Strategic Management

By. Hamza Ahmad

Scope of Strategic Development

All organizations have two things in
common.
A Present ................... A Future
Change is inevitable and will occur
whether planned or not.

 All organizations are perfectly

designed for the results they are now
getting. The quality of the future
depends on the excellence of process
we use to get there.

 Strategic development is about

change. How management handles
the new realities (in technology,
information flow, global competition
and political accountability), is key to
success. Effective leaders
understand these dynamics and work
to control change within the
organization.

Competitive Advantage
Competitive advantage
The ability of a firm to win consistently
over the long term in a competitive
situation.
Competitive advantage is created
through
the achievement
of five
Superiority
Nonqualities
substitutability
Inimitability
Durability

Appropriability

Five Qualities that Lead to

Competitive Advantage
Superiority

Superiority
Are you significantly
better than your
competitors?
At what things are you
better?

Five Qualities that Lead to

Competitive Advantage
Superiority
Inimitability

Inimitability
Managers must create
barriers that make it
hard for others to copy
their superiority
advantages

Culture
Product design
Marketing strategy
And others

Five Qualities that Lead to

Competitive Advantage
Superiority
Inimitability
Durability

Durability (long lasting)

Legally protected
Patents
Copyrights
Brand names

Well-established
Brand image
Reputation for quality

Five Qualities that Lead to

Competitive Advantage
Superiority
Inimitability
Durability
Non-substitutability

Non-substitutability
Can the customers
need that you fulfill
can be met by
alternative means?
Encyclopedias vs.
information availability
on the Internet
Movie theater
entertainment vs.
concert band
entertainment

Five Qualities that Lead to

Competitive Advantage
Superiority
Inimitability
Durability
Non-substitutability
Appropriability

Appropriability
Can you actually
capture the profits that
can be made in the
business?
Supernormal returns
Profits that are above
the average for a
comparable set of firms
Primarily a function of
greaterthanaverage
costprice margins

What is Strategy?
Large-scale, future-oriented plan
for interacting with the
competitive environment to
achieve objectives
Companys game plan
Framework for managerial
decisions
11

Strategic Management
Strategic management process is a
planning process in which managers
1. Set the organization's general direction

and objectives
2. Formulate a specific strategy
3. Plan and carry out the strategys
implementation
4. Monitor results and make necessary
adjustments

Strategic management:
Purposes
Help define the organizations identity
(provides organizations with a clearer sense of
who they are and what their purpose is.
Help organization prepare for the future
(it clarifies the desired destination. Knowing
where the organization wants to go.)
Enhance ability to adapt to environmental
change and even anticipate future changes.

(continued on next slide)

Strategic management: Purposes

Provide focus and allow for better allocation of
resources
Produce an organizational culture of
cooperation (that a common set of goals is
created)
Allow for the consideration of new options and
opportunities(expending to new markets or
offering new products)
Provide employees with information to direct
daily activities (it identifies the behavior and
results that really matter.)

Basic Elements of the Strategic

Management Process

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Environmental Analysis
An environmental analysis identifies external
and internal parameters with the purpose of
understanding broad issues related to the
industry where the organization operates so
that decisions can be made against the
backdrop of a broader context.
Identifies external and internal trends
To understand broad industry issues
To make decisions using big picture context

External trends
Examination of the external environment includes
Opportunities:
environmental characteristics that can help
the organization succeed
(for example: market not currently being
served, untapped labor pools, and the new
technological advances)
Threats:
environmental characteristics that can prevent
the organization from being successful
(example: economic recession, innovative
products of competitions)

External trends
Factors to Consider
Economic
Political/legal Technological
Social
Competitors
Customers
Suppliers

Internal trends
Examination of internal environment includes:
Strengths:
internal characteristics that the organization
can use for its advantage
(i.e. organizations assets and staffs key skills)
Weaknesses:
internal characteristics that can hinder the
success of the organization
(obsolete organizational structure,
misalignment of organizational, unit, and
individual level goals.

Internal trends
Factors to Consider

Organizational structure
Organizational culture
Politics
Size

Basic Concepts of Strategic Management

Environment
al Variables

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2006

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Gap analysis determines:

A gap analysis determines whether
the situation is
Opportunity + Strength =
Leverage (advantageous)
Opportunity + Weakness =
Constraint (disadvantageous)
Threat + Strength = Vulnerability
(some how problem)
Threat + Weakness = Problem
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In sum, the process

Environmental and Gap

Analyses provide information
for organizations to decide:
Who they are
What they do

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Mission
After gap analysis organization determines
who they are and what they do. This
information will then be incorporated into
the organizations mission statement.
A mission statement summarize the
organizations most important reson for its
existence.
Mission statement provide information on the
purpose of the organization and its scope.
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A good mission statement answers:

Why does the organization exist?
What is the scope of the
organizations activities?
Who are the customers served?
What are the products or services
offered?
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Mission Statement contains:

A. Information on organizations
Basic product/service to be offered
Primary market/customer groups
Unique benefits and advantages of
product/services
Technology to be used
Concern for survival through
growth and profitability
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Sample mission statement:

The Coca-Cola Company exists to benefit and refresh
everyone it touches, the basic proposition of our
company is simple, solid and timeless. When we bring
refreshment, value, joy and fun to our stakeholders,
then we successfully nurture and protect our brands,
particularly Coca-Cola. That is key to fulfilling our
ultimate obligation to provide consistently attractive
returns to the owners of our business.
Based on give statement please identify:

Why company exists?

Scope of the company existence?
Organizations ultimate goals?
Whats missing?

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Mission Statement for the

Internal Revenue Service
The IRS mission is to provide Americas
taxpayers
top quality service by helping them
understand and meet their tax responsibilities
and by applying the tax law with
integrity and fairness to all.

2005 Prentice Hall

Adapted from Exhibit 6.2 Mission Statement for the Internal Revenue Service

In sum, a mission statement defines

why the organization exists the scope of

its activities the customers served and the
product and services offered.
Include specific information, such as the
technology used in production or delivery
and the unique benefits or advantages of
the organizations products and services.
Can include a statement of values and
beliefs.
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Vision
Statement of future aspirations
The vision statement includes a description of
what the organization would like to become in
the future (about 10 years in the future).
Focuses attention on what is important
Provides context for evaluating
Opportunities
Threats

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Example: vision statement

Greif (a global company) vision statement:
1. We will achieve superior return on assets while consistently
increasing revenue.
2. We will strive to be one of the most desirable companies to work
for in our industries, focusing on establishing a work atmosphere
in which our employee can excel.
3. We will continually add value to our customer relationships, with
an emphasis on providing packaging solutions on a global scale.
4. We will capitalize on out leadership position and pursue profitable
growth in the industrial packaging and services business
5. We will pursue internal growth in addition to strategic acquisitions
to profitably expand the paper, packaging and services business,
6. We will grow our Timber business both in terms of land holding
and revenue generation.

A Good Vision Statement is:

Brief

Focused
Verifiable
Understandab
Bound by a
le
Timeline

Inspiring
Current
In sum, a vision statement includes a description of future aspirations.
Whereas the mission statement emphasizes the present, the vision
statement emphasizes the future.

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Purposes for Setting Goals

Formalize expected
achievements
Provide motivation
Provide tangible targets
Provide basis for good decisions
Provide basis for performance
measurement

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Strategic Objectives
Strategic objectives translate the
strategic intent and mission of the firm
into concrete and measurable goals
Facilitates a firm's ability to

Allocate resources appropriately

Reach a shared understanding of priorities
Delegate responsibilities
Hold people accountable for results

2005 Prentice Hall

Strategic Objectives

Strategic objectives address many

issues, such as
Revenue growth
Profitability
Customer

satisfaction
Market share
Financial returns
(e.g., return on
equity, return on
assets)
2005 Prentice Hall

Technological

leadership
Cash flow
Operating
efficiency (e.g.,
costs per unit,
expense per
employee)