Introduction to

Management
Dr. Menatallah Darrag & Dr. Dalia Abdelwahab

Lecture
6
Chapter 8: Strategic Management
 Learning Objectives

 Define strategic management and explain why it is important.

 Explain what managers do during the six steps of the strategic management process.

 Describe the three types of corporate strategies.

 Describe competitive advantage and the strategies organizations use to get it.

 Discuss current strategic management issues.

 What is Strategic Management?
Strategic Strategies
management
 It is considered by managers as a  The decisions and actions that
“key for excellence & success”. determine the long-run performance
of an organization.
 It’s an important task involving all
the managerial functions of  Strategies encompass:
planning, organizing, leading & • plans for how the organization will
controlling. do what it’s in business to do,
 It’s what managers do to develop • how it will compete successfully,
an organization’s strategies. and
• how it will attract and satisfy its
customers in order to achieve its
goals.
 What is Strategic Management?

A “Business Model”

 Answers the question of (How a company is going to make money?)

 Is a strategic design for how a company intends to profit from its

strategies, work processes, and work activities.

 Focuses on two things:

• Whether customers will value what the company is
providing.
• Whether the company can make any money doing
that.
 Business Model Examples
Business Model Description Examples

Razor & Blade Buy at low margin item and then buy Gillette, Hewlett-Packard
the replacement at a high cost printers, Nespresso coffee
maker
Cheap chic Marketing of stylish but inexpensive IKEA
merchandise. Allows for high margins
as merchandise sells at low price.
Bricks and clicks Extension of in-store shopping to BestBuy.com, local mystery
include online ordering, in-store book store with online shop,
pickup or items found exclusively argos.uk
online.
Franchise Sell the right to use the business McDonald’s, Pizza Hut
model in exchange for a percentage
of revenues.
 Business Model Examples
Business Model Description Examples

Cut out the middle Removal of intermediaries in a supply Dell Computer

man chain. Skipping the warehouse
distributor.
Freemium business Product is offered for free. Users McAfee security, Netflix
model upgrade to become paying
customers of virtual goods or to get
expanded
access.
Premium Offer high-end products that appeal Tiffany, Rolls-Royce
to brand-conscious
consumers.
Online auctions Create a community of buyers and Ebay, Alibaba
sellers by using an auction-type
selling process versus a set sales price.
 Why Is Strategic Management Important?
1. It results in higher organizational performance.
 Thus, it can make a difference on how the overall organization performs & that’s
why given the same circumstances some businesses survive while others fail..due
to their adopted strategies!

2. It requires that managers examine and adapt to business environment

changes.
 As change is inevitable & managers have to face it, strategy acts like a cursor to
help them navigate with the organization through proper managerial decisions.

3. It coordinates diverse organizational units, helping them focus on

organizational goals.
 As organizations expand, they need to keep their efforts and decisions aligned to
help towards attaining success, efficiency & effectiveness. Strategy helps in
keeping an eye on all of these objectives.
 Strategic Management in the Arab
Organizations
1. Formal strategic planning exists, but is rather limited.
 Plans are more reactive or intuitive in nature rather than proactive or
intended.

2. Lack of confidence in the impact of formal strategic planning prevails.

 Generally; or rather culturally; value and importance of long-term planning is
not high or well-developed and thus a general attitude of lack of confidence
prevails.

3. The trend for formal strategic planning is on the rise.

 Western models as success cases lead the way to following their pace and
importing their practices to succeed alike.
 The Strategic Management Process
 The strategic management process is a six-step process that
encompasses:
• strategy planning (first four steps)
• implementation
• evaluation

Exhibit 8–1 The Strategic Management Process

What do you know about Etihad Airlines?
• Established by a royal decree as the national airline of the United Arab• In 2016, Etihad won Air Transport World’s 2016 Airline of the Year award,
Emirates in February, 2003, Etihad Airways started its services in as well as the World’s Leading Airline 2016 award at the 23rd edition of
November with a ceremonial flight to Al Ain. World Travel Awards. As of October 2016, Etihad Airways is rated as a 5-
star airline by Skytrax.
• In November, 2009, Etihad Airways won the “World’s Leading Airline”
award at the World Travel Awards in London, making this a first for any• In 2017, Etihad achieved its best operational on-time performance
Middle East airline. Etihad Airways received this award for five (OTP) results since 2009, recording network punctuality of 82% for flight
consecutive years, until 2013. departures and 86% for arrivals. Etihad Airways has also been placed in
the Top 20 safest airlines in the world by AirlineRatings.com.
• In August 2010, Etihad Airways signed a 10-year strategic partnership
agreement with Virgin Australia (Etihad Airways has a 22% equity stake• In January 2018, Etihad introduced a new baggage policy, setting the
in Virgin Australia Holdings). In December 2011, Etihad Airways allowance for all markets, excluding the US and Canada, based on total
announced it had taken a 29.21% stake in airberlin, Germany’s second weight rather than the number of bags checked in. With the switch to a
largest airline and Europe’s sixth largest airline. In 2012, Etihad Airways weight-based baggage policy, Economy Class passengers will be
acquired a 40% stake in the national airline of the Republic of entitled to 23 to 35 kg in Economy Class, depending on the fare
Seychelles, Air Seychelles, and a 2.987% stake in Aer Lingus (increased purchased, Business Class passengers 40 kg for all fare categories, while
to 4.11% in 2014). In 2013, Etihad Airways acquired 49% of Air Serbia, First Class customers will enjoy a 50 kg allowance. Exceptions apply to
the national airline of the Republic of Serbia (formerly Jat Airways), and select markets.
concluded the transaction for the subscription of a 24% minority equity
stake in Jet Airways, a full-service airline with one of the youngest fleets• From its Abu Dhabi hub, Etihad Airways flies to 116 passenger and
in the world. At the 2013 Dubai Airshow, Etihad Airways announced the cargo destinations. Etihad Airways has a fleet of 108 Airbus and Boeing
acquisition of a 33.3% stake in Darwin Airline. From March 2014, the aircraft, and a firm order of more than 170 aircraft, including 62 Airbus
Swiss carrier was rebranded as Etihad Regional. In August 2014, Etihad A350s, 52 Boeing 787s and 25 Boeing 777s.
Airways agreed to take a 49% stake in the Italian flag carrier Alitalia for• No deadly incidents involving Etihad Airways have been recorded so far.
an estimated sum of 560 Million Euros. In 2014, Etihad established
Etihad Airways Partners, its own airline alliance.
• In 2015, Etihad’s A380 First Apartment was named the world’s best First
Class due to its luxurious innovation. The First Apartment, launched in
December 2014 on Airbus A380 only, has a large leather armchair and
separate bed of 6 feet and 10 inches, as well as a 24-inch (61 cm) TV
monitor.

https://www.etihad.com/en-bh/about-us/etihad-news/archive/2019/etihad-acquires-valuables-management-subsidiary-under-its-cargo-and-logistics-portfolio/
 The airline has been reducing its overheads as part of its transformation strategy, which
saw losses cut by around 16% last year to $1.3 billion, despite rising fuel costs.
 Mr Kamark said: “What we anticipated in the plan is a cautious steady growth, not sort of
extraordinary growth.
 “We also see that the international business market and the GDP around the world is not
growing and it will be a tough economy next year and the year after. We’ve put that
into plans and so far we are delivering above what we have planned in the
restructuring.”
 He added that the company wants to become seen as “the boutique hotel of airlines”.
 Drawing on an analogy, he said: “Yes, we want to have the presidential suite – the first
class and business class – but we also want to have the standard rooms – our economy
class.
 “The way we innovate that product type is to give the guest the choice. Even if I’m
staying in a standard room I may want some champagne in the room; that is also a
possibility if you’re flying with Etihad.”
 The company is currently following a plan to transform and upgrade its economy class
by offering customers purchasable upgrades.
 Speaking at a media briefing on Tuesday, Robin Kamark said that 2019 has been “a very
good year” and that he is “confident” that the transformation program is working.
 Abu Dhabi’s Etihad Airways anticipates turning a profit by 2023, when its transformation
period comes to an end.
 That’s according to its chief commercial officer, who said that Etihad will be a “good,
sustainable company” when its five-year turnaround plan comes to an end.

https://www.aviationbusinessme.com/20029-etihad-airways-turnaround-strategy-to-produce-profits-by-2023
Step 1: Identifying the Current Mission, Goals, and Strategies

 Mission: a statement of the purpose of an

organization. It also includes the scope of its
products and services

 Goals: the foundation for further planning. It

projects measurable performance targets.

 Strategies: The decisions and actions that

determine the long-run performance of an
organization.
Step 1: Identifying the Current Mission, Goals, and Strategies

Exhibit 8–2 Components of a Mission Statement

8-15 Copyright © 2015 Pearson Education

Step 1: Identifying the Current Mission, Goals, and Strategies
Characteristics of a MISSION

1.Mission must be feasible and attainable. It should be possible to achieve it.

2.Mission should be clear enough so that any action can be taken.

3.It should be inspiring for the management, staff and society at large.

4.It should be precise enough, i.e., it should be neither too broad nor too narrow.

5.It should be unique and distinctive to leave an impact in everyone’s mind.

6.It should be credible, i.e., all stakeholders should be able to believe it.

16
Examples of Mission
• Our customers’ practices and needs
are evolving. They want simple
solutions that are truly useful. They
seek flawless connectivity,
personalized responses and good
value for money. • At Microsoft, our mission is to enable people
and businesses throughout the world to realize
• And this is what makes our mission so
their full potential.
meaningful: to be "always be in
touch to connect what’s essential in • We consider our mission statement a
commitment to our customers.
your life."
• We deliver on that commitment by striving to
create technology that is accessible to
everyone—of all ages and abilities.
• Microsoft is one of the industry leaders in
accessibility innovation and in building
products that are safer and easier to use.

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Examples of Mission

“Our mission is to be our customers’

favorite place and way to eat & drink.
We’re dedicated to being a great
place for our people to work; to being a
strong, positive presence in your
community; and to delivering the
quality, service, cleanliness and value
our customers have come to expect
from the Golden Arches – a symbol
that’s trusted around the world.”

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Step 1: Identifying the Current Mission, Goals, and Strategies

 Goals are the foundation for further planning. It projects measurable performance targets.
They are desired future states or objectives that an organization tries to achieve.
 They must be realistic and challenging
 They must be achieved within a specific time frame
 They must be precise and measurable

• Example McDonald’s goals:

 Committed to our customers
 Operate our business ethically
 Give back to our communities
 Grow our business profitably
 Strive continually for improvement

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Example: Step 1: Identifying the Current Mission, Goals, and Strategies

 Mission is to be “World’s Leading Airline” and to be a “good,

sustainable company” when its five-year turnaround plan comes to an
end by 2023.

 Goals are to reduce its overheads as part of its transformation strategy,

which saw losses cut by around 16% last year to $1.3 billion, despite
rising fuel costs.

 Strategy is to follow a cautious steady growth path, and not sort of

extraordinary growth.
Step 2: Doing an External Analysis

It encompasses:
 The environmental scanning of specific
and general environments
 Focuses on identifying opportunities and
threats

8-21 Copyright © 2015 Pearson Education

Step 3: Doing an Internal Analysis

 Assessing organizational resources, capabilities,

and core competencies to deduce
organizational:
• Strengths create value for the customer and
strengthen the competitive position of the
firm.
• Weaknesses can place the firm at a
competitive disadvantage.

 Analyzing financial and physical assets is fairly

easy, but assessing intangible assets (employee’s
skills, culture, corporate reputation, and so forth)
isn’t as easy.

8-22 Copyright © 2015 Pearson Education

 Steps 2 and 3 combined are called
a SWOT analysis:
 Strengths
 Weaknesses
 Opportunities
 Threats

8-23 Copyright © 2015 Pearson Education

Example: Steps 2 & 3: Doing an External & an Internal Analysis

 The environmental scanning of specific and general environments:

 Focuses on identifying opportunities and threats

 Opportunities:
 Launching new routes
 More international destinations
 Threats:
 Fierce competition
 Increased costs & changing policies
 Strengths:
 Strong Brand Image
 Strong services in Dubai & throughout UAE
 Weaknesses:
 Heavy Investments Required
 High costs (fuel prices & aviation lines royalties)
Step 4: Formulating strategies

 Develop and evaluate strategic alternatives.

 Select appropriate strategies for all levels in the
organization that provide relative advantage
over competitors.
 Match organizational strengths to
environmental opportunities.
 Correct weaknesses and guard against
threats.
Step 5: Implementing strategies

 Implementation: effectively fitting organizational

structure and activities to the environment.

 The environment dictates the chosen strategy;

effective strategy implementation requires an
organizational structure matched to its
requirements.
 Example: Step 4: Formulating strategies

 Strategy is to follow a cautious steady growth path, and not

sort of extraordinary growth.

Example: Step 5: Implementing strategies

 The company is currently following a plan to transform and upgrade its

economy class by offering customers purchasable upgrades.
Step 6: Evaluating results

 How effective have strategies been?

 What adjustments, if any, are
necessary?
Thank you