BSAD 428: BUSINESS POLICY AND

STRATEGIC MANAGEMENT
DR. Olubisi Grace MAKINDE

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Learning Objectives (1 of 2)

1.1 Discuss the benefits of strategic management

1.2 Explain how globalization, innovation, and
environmental sustainability influence strategic
management
1.3 Discuss the differences between the theories of
organizations
1.4 Discuss the activities where learning
organizations excel

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Learning Objectives (2 of 2)

1.5 Describe the basic model of strategic

management and its components
1.6 Identify some common triggering events that act
as stimuli for strategic change
1.7 Explain strategic decision-making modes
1.8 Use the strategic audit as a method of analyzing
corporate functions and activities

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The Study of Strategic Management
(1 of 2)
• Strategic Management
– a set of managerial decisions and actions that
determines the long-run performance of a
corporation

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The Study of Strategic Management
(2 of 2)
Strategic management includes:
• Internal and external environmental scanning
• Strategy formulation
• Strategy implementation
• Evaluation and control

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 Defining Strategic Management

• Strategic management
– the art and science of formulating,
implementing, and evaluating cross-functional
decisions that enable an organization to
achieve its objectives

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 Defining Strategic Management

• Strategic management is used

synonymously with the term strategic
planning.
• Sometimes the term strategic management
is used to refer to strategy formulation,
implementation, and evaluation, with
strategic planning referring only to strategy
formulation.
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 Defining Strategic Management

• A strategic plan is a company’s game plan.

• A strategic plan results from tough
managerial choices among numerous good
alternatives, and it signals commitment to
specific markets, policies, procedures, and
operations.

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Benefits of Strategic Management
(1 of 2)
• The attainment of an appropriate match, or “fit,”
between an organization’s environment and its
strategy, structure, and processes has positive
effects on the organization’s performance.
• Strategic planning becomes increasingly important
as the environment becomes more unstable.
• Financial Benefits - Businesses using strategic-
management concepts show significant improvement
in sales, profitability, and productivity compared to
firms without systematic planning activities

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Benefits of Strategic Management
(2 of 2) – Non financial benefits
• Clearer sense of strategic vision for the firm
• Sharper focus on what is strategically important
• Improved understanding of a rapidly changing
environment
• It allows for identification, prioritization, and
exploitation of opportunities.

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Benefits of Strategic Management
(2 of 2) – Non financial benefits
cont’d
• It provides an objective view of
management problems.
• It represents a framework for improved
coordination and control of activities.
• It minimizes the effects of adverse
conditions and changes.

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Impact of Globalization
• Globalization
– the integrated internationalization of markets
and corporations
– has changed the way modern corporations do
business

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Impact of Innovation

• Innovation
– describes new products, services, methods,
and organizational approaches that allow the
business to achieve extraordinary returns

• It is the implementation of potential innovations

that truly drives businesses to be remarkable.

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Impact of Sustainability (1 of 2)

• Sustainability
– refers to the use of business practices to
manage the triple bottom line

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Impact of Sustainability (2 of 2)
The triple bottom line involves:
1. the management of traditional profit/loss
2. the management of the company’s social
responsibility
3. the management of its environmental
responsibility

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Theories of Organizational
Adaptation (1 of 3)
• Population ecology • Institution theory
– Once an organization – Organizations can
is successfully and do adapt to
established in a changing conditions
particular by imitating other
environmental niche, successful
it is unable to adapt to organizations.
changing conditions.

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Theories of Organizational
Adaptation (2 of 3)
• Strategic choice perspective
– not only do organizations adapt to a changing
environment, but also have the opportunity and
power to reshape their environment

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Theories of Organizational
Adaptation (3 of 3)
• Organizational learning theory
– an organization adjusts defensively to
changing environment and uses knowledge
offensively to improve fit between itself and its
environment

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Creating a Learning Organization
(1 of 3)
• Strategic flexibility
– the ability to shift from one dominant strategy to
another
– demands long-term commitment to development
and nurturing of critical resources
– also demands that the company become a
learning organization

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Creating a Learning Organization
(2 of 3)
• Learning organization
– an organization skilled at creating, acquiring,
and transferring knowledge and at modifying its
behavior to reflect new knowledge and insights
• Organizational learning is a critical component of
competitiveness in a dynamic environment.

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Creating a Learning Organization
(3 of 3)
Learning organizations are skilled at four main
activities:
1. Solving problems systematically
2. Experimenting with new approaches
3. Learning from the organization’s own
experiences and past history as well as from the
experiences of others
4. Transferring knowledge quickly and efficiently
throughout the organization
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Basic Model of Strategic
Management (1 of 9)
Strategic management consists of four
basic elements:
1. Environmental scanning
2. Strategy formulation
3. Strategy implementation
4. Evaluation and control

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Figure 1-2: Strategic Management Model

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Basic Model of Strategic
Management (2 of 9)
• Environmental Scanning
– the monitoring, evaluating and disseminating of
information from the external and internal
environments to key people within the
organization
– SWOT analysis: simple way to conduct
environmental scanning

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Figure 1-3: Environmental Variables

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Basic Model of Strategic
Management (3 of 9)
• Strategy formulation
– process of investigation, analysis, and
decision-making that provides the company
with the criteria for attaining a competitive
advantage
– includes defining the competitive advantages
of the business, crafting the corporate mission,
specifying achievable objectives, and setting
policy guidelines

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Basic Model of Strategic
Management (4 of 9)
• Mission
– purpose or reason for the organization’s
existence
• Vision
– describes what the organization would like to
become
• Objectives
– results of planned activity

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Basic Model of Strategic
Management (5 of 9)
• Strategy
– forms a comprehensive master approach that
states how the corporation will achieve its
mission and objectives
– maximizes competitive advantage and
minimizes competitive disadvantage
– corporate, business, functional

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Figure 1-4: Hierarchy of Strategy

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Basic Model of Strategic
Management (6 of 9)
• Policy
– a broad guideline for decision-making that links
formulation of a strategy with its
implementation

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Basic Model of Strategic
Management (7 of 9)
• Strategy implementation
– process by which strategies and policies are
put into action through the development of
programs, budgets, and procedures

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Basic Model of Strategic
Management (8 of 9)
• Evaluation and control
– a process in which corporate activities and
performance results are monitored so that
actual performance can be compared with
desired performance

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Basic Model of Strategic
Management (9 of 9)
• Performance
– result of activities
– includes actual outcomes of the strategic
management process
• Feedback/learning process
– revise or correct decisions based on
performance

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Initiation of Strategy:
Triggering Events
• Triggering event
– something that acts as a stimulus for a change
in strategy and can include:
 new CEO
 external intervention
 threat of change of ownership
 performance gap
 strategic inflection point

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Strategic Decision-making

• Strategic decisions
– deal with the long-term future of an entire
organization and have three characteristics:
1. rare
2. consequential
3. directive

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Three Characteristics of
Strategic Decisions
• Rare
– Strategic decisions are unusual and typically have no
precedent to follow.
• Consequential
– Strategic decisions commit substantial resources and
demand a great deal of commitment from people at all
levels.
• Directive
– Strategic decisions set precedents for lesser decisions
and future actions throughout an organization.

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Strategic Decision-making Process
1. Evaluate current performance results.
2. Review corporate governance.
3. Scan and assess the external environment.
4. Scan and assess the internal corporate environment.
5. Analyze strategic factors.
6. Generate, evaluate, and select the best alternative
strategies.
7. Implement selected strategies.
8. Evaluate implemented strategies.

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The Strategic Audit:
Aid to Strategic Decision-making
• Strategic audit
– provides a checklist of questions, by area or
issue, that enables a systematic analysis to be
made of various corporate functions and
activities

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 Key Terms in Strategic Management

• Competitive • Strategists
advantage – the individuals who
– anything that a firm are most responsible
does especially well for the success or
compared to rival failure of an
firms organization

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 Key Terms in Strategic Management

• Vision statement
– answers the question “What do we want to
become?”
– often considered the first step in strategic
planning

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 Key Terms in Strategic Management

• Mission statements
– enduring statements of purpose that
distinguish one business from other similar
firms
– identifies the scope of a firm’s operations in
product and market terms
– addresses the basic question that faces all
strategists: “What is our business?”

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 Key Terms in Strategic Management

• External opportunities and external

threats
– 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

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 Some Opportunities and Threats
• Computer hacker problems are increasing.
• Intense price competition is plaguing most firms.
• Unemployment and underemployment rates
remain high.
• Interest rates are rising.
• Product life cycles are becoming shorter.
• State and local governments are financially
weak.
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 Key Terms in Strategic Management

• Internal strengths and internal

weaknesses
– an organization’s controllable activities that are
performed especially well or poorly
– determined relative to competitors

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 Key Terms in Strategic Management

• Objectives
– specific results that an organization seeks to
achieve in pursuing its basic mission
– long-term means more than one year
– should be challenging, measurable, consistent,
reasonable, and clear

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 Key Terms in Strategic Management

• Strategies
– the means by which long-term objectives will
be achieved
– may include geographic expansion,
diversification, acquisition, product
development, market penetration,
retrenchment, divestiture, liquidation, and joint
ventures

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 Key Terms in Strategic Management

• Annual objectives
– short-term milestones that organizations must
achieve to reach long-term objectives
– should be measurable, quantitative,
challenging, realistic, consistent, and prioritized
– should be established at the corporate,
divisional, and functional levels in a large
organization

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Key Terms in Strategic Management

• Policies
– the means by which annual objectives will be
achieved
– include guidelines, rules, and procedures
established to support efforts to achieve stated
objectives
– guides to decision making and address
repetitive or recurring situations

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IMPORTANCE OF BUSINESS
POLICY
• It communicates the organization’s expectations
about appropriate employee work performance
• It illustrates the acceptable performance
boundaries while simultaneously addressing the
employees’ needs

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Why Some Firms Do No
Strategic Planning
• Lack of knowledge in strategic planning
• Poor reward structures
• Firefighting
• Waste of time
• Too expensive
• Laziness
• Content with success
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Why Some Firms Do No
Strategic Planning
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Honest difference of opinion
• Suspicion
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Pitfalls in Strategic Planning
• Using strategic planning to gain control over
decisions and resources
• Doing strategic planning only to satisfy
accreditation or regulatory requirements
• Too hastily moving from mission development to
strategy formulation
• Failing to communicate the plan to employees, who
continue working in the dark
• Top managers making many intuitive decisions that
conflict with the formal plan
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Pitfalls in Strategic Planning
• Top managers not actively supporting the strategic-
planning process
• Failing to use plans as a standard for measuring
performance
• Delegating planning to a “planner” rather than
involving all managers
• Failing to involve key employees in all phases of
planning
• Failing to create a collaborative climate supportive
of change
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