Strategic Management

Chp#5
BS IT 3rd
university of Gwadar
 Introduction
• Strategic Management:
– Strategic management is what managers do to develop the organization
Strategies.
– It is an important task involving all the basic function –
• Planning
• Organizing
• Leading
• Controlling
• Strategies
– They are the plans for how the organization will do:
• Whatever it is in business to do
• How it will complete successfully
• How it will attract and satisfy customer in order to achieve
organizational Goal.
 Business model
• One term used in strategic management, which simply is how a
company is going to make money.
• It focus on two things:
– Whether customer will value what the company is providing
– Whether the company can make money doing that.
– For example:
• Jeff Bezos Business model of selling online instead through
Book Store.
– Did Customer Value that?
» Absolutely
– Did company make money doing it in that way?
» Not at first…. But yes Now.
 Why is Strategic management Important?

• There are three reasons.

1. It can make a difference in how well an organization performs.
• Why do some business fails and some succeed?
– Even when faced the same environmental conditions.
• Researcher has found a positive relationship between Strategic planning
and performance
2. Organization of all type and size face continually changing situations.
• They cope with this uncertainty by using Strategic management process
to examine relevant factors and decide what action to take.
3. Finally, organizations are complex and divers
• Each part need to work together toward achieving the organization’s
goal; Strategic management help do this.
• Help coordinate and focus employees effort on what is important as
determined by its goals.
 Strategic Management Process

• A six step process that encompasses strategic

planning, implementation and evaluation.
• The Strategic management Steps are:
1) Identifying the Organization’s Current Mission,
Goals, and Strategies.
2) Doing External Analysis
3) Doing an Internal Analysis
4) Formulating Strategies
5) Implementing Strategies
6) Evaluating Results.
 Strategic Management Process
1) Identifying the Organization’s Current Mission, Goals,
and Strategies:
• Every organization needs a mission statement – a statement of
purpose.
• Defining the mission forces managers to identify what it is in
business to do?
• But sometime that mission statement can be too limiting
– For example: Nike’s Mission Statement is
“Bring inspiration and innovation to every athlete in the world”
– Not everybody plays one or more sports, which is why Nike wisely
defines athlete more broadly:
“If you have a body you are an Athlete”
– Had Nike not expanded its mission statement in this way?
» It surely would have compromised its overall appeal, sales and
profits.
 What should a mission statement include?

Components of Mission Statement

• Customers 🡪 Who are the firms customer?
• Markets 🡪 Where does the firm compete geographically?
• Concern for survival, growth and profitability 🡪 Is the firm committed to growth and
financial stability?
• Philosophy 🡪 What are the firms basic beliefs, value, and ethical priorities?
• Concern for public image 🡪 How responsive is the firm to societal and environmental
concerns?
• Products or Services 🡪 What are the firms major product or services?
• Technology 🡪 Is the firm Technologically current?
• Self-Concept 🡪 What are the firm competitive advantage and core competencies?
• Concern for Employees 🡪 Are employees a valuable assets of the firm?
 Strategic Management Process

2) Doing External Analysis

– Manager do an external analysis so they know:
• What the competitors are doing?
• What pending legislation might effect the organization?
• What the labor supply is likely in location where it operates?
– In short, Manager in External Analysis should examine the
economic, demographic, political/Legal, sociocultural,
technological and Global components to see the trends and
changes.
– Once they have analyzed the external environment, managers
need to pinpoint the opportunities that the organization can
exploits and the threats that it must counteract or buffer
against.
• Opportunities are positive trends in environment
• Threats are negative trends in environment
 Strategic Management Process
3) Doing Internal Analysis
• Internal Analysis provides information about organization’s specific resources
and capabilities.
– Resources:
• An organization’s resources are its assets – financial, physical, human
and intangible – that is used to develop, manufacture, and deliver
products to its customers.
– Capabilities”
• Capabilities are its skills and abilities in doing the work activities needed
in its business – “how” it does its works?
• The major value creating capabilities of the organization are known as
its core-competencies.
– Both Resources and core competencies determine the organization’s
competitive weapons.
• After completing Internal Analysis the , managers should be able to identify
organization’s Strengths and weaknesses
– Strength: Activities organization do well, or unique resources
– Weaknesses: activities organization doesn’t do well, doesn’t have the
resources it need.
 Strategic Management Process
4) Formulating Strategies:
– As manager formulate strategies, they should
consider the realities of the external environment
and their available resources and capabilities in
order to design strategies that will help
organization achieve its goals.
– Three main types of strategies manager
formulate include:
• Corporate Strategies
• Competitive Strategies
• Functional Strategies
 Strategic Management Process
Corporate Strategy
– An organization strategy that determines what business a company is in or
wants to be in and what it wants to do with those business.
– Growth Strategy:
» A corporate Strategy that is used when an organization wants
to expand the number of served markets or products offered,
either through its current business(ss) or through new
Business(ss).
– Stability Strategy:
» A corporate strategy in which organization continues to do
what it is currently doing.
– Renewal Strategy:
» A corporate strategy to designed to address declining
performance.
 Strategic Management Process
Competitive Strategy
• For organization in multiple businesses, however each business will have
its own competitive strategy that define its:
– Competitive advantage
– The products and services it will offer
– The customer it wants to reach
• Strategic Business Units: The single independent business of an
organization that formulate their own competitive advantage.
• Competitive advantage: What sets organization apart is; its distinctive
edge -- can come from the organization’s core competencies that other
can not do it. Quality/Design/Social media
Functional Strategy
A strategy used by an organization’s various functional departments to
support the competitive strategy.
 Strategic Management Process
5) Implementing Strategy
– Once strategies are formulated, they must be
implemented.
– No matter how effectively an organization has planned
its strategies, performance will suffer if strategies aren't
implemented properly
6. Evaluating Results
– The final Steps in the strategic management processs is
evaluating results.
– How effective the strategies been helping the
organization reach its goals?
– What adjustments are necessary?