Dr.

Razia Sultana
Department of Business Management

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Strategic Management: Concepts and Cases
Arab World Edition
Fred R. David
Abbas J. Ali
Abdulrahman Y. Al-Aali

Chapter 1:
The Nature of Strategic
Management

Ch 1 -2 Copyright © 2011 Pearson Education

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 Course Objective

The course aims to teach the students about strategic

environment and decision-making to impart case-based
knowledge to students in real-time decision-making.

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 LEARNING OBJECTIVES
• Key Terms in Strategic Management
• Introduction and concept of strategy
• Strategic Management Definition
• Objectives of Strategic Management
• Stages of Strategic Management
• The Strategic Management Model
• Integrating intuition and Analysis
• Adapting to change
• Levels of strategy
• Benefits & Limitations of Strategic Management

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•Why do some Firms not do Strategic Planning?
•Pitfalls in Strategic Planning
•Guidelines for Effective Strategic Management
•Business Ethics and Strategic Management
•Natural environment perspective(ISO 14000 &14001)
•The Nature of Global Competition
Comparing Business and Military Strategy

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 Key terms:
Strategy
Goal & Objective
Vision
Mission
SWOT

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 What does Strategy mean?
The word “ strategy” is derived from a Greek word
“strategia”, which means “generalship”, or “Command
of a general”.
The term strategy entered the business world from
military services where it was originally used.

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 Concept of Strategy
What is strategy?
“Strategy is the determinator of the basic long-term goals
of an enterprise, and the adoption of courses of action and
the allocation of resources necessary for carrying out these
goals”. – Chandler
Strategy is a tactical course of action which is
designed to achieve long term objectives.
Its is all about integrating organizational activities and
utilizing and allocating the scarce resources within the
organizational environment so as to meet the present
objectives.

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 Mary Parket Follett, “Management is the art of getting
things done through people”.
Henry Fayol, “To manage is to forecast and to plan, to
organize, to command, to co-ordinate and to control".

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 Need of strategy
Gives direction
Facilitate overall effectiveness
Coordinate activities
Facilitate optimal resource allocation
Helps in comparing courses of action
Programme all organizational activities

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 Who is a Strategist?
 A strategist is a person with responsibility for the formulation and
implementation of a strategy.
 A strategy describes how the ends (goals) will be achieved by the means
(resources).
 Strategists are the individuals who are most responsible for the success
or failure of an organization. They are responsible for developing and
implementing effective strategies that align with the organization's goals
and objectives.
 The Strategists :
• Chief Executive Officer (CEO)
• Chief Strategy Officer (CSO)
• Owner
• Board Chairman, Executive Director and Managing Director

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 Strategy once formulated has long term implications.
It is framed by top management in an organization.
 In short, it may be called as the 'game plan of
management’.

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 Strategic Management
Strategic management is the process of making
decisions and taking actions that will enable an
organization to achieve its goals and objectives.
It involves the formulation of strategies and plans to
achieve the desired outcomes.
This process can include formulating strategy, planning
organizational structure and resource allocation,
leading change initiatives, and controlling processes
and resources.

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 Strategic Management

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 One of the major aspects of strategic management is to
organize various functional areas of the organization
effectively, as well as to assure these functional areas
harmonize and get together well.

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 Objectives of Strategic Management
To increase profitability by improving the efficiency of
business operations.
Identifying problems, comprehending new opportunities and
initiating changes whenever needed.
• Creating a competitive advantage over other market players.
• Identify risks and design strategies to address them.
• Communicating organizational objectives by setting up goals.
• Monitoring performance against set standards.
• Reward top performers.

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Stages of Strategic Management

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1. Strategy formulation: It is the process of establishing goals.
Determining the proper plan of action to achieve those goals.
Ensuring that all business activities are aligned with the
organization’s vision, goals and objectives.
Strategic planning refers only to strategy formulation.
2.Strategic implementation: It is the process of executing
strategies into action plans and initiatives. It involves specific
actions, resource allocation, goal setting, and performance
measurement to achieve strategic objectives.
3. Strategy evaluation: It is that process in which corporate
activities and performance results are monitored so that the actual
performance can be compared with desired performance.

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 Strategic decisions are based on insight from the environmental
assessment and are responses to strategic questions about how the
organization will compete, such as:

 What is the organization's business?

 What products and services will we offer? At what prices? On
what terms?
 Who is the target customer for the organization's products and
services?
 What differentiates the company from its competitors in the
eyes of customers and other stakeholders?

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  What are the important opportunities and risks for the
organization?
 How can the firm grow, through both its base business and
new business?
 Which skills and capabilities should be developed within the
firm?

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• Vision Statement: Details where the organization aspires to go
in the long run.
• Mission statement: Defines the organization’s business,
objectives, and how it will reach these objectives.
• SWOT analysis is a strategic planning method used to research
external and internal factors which affect company success and
growth.
• Industry analysis refers to the process of conducting research
and gathering external information about a specific industry.
• It involves examining various factors such as market trends,
competition, customer behavior, and regulatory environment to
gain insights and make informed business decisions

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 External Opportunities and Threats :
External opportunities and threats refer to factors outside of a
company that can affect its performance.
Analysis of Trends:
 Economic
 Social
 Cultural
 Demographic/Environmental
 Political, Legal
 Technological
 Competitors

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Strengths and Weaknesses (Internal)
Strengths and weaknesses are typically located in the
functional areas of the firm, such as:
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems

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 Assessing the Internal Environment

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 Long-term Objectives:
goals you aim to achieve in the future Long-term aims
require a significant amount of time to accomplish, usually a
year or more.
Long term objectives are essential for ensuring a firm’s
success. They
• Provide direction
• Help with evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and
controlling

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 Short term objectives:
Short-term goals are objectives that you can achieve in the
near future, typically within weeks or months. These goals
help you make progress toward larger, long-term
objectives.
Short-term goals are important because they provide a
roadmap for achieving success and help you stay focuses
and motivated.

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 The five elements of the strategy diamond are actually
arenas, differentiators, vehicles, staging, and economic
logic.

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 Alternative strategies: The process and results of alternate
strategies provide a basis for further study and exploration
regarding areas of interest.
It can be used to set the direction for human and material
resources, to generate a different pattern of risk and return
in comparison to traditional investment.

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Issues in Strategy Formulation

• Achieving Shared Vision

• Leadership and Managerial Bias
• New business opportunities
• Allocation of resources
• Expansion or diversification
• International markets
• Mergers or joint ventures

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 Strategy Implementation
(Action stage of SM)

Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

Ch 1 -33
Ch 1 -33 Copyright © 2011 Pearson Education

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Issues in strategy implementation
 Lack of commitment to the strategy.
 The alignment of strategy with organizational structure.
 The alignment of strategy with the organization’s culture.
 Creation of an environment for your strategy to succeed.
 The setting of realistic targets for delivery across a set
time period.

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 Strategy Evaluation
(Final stage of SM)

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 Issues in Strategic Evaluation
• Difficulty in measuring managers' contributions.
• Difficulty in measuring divisional performance as compared to
individual performance.
• Organizations may change their strategic plans during
evaluation.
• Lack of cooperation.
• Difficulty in measurement.
• Subject to future modification
• Selection of Evaluator
• Today’s success is no guarantee of future success.

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Summary
 Strategy is a tactical course of action which is designed to achieve long
term objectives.
 Management is the art of getting things done through people.
 A strategist is a person with responsibility for the formulation and
implementation of a strategy.
 Strategy gives direction, Coordinate activities and optimal
resource allocation.
 Strategic management is the process of making decisions and taking actions
that will enable an organization to achieve its goals and objectives.

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 Example Strategies in Action in 2009
Mohammed Abdulmohsin Al-Kharafi & Sons Company
(MAK Group)

The MAK Group is one of the largest family-owned organizations in the Arab
world. In 2008 it was listed among the top 100 companies in the Muslim world
by Dinar Standard. In 2009 its annual turnover was over US$5 billion; it
operates in more than 25 countries around the world and has more than
120,000 employees. The company was established as a trading company more
than 100 years ago and it has since developed into a large multi-national
corporation.

Faced with limited local market and enriched with a large amount of cash, the
company has embarked on an ambitious diversification strategy. Since 1956 the
company has participated in a number of important projects in Kuwait, the Gulf
States, Africa, the Caribbean, Asia, and Eastern Europe. It has various branches
and subsidiaries in area related Construction, trade, and manufacturing in
various parts of the world.
Ch 1 -38
Ch 1 -38 Copyright © 2011 Pearson Education
 Example Strategies in Action in 2009 (Cont’d)
SKAB Group

“The SKAB Group is one of the largest private-sector business groups in

Saudi Arabia with a variety of diversified but interconnected business
enterprises, spanning such disciplines as environment protection and
recycling, mineral-water bottling, contracting, the hospitality industry,
real estate, shopping malls, travel and tourism, food products, and
construction and maintenance.”

SKAB embarks on three major strategies to realize growth and market

vitality: market expansion at home and abroad, partnership, and
acquisition. Although the group is family-owned, it is managed by
professional management team.

Ch 1 -39
Ch 1 -39 Copyright © 2011 Pearson Education
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 Thank you

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