• Your mission statement may • As your organization evolves, you

change, but it should still tie might feel tempted to change your
back to your core values, vision. However, mission or vision
customer needs and vision statements explain your organization's
foundation, so change should be kept
to a minimum

• What do we do today? For • Where do we want to be going

whom do we do it? What is the forward? When do we want to reach
benefit? In other words, Why we that stage? How do we want to do it?
do what we do? What, for
Whom and Why?
 Conti...
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• Purpose and values of the • Clarity and lack of ambiguity:

organization: Who are the Describing a bright future (hope);
organization's primary “clients” Memorable and engaging
(stakeholders)? What are the expression; realistic aspirations,
responsibilities of the organization achievable; alignment with
towards the clients? organizational values and culture
 Objectives
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 Objectives represent a managerial commitment to achieve

specified results in a specified period, of time. They clearily spell
out the quantity and quality of performance to be achieved, the
time period, the process and the person who is responsible for
the achievement of the objective.

 Objectives are end results of planned activity.

 Objectives state what is to be accomplished by when and should

be quantified if possible.
 Conti...
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 Objectives are more specific and narrower

 Objectives are always measurable and particular

 Objectives vary with the hierarchical level in the organization,

becoming more focused and short term going down from top
level to frontline managers

 Objectives are critical for organizational effectiveness and

efficiency, and it has been shown that managers who
aggressively pursue objectives perform better that managers
who are not driven by them
 Importance of objectives
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 1. Objectives help to define the organization in its environment

 2. Objectives help in coordinating decisions and decision-maker

 3. Objectives help in formulating strategies

 4. Objectives provide standards for assessing organizational

performance
 Conti…
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 Conti…
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 1. Specific and unambiguous

 Help to remove confusion about the target at which efforts

should be directed

 Help to determine reward structure in fair and equitable

manner

 Example: objective of almost every business would have

increased profitability, but it should be explicitly explained, as
10% increase in profit
 Conti...
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 2. Time horizon

 Should be stated in terms of a time frame within which they

should be attained

 Without a timeframe, an objective would be ineffective and

almost meaningless.

 Example: A 10% increase in profit being targeted over a year

is a different, objective than over 2 years, if there is no time
horizon, this objective would serve no purpose
 Conti…
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 3. Flexible: Since objectives are set in the future, which cannot

be predicted, exactly there should be room for altering an
objective to the environment change.

 4. Attainable: Objectives are balanced act between being too

easy and too difficult

 Should be challenging enough in that they give rise to

innovation and fresh approaches, yet they should be
achievable with not too much increase in resource
 Conti...
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 5. Measurable: should be stated in quantifiable, measurable

terms

 So everyone can clear about objectives, progress can be

measured towards the objectives and employees morale can
be tied to number rather than personalities
 Conti…
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 6. Multiple objective

 rare to have just one objective that all employees work

towards.

 Example: An objective such as increasing in number of

customers served would directly with either a cost
minimization or quality improvement objective.

 Even when the management aligns different objectives, even

seemingly opposing ones, but all efforts is coordinated in the
same direction
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 Factors affecting Objectives
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 1. Size of the organization: Bigger size makes that objective

formulation process complex

 2. Level of management: organizational objectives are set by

managers. Different levels of managers set different kinds of
objectives

 3. Organization culture: Culture is a system of shared set of

values, beliefs and norms that guide behavior
Conti...
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 Conti…
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 1. Market share: Healthy market share should sustain even as an

organization tries to increase its share.

 Sustainable market share is important in stable markets and in

competitive environment

 2. Leadership in innovation and productivity: innovation is

needed for success and in some cases for survival

 Innovation must be translated into objectives indicate what the

orgainzation is aiming for.
 Conti…
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 3. Product quality and productivity: designing and ensuring

quality has been shown to be critical competitive strength.

 Constant balance between achieving efficiency as related to

cost-cutting objective and maintaining quality.

 4. Resource level: resources includes inventory, equipments,

capital, human capital

 resources imply cost, their use should be minimized without

any compromise in aspects such as quality and service
 Conti...
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 5. Customer satisfaction: maintaining customer relationships and

building customer loyalty and goodwill are highly desirable.

 6. Performance level: related to productivity and effectiveness

and performance objectives can also include innovation and
professional development

 7. Social responsibilities: business respond to society and

community by specifying explicit objectives for socially
beneficial activities
 Conti…
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 Goals
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 Goal is defined as an “intermediate result to be achieved by a

certain time as part of the grand plan. A plan can, therefore
have many goals.”

 Goal is a specific target that a firm intend to reach in long term.

 Goal describes clearily the activities and task to be completed by

an individual, a department or an organization.

 Goals should be measurable, quantitative, challenging, realistic,

consistent and prioritized.
 Conti…
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 Provide basics for measuring companies performance and the

process it is making towards the vision.

 Strategic goals help managers to establish end result of activities

in general without getting bogged down in details, such as issues
of measurement and timing.
 Types of Goals
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 1. Financial goals: these goals focus on achieving a certain level

of financial performance, measured interms of return in
investment or growth of revenues

 2. Strategic goals: the goals focus on achieving strategic or

competitive advantages within the industry, like technology
leadership, creativity and innovation and superior customer
service
Characterstics of goal
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 According to M.D.Richards:

 1. Specific: so that they are precise and measurable, would

assist management in monitoring the progress towards
achievement of goals at each specific point of time

 2. Issues of goal: short-term goals and objectives should be

left to lower level managers to identify, plan and achieve

 issues like lowering of cost and improving quality should be

included in goals of middle level managers
Conti...
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 3. Should be well constructed, realistic and challenging:

challenging goals motivates managers to be innovative, creative
and ambitious in improving operations, marketing, sales, etc.

 4. Specification of time period

Examples of goals “El paso Electrical Company' in various
operations
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 Customer service:

 provide quality service to customer at least equal to the highest

standard in the industry

 Maintain reliability of service to customer at a level above

99%

 ensure that customer are educated about the safety aspects of

using electricity
Conti...
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 Community service:

 promote economic growth and increased development of the

company's total service area

 provide job opportunities and investment in the service area

which promotes a higher standards of living for all citizens

 cooperate with and serve the educational institutions located in

the service area in a manner consistent with other leaders in
the industry
Conti...
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 Shareholders relations:

 assure that all expenditure are made in such a way as to

protect and enhance shareholders investment

 provide a rate of return to the shareholders which is

competitive with other investments

 base all company involvement in new programmes or projects

on solid economic principles
Conti...
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 Employee-management obligations:

 monitor and strive to improve the quality of management and

supervision

 attract, develop and retainable and loyal employees

 provide equal employment opportunities and a high degree of

training along with professional tools
Conti...
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 Corporate communication:

 make an assertive effort to provide information communication

on relevant company issues

 keep senior management appraised and educated on current

topics of interest

 enhance the community image of the company by being

receptive to the needs of customer and the community
Goal vs Objectives
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 Goals are an expected or desired outcome of a planning process.

Goals are usually broad, general expressions of the guiding
principles and aspirations of an organization

 Objectives are precise targets that are necessary to achieve goals.

Objectives are detailed statements of quantitatively or
qualitatively measurable results the plan hopes to accomplish
Conti...
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Goal Objectives
• The purpose toward which an • something that one's efforts
endeavor is directed or actions are intended to
attain or accomplish, purpose;
target

• Generic action, or better still, an • Specific action-the objective

outcome towards which we supports attainment of the
strive associated goal

• Goals maynot be strictly • Must be measurable and

measurable or tangible tangible
• Longer term • Mid to short term
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