STRATEGIC MANAGEMENT: INCLUDING APPLICATION OF MAQASID AL-SHARIAH AS STRATEGIC OPTION

Lecture

STRATEGIC MANAGEMENT
[Including Application of Maqasid Al Shariah in Strategic Management]
This lecture was given to MBA Students.
University of Keele ,Staffordshire,(UK); INSANIAH & KUIS (MALAYSIA)
and Senior Managers of Caprice Gold Group, Turkey

MISSION
To Score Distinction For MBA
OBJECTIVE
Understand & Apply
By Prof. SHAYA’A OTHMAN
sottoman@gmail.com

1429H [1st Lecture] -1435H [Revised] / 2008M [1st Lecture] -2014M [Revised]

Proposed Time For The Lecture [1000 - 1800]
[13th March 1999]

Strategic Management
•
•
•
•
•
•
•
•
•

1000-1100
1100-1200
1200-1300
1300-1400
1400-1500
1500-1600
1600-1615
1600-1700
1700-1800

-

LECTURE
LECTURE
DISCUSSION
LUNCH
LECTURE
LECTURE
TEA BREAK
DISCUSION
DISCUSSION

STRUCTURE OF LECTURE
Part 1. SITUATION ANALYSIS
:

1000 - 1300 [3hrs]

• STRATEGIC MANAGEMENT
• Definition and Process

• FORMULATION OF
STRATEGY

• Situation Analysis
• Strategic Option
• SITUATION ANALYSIS
• General Environment
• Competitive Environment
• Organization
• Internal Environment
• SWOT Analysis

Part 2. STRATEGIC OPTION
: 1400-1800 [4 hrs]

• COMPETITIVE STRETEGY
• Three Generic Strategies
• DEVELOPMENT STRATEGY
• Alternative Directions For
Strategic Development

• PORTPOLIO STRATEGY
• Boston Consulting Group
[BCG] Growth Share Matrix

• McKinsey/Attractiveness
Strength Matrix

• BLUE OCEAN STRATEGY
• MAQASID AL-SHARIAH
STRATEGY


STRATEGIC

S

MANAGEMENT

SUM

M
Slide 2

Definition
of

STRATEGY
• As Plan = deals with how leaders try to establish direction for the
company, to set them on predetermine courses of action

• As Pattern = focuses on action, reminding us that the concept is
an empty one if it does not take behavior into account

• As Position = encourages us to look at organizations in their
competitive environments

• As Perspective = raises intriguing questions about intention and
behavior in a collective context

• A Strategy is a pattern or plan that integrate an organization’s major goals,
policies, and action sequences into a cohesive whole.

James Brian Quinn,[1988], The Strategy Process, Prentice Hall

Definition
of

Management
• “Knowing exactly what you want [people] to do, and then seeing that they do it in
the best and cheapest way”.

- Frederick Taylor

• “Application of knowledge to realities in order to attain desired results”
•

K. O’Donnell, Weitrich 1986, Essential of Management, McGraw Hill

• “A set of activities [including planning and decision making, organizing, leading, and

controlling] directed at an organization’s resources, [human, finical, physical and
information] within the aim of achieving organizational goals in an efficient and
effective manner”
• efficient = using resources wisely and in a cost-effective way.
• effective = making the right decisions and successfully implementing them.
Ricky W Griffin [1996] Management, Houghton
Mifflin

Definition
of


• ALL THAT IS NECESSARY TO
POSITION THE COMPANY A WAY
THAT WILL ASSURE ITS LONGTERM
SURVIVAL
IN
A
COMPETATIVE ENVIRONMENT

FORMULATION OF STRATEGY
MATCHING
CAPABILITIES

ENVIRONMENT

• In essence, the
FORMULATION OF
STRATEGY is
concerned with
MATCHING the
CAPABILITIES of the
organization with its
ENVIRONMENT

MATCHING = SITUATION ANALYSIS [The Firm and its Environment]

STRATEGY FORMULATION
5

3

SITUATION ANALYSIS

•

GENERAL ENVIRONMENT

•
•

Firm’s Position - Lifecycle Model,
Strategic Group analysis, Market
Share Analysis

•

Recourses and Capabilities: The
Value Chain

COMPETITIVE STRETEGY

•
•

•

Three Generic Strategies

DEVELOPMENT STRATEGY

•

Alternative Directions For Strategic
Development

PORTPOLIO STRATEGY

•

Boston Consulting Group [BCG]
Growth Share Matrix

•

INTERNAL ENVIRONMENT

•
•

Product, Supplier, Buyer, Rivalry,
Labor

ORGANIZATION

•
•

Economics, Technological, Legal,
Political, Social & Cultural

COMPETITIVE ENVIRONMENT

•
•

STRATEGIC OPTIONS

McKinsey/Attractiveness Strength
Matrix

•

BLUE OCEAN STRATEGY

•

MAQASID AL SHARIAH STRATEGY

SWOT ANALYSIS

•

Determine Firm Strategic position,
Capability of Present Strategy to
changes

SITUATION ANALYSIS
• GENERAL ENVIRONMENT
• Economics, Technological, Legal, Political, Social & Cultural
• COMPETITIVE ENVIRONMENT
• Product, Supplier,Buyer,Rivalry,Labor

• ORGANIZATION
• Firm’s Position - Lifecycle Model, Strategic Group analysis, Market Share
Analysis

• INTERNAL ENVIRONMENT
• Recourses and Capabilities: The Value Chain
• SWOT ANALYSIS
• Determine Firm Strategic position, Capability of Present Strategy to
changes

1. General Environment
[SITUATION ANALYSIA]

• Economics factors :
• Technological factors :
• Legal factors :
• Political factors :
• Social & Cultural factors :

2. Competitive Environment
[SITUATION ANALYSIA]

• Product, Supplier,Buyer,Rivalry,Labor [ PROS BURILA]
Potential Entrants
Treats of new entrants

Suppliers

Bargaining
Power

Industry
Competitors

Bargaining
Power

Buyers

Rivalry Among
Existing Firms
Porter 1980
The Five Forces of
Industry Competition

Treats of substitute products or services
Substitutes

3. Organization
[SITUATION ANALYSIS]

• Firm’s Position :
• Lifecycle Model:
• Strategic Group Analysis:
• Market Share Analysis

3.1 Firm’s Position
[SITUATION ANALYSIS: Organization]

• Comparing environmental influences have on the firm and its
competitors. Assessment of the overall impact the changes are likely to
have on companies
Company
Overall

Healthy living

PROTONGood

Fair

Prices

Design

Fair

Thriftiness

Excellent

Good

KIA
Excellent

Excellent

Good

Good

Excellent

MZADA
Excellent

Excellent

Excellent Good

Excellent

LADA
Fair

Fair

Good

Fair

Fair

3.2 Life-Cycle Model

[SITUATION ANALYSIS: Organization]

Industry Sales

• INTRODUCTION

GROWTH

Proton Perdana V6
Proton Satria GTi

•
•
•
•
•
•
•

MATURITY

Proton
Wira

DECLINE

Proton
Iswara

Growth Rate

Slow

Accelerating

Leveling

Declining

Sales

Low

Rising

Peak

Declining

Unit Cost

High

Declining

Product Line
Profits
Competitors
Pricing

Short
Negative
Few
Cost Plus

Low

Low

Growing

Diversified

Shrinking

Increasing

High

Declining

increasing

more but stable

Declining

Penetration

Competitive

Cut

3.3 Strategic Group Analysis
FORD

ROVER

VW
MAZDA

NISSAN
HONDA
TOYOTA

SUZUKI
DAIHATSU
SKODA
LADA

Local

•

CRYSLER
FIAT
RENAULT
PEUGEOT

SEAT

Narrow

Product Range Covered

Broad

[SITUATION ANALYSIS : Organization ]

VOLVO

PROTON

MERCEDES
BMW
AUDI

SAAB

Multinational

Extend of Geographic coverage [in terms of sales

3.4 Market Share Analysis
[SITUATION ANALYSIS : Organization ]

100 %

Proton Market Shares in Malaysia 1998
Mercedes
BMW

0%

MARKET SHARES

Proton
Perodua

Audi
Volvo

Perodua
Micro

Mini

Medium

Big

Luxury

•

MARKET SEGMENTS

4x4

Proton-Lotus
Sports

4. Internal Environment
• Recourses and Capabilities: The Value Chain, Porter
Firm Structure
1985
Human Resource Management
Technology Development
Procurement

PRIMARY ACTIVITIES

Marketing
and sales

Services

in

Outbound
Logistics

M
a rg

Operation

n

Inbound
Logistics

i
arg
M

SUPPORT
ACTIVITIES


5. SWOT Analysis

• STRENGTH &
WEAKNESSES OF
THE ORGANIZATION
AGAINST THE
OPPORTUNITIES
AND TREATS
THROWN OUT BY
THE ANALYSIS OF
EXTERNAL
ENVIRONMENT

STRATEGIC OPTION
1. COMPETATIVE STRATEGIES
2. DEVELOPMENT STRATEGIES
3. PORTPOLIO STRATEGIES
4. BLUE OCEAN STRATEGY
5. MAQASID AL SHARIAH STARTEGY

Criteria for evaluating the Strategic Option
• SUITABILITY

• relation to the state of the internal and

external environment[based on Situational
Analysis

• FEASIBILITY

• assessment of how it might work in practice
• ACCEPTABILITY

• consequences in terms of the risk and return
to interested parties [shareholders,
management, etc]

1. Competitive Advantage
[STRATEGIC OPTION]

• Three Generic Strategies. [Porter 1985]

Broad Target
Narrow Target

Competitive Scope

Low Cost

Competitive Advantage
Differential

1. Cost Leadership

2. Differentiation

3A. Cost Focus

3B. Differential Focus

1.1 Cost-Leadership Strategies
[Examples of Successful Implementation ]

• BiC in ballpoint pens and disposable razors
• Black&Decker in tools
• Amstrad in consumer electronics
• Aldi and KwikSave in the retail grocery trade
• The Superdrug chemist chain

1.1.1 Cost-Leadership Strategies
[Striving for an overall low-cost position ]
•
•
•
•

Leader in constructing the most efficient plants
Implementing cost-reducing technological advances
Keeping overhead and administrative costs to a minimum
Containing costs in R&D, advertising, service and
distribution,
• WHILE MAINTAINING PRODUCT QUALITY
• THE FIRM HAS SUPERIOR COORDINATION ACROSS

LINKAGES IN THE VALUE CHAIN, WHILE KEEPING
COSTS TO A MINIMUM IN EACH ACTIVITY

[Backfiring ]
• Ford Motor Company 1900, the low cost leader, successful
strategy for decade

• But fail to take into account the changing nature of
consumer preferences

• Inflexibility, notably in production, and spread right across
the value chain into other activity, thus Ford could not
respond to market change

• Example of Ford Model T 1900s for mass production at low
costs, 55% market share in 1921 drop to 45% in 1925 and to
35% in 1926. Consumer shift to Chevrolet, little expansive
but better specification.

[Possible Risks ]

• Technological Changes can result in cost or process
breakthrough which
efficiency gains

nullify

past

investments

and

• May be short-lived if rivals easily imitate the leader’s lowcost methods

• Shift in market with consumers being less price sensitive
• requires firms to be the overall cost leader - this would

result in fierce competition and squeeze the profit until
leader was established and recognized.

1.2 Differentiation Strategies
• Coca-Cola - A different taste
• Rolex - Unusual quality and distinctiveness
• Mercedes Benz - Engineering design & performance
• Rolls Royce -Top-of-the-line image and reputation
• Sony - Technological leadership in consumer
electronics

1.2.1 Differentiation Strategies
[Sustained Competitive Advantage is to come from four areas ]
• Technical Superiority
• Quality
• Giving Customers More Support Services
• More Value [The Same Money

1.2.2 Differentiation Strategies
[Be warned - there are risks ]

• May result in a selling price so high that buyers opt
for lower-priced brand

• Buyers may decide, over a period of time, decide
that they do not need extra features.

• Rival may imitate the product or service attributes buyers cannot distinguish

• Broad-based differentiators may be out-maneuvered
by specialist firms focusing on particular segment

1.3 Focus Strategies

•
•
•
•
•
•

Cray Computer - Large Main Frame
Rolls Royce - Luxury cars
Land Rover - Off Road Vehicles
Porsche - Unique Sports Cars
Lotus - Sports Cars Excellent Handling
Virgin Airline - Low-cost transatlantic flight

1.3.1 Focus Strategies
[Risks Involved ]

• Possibility that broad-range competitors will find
effective ways to match the focused firm in serving
market segment

• Unfavorable shifts in buyer preferences may leave
the focuser without viable market

• Competitors may find sub- segments within the
target segment and out focuses the focuser

[Alternative Directions For Strategic Development]
Market
Product
Line
PL0

Mo

M1

Market
Penetration

M2

…………………….

.Mn

Market Development

PL2
‘
.
.
PLn

Product Development

PL1

Diversification

Paul Dobson & Ken Starkey [1993], The Strategic Management , Blackwell


• 1. MARKET PENETRATION
• Continue with the same market with the same product
• Increases its market share through improved quality or productivity
• Market share is maintained through consolidation

• 2. PRODUCT DEVELOPMENT
•
•
•
•

Develops new products while maintaining its present markets
Firms continually introducing product lines
Typically in consumer-oriented industries-tastes are changing
Products with short-life-cycle : computer, electronics products


• 3. MARKET DEVELOPMENT
• Maintaining present product lines but extends its market
operation

• Opening new market segments, devising new uses for the
products

• Extending new geographical areas for its present products
Globalization


• 4. RELATED DIVERSIFICATION
• Increasing the range of activities in the value chain
• ‘Vertically integrate backwards’ towards its inputs [e.g producing
raw materials, machinery - for better quality and price

• ‘Vertically integrated forwards’ towards outputs[ e.g. moving to

transportation, distribution, retailing, or services and maintenance, to
have control over final product market.

• ‘Horizontally integrated’ towards substitute or complementary
activities[ e.g. marketing-by-products]

[Alternative Directions For Strategic Development

• 5. UNRELATED DIVERSIFICATION
• Covers beyond the boundaries of the industry presently operates
• Appropriate when current markets are saturated and/or declining
• New activities sought should be complementary to current activities,
either in terms of resources or finances [combined effect should be
3+3=8 [e.g join production, common use of facilities etc]

• Divisionalized or internally restructured the firm’ management
bureaucracy

[Categories of Methods]

• Internal Development
• Appropriate when activities requires a build-up knowledge and skills
- highly technical in design or methods of manufacturing

• Acquisition
• To enter new product or market areas [e.g. R&D, knowledge of
markets and products, production system, all these may take years to
develop internally]

• Joint Development and Agency Relations
• Entering into partnership or Joint venture
• Franchising and agency

3. PORTFOLIO STRATEGIES
HIGH [Higher than
LOW [Slower than
the economy as a whole] the economy as a whole]

Industry Growth Rate

[Boston Consulting Group [BCG] Growth-share matrix]

Relative Market Share Position
STARS

CASH COWS

PROBLEM CHILDREN

DOGS

Note: The sizes of the circles indicate the sizes of revenues generated


• STARS
• High Growth and High Share
• Strongly placed in the growth phase of the product life cycle
• Cash generation is strong but not sufficient to finance rapid growth

• CASH COWS
• Dominant products in a mature market
• Produce excess cash that can be invested in STARS and PROBLEM
CHILD

• DOGS
• Low-share products in low-share markets
• Cash flow is usually low and can be negative due to weak competitive
position

• Divest and re-allocate to STARS or PROBLEM CHILDREN

• PROBLEM CHILDREN
• Low-share of a growing market
• Considerable cash is required to maintain share
• Investment to create a star is risky

STAR

PROBLEM CHILD

DOG
CASH COW

[Drawbacks of BCG Growth Share Matrix]

• Is mainly concerned with the uses of cash flows
• Its relies too heavily on the notion of product lifecycles and cost efficiency
for generating profits

• It neglects that small market share can still result in high profits if
product quality is high and unique.

• It limits the measurement to business strength [market share] and market
attractiveness [growth rates] only.

[McKinsey/ General Electric Attractiveness-Strengths Matrix]

Medium
High

Business Strength

Low

Industry Attractiveness
High
Medium
Low

Note:
The sizes of circles
indicate the sizes
of revenues
generated
and the shaded
areas in each circle
indicate product’s
market share


• BUSINESS STRENGTH
• is measured in terms of organization’s ability and relative
competitive position and to take into consideration:
• relative market shares
• profit margins relative to competitors
• able to compete on price and quality
• knowledge of customer and market
• competitive strength and weakness
• technological capability
• employee relations and goodwill
• the caliber of management


• INDUSTRY ATTRACTIVENESS
• is measured with reference to the operating and general environment
and addresses:

• market size and its growth rates
• industry profit margins [both historic and projected]
• competitive intensity
• economies of scale
• the nature of demand [seasonality , cyclicality]
• technology and capital requirements
• barriers to entry and exist
• social, environmental and legal impacts
• emerging opportunities and threats

4. BLUE OCEAN
STRATEGY
By
W. Chan Kim –The Boston Consulting Group ,
Chair Professor of Strategy and International
Management at INSEAD,
and
Renee Mauborgne, -The INSEAD Fellow and
Professor of Strategy and Management

BLUE OCEAN STRATEGY
The Essence:
“Creating Uncontested Market Space
and Make Competition Irrelevant”

RED OCEAN STRATEGY vs BLUE OCEAN STRATEGY
RED OCEAN STRATEGY

BLUE OCEAN STRATEGY

Compete in existing market space

Create uncontested market space

Beat the Competition

Make the competition irrelevant

Exploit existing demand

Create and capture new demand

Make the value-cost trade-off

Break the value-cost trade-off

Align the whole systems of a firm’s
activities with its strategic choice of
differentiation or low cost.

Align the whole system of a firm’s
activities in pursuit of differentiation
and low costs

BLUE OCEAN STRATEGY
Align the whole system of a
firm’s activities in pursuit of
differentiation and low costs

From Head to Head Competition to Blue Ocean Creation
Head to Head Competition

Blue Ocean Creation

INDUSTRY

Focuses on rivals within its industry

Looks across alternative industries

STRATEGIC GROUP

Focuses on competitive position
within strategic group

Looks across strategic groups within
industries

BUYER GROUP

Focuses on better serving the buyer
groups

Redefines the industry buyer group

SCOPE OF PRODUCT OR SERVICE
OFFERING

Focuses on maximizing the value
product and service offering within
the bounds of its industry

Looks across to complementary
product and service offering

FUNCTIONAL -EMOTIONAL
ORIENTATION

Focuses on improving price
Rethinks the functional-emotional
performance within the functional- orientation of its industry
emotional orientation of its industry TIMEX, BODYSHOP,

TIME

Focuses on adapting to external
trends as they occur

Participates in sharing external
trends over time
iTUNE, MP3

SIX PRINCIPLES OF BLUE OCEAN STRATEGY
Formulation Principles
1. Reconstruct market boundaries.
2. Focus on the big picture, not the numbers
3. Reach beyond existing demand
4. Get the strategic sequence right
Execution Principles
5. Overcome key organizational hurdles.
6. Build execution into strategy

Cirque du Soeil as an example of putting BLUE
OCEAN STRATEGY back since 1984
Cirque du Soeil [CDS], Canada’s largest cultural exports, created in 1984 by group of
street performers.
CDS productions - 40 million people in 90 countries in less than 20 years. It revenues
took champion of circus industries more than 100 years to attain.

CDS Success:

1.Did not win by taking customers from shrinking circus industry
2.Did not compete with Circus Players or Industry.
3.It created uncontested new market space that made the competition
irrelevant.
4.It appealed to a whole new group of customers.
5.CDS succeeded because it realized that to win in the future, companies
must stop competing with each other.

MALAYSIAN Experience – From Blue Ocean to Red Ocean
The first to introduce to the world the usage of e-Identification
Cards.

MALAYSIAN Experience – From Blue Ocean to Red Ocean
The first to introduce to the world the usage of e-Passport. Now
it going to become a world standard.

My-Kad to I-Kad
From Blue Ocean to Red Ocean than to Blue Ocean

World’s First Variable Density Tunnel Boring Machine

Examples of Blue Ocean Strategy

Examples of Blue Ocean Strategy

The Malaysian Police force kickstarted its 2014 Hybrid Revolo
engine, first-of-its-kind plug-in technology for car and light
commercial vehicles
The prime minister witnessed a
memorandum of understanding signing
between the Police and Malaysian Green
Technology Corporation as well as
DFRAN Technologies Research Sdn Bhd
responsible in introducing the Revolo
engine, first-of-its-kind plug-in
technology for car and light commercial
vehicles.
The hybrid engine capable
1.Improving acceleration up to 40 %,
%
2.Fuel efficiency by 35%,
3.Reduce emission by 30%
4.Lower travel cost by 25 %.

5. MAQASID AL-SHARIAH STRATEGY
MAQASID = ULTIMATE OBJECTIVES
AL-SHARIAH = THE COMAMMADMENT OF ALLAH FOR ALL
ASPECT OF HUMAN ACTIVITIES IN THIS WORLD

MANAGEMENT = ACTIVITIES OF THINKING, PLANNING,
ORGINIZING, LEADING & CONTROLING

MAQASID AL- SHARIAH = ULTIMATE OBJECTIVES OF THE

COMAMMADMENT OF ALLAH FOR ALL ASPECT OF HUMAN ACTIVITIES
INCLUDING MANAGEMENT, IN THIS WORLD:

1.

PARENTS, COMMUNITY LEADERS, COMPANY
MANAGERS & NATION LEADERS
SHOULD
UNDERSTAND AND APPLY THIS MAQASID ALSHARIAH IN MANAGING FAMILIES,
COMMUNITIES, COMPANIES, NATIONS,
RESPECTIVELY.
SHAYA’A OTHMAN

PROTECTION OF
RELIGION

2.
3.

PROTECTION OF LIFE

4.

PROTECTION OF
INTELLECT

5.

PROTECTION OF WEALTH

PROTECTION OF
OFFSPRING

MAQASID AL SHARIAH AS A
CORPORATE STARTEGY
1.
2.
3.
4.
5.

PROTECTION OF RELIGION
PROTECTION OF LIFE
PROTECTION OF OFFSPRING

FUNCTIONAL STRTAEGIES

PROTECTION OF INTELLECT
PROTECTION OF WEALTH

1. COMPETATIVE STRATEGIES

FULFILLING THE
ABOVE OBJECTIVES
OF SHARIAH

3. PORTPOLIO STRATEGIES
4. BLUE OCEAN STRATEGY

MBA
Strategic Management
Distinction

EVALUATION
• MISSION
• To Score Distinction
Result of The Exam
A

• OBJECTIVE
• To Understand [ %]
[ %]
• To Applied
Above 80% Distinction

ASSIGMENT
[ To get Distinction you must score 80% and above.
Below 50% is definitely failed ]

Explain in details how you can apply Maqasid AlShariah in Strategic Management of your
Organization or your Company.
[ To be submitted by 14 Rabi Al-Awal 1435 / 15. 01.2014
in Soft Copy to my e-Mail AND Hard Copy to of Office ]
e-Mail to sottoman@gmail.com

STRATEGIC MANAGEMENT: INCLUDING APPLICATION OF MAQASID AL-SHARIAH AS STRATEGIC OPTION

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