NATURE OF STRATEGIC MANAGEMENT
This Lecture provides an overview of strategic management. It
introduces a practical, integrative model of
the strategic-management process and defines basic activities
and terms in strategic management and
discusses the importance of business ethics. After reading this
lecture you will be able to know that:
What Is Strategic Management?
Discuss the nature of strategy formulation, implementation, and
What is strategic management?
Strategic Management can be defined as “the art and science of
formulating, implementing and evaluating
cross-functional decisions that enable an organization to
achieve its objective.”
“The on-going process of formulating, implementing and
controlling broad plans guide the
organizational in achieving the strategic goods given its
internal and external environment”.
1. On-going process:
Strategic management is a on-going process which is in existence
through out the life of organization.
2. Shaping broad plans:
First, it is an on-going process in which broad plans are
firstly formulated than implementing and finally
3. Strategic goals:
Strategic goals are those which are set by top management. The
broad plans are made in achieving the goals.
4. Internal and external environment:
Internal and external environment generally set the goals.
Simply external environment forced internal
environment to set the goals and guide them that how to achieve
How the strategic management show:
Environment Scanning Strategy Fermentation Strategy Implication
Shaping & achieving
Broad plans are for
Top management or
Internal Environment to
Importance of strategic Management
Why do we need to lay so much stress on strategic management?
Strategic management becomes important due to the following
The survival for business
First, global considerations impact virtually all strategic
decisions! The boundaries of countries
no longer can define
the limits of our imaginations. To see and appreciate the world
from the perspective of others has become a
matter of survival for businesses. The underpinnings of
strategic management hinge upon managers' gaining
an understanding of competitors, markets, prices, suppliers,
distributors, governments, creditors,
shareholders, and customers worldwide. The price and quality of
a firm's products and services must be
competitive on a worldwide basis, not just a local basis.
The distance between the business sectors are becoming less due
to the provisions of certain facilities.
Although political boundaries are there but in order to become
successful in business it is essential to laid
stress on globalization.
A second theme is that
electric commerce (e-commerce) has
become a vital strategic-management tool.
number of companies are gaining competitive advantage by using
the Internet for direct selling and for
communication with suppliers, customers, creditors, partners,
shareholders, clients, and competitors who
may be dispersed globally. E-commerce allows firms to sell
products, advertise, purchase supplies, bypass
intermediaries, track inventory, eliminate paperwork, and share
information. In total, electronic commerce is
minimizing the expense and cumbersomeness of time, distance and
space in doing business, which yields
better customer service, greater efficiency, improved products
and higher profitability.
The Internet and personal computers are changing the way we
organize our lives; inhabit our homes; and
relate to and interact with family, friends, neighbors, and even
ourselves. The Internet promotes endless
comparison shopping which enables consumers worldwide to band
together to demand discounts. The
Internet has transferred power from businesses to individuals so
swiftly that in another decade there may be
"regulations" imposed on groups of consumers. Politicians may
one day debate the need for "regulation on
consumers" rather than "regulation on big business" because of
the Internet's empowerment of individuals.
Buyers used to face big obstacles to getting the best price and
service, such as limited time and data to
compare, but now consumers can quickly scan hundreds of vendors’
offerings. Or they can go to Web sites
such as CompareNet.com that offers detailed information on more
than 100,000 consumer products.
The Internet has changed the very nature and core of buying and
selling in nearly all industries. It has
fundamentally changed the economics of business in every single
environment has become a major strategic issue
A third theme is that
the natural environment has become an
important strategic issue. With the
communism and the end of the Cold War, perhaps there is now no
greater threat to business and society
than the continuous exploitation and decimation of our natural
The resources are scarce but the wants are unlimited. In order
to meet the wants of the world, the resources
should be efficiently utilized. For example, the use of oil
resources or energy resources will make the people
to use these resources for a long time.
Strategic management – A route to success:
The study of strategic management integrates different topics.
Different courses are integrated due to the
study of this course so that businesses become successful in
every sector. It integrates the following:
The management and marketing are essential part of a business
sectors. They should be integrated. Just like
other sections of the business are integrated under this study.
This term is mostly used by academia but this
is also used in media.
History of strategic management:
This course develops in 1950’s. Due to the detailed planning of
the business circumstances, the importance
of this increased rapidly.
In 1960; s and 70 it was consider to be panacea for problems.
But in 1980; s two important revolutions
occur in business world.
The invention of these things has decreased the importance of
strategic management. But at the end of
1980, the business involves in computers and mobiles business
realized that they still need to adopt the
policies for strategic management.
1. In early time the management takes institution decisions. But
now the management has to take decision
by a specific process.
2. Organizational layers become more complex now a days and
management divided into layers.
3. Environment change also evaluates the strategic management.
4.Stages of Strategic management:
The strategic management process consists of three stages:
Strategic formulation means a strategy formulate to execute the
business activities. Strategy formulation
Mission (The target of the business)
weakness (Strong points of business
and also weaknesses)
and threats (These are related with
external environment for the business)
Strategy formulation is also concerned with setting
long term goals and objectives,
strategies to achieve that long term goals and choosing
particular strategy to pursue.
The considerations for the best strategy formulation should be
Allocation of resources
Business to enter or
Business to divest or
Joint ventures or
Whether to expand or
Moving into foreign
Trying to avoid take
Strategy implementation requires a firm to establish annual
objectives, devise policies, motivating employees
and allocate resources so that formulated strategies can be
executed. Strategy implementation includes
developing strategy supportive culture, creating an effective
organizational structure, redirecting marketing
efforts, preparing budgets, developing and utilizing information
system and linking employee compensation
to organizational performance.
Strategy implementation is often called the action stage of
strategic management. Implementing means
mobilizing employees and managers in order to put formulated
strategies into action. It is often considered
to be most difficult stage of strategic management. It requires
personal discipline, commitment and
sacrifice. Strategy formulated but not implemented serve no
Strategy evaluation is the final stage in the strategic
management process. Management desperately needs to
know when particular strategies are not working well; strategy
evaluation is the primary means for obtaining
this information. All strategies are subject to future
modification because external and internal forces are
Nature of Strategic Management
The strategic-management process does not end when the firm
decides what strategy or strategies to pursue.
There must be a translation of strategic thought into strategic
action. This translation is much easier if
managers and employees of the firm understand the business, feel
a part of the company, and through
involvement in strategy-formulation activities have become
committed to helping the organization succeed.
Without understanding and commitment, strategy-implementation
efforts face major problems.
Implementing strategy affects an organization from top to
bottom; it impacts all the functional and
divisional areas of a business. It is beyond the purpose and
scope of this text to examine all the business
administration concepts and tools important in strategy
Even the most technically perfect strategic plan will serve
little purpose if it is not implemented. Many
organizations tend to spend an inordinate amount of time, money,
and effort on developing the strategic
plan, treating the means and circumstances under which it will
be implemented as afterthoughts! Change
comes through implementation and evaluation, not through the
plan. A technically imperfect plan that is
implemented well will achieve more than the perfect plan that
never gets off the paper on which it is typed.
Peter Drucker says:
“The prime task is to think through the overall mission of a
Intuition and analysis
Strategic management tries to bring together qualitative and
Intuition rests on:
o Past experiences
Intuitions help in decision making where:
o Uncertainty prevails
o Little or no precedence
o Highly interrelated
o A choice from various
possible alternatives is needed
o Intuition and analytical
judgment requires inputs from all managerial levels
o Analytical thinking and
intuitive thinking complement one another
“Imagination is more important than knowledge, because knowledge
is limited, whereas imagination embraces the