Basic Concepts of Strategic

Management
 Basic Concepts of Strategic Management

Learning Objective
After finishing this chapter, you should be able to
• Understand the benefits of strategic management,
• Explain how globalization and e-commerce influence strategic
management,
• Understand the basic model of strategic management,
• Identify some triggering events that act as stimuli for strategic change,
• Understand strategic management decision making modes,
• Use the strategic audit as a method of analyzing corporate functions and
activities.

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 Basic Concepts of Strategic Management

Strategic Management Defined

• Strategic management is the process by which
managers set an organization’s (or several
organizations’) long-term course, develop plans in the
light of internal and external circumstances, and
undertake appropriate action to reach those goals.
• strategy management activities: Environmental
scanning, strategy formulation (strategic or long-range
planning), strategy implementation, and evaluation
and control.
• However, in this study emphasizes the monitoring and
evaluating of external opportunities and threats in light
of a corporation’s strengths and weaknesses
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 Basic Concepts of Strategic Management

• There are three concepts related to strategy

and determine the success of strategic plans:
– Distinctive competence. Do the best than
competitor by having skilled labor and resource
capacity.
– Competitive advantage. Expensive product
(differentiation strategy ) or less cost product (cost
leadership strategy ).
– Focus strategy : focus on the small market and
avoid from competitor by differentiation strategy.
 Basic Concepts of Strategic Management

4 Phases of Strategic Management

1. Basic financial planning. initiate some planning when they
requested to set up their budgets; considers activities for one
year
2. Forecast-based planning. the project take more than one
years (3-5 years),take a months to fit it with budget. Need
more environmental data and extrapolate current trends
five years into the future.
3. Externally-oriented planning. : conduct strategic planning by
top management (using the planning staff and consultant) and
they leave implementation to low level when the market
changing and competitive.
4. Strategic management. planning by forming a team from all
levels in the company.
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 Basic Concepts of Strategic Management

Benefits of Strategic Management

• The organizations who use the strategic management can
make attainment appropriate or “fit,” between an
organization’s environment and strategy, structure, and
processes has positive effects on the organization's
performance.
• The benefit of strategic management are :
• Clearer sense of strategic vision
• Sharper focus on strategic importance
• Improved understanding of changing environment

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 Basic Concepts of Strategic Management

Some question to start the planning strategic

• Where is the organization now? (not

where do we hope it is)
• If no changes are made, where will the
organization be in 1,2,5 or 10 years?
• What specific actions should management
undertake?
• What are the risks and payoffs?

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 Basic Modelof Strategic Management

Basic Model of Strategic Management

Basic Model of Strategic Management
 1. Environmental Variables
Natural environment Physical
Resources

wildlife Climate

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 Environmental Scanning Defined

SWOT Analysis
• SWOT is an acronym used to describe the particular
strengths, weaknesses, opportunities, and threats,
that are strategic factors for a specific company.
• The external environment consists of variables
(opportunities, and threats)that are outside the
organization and not typically within the short run
control of top management. These variables from the
context within which the corporation exists

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 Environmental Scanning Defined

SWOT Analysis
• The internal environment of a corporation consists of
variable(strengths, weaknesses) that are within the
organization itself and are not usually within the
short run control of top management. These
variables from the context in which work is done.
They include the corporation’s structure, culture, and
resources, key strengths from a set of core
competencies that the corporation can use to gain
competitive advantage.

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 2. Strategy Formulation
• Formulation is the development of long-range
plans for the effective management of
environmental opportunities and threats, in
light of corporate strengths and weaknesses
(SWOT). It includes defining the corporate
mission, specifying achievable objectives,
developing strategies, and setting policy
guidelines.

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 Strategy Formulation
• Mission statement: An organization’s mission statement is
the purpose or reason for the organization’s existence. It tells
what the company is providing to society.
• Objectives are the end results of planned activity, tell what is
to be accomplished by when and quantified. it is the result in
the fulfillment of corporation’s mission.
• a goal as an open ended statement of what we want to
accomplish, with no quantification of what is to be achieved
and no time criteria for completion
• A strategy of a corporation forms a comprehensive master
plan that states how the corporation will achieve its mission
and objectives. It maximizes competitive advantage and
minimizes competitive disadvantage
• A policy is a broad guideline for decision making that links
the formulation of a strategy with its implementation
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 Strategy Formulation

Mission Statement

• Purpose/reason for organization

• Promotes shared expectations
• Communicates public image
• Who we are; what we do; what we aspire
to

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 Strategy Formulation
Goals and objective
– Profitability (net profit)
– Efficiency (low costs.etc)
– Growth (increase in total assets, sales, etc)
– Resource utilization (ROE, ROI)
– Reputation(being considered a “top” firm
– Contributions to employees(employment security, wages,
diversity)
– Contributions to society(tax paid, participation in charities)
– Market leadership (market share)
– Technological leadership(innovation, creativity)
– Survival (avoiding bankruptcy)
– Personal need of top management (using the firm for personal
purposes, such as providing jobs for relatives)
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 Strategy Formulation

Policies
• 1. Policies include guidelines, rules, and procedures
established to support efforts to achieve stated
objectives.
• 2. Policies are most often stated in terms of
management, marketing, finance/accounting,
production/operations, research and development,
and computer information systems activities.
• Examples: smoking policy, recruitment policy

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 Strategy implementation
• Strategy implementation is a process by which
strategies and policies are put into action through
the development of programs, budgets, and
procedures.
• the implementation of strategy directly or indirectly
connects to all facts of management. Thus it is
fundamental to follow a holistic approach when
analyzing and assessing complex issues of strategy
implementation.

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 Strategy Implementation

Budgeting and procedures

• Budgeting: Is the process of allocating resources to be employed to
achieve objectives.
• Budget is a statement of a corporation’s activities in terms of dollars. Used
in planning and control, a budget lists the detailed cost of each program.
Many corporations demand a certain percentage return on investment,
often called a “hurdle rate” before management will approve a new
program.
• Budget should be directly linked to strategy implementation.
• Procedures: Sometimes termed Standard Operating Procedures (SOP), are
a system of sequential steps or techniques that describe in detail how a
particular task or job is to be done. They typically detail the various
activities that must be carried out in order to complete the corporation’s
program.

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 Strategy control and evaluation
• Ensure that a company is achieving what it
sets out to accomplish. It compares
performance with desired result and provides
the feed back necessary for management to
evaluate results and take corrective action, as
needed.

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 Strategy control and evaluation

Performance
• Performance is the end result of activities, it includes the
outcomes of the strategic management process. The practice
of strategic management is justified in terms of its ability to
improve an organization’s performance, typically measured in
terms of profits and return in investment. For evaluation and
control to be effective, managers must obtain clear, prompt,
and unbiased information from the people below them in the
corporation’s hierarchy. Using this information, managers
comparing what is actually happening with what was
originally planed in the formulation stage.

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 Strategic Decision Making
• The characteristics of strategic decisions.
– Rare: unusual, no precedent to follow.
– Consequential : require substantial
resources and commitment from all.
– Directive: set precedent for future action.

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 Strategic Decision Making

Mintzberg’s Modes
– Entrepreneurial mode: the strategy is made by powerful
individual. The focus on opportunities. The dominant goal
is growth of the corporation
– Adaptive mode: using reactive solution rather than
proactive search for new opportunities.
– Planning mode: it uses reactive and proactive mode. Data
gathering and analysis and select strategies.
– Logical incrementalism: strategy is set based on a series of
incremental commitment rather than through global
formulation of total strategies. This suitable when
environment is changing rapidly. Thus, although the
mission and objectives are set, the strategy is allowed to
emerge out of debate, discussion, and experimentation

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 Strategic Decision Making

Strategic Decision Making Process

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 Organization learning
• To be competitive in dynamic environments, corporations are
becoming less bureaucratic and more flexible.
• Hypercompetition that any sustainable competitive advantage
lies not in doggedly following a centrally managed five-year plan
but in stringing together a series of strategic short-term thrusts.
(Strategy Flexibility)
• the company become a learning organization—an organization
skilled at creating, acquiring, and transferring knowledge and at
modifying its behavior to reflect new knowledge and insights.
Organizational learning is a critical component of
competitiveness in a dynamic environment. It is particularly
important to innovation and new product development.
 Organization learning

Learning organizations are skilled at four main

activities:
• Solving problems systematically
• Experimenting with new approaches
• Learning from their own experiences and past
history as well as from the experiences of
others
• Transferring knowledge quickly and efficiently
throughout the organization
 Basic Concepts of Strategic Management

Globalization and Environmental Sustainability:

Challenges to Strategic Management
Globalization
Internationalization of markets and corporations
Global (worldwide) markets rather than national markets
Environmental Sustainability
the use of business practices to reduce a company’s impact
upon the natural, physical environment
Electronic Commerce
Use of the Internet to conduct business transactions
Basis for competition on a more strategic level rather than
traditional focus on product features and costs

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The six categories of risk that will be perceived by company to
climate changes
1. Regulatory. For example, the Kyoto Protocol, which requires the
developed countries (and thus the companies operating within
them) to reduce carbon dioxide and other greenhouse gases by
an average of 6% from 1990 levels by 2012.
2. supply chain. Suppliers will be increasingly vulnerable to
government regulations— leading to higher component and
energy costs as they pass along increasing carbon-related costs
to their customers
3. product and technology. Environmental sustainability can be a
prerequisite to profitable growth.
4. litigation, Companies that generate significant carbon emissions
face the threat of lawsuits similar to those in the tobacco,
pharmaceutical, and building supplies (e.g., asbestos) industries
5. Reputational. A company’s impact on the environment can
heavily affect its overall reputation.
6. physical. The direct risk posed by climate change includes the
physical effects of droughts, floods, storms, and rising sea levels
 Aturan Pengerjaan Tugas
• DILARANG COPY PASTE baik sesama teman
maupun dari Internet.
• Kerjakan dalam Ms. Word dan dikumpulkan ke
email : dimas.danisworo@polban.ac.id paling
lambat hari Minggu, 10 Maret 2019 pukul
24.00 WIB.
 TUGAS 1. Kelompok
• Berdasarkan bagan strategy management
model. Berikan 1 contoh perusahaan yang
menerapkan model tersebut. (berikan
sumbernya).
 TUGAS 2: Individu
1. Why has strategic management become so important to
today’s corporations?
2. How does strategic management typically evolve in a
corporation?
3. What is a learning organization? Is this approach to
strategic management better than the more traditional top-
down approach in which strategic planning is primarily done
by top management?
4. Why are strategic decisions different from other kinds of
decisions?
5. When is the planning mode of strategic decision making
superior to the entrepreneurial and adaptive modes