Strategic Management (Overview) Dr. Fred Mugambi Mwirigi JKUAT

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 StrategyProfit Strategy: goal and set of policies designed to achieve competitive advantage in a particular marketplace Competitive Advantage: ability to transform inputs into goods and services at a maximum profit on a sustained basis, better than competitors Firm Competitive Advantage Shareholder Value

Levels of strategy 5

Strategic Management Process 6

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

Triggering events New CEO External intervention Threat of change in ownership Performance gap Strategic inflection point Stimulus for change in strategy 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 Strategic Implemen- tation Strategic choice The environment Expectations, objectives and power Resources Resource planning Organisation structure Selection of strategy People and systems Evaluation of options Generation of options

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