The role of management when setting long-term goals and implementing cross-functional decisions that should enable a business to reach these goals.

1. UNIT 6
STRATEGIC MANAGEMENT
CHAPTER 34
WHAT IS STRATEGIC MANAGEMENT?
Siti Naquiah Mohd Hanapi
A-Levels Centre
International Islamic School Malaysia, Kuala Lumpur

2. UNIT 6
Strategic
management
34.
What is
strategic
management?
35.
Strategic
analysis
36.
Strategic choice
37.
Strategic
implementation

3. 34. Strategic
Management
34.1. Learning
objectives
34.2. Key definitions
34.3. What strategic
management
involves
34.4. Establishing
corporate strategy
34.5. Corporate
strategy and
organisational
structure
34.6. Business
strategy and
competitive
advantage
34.7. Case study –
GlaxoSmithKline plc
34.8. References

4. 34.1. Learning objectives
• Understand the meaning of corporate strategy and strategic management
• Differentiate between strategic decisions and tactical decisions
• Analyse the need for strategic management
• Discuss the link between strategy and organisational structure
• Evaluate the importance of business strategy in determining competitive
advantage in an increasingly competitive world

5. 34.2. Key definitions
• Corporate strategy: a long-term plan of action for the whole organisation,
designed to achieve a particular goal
• Tactic: short-term policy or decision aimed at resolving a particular problem
or meeting a specific part of the overall strategy
• Strategic management: the role of management when setting long-term goals
and implementing cross-functional decisions that should enable a business to
reach these goals

6. 34.3. What strategic management involves
Key stages of strategic management
1. Assessing the current position of the company in relation to its
market, competitors, and the external environment.
2. Setting the company’s mission, vision, and objectives – these
may be new if the business is undergoing a significant change
of direction.
3. Taking important long-term decisions that will push the
business towards the objectives set.
4. Integrating and coordinating the activities of the different
functional areas.
5. Allocating sufficient resources to put decisions into effect.
6. Evaluating success – evaluating the overall performance of the
business and its progress towards objectives.
Reasons why important
1. Decisions that do not start from knowledge of ‘where the
business is now’ may be inappropriate and ineffective.
2. The importance of having clear and well-defined aims and
objectives to provide a clear sense of overall direction to the
work of the whole organisation.
3. A new direction for a business will require key decisions to be
taken about products and markets.
4. As strategic decisions are cross-functional, all departments
must work together to implement them successfully. So a
decision to enter a new geographical market will need input
from finance, marketing, human resource, and operations
management.
5. Changing strategy is rarely cheap and resources must be
provided at the right time and in sufficient quantities to allow
the new policies to work.
6. The outcome of the strategy should be measured against the
original objectives set for it. Lessons can be learnt from both
failed and successful strategies.

7. Strategic decisions
VS
Tactical decisions
Resources
available
Strength of
the business
Competitive
environment
Objectives
Key stages of
strategic management
Strategic decisions
• Long term
• Difficult to reverse
• Taken by directors and senior managers
• Cross-functional – involve all major
departments in the business
• E.g. to develop new markets abroad
Tactical decisions
• Short to medium term
• Reversible with incurred costs
• Taken by less senior managers and subordinates
with delegated authority
• The impact is often only on one department
• E.g. to sell products in different-sized packaging
34.4. Establishing corporate strategy

8. 34.5. Corporate strategy and organisational structure
‘Structure Follows Strategy’ by Alfred Chandler
(based on case studies of Du Pont, General
Motors, Sears Roebuck, and Standard Oil)
Companies are driven by market growth and technological
change to develop greater diversity in the markets they operate
in and the products they sell.
• Acquired labour and raw materials to allow for growth that
required the build-up of marketing and distribution channels.
• Established a functional or departmental structure to
improve specialisation and efficiency.
• Adopted growth-and-diversification strategies – new markets
and new products to overcome the limits of the original
home market.
• Developed divisional organisational structures that allowed
geographical regions or product groups to be created with
considerable independence but controlled, ultimately, from a
centralised headquarters – this is called the M-form
organisational structure (multi-divisional structure).
How could ‘Strategy of Diversity’ be managed
effectively?
o Merger to create product-focused profit centres
 1988’s Asea & Brown Boveri (ABB); adopted global
market penetration in key product areas i.e. power
systems and robotics  cross-functional top executives
 decentralisation of responsibility (ABACUS system)
o Development of new markets lead to new structure
 Coca-cola decentralised its organisational structure by
cutting half of its Atlanta headquarters and moving
regional managers closer to the countries they were
responsible for  different geographical areas have
different market requirements i.e. India
o Conglomerate wants to cut costs and increase flexibility
 Tata group of companies delayered its business units 
clearly defined job descriptions  mobility across the
organisation  opportunity to work with different
divisions and group companies

10. 34.6. Business strategy and competitive advantage
Four Building
Blocks of
Distinctive
Competencies
Quality
Innovation
Customer
Responsiveness
Efficiency
Michael Porter’s
Cost Advantage
(lower costs)
+
Differentiation Advantage
(differentiated products)

11. 34.7. Case study – GlaxoSmithKline plc
• GlaxoSmithKline plc (GSK) is a British multinational pharmaceutical, biologics, vaccines, and consumer
healthcare company which has its headquarters in Brentford, London. As of March 2014, it was the world’s
sixth-largest pharmaceutical company after Johnson & Johnson, Novartis, Hoffmann-La Roche, Pfizer,
and Sanofi, measured by 2013 revenue. The company was established in 2000 by the merger of Glaxo
Wellcome (formed from the acquisition of Wellcome plc by Glaxo plc) and SmithKline Beecham plc (formed
from the merger of Beecham Group plc and SmithKline Beckman Corporation, which in turn was formed by
combining the Smith, Kline & French, and Beckman companies). History of GSK http://www.gsk.com/en-
gb/about-us/our-history/
• How GSK creates its value? http://www.gsk.com/en-gb/about-us/how-we-create-value/
• High quality of products offered to different categories of people http://www.gsk.com/en-gb/products/
• Achieve efficiency by producing output using lesser amount of input i.e. global outsourcing
• Continuous research and development activities across the globe http://www.gsk.com/en-gb/research/
• Superior customer responsiveness http://www.gsk.com/en-gb/consumers/

12. Watch video – GSK Andrew Witty in Africa

13. References
Chandler, A. D. (2003). Strategy and Structure: Chapters in the History of the American Industrial
Enterprise. Cambridge, MA: MIT Press.
Delaney, E. L. (2003). GlaxoSmithKline pharmaceuticals research and development: document
delivery in a global corporate environment. Interlending & Document Supply, 31(1), 15-20.
Mangan, J. and Christopher, M. (2005). Management development and the supply chain manager of
the future. The International Journal of Logistics Management, 16(2), 178-191.
Mascarenhas, O. A., Kesavan, R., and Bernacchi, M. (2005). Global marketing of lifesaving drugs: an
analogical model. Journal of Consumer Marketing, 22(7), 404-411.
Stimpson, P. and Farquharson, A. (2010). Cambridge International AS and A Level Business Studies.
2nd Ed. United Kingdom: Cambridge University Press.