Chapter One: The Nature of Strategic Management

• Author: Asres Abitie (PhD)

Definition of Strategy

• Origin: The term 'strategy' is derived from the Greek word 'strategos,' meaning the "art of being a general" or "the art of the general."

• Purpose: Refers to a significant plan for deploying available resources to outmaneuver an opponent.

• Comprehensive Definition:

  • Strategy is defined as a unified, comprehensive, and integrated plan that aligns the strategic advantages of a firm with environmental challenges.

  • Aim: to achieve the enterprise's basic objectives. (Source: Guleck, 1980:9)

5 Ps of Strategy

• Plan

• Perspective

• Ploy

• Position

• Pattern

Understanding Strategy

• Strategy encompasses goal-directed decisions and actions.

• Involves matching capabilities and resources with environmental opportunities and threats.

Strategic Management

• Definition: It is both an art and science of formulating, implementing, and evaluating cross-functional decisions that help organizations achieve their objectives.

• Integration: Focuses on integrating several components (HR, marketing, finance, etc.) to ensure success.

• Importance of Strategy:

  • Peter Drucker emphasizes that strategic management requires introspection about the business mission, leading to objective setting, strategy development, and future decision-making.

Strategic Management Process

• Stages:

  • Analyze the current situation

  • Develop appropriate strategies

  • Implement strategies

  • Evaluate/modifying strategies as needed

• Model:

  • Elements include evaluation, strategy formulation, implementation, and control.

Strategic Management Characteristics

• Interdisciplinary approach

• Focus on four aspects:

  • External focus

  • Internal focus

  • Strategic management

  • Future direction

Analyzing Current Situation

• Process Involves:

  • Evaluating organizational context

  • Industrial Organization View (I/O)

  • Resource-Based View (RBV)

  • Examining external and organizational environments

External Context Influences

• Subcategories:

  • Societal Environment

  • Economic Forces

  • Technological Forces

  • Competitive environment

• Changes in Strategy Context:

  • Declining smokestack industries vs. growing service industries

  • Increased workforce diversity and globalization

  • Importance of protecting the environment

Levels of Strategy

• Competitive: How to compete in chosen business(es)

• Functional: What resources are available to support strategies

• Corporate: Overall direction and business portfolio decisions

Strategy Implementation and Evaluation

• Implementation:

  • Putting strategies into action requires objective establishment, policy formulation, resource allocation, and staff motivation.

  • Commonly regarded as the most challenging stage of strategic management.

• Evaluation:

  • Assessing strategy outcomes and making necessary adjustments.

  • Ensures success is not taken for granted.

Benefits of Strategic Management

• General Benefits:

  • Encourages proactivity in shaping a firm's future

  • Financial benefits: improved sales and profitability

  • Non-financial benefits: employee productivity and understanding market conditions

• Greenly's Benefits Overview:

  • Identification of opportunities, improved coordination, mitigating adverse changes, aligning major decisions with objectives, and enhancing internal communication.

Key Players in Strategic Management

• Roles Include:

  • Board of Directors: Oversees corporate governance

  • Top Management: Responsible for overall decision-making and strategy execution

  • Other strategic managers and employees assist in implementation and evaluation.

Effective Strategic Leadership

• Involves:

  • Utilizing core competencies

  • Promoting ethical practices

  • Creating a strong organizational culture

Strategic Management Challenges

• Addressing issues such as globalization, corporate governance, and the rise of e-business.

Key Terms in Strategic Management

• Competitive Advantage, Strategists, Vision & Mission Statements, External Opportunities and Threats, Internal Strengths and Weaknesses, Long-Term Objectives, Strategies, Annual Objectives, Policies.

Excerpts from Sun Tzu’s The Art of War

• Key Insights:

  • Warfare requires in-depth study and understanding.

  • Deception is a fundamental strategy in warfare.

  • Knowledge of self and the enemy is crucial for success.

  • It is vital to shape conditions of conflict before they arise.