Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Introduction to Strategic Management

Strategic management is not a very old phenomenon in the corporate world.
The concepts and techniques have evolved over the years beginning in the
1970s in lukewarm way. Initially the concept of long-range planning was used
in a few large companies in the USA. The two most admired companies that
began using long-range planning are General Electric Company and Boston
Consulting Group (a consulting firm). General Electric Company led the
transition from strategic planning to strategic management during the
1980s. The concept of strategic management got worldwide attention in
1990s.
CONCEPT OF STRATEGY
By strategy, managers mean their large-scale, future-oriented plans for
interacting with the competitive environment to achieve company objectives.
It involves determination of long-term objectives of the organization and
adoption of courses of action.
According to Thompson and Strickland, strategy is the means used to
achieve the ends. Here means refer to ways or actions and ends refer to
objectives.
STRATEGIC MANAGEMENT
Strategic management is a stream of decisions and actions, which leads to
the development of effective strategy to help achieve organizational
objectives.
Strategic management is defined as the set of decisions and actions that
result in the formulation and implementation of plans designed to achieve a
company's objectives.
Strategic management is the process of strategic analysis of an organization,
strategy-focused objective-setting, strategy formulation, strategy
implementation, and strategic evaluation and control.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Strategic analysis is involved with making an analysis of the industry in

which the organization is operating its business and analysis of both the
external and internal environmental factors.
Strategy-focused objective-setting is concerned with establishing long-range
objectives for the organization to achieve the vision and mission.
Strategy formulation entails making decisions with regard to selecting the
strategy to achieve the long-range objectives.
Strategy implementation is concerned with putting the formulated-strategy
into action. This element is also involves with making decisions regarding
setting short-range objectives, developing budgets and formulating
functional/supporting strategies to achieve the main strategy.
The last element of strategic management process strategic evaluation and
control aims at establishing standards of performance, monitoring progress
in the implementation of strategy, and initiating corrective adjustments in
the strategy (if anything goes wrong).
Strategic Management Process
Formulate the company's mission, including broad statements about its
purpose, philosophy, and goals.
Develop a company profile that reflects its internal conditions and
capabilities.
Assess the company's external environment, including both the competitive
and general contextual factors.
Analyze the company's options by matching its resources with the external
environment.
Identify the most desirable options by evaluating each option in light of the
company's mission.
Select a set of long-term objectives and grand strategies that will active the
most desirable options.
Develop annual objectives and short-term strategies that are compatible
with the selected set of long-term objectives and grand strategies.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Implement the strategic choices by means of budgeted resource allocations

in which the matching of tasks, people, structures, technologies, and reward
systems is emphasized.
Evaluate the success of the strategic process as an input for future decision
making.
Company Mission
The mission of a company is the unique purpose that sets it apart from other
companies of its type and identifies the scope of its operations.
The mission describes the company's product, market, and technological
areas of emphasis.
It states what the company is providing to society. For example, a company
may provide a service such as legal services, housecleaning, or software
development.
Mission Statement of Apple Computers: To bring the best personal
computing products and support to students, educators, designers,
scientists, engineers, business persons and consumers in over 140 countries
around the world.
Company Profile
The company profile depicts the quantity and quality of the company's
financial, human, and physical resources.
It also assesses the strengths and weaknesses of the company's
management and organizational structure.
Finally, it contrasts the company's past successes and traditional concerns
with the company's current capabilities in an attempt to identify the
company's future capabilities.
External Environment
A firm's external environment consists of all the conditions and forces that
affect its strategic options and define its competitive situation.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

The strategic management model shows the external environment as three

interactive segments: the operating, industry, and remote environments.
Remote environment includes economic, social political, technological,
ecological.
Industry environment includes entry barriers, supplier power, buyer power,
substitutes, competitive rivalry.
Operating environment includes competitors, creditors, customers, labour,
suppliers
Strategic Analysis and Choice
Simultaneous assessment of the external environment and the company
profile enables a firm to identify a range of possibly attractive interactive
opportunities.
These opportunities are possible avenues for investment. However, they
must be screened through the criterion of the company mission to generate
a set of possible and desired opportunities.
This screening process results in the selection of options from which a
strategic choice is made. The process is meant to provide the combination of
long-term objectives and generic and grand strategies that optimally position
the firm in its external environment to achieve the company mission.
Strategic analysis and choice in single or dominant product/service
businesses centers around identifying strategies that are most effective at
building sustainable competitive advantage based on key value chain
activities and capabilities - core competencies of the firm.
Multibusiness companies find their managers focused on the question of
which combination of business maximizes shareholder value as the guiding
theme during their strategic analysis and choice.
Long-Term Objectives
The results that an organization seeks over a multiyear period are its longterm objectives.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Such objectives typically involve some or all of the following areas:

profitability, return on investment, competitive position, technological
leadership, productivity, employee relations, public responsibility, and
employee development.
Generic and Grand Strategies
Many businesses explicitly and all implicitly adopt one or more generic
strategies characterizing their competitive orientation in the market place.
Low cost, differentiation, or focus strategies define the three fundamental
options.
Grand strategies are the means that indicate how the objectives are to be
achieved. Although every grand strategy is, in fact, a unique package of
long-term strategies, 14 basic approaches can be identified i.e.
concentration, market development, product development, innovation,
horizontal integration, vertical integration, joint venture, strategic alliances,
consortia, diversification etc.
Action Plans and Short-Term Objectives
Action plans translate generic and grand strategies into "action" by
incorporating four elements.
First, they identify specific functional tactics and actions to be undertaken in
the next week, month or quarter as part of the business's effort to build
competitive advantage.
The second element is a clear time frame for completion.
Third, action plans create accountability by identifying who is responsible for
each "action" in the plan.
Fourth, each "action" in an action plan has one or more specific, immediate
objectives that are identified as outcomes that action should generate.
Functional Tactics
Functional tactics are detailed statements of the "means" or activities that
will be used to achieve short-term objectives and establish competitive
advantage.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Within the general framework created by the business's generic and grand
strategies, each business function need to identify and undertake activities
unique to the function that help build a sustainable competitive advantage.
Managers in each business function develop tactics which delineate the
functional activities undertaken in their part of the business and usually
include them as a core part of their action plan.
Policies that Empower Action
Speed is a critical necessity for success in today's competitive, global
marketplace.
One way to enhance speed and responsiveness is to force/allow decisions to
be made whenever possible at the lowest level in organizations.
Creating policies that guide and "preauthorize" the thinking, decisions, and
actions of operating managers and their subordinates in implementing the
business's strategy is essential.
Restructuring, Reengineering, and Refocusing the Organization
Downsizing, restructuring, reengineering, outsourcing, and empowerment
are all terms that reflect the critical stage in strategy implementation
wherein managers attempt to rationalize and recast their organizational
structure, leadership, culture, and reward systems to ensure a basic level of
cost competitiveness, capacity for responsive quality, and the need to shape
each one to accommodate unique requirements of their strategies.
Strategic Control and Continuous Improvement
Strategic control is concerned with tracking a strategy as it is being
implemented, detecting problems or changes in its underlying premises, and
making necessary adjustments.
In contrast to post action control, strategic control seeks to guide action on
behalf of the generic and grand strategies as they are taking place and when
the end results are still several years away.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

The rapid, accelerating change of the global marketplace of the last 10 years
has made continuous improvement another aspect of strategic control in
many organizations.
DIMENSIONS OF STRATEGIC DECISIONS
Strategic Issues Require Top-Management Decisions
Strategic Issues Require Large Amounts of The Firms Resources
Strategic Issues Often Affect the Firms long-term Prosperity
Strategic Issues are future Oriented
Strategic Issues Usually Have multifunctional or Multi-business consequences
Strategic Issues Require Considering the Firms External environment
Strategic Issues Require Top-Management Decisions: Since strategic
decisions overarch several areas of a firms operations, they require topmanagement involvement.
Usually only top management has the perspective needed to understand the
broad implications of such decisions and the power to authorize the
necessary resource allocations.
Strategic Issues Require Large Amounts of The Firms Resources: Strategic
decisions involve substantial allocations of people, physical assets, or
moneys that either must be redirected from internal resources or secured
from outside the firm. They also commit the firm to actions over an extended
period. For these reasons, they require substantial resources.
Strategic Issues Often Affect the Firms long-term Prosperity: Strategic
decisions ostensibly commit the firm for a long time, typically five years;
however, the impact of such decisions often lasts much longer.
Strategic Issues are future Oriented: Strategic decisions are based on what
managers forecast, rather than on what they know. In such decisions,
emphasis is placed on the development of projections that will enable the
firm to select the most promising strategic options. In the turbulent and
competitive free enterprise environment, a firm will succeed only if it takes a
proactive (anticipatory) stance toward change.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Strategic Issues Usually Have multifunctional or Multibusiness consequences:

Strategic decisions have complex implications for most areas of the firm.
Decisions about such matters as customer mix, competitive emphasis, or
organizational structure necessarily involve a number of the firms strategic
business units, divisions, or program units. All of these areas will be affected
by allocations or reallocations of responsibilities and resources that result
from these decisions.
Strategic Issues Require Considering the Firms External environment: All
business firms exist in an open system. They affect and are affected by
external conditions that are largely beyond their control. Therefore, to
successfully position a firm in competitive situations, its strategic managers
must look beyond its operations. They must consider what relevant others
(competitors, customers, suppliers, creditors, government and labour) are
likely to do.
Characteristics of Strategic Management Decisions
The characteristics of strategic management decisions vary with the level of
strategic activity considered.
Decisions at the corporate level tend to be more value oriented, more
conceptual, and less concrete than decisions at the business or functional
level.
Corporate level decisions are often characterized by greater risk, cost and
profit potential; greater need for flexibility; and longer time horizons. Such
decisions include the choice of businesses, dividend policies, sources of long
term financing and priorities for growth.
Functional-level decisions implement the overall strategy formulated at the
corporate and business levels. They involve action-oriented operational
issues and are relatively short range and low risk.
Functional-level decisions incur only modest costs, because they are
dependent on available resources. They usually are adaptable to ongoing
activities and therefore, can be implemented with minimal cooperation.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Because functional-level decisions are relatively concrete and quantifiable,

they receive critical attention and analysis even though their comparative
profit potential is low.
Common functional-level decisions include decisions on generic versus
brand-name labeling, basic versus applied research and development, high
versus low inventory levels, general-purpose versus specific purpose
production equipment, and close versus loose supervision.
Business-level decisions help bridge decisions at the corporate and
functional levels; such decisions are less costly, risky, and potentially
profitable than corporate-level decisions. Common business-level decisions
include decisions on plant location, marketing segmentation and geographic
coverage, and distribution channels.
Benefits of Strategic Management
Providing better guidance to the entire organization.
Making managers more alert to the winds of change, new opportunities and
threatening developments in the organizations external environment.
Providing managers with a rationale for evaluating competing budget
requests for investment capital and new employees.
Helping to unify the numerous strategy-related decisions by managers across
the organization.
Creating a more proactive management posture.
Core Competency
Core competency of an organization is its core skill.
It is a central value-creating capability of the organization.
Core competencies emerge from a companys experience, learned skills, and
focused efforts on performing one or more related value chain components.
Also called distinctive competences, core competencies are activities of the
company where its position is superior to its competitors.

Khondokar Shah Md Shohidullah

Senior Lecturer
Dania University College

Competitive Advantage
Competitive advantage is the special edge that allows an organization to
deal with market and environmental forces better than its competitors.
It comes from strategies that lead to some uniqueness in the market place.
It indicates a companys competitive position that allows it to achieve higher
profitability than the industrys average.
To develop competitive advantage, a company should develop distinctive
competences and then use them to creatively compete in its markets.