Lecture 1: Introduction to

Strategic Management

Weeks 1-3:David Meade

info@davidmeade.co.uk

Weeks 4-12: Larry McCurry

l.mccurry@ulster.ac.uk
 Lecture Objectives
 By the end of this lecture, students should be able
to:
1. Explain the functions of management
2. Define and explain strategy and strategic management
3. Explain why strategic management is important
4. Explain the strategic management process
5. Describe the levels of organizational strategies
6. Discuss the misconceptions about strategy and strategic
management
 Industrial Focus
Apple

Organic poultry producer

UK based car manufacturer

 Functions of Management
 Planning
– defining goals and objectives
– deciding what type of activities the
company will engage in
– determining the resources needed to
achieve the organization’s goals &
objectives.
 Functions of Management
 Leading
– Attracting people to the organization.
– Specifying job responsibilities
– Grouping jobs into work units
– Marshalling and allocation of resources
– Creating good working conditions
 Functions of Management
 Organizing
– Directing, motivating, and communication with
employees, individually & in groups.
– Conflict resolution.
 Controlling
– Monitoring performance of people & units.
– Provision of feedback or information about
progress.
– Identification of performance problems &
actions to correct problems.
 Disciplinary Focus
 Variousdisciplines in “management”
emerge from the functions of management:
– Business Policy (formally called Strategic
Planning) from the planning function.
– Organizational Behavior primarily from the
leading function.
– Human Resources Management primarily
from the organizing function.
– Strategic Management, originated from
Business Policy, but focuses on overall
management – PLOC – and beyond.
 What’s Strategy?
 Strategyis management’s overall plan and actions for
deploying resources and skills taking into
consideration opportunities and threats in the
environment
– to achieve it’s mission, vision and objectives
– to establish a favorable competitive position.
 Strategy involves:
– An organization’s goals
– A series of related decisions & actions
– Takes into account key internal strengths & weaknesses and
external opportunities threats
– Analysis, communication, coordination, & action
 What is Strategic Management?
 Focuses on how managers formulate and implement,
and evaluate strategies aimed at developing and
maintaining competitive advantage:
– the reason some firms enjoy higher levels of performance
than their rivals or competitors.
 Four aspects that set strategic management apart:
– Interdisciplinary
– External focus
“Big picture” view of an
– Internal focus organization influenced by
– Future directions its external environment
Importance of Strategic Management
 Gives every employee a role to play in making the firm
successful
– Applies to all professional employees, not just those in
management
– Allows decision-making, allocation of resources and management
of people to be based on a firm’s strategic plan
– Success as a manager (as measured by your promotion, job
security, and pay increases) is often determined by your efforts &
departments contribution to overall organization’s success
 Makes a difference in performance levels
– Research suggest that successful companies use strategic
management concepts & techniques
– Success evolves from “knowing what you’re doing” and often
implies having a strategic plan
Importance of Strategic Management
 Provides systematic approach to uncertainties that
organizations face
– Competitive & global environment are dynamic (changing)
– Change, whether significant of minor, must be recognized
and analyzed, & dealt with
– Strategic management allows for the analysis of the situation
(identifying the sources of change in environment)
 Coordinates and focuses employees to achieve
organization’s goals
– Allows for team effort which is coordinated for firm success
– Allows for development of a plan, communication,
coordination, & cooperation among diverse depts & functions
Strategic Management Process
 Establishing a mission, vision and
objectives
 Environmental Analysis
 Internal Analysis
 Strategy Formulation
 Strategy Implementation
 Strategic Control and Performance
Evaluation
The Strategic Management
Process
 Mission, Vision & Objectives
A company’s mission is a statement of
– the basic purpose or reason for its existence
– its values (role to stakeholders - customers, employees,
society, etc.).

 The vision goes beyond the mission statement

– clarifies the long-term direction of the company (where
the company is going)
– reflects management’s aspirations for the company
 Mission, Vision & Objectives
 Objectives
are yardsticks for tracking a
company’s performance or end result.
– Financial performance objectives (e.g., ROA,
ROI, ROE, Dividend growth, Stock price, etc.).

– Strategic performance objectives (e.g., market

share, growth, innovation leader, customer
service, community & environmental
responsibility, etc.)
Examples of Mission & Vision
 Southwest Airlines:
– Mission: To provide high quality service at a
lower price in the airline industry.
– Vision: Opening air travel to a wider group of
leisure travelers while infusing the organization
with a sense of fun.
 Apple Computer:
– Mission: To bring the best personal computing
products and support to consumers around the
world.
– Vision: One person, one computer.
 Financial & Strategic
Objectives
 Alcan Aluminum
– Financial: To outperform the average return on
equity of the S&P’s industrial stock index.
– Strategic: To be lowest-cost producer of aluminum.
 GE
– Financial: To achieve an average of 10 inventory
turns and a corporate operation profits margin of
16% by 2008.
– Strategic: To become most competitive enterprise in
the world by being #1 or #2 in market share in every
business the company is in.
 Environmental Analysis
 Involves
the evaluation of the business
environment of the organization.
– All external influences that impact a company’s
decision and performance.

 Environment of firm classified by proximity into

(1) Macro-environment; and
(2) Micro-environment or task environment.
 Environmental Analysis
 The macro-environment consists of
– The international/national economy; changes in
demographic structures; social and political
trends; technology; and the natural environment.

 The micro-environment consists of

– The industry environment such as competitors,
suppliers, customers; unions and employees;
owners and shareholders, etc.
 Internal Analysis
 Involves the evaluation of the inventory of
the firm’s resources and capabilities.
 Resources/Capabilities can be classified as:
– Tangible resources: Financial or physical assets
– Intangible resources: brand name, reputation
(product & firm), organizational culture, etc.
– Capabilities or competencies: managerial
ability, specialized skill & knowledge base of
employees, etc.
 Strategy Formulation
 The strategy formulation process
– involves designing a course of action for
addressing strategic issues facing the firm after
going through the external and internal evaluation
processes.
 Actual strategy of a company involves:
– Planned or Intended Actions (Deliberate &
purposeful actions).
– Reactive or Emergent Actions (As-need
reactions to unanticipated events in firm’s micro
and macro environments).
 Strategy Formulation
 Strategyformulation is concerned with the
following parts of a company:
– Corporate (whole company) -- Corporate strategies:
Deals with businesses company wants to be in & how
to manage those businesses
– Businesses -- Competitive strategies: How to compete
in specific business or industry
– Functional areas -- Functional strategies: short goal-
directed decisions & actions of an organization’s
various functional departments.
 Strategy Implementation
 Strategy implementation is the process of
putting a company’s various strategies into
action
– development of programs, policies, budgets &
procedures.
 It
can take several months to years to complete.
 Most difficult part of the strategy process.
 The job of implementing strategy involves
managers at all levels
Strategic Control & Evaluation
 Process by which desired outcomes
(mission, vision, & objectives) are
compared with realized outcomes to
determine if there are gaps.
 Initiate corrective actions by monitoring
changes in environment - competitor
actions, new market opportunities,
customer needs & expectations.
 Strategic Management
Process
 On-going and continuous cycle of
– Situation Analysis : Internal evaluation &
Environmental scanning
– Strategy formulation
– Strategy implementation
– Strategy evaluation
Misconceptions about Strategy &
Strategic Management
 Strategy & strategic planning are dead
– Every organization needs the focus and direction
provided by its strategies and the strategic
management process
 Strategy is strictly for top management
– Top management play a crucial role, but everyone
in the organization has a part to play.
 Strategy is about planning
– Strategic management process shows that strategy
is not only about planning, but also about doing.
Misconceptions about Strategy &
Strategic Management
 Strategy is stable and constant
– Organizations compete in dynamic environments.
Flexibility and change needed to respond to
environmental opportunities & threats, & strength
and weaknesses
 Strategic management outlines ultimate
destination & route
– It establishes a systematic approach to analyzing
relevant information & using it to design,
implement, & evaluate appropriate strategies.