Strategic Management (Overview)

Dr. Fred Mugambi MwirigiJKUAT

Definition

• … a systematic approach to a major and increasingly important responsibility of general management to position and relate the firm to its environment in a way which will assure its continued success and make it secure from surprises. [Ansoff (1990) Implanting Strategic Management]

The central objective of strategic management is to learn why some firms

succeed while others fail

Strategic Management

Strategy Profit

Strategy: goal and set of policies designed to achieve competitive advantage in a particular marketplace

Competitive Advantage: ability to transform inputs into goods andservices at a maximum profit on a sustained basis, better than competitors

FirmCompetitive Advantage

ShareholderValue

Levels of strategy

5

Strategic Management Process

6

Strategic Management Process• Step 1: Identifying the organization's current

mission, objectives, and strategies– Mission: the firm’s reason for being

• Who we are,• What we do, and • Where we are now

– Goals: the foundation for further planning• Measurable performance targets

• Step 2: Conducting an external analysis– The environmental scanning of specific and general

environments– Focuses on identifying opportunities and threats

7

Strategic Management Process (cont’d)

• Step 3: Conducting an internal analysis– Assessing organisational resources,

capabilities, activities and culture:• Strengths (core competencies) create value

for the customer and strengthen the competitive position of the firm.

• Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.

8

Strategic Management Process (cont’d)

• Step 4: Formulating strategies– Develop and evaluate strategic alternatives– Select appropriate strategies for all levels in

the organisation that provide relative advantage over competitors

– Match organisational strengths to environmental opportunities

– Correct weaknesses and guard against threats

9

Triggeringevents

•New CEO

•External intervention

•Threat of change inownership

•Performance gap

•Strategic inflection point

Stimulusfor change

instrategy

What leads to a formulating a new strategy?

Forms of Strategy

• Formal versus informal - associated with size of firm and stage of development. Mintzberg’s distinction between entrepreneurial and planning mode.

• Intended versus realized - intended strategies are the plans managers develop; realized strategies are the actions that actually take place over time.

Forms of Strategy

Strategic Management Process (cont’d)

• Step 5: Implementing strategies– Implementation: effectively fitting organizational

structure and activities to the environment– Effective strategy implementation requires an

organizational structure matched to its requirements.

• Step 6: Evaluating results– How effective have strategies been?– What adjustments, if any, are necessary?

13

Strategies Evolve….

• A company’s strategy is a work in progress• Changes may be necessary to react to

– Shifting market conditions– Technological breakthroughs– Fresh moves of competitors– Evolving customer preferences– Emerging market opportunities– New ideas to improve strategy– Crisis situations

In Summary 15

Strategic analysis

StrategicImplemen-

tation

Strategic choice

Theenvironment

Expectations,objectives

andpower

Resources

Resourceplanning

Organisationstructure

Selection of strategy

People and systems

Evaluation of options

Generationof options

Thank you