WHAT IS STRATEGIC MANAGEMENT

Defining Strategic Management

Strategic management is the art or science of formulating, implementing and evaluating
cross-functional decisions that enable an organization to achieve its objective.
The definition implies
Strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, R&D and computer information system to
achieve the success of the organization.
Benefit of Strategic Management

Allows organization be more proactive than reactive in achieving to the future.

Allows organization to initiates and influence activities in the organization.

Allows organization to exert control of its own destiny.

Helps organization make better strategies through more systematic, logical and
rational approach to strategic choices.

Stages of strategic management

The strategic management process:
The objective of strategic management process is to make logical and systematic
approach for making major decision in organization.
1.
2.
3.
4.

Strategic analysis
Strategy formulation
Strategy implementation.
Strategy evaluation.

Strategic Analysis
Referred as the "home work" required to develop appropriate strategy. Strategic analysis
includes:
1. Developing business mission
2. Consideration of an organization's strategic goal or long term objectives.
Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

3. The exploration of the opportunities could threat present in the external

environment.
4. The study of organization's internal strength and weakness.
Strategy Formulation
Strategy formulation includes:
1. Generating alternative strategies
2. Choosing particular strategy to pursue.
A sound strategic analysis's provides a basis for formulating strategy. There are three
levels of strategies:
a.
Functional
b. Business
c. Corporate
d. International
Although strategy formulation takes place on a number of levels, emphasis should be on
the business level.
Strategy implementation.
The process of transforming intended strategy into realized strategy is called strategy
implementation.
It is also called the action stage of the strategic management process.

Implementing means mobilizing strategy into actions.

Considered the most difficult stage.
Implementation requires personal discipline, commitment and sacrifices.

Successful strategy implementation hinges upon manager's ability to:

1. Motivate employees,
2. Interpersonal skill - the strategy implementation affect all employees and divisional
managers.
3. Managers must decide on how best can we get the job done.
Strategy evaluation

It is the final stage of the strategy implementation process.

It is the primary mean for obtaining information whether or not a particular strategy
works well.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

Strategy evaluation is needed, to put the organization on to the right direction.

All strategies are subject to modification due to internal and external changes.

Key Terms In Strategic Management

There are eight (8) key terms that need to be discussed:
1.
2.
3.
4.
5.
6.
7.
8.

The strategist
Mission statement
External opportunities and threat
Internal strengths and weaknesses
Long term objectives
Strategies
Annual objectives
Policies

The Strategists
Strategists are individuals who are responsible for the success or failure of an
organization.
They are the chief executives officer, chairman of the board of directors, executive
directors, chancellor, and dean, owner of a company or an entrepreneur.
Strategist main responsibilities are:
1. Creating a context for change
2. Building commitment and ownership
3. Balancing stability and innovation
Different Strategist may differ in term of:
1.
2.
3.
4.
5.
6.

Attitude, values, ethics

Willingness to take risk,
Concern for social responsibilities,
Concern for profitability,
Concern for short run vs. long run aims and
Management style.

Most strategists agreed that their social responsibility is to make profit to cover the cost of
the future. Strategists evaluate social problems in term of potential cost and benefit to the
firms and address social issues that could benefit the firms.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

Definition of Strategy
Strategy is the direction and scope of an organization over long term: which achieves
advantage for the organization through its configuration of resources within a changing
environment, to meet the needs of markets and to fulfill stakeholder's expectation.

The characteristic of strategic decisions:

1. It is likely to affect the long-term direction.
2. Strategic decision is about to achieve advantage for the organization.
3. Strategic decision is concerned with the scope of an organization activity.
Such as the degree of business diversification.
i.e.: boundaries of business in term of the type of product and mode of
services.

Strategy is the matching of the activities of the organization to the environment in

which it operates. That is in search of strategic fit.

Strategy is also seen as building on or stretching an organization's resources and

competences. - seizing new opportunities from existing resources.

The strategy will be affected by environmental forces, availability of resources,

values and power of the stakeholders.

Integrating intuition and analysis

Strategic management process can be described as an objective, logical, systematic
approach for making decision in an organization.
It attempts to organize qualitative information in a way that allows the decision to be made
under condition of uncertainty.

Judgment and gut feeling and intuition are essential to making good strategic
decisions.

Intuition is useful in making decision in situation of great uncertainty and precedent.

Intuition or gut feeling is Feeling certain that you are right without knowing the
reason.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

It is also useful when highly interrelated variables exist. This situation describes the
very nature and heart of strategic management.

Some may have extra ordinary ability to use intuition alone in deciding brilliant
strategy.
E.g. Will Durant - organize the G.M group. Alfred Sloan commented him as always
outstandingly correct in his judgment.

Choosing intuitive or analytic approach alone is not an either-or proposition. Analytic and
intuitive thinking complement each other.
On the other hand, operating from I has already made up my mind, don't bother me with
the facts indeed is management by ignorant.
Adapting to change
1. Strategic management is laid on the principle that organization should continually
monitor internal and external event and trends so that timely change can be made
when needed.
2. The need to adapt to changes leads organization key strategic management
questions such as:

What kind of business should we become?

Are we in the right field?
Should we reshape our business?
What new competitors are entering our industry?

The external opportunity and threat

External opportunity and threat refers to the social, cultural, economics, legal, political,
technology and competitive trend that could significantly benefit or affect an organization
in the future.
These are the uncontrollable external factors that determine opportunity or threat to a
particular organization.
Basic tenet of strategic management is that firms need to develop a strategy that they
could take advantage of the external opportunities and avoid or attempt to reduce the
impact of external threat for the success of the organization.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

The process of researching, gathering, assimilating of external information regarding its

threat and opportunities to the particular organization is term as environmental scanning
or also known as industry analysis.
Internal strength and weaknesses
The internal strength and weakness are organization controllable activities. Examples
are management, marketing, finance /accounting, production/operation, research &
development and all functional activities of the organization.
The performance of internal factors can be determined by financial ratios, performance
indicators, comparing with pass period, comparing with industry average.
Business Vision & Mission
Vision Statement
The vision statement should answer the basic question, What do we want to become in
the future? A clear vision provides the foundation for developing a comprehensive
mission statement.

Vision is a very broad, most general and all inclusive goal statement.

Vision describes:
- Aspiration for the future, without specifying the means necessary to achieve
the desired ends.
- Inspiration that asking for the best.
- The most or the greatest.
- A vision is an appeal to the emotions that goes beyond carrot and stick.

Many organizations have both a vision and mission statement, but the vision statement
must be established first and foremost.
a.
b.

The vision statement should be short, preferably one sentence,

As many managers as possible should have conytributed as input
into developing the statement.

Mission Statement
Mission statement is enduring statement of purpose that distinguishes one
business from other similar firms.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

Mission statement is a statement of "reason for being". It identifies scope of

operation in product or market terms.

Mission stement sometimes called a creed statement, a statement of phillosophy, a

statement of beliefs, a statement of business principles.

Mission statement reveals what an organization want to be and whom it want to

serve.

It addresses the basic question that faces all - "what is our business?" A clear
mission statement describes the value and priorities of the organizations.

A mission statement charts the future direction of an organization.

Data shows that 60% of organization developed mission statement. Organization

that has developed mission statement doing better than those that does not
develop their mission statement.

Mission statements establishes the followings:

1. Describe the unique characteristic of the organization.
2. It establish boundaries for the strategy formulation
3. It establish standard for organization performance along multiple dimensions (e.g.
the stakeholders).
4. It suggest standard for individual ethical behavior in the organization - values that
guides the sense of responsibility and duty to the stakeholders.
Mission statement usually attempt to answer the following questions:
What is our reason for being?
What is our basic purpose?
What is unique or distinctive about our organization?
What is likely to be different about our organization?
Who should be our customer?
What are our principal products or services for present and future?
What should be our principal economic concern?
What are our basic belief, values, aspiration, and philosophical priorities of the
firms?
The important of clear mission:
1. To ensure the unanimity of purpose within organization.
2. To provide a basis or standard, for allocation of resources.
Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

3. To serve as a focal point for the individual to identify with organization purpose and
direction.
4. To facilitate translation of objective into organization structure.
5. To establish a general tone or an organizational climate.
6. To specify organization purpose and the translation of this purpose into objectives in
such a manner, cost, time and performance parameters can be assessed and
controlled.
The Characteristic Of A mission Statement
A mission statement normally has the following characteristics:
1. Declaration of attitude
2. A customer orientation
3. Declaration of social policy
EVALUATING MISSION STATEMENTS
1. Components of A Mission Statement
2. Customers: Who are the firm's customers?
3. Product or services: What are firm's major product or services?
4. Markets: Geographically, where does the firm compete?
5. Technology: Is the firm technologically current?
6. Concern for survival, growth and profitability: Is the firm committed to growth and
financial soundness?
7. Philosophy: What are the basic beliefs, values, aspirations and ethical priorities in
the firm?
8. Self-concept: What is the firm's distinctive competence or major competitive
advantage?
9. Concern for public image: Is the firm responsive to social, public and environmental
concern?
10. Concern for employee: Are employee valuable asset of the firm?

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

Differentiating Vision and Mission

Vision statement answers the question of "What do we want to become?"
Mission statement answers the question of "What is our business?"
Longterm objectives (goals)
The long-term objectives are specific result that an organization seeks to achieve in
pursuing its basic mission. Long term means more than one year.
Annual Objective:
They are short-term objectives that integrate with the long-term objectives. They are the
milestones that the organization has to achieve in order to achieve long term objectives.
Annual objective is important in strategy implementation while the long-term objective is
important in the strategy formulation process.
Objective should be challenging, measurable, consistent, reasonable and clear.
E.g. To achieve 30 % R.O.E. by the end of the year.
Objective are important because:

They state organizational directions.

Helps to carry out evaluation.
Create synergy
Reveal priorities
Focus coordination
Provide basis for effective planning.

Policies
Policy can be established at the corporate level and apply to an entire organization, at the
divisional level it will apply to a single division or at functional level, it applies to a
particular operational activities.
Policies are the means by which annual objectives will be achieved.
Policy includes:

Guidelines, rule and procedures established to support efforts to achieve stated

objectives.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

Policies are guides to routine decisions and address repetitive situations.

Important of policy

Outline organization's expectation of its employees and managers.

Allow constancy of purpose and coordination within and between organizational

departments.

Constancy of purpose through the strategic goals

Constancy of purpose would prevent the organization from wandering aimlessly.
Constancy of purpose is a critical ingredient of the strategic management process.
The hierarchy of strategic goals spanning across Vision, mission and objectives contribute
to this constancy of purpose.
Business ethics and strategic management
Business ethics can be defined as principles of conduct within organizations that guide
decision-making and behavior. Good business ethics is a prerequisite for good strategic
management. Good ethics, is just good business.
Business Vs. Military Strategy
The study of strategic management evolved from military heritage. The term objective,
mission, strength and weakness were first formulated in military exercise to address
problems in the battlefield.
In business strategy is formulated, implemented and evaluated to address business
competition.
In military the main issue of strategy development is to address conflict with enemy.
Both must adapt through changes and constantly improve the organization to maintain
alignment with the environment.

Strategic Management MGT658 Note / Assoc. Prof. Dr. Nawawi

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