INTRODUCTION TO

STRATEGIC MANAGEMENT

LESSON 1
LEARNING OUTCOMES
➔ Understand the characteristics of strategic decisions and what is
meant by strategy and strategic management, distinguishing them
from operational management.
➔ Understand how strategic priorities vary by level: corporate,
business and operational.
➔ Understand the basic vocabulary of strategy, as used in different
contexts.
➔ Understand the three key elements of the exploring Corporate
Strategy strategic management model.
 QUOTE
"Without a strategy, an organization is like a ship without a rudder, going around in
circles. It’s like a tramp; it has no place to go."
—Joel Ross and Michael Kami
DEFINITION OF STRATEGY
 is the direction and scope of an organisation over the long term, which achieves
advantage in a changing environment through its configuration of resources and
competences with the aim of fulfilling stakeholder expectations

the most basic definition of strategy might be ‘the long-term direction of an

organisation’.
 THE CHARACTERISTICS OF STRATEGIC
DECISIONS
The long-term direction/objective of an organisation
• Objectives can be defined as specific results that an organization seeks to
achieve in pursuing its basic mission.
•The advantages of organization's objective/direction are: aid in evaluation; create
synergy; reveal priorities; focus coordination; and provide a basis for effective
planning, organizing, motivating, and controlling activities.
The scope of an organisation’s activities
•Should the organisation concentrate on one area of activity, or should it have
many?
 Cont.…
Advantage for the organization over competition
•Strategic management is all about gaining and maintaining competitive advantage
• Competitive advantage can be defined as “anything that a firm does especially well compared to rival firms
•Advantage may be achieved in different ways and may also mean different things.
How to gain an advantage over the competition
•Continually adapting to changes in external trends and events and internal capabilities, competencies, and
resources. For example yahoo case.
Strategic fit with the business environment
•Organisations need appropriate positioning in their environment.
 Cont.…
The organisation’s resources and competences
•Following ‘the resource-based view’ of strategy, strategy is about exploiting the strategic capability of an
organisation, in terms of its resources and competences, to provide competitive advantage and/or yield new
opportunities.
•The Resource-Based View (RBV) approach to competitive advantage contends that internal resources are
more important for a firm than external factors in achieving and sustaining competitive advantage.
 Cont.….
•Robert Grant concluded that the internal audit is more important, saying: In a world where customer
preferences are volatile, the identity of customers is changing, and the technologies for serving
customer requirements are continually evolving, an externally focused orientation does not provide a
secure foundation for formulating long-term strategy. When the external environment is in a state of
flux, the firm’s own resources and capabilities may be a much more stable basis on which to define its
identity. Hence, a definition of a business in terms of what it is capable of doing may offer a more
durable basis for strategy than a definition based upon the needs which the business seeks to satisfy.

•RBV asserts that for a resource to be valuable, it must be either (1) rare, (2) hard to imitate, or (3) not
easily substitutable. For example Apple company
Cont.….
The values and expectations of powerful actors in and around the organisation
•The actors are individuals, groups or even other organisations
•The actors can drive fundamental issues such as whether an organisation is expansionist or more
concerned with consolidation, or where the boundaries are drawn for the organisation’s
activities
•The beliefs and values of these stakeholders will have a greater or lesser influence on the
strategy development of an organisation, depending on the power of each.
 IMPLICATIONS OF STRATEGIC
DECISIONS
With the characteristics mentioned above, the strategic decisions therefore are likely to:
Be complex in nature
•Complexity is a defining feature of strategy and strategic decisions and is especially so in organisation with
wide geographical scope (the area over which a firm chooses to compete), such as multinational firms, or
wide ranges of products or services.
•The strategic-management process is conceptually the same for multinational firms as for purely domestic
firms; however, the process is more complex for international firms due to more variables and
relationships.
•The social, cultural, demographic, environmental, political, governmental, legal, technological, and
competitive opportunities and threats that face a multinational corporation are almost limitless, and the
number and complexity of these factors increase dramatically with the number of products produced and
the number of geographic areas served.
Cont.….
Be made in situations of uncertainty
•Uncertainty is inherent in strategy because nobody can be sure about the future.
•The strategic management process can be described as an objective, logical, systematic
approach to making major decisions in an organization. It attempts to organize qualitative and
quantitative information in a way that allows effective decisions to be made under conditions of
uncertainty.
 Cont.…..
Affects operations decisions of the organization
•If the operational aspects of the organization are not in line with the strategy, then, no matter how well-
considered the strategy is, it will not succeed.
•It is at the operational level that real strategic advantage can be achieved.
LEVELS OF STRATEGIES
 Cont.…
Requires an integrated approach
•Managers have to cross functional and operational boundaries to deal with strategic problems and come to
agreements with other managers who, inevitably, have different interests and perhaps different priorities
•The organization can use either vertical integration or horizontal integration
•Vertical integration: is a strategy that allows the company to streamline its operations by taking direct
ownership of various stages of its production process rather than relying on external contractors or suppliers.
For example Illovo
•Horizontal integration: the acquisition of a business producing the same or similar goods and services. For
instance, Universal Industries acquired Zokoma
 Cont.…
Involves considerable change
•The strategic management process provides a basis for identifying and rationalizing the need for change to all
managers and employees of a firm; it helps them view change as an opportunity rather than as a threat.
•Change is typically a crucial component of a strategy. Change is often difficult because of the heritage of
resources and because of organizational culture.
•Notable quote; "Most of us fear change. Even when our minds say change is normal, our stomachs quiver at the
prospect. But for strategists and managers today, there is no choice but to change." —Robert Waterman Jr.
•Some businesses adapt and thrive while other businesses fail to survive.
•For example, Netflix is a great example of a company that completely pivoted its business model against
changing trends. (Read a Netflix case study)
•While Kodak (the photography company), Nokia failed because of its inability to adapt to changing market
conditions/technological landscape.
Cont..
Requires relationships and networks
•Relationships and networks outside the organization are important in strategy, for example with
suppliers, distributors, and customers.
•Relationships with suppliers or distributors are often a critical success factor.
•Interorganizational relationships and networks are inevitably a strategic issue for any company and
should thus have a crucial role in the business strategy. The firm’s networks, and the resources
they allow the firm to tap into, can serve as a source of sustainable competitive advantage. (Gulati
et el.) (page 33)
 THE LEVELS OF STRATEGY
 Corporate-level strategy
•Is concerned with the overall purpose and scope of an organization and how value will be added to
the different parts (business units) of the organization.
•The issues include; geographical coverage, diversity of products/services or business units, and
how resources are to be allocated between the different parts of the organisation.
•for example the corporate strategy for Coca-Cola is to grow the company, the industry, and craft
brands and drinks that people love.
•Being clear about corporate-level strategy is important because it helps companies to identify
trends and opportunities, creates a vision, encourages innovation, offers a competitive advantage
in the market, and optimises the business model.
Cont.…
Business-level strategy
•Is about how to compete successfully in particular markets (for this reason, business-level strategy is
sometimes called ‘competitive strategy’)
•Business-level strategy is decisions about how Strategic Business Units (SBUs) should provide the
best value services.
•A strategic business unit is a part of an organization for which there is a distinct external market for
goods or services that is different from another SBU.
•For example, Disney operates using a strategic business unit (SBU). It has four SBUs which consist of
(1) Disney Consumer Products, (2) Studio Entertainment, (3) Parks and Resorts, and (4) Media
Networks and Broadcasting.
•The corporate strategy should support the SBUs, but at the same time the SBUs have to make sure
their business-level strategies do not damage the corporate whole or other SBUs in the group.
Disney corporate structure
Cont.….
Operation-level strategy
•Are concerned with how the parts of an organization deliver effectively the corporate and
business-level strategies in terms of resources, processes, and people.
•Successful business strategies depend to a large extent on decisions that are taken, or activities
that occur, at the operational level.
•The integration of operational decisions and strategy is therefore of great importance.
•It is important to note that all persons responsible for strategic planning at the various levels
ideally participate and understand the strategies at the other organizational levels to help ensure
coordination, facilitation, and commitment while avoiding inconsistency, inefficiency, and
miscommunication. Plant managers, for example, need to understand and be supportive of the
overall corporate strategic plan (game plan).
VOCABULARY OF STRATEGY
A Mission is a general expression of the overall purpose of the organization, which, ideally, is in line
with the values and expectations of major stakeholders and concerned with the scope and boundaries
of the organization.
•For example NBM’s Mission is to provide outstanding and inclusive financial solutions that deliver
sustained stakeholder value
A Vision or strategic intent is the desired future state of the organization
•For instance NBM’s Vision is to be the most successful financial institution in Malawi with an
internationally visible presence.
Goal means a general aim in line with the mission
An Objective is more likely to be quantified, or at least to be a more precise aim in line with the goal
•Objectives should be challenging, measurable, consistent, reasonable, clear, realistic, and prioritized
•In an organisation there should be long-term objectives and annual objectives.
Cont.…
Strategic capability is concerned with the resources and competencies that an organization can
use to provide value to customers or clients
•Unique resources and core competencies are the bases upon which an organization achieves
strategic advantage and is distinguished from competitors.
The concept of strategy
A business model describes the structure of product, service, and information flows and the
roles of the participating parties.
•There are numerous business models, e.g. Three-legged stool used by McDonald’s which
comprises owner/operators, suppliers, and company employees to balance the interests among
the three groups.
Strategic control involves monitoring the extent to which the strategy is achieving the objectives
and suggesting corrective action (or a reconsideration of the objectives).
•Notable quote; "Complicated controls do not work. They confuse. They misdirect attention from
what is to be controlled to the mechanics and methodology of the control." by —Seymour Tilles
•A fundamental problem facing managers today is how to control employees effectively in light of
modern organizational demands for greater flexibility, innovation, creativity, and initiative from
employees.
•Controls need to be action-oriented rather than information-oriented.
DEFINITION OF STRATEGIC
MANAGEMENT
Includes understanding the strategic position of an organization, making strategic choices for
the future, and managing strategy in action.
Strategic management can be defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives
The purpose of strategic management is to exploit and create new and different opportunities
for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends of
today.
 STRATEGIC MANAGEMENT VS
OPERATIONAL MANAGEMENT
Strategy involves people, especially the managers who decide and implement strategy.

Strategic management is concerned with complexity arising out of ambiguous and non-routine
situations with organization-wide rather than operation-specific implications.

Because strategic management is characterized by its complexity, it is also necessary to make

decisions and judgements based on the conceptualisation of difficult issues.
Cont.…
Whilst an operational manager is most often required to deal with problems of operational
control, such as the efficient production of goods, the management of a salesforce, the monitoring
of financial performance or the design of some new system that will improve the level of customer
service.

These are all very important tasks, but they are essentially concerned with effectively managing
resources already deployed, often in a limited part of the organisation within the context of an
existing strategy.

Operational control is what managers are involved in for most of their time. It is vital to the
success of strategy, but it is not the same as strategic management
Cont.…
In conclusion, strategic management focuses on the future of the company, expanding a
business plan to last for three to five years while operational management, however, focuses on
more short-term ideas and implementation tactics.
Assignment
Find detailed differences between strategic management and operational management
ELEMENTS OF STRATEGIC
MANAGEMENT
The strategic position is concerned with the impact on the strategy of the external environment,
an organization’s strategic capability (resources and competencies), and the expectations and
influence of stakeholders.

Strategic choices involve understanding the underlying bases for future strategy at both the
business unit and corporate levels and the options for developing strategy in terms of both the
directions and methods of development.

Strategy in action is concerned with ensuring that strategies are working in practice.
EXPLORING CORPORATE STRATEGY
MODEL
Cont.….
The elements of strategic management do not follow linear sequence – they are interlinked and
feedback on each other.
Position, choices, and action should be seen as closely related, and in practice none has priority
over another.
Reading assignment
Strategy as a subject of study
Strategy as a job
The strategy lenses