Strategic management involves analyzing a firm's internal and external environment to formulate strategies to achieve competitive advantage. It is a process that includes analyzing the environment and a firm's resources, formulating strategies, and implementing strategies. Strategy formulation develops long-term plans based on analyzing opportunities and threats in the external environment as well as a firm's strengths and weaknesses.

1. Strategic Management
UNIT-I NMBA 041
DR. ZIAUL HASSAN BAKHSHI

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Strategic Management
Strategic Management
– The set of decisions and actions used to formulate and
implement specific strategies that will achieve a
competitively superior fit between the organization and its
environment so as to achieve organization goals
Strategy
– The general plan of action that describes resource
allocation and other activities for dealing with the
environment and helping the organization attain its goals

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Strategy Formulation and Implementation
Strategy Formulation
– The integrating knowledge of the environment, vision, and
mission with the core competence in such a way as to
achieve synergy and create customer value
Strategy Implementation
– Putting strategy into action by adjusting various parts of
the organization and directing resources to accomplish
strategic goals

4. Definition of Strategic Management
Strategic management consists of the
analysis, decisions, and actions an
organization undertakes in order to create
and sustain competitive advantages (Dess,
Lumpkin, & Eisner, Strategic Management:
Creating Competitive Advantage, 3rd Ed., p.
9).

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Thomson Canada Limited.
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Important definitions
Risk
An investor’s uncertainty about the economic gains or
losses resulting from a particular investment.
Returns equal to what an investor expects from other
investments with similar amount of risk.
Average returns
Strategic management process
The full set of committee's decisions and actions
required for a firm to achieve strategic competitiveness
and earn above average returns.

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The Strategic Management Process
The full set of commitments, decisions,
and actions required for a firm to achieve
strategic competitiveness and earn above-
average returns.

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Thomson Canada Limited.
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The Strategic Management Process

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Thomson Canada Limited.
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What is Strategy?
• An integrated and coordinated set of
commitments & actions designed to exploit
core competencies and gains and gain a
competitive advantage.

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Thomson Canada Limited.
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What is Strategy?
“A unified, comprehensive, and integrated plan designed to ensure
that the basic objectives of the enterprise are achieved.” (Glueck,
1980:9)
“The pattern or plan that integrates an organization’s major goals,
policies, and action sequences into a cohesive whole.” (Quinn, 1980)
“A good strategy… neutralizes threats and exploits opportunities while
capitalizing on strengths and avoiding or fixing weaknesses.”
(Barney, 1997:17)
“A pattern of resource allocation that enables firms to maintain or
improve their performance.

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Intended, Emergent and Realized Strategies

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Strategy Formulation: the development of long-range
plans for the effective management of environmental
opportunities and threats in light of organizational
strengths and weaknesses (SWOT)
Basic Elements of Strategic Management

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Mission- the purpose or reason for the organization’s
existence
Vision- describes what the organization would like to
become
Objectives- the end results of planned activity
Basic Elements of Strategic Management

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Strategies- form a comprehensive master plan that
states how the corporation will achieve its mission
and objectives
– Corporate
– Business
– Functional
Policies- the broad guidelines for decision making
that links the formulation of a strategy with its
implementation
Basic Elements of Strategic Management

14. Definition of Strategic Management
• Analysis
– Strategic goals (vision, mission, strategic objectives)
– Internal and external environment of the firm
• Decisions
– What industries should we compete in?
– How should we compete in those industries?
• Actions
– Allocate necessary resources
– Design the organization to bring intended strategies to
reality

15. Mintzberg’s Views of Strategy
• Plan - consciously intended course of action
• Ploy - maneuver to outwit opponent
• Pattern - consistency in behavior
• Position - location in environment
• Perspective - way of perceiving the world

16. Strategic Management Process
• Analysis
– Hierarchy of goals
– Analysis of external and internal environments
• Formulation
– What business(es) should we be in?
– For each, what is the basis for competitive advantage
(low cost, differentiation, focus)?
• Implementation
– Functional tactics
– Culture and organization structure

17. Hierarchy of Goals
Coherence in Strategic Direction
Company vision
• Massively inspiring
• Overarching
• Long-term
• Driven by and evokes passion
• Fundamental statement of the
organization’s
– Values
– Aspiration
– Goals
Company vision

18. Hierarchy of Goals
Company vision
Coherence in Strategic Direction
Mission statements
• Purpose of the company
• Basis of competition and
competitive advantages
• More specific than vision
• Focused on the means by
which the firm will compete
Mission statements

19. Hierarchy of Goals
Company vision
Mission statements
Coherence in Strategic Direction
Strategic objectives
• Operationalize the mission
statement
• Measurable, specific,
appropriate, realistic,
timely, challenging, resolve
conflicts that arise, and
yardstick for rewards and
incentives
Strategic objectives

20. Levels of Strategy
Corporate-level
Functional-level
Business-level
Operations Marketing Finance...
Manager
WaltDIsneyPictures TouchstonePictures...
StudioEntertainment
Disneyland...
Parks&Resorts
DisneyStores...
ConsumerProducts
ABCNetwork...
MediaNetworks
CEO
DIsneyCorporation

21. Copyright Jeff Dyer, 2001
Strategic Management
Strategy Profit
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

22. Introduction to Strategic Management
Strategic Management Process
• Strategic Inputs: Internal and External Scanning
• Strategic Actions: Formulation and implementation of
strategy
• Strategic Outcomes: Above, at or below average
returns

23. Introduction to Strategic Management
From Organizational Vision to Tactical Steps
• Define the Organization:
– Vision
– Mission Statement
• Understand the Operating Environment
– External Environment (Threats and Opportunities)
– Internal Conditions (Strengths and Weaknesses)
• Determine Strategic Alternatives
• Formulate Strategy (long term)
• Implement Strategy through Tactics (short term)

24. Introduction to Strategic Management
SWOT Analysis
External Analysis –
EFAS Matrix (Chapter
3)
Internal Analysis -
IFAS Matrix (Chapter
4)
Strategy
Implementation
Organizing
(Chapter 8)
Staffing (Chapter
9)
Evaluating (Chapter
10)
Strategy
Formulation
Alternative
Strategies – TOWS
Matrix (Chapter 5)
Corporate Strategy
(Chapter 6)
Functional Strategy
(Chapter 7)

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Basic Elements of the Strategic Management Process
Evaluation
and
Control
Strategy
Implementation
Environmental
Scanning
Strategy
Formulation

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6
Identify
current
mission
and
strategic
goals
Conduct
competitive
analysis:
•strengths
•weakness
•opportunity
•threats
Develop
specific
strategies:
•corporate
•business
•functional
carry out
strategic
plans
maintain
strategic
control
assess
organisational
factors
assess
environmental
factors
Strategy implementationStrategy formulation

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The Evolution of Strategic ManagementThe Evolution of Strategic Management
DOMINANT
THEME
MAIN
ISSUES
CONCEPTS
&
TECHNIQUES
IMPLEMENT-
ATION
1950s 1960s Early-mid Late1970s Late 1980s Late 1990s
1970s early 1980s early 1990s early 2000s
Budgetary Corporate Corporate Analysis of Quest for Strategic
planning & planning strategy industry & competitive innovation
control competition advantage The “New
Economy”
Financial control Planning growth Diversifica- Positioning Competitive Innovation &
ion advantage knowledge
Budgeting Forecasting & Portfolio Analysis of Resource Dynamic
project appraisal investment planning. industry & analysis. sources of
planning Synergy competition Case advantage
market competences Knowledge
share management
cooperation
Emphasis on Rise of Diversifi- Industry/market Restructuring Virtual orga-
financial corporate planning cation. selectivity. BPR. nization.
management departments Quest for Active asset Refocusing Alliances
& formal global management Outsourcing Quest for
planning market share critical mass

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The Levels of Strategy
R&D
HR
Finance
Production
Mktg/Sales
Division A
R&D
HR
Finance
Production
Mktg/Sales
Division B
R&D
HR
Finance
Production
Mktg/Sales
Division C
Corporate
Headquarters
Corporate - General Electric
Business - Home Appliances
Functional - e.g., Production

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Corporate Strategy
• At the corporate level, value creation can occur if
the individual parts of a firm are integrated into a
coherent whole.
• Corporate strategy is the way a company creates
value through the configuration and coordination of
its multi-market activities.

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Eclectic Definitions of Strategy and
Strategic Management
• Mintzberg’s 5 P’s of Strategy:
– Planning
– Ploys (non-credible strategies)
– Pattern (“emerging strategy”)
– Position (firm “dynamic fit” with
environment)
– Perspective (Ideology and culture)

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Strategic Management Defined
Set of managerial decisions and actions that
determines the long-run performance of a
firm.

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Basic Concepts of Strategic Management
4 Phases of Strategic Management
1. Basic financial planning
2. Forecast-based planning
3. Externally-oriented planning
4. Strategic management

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Basic Concepts of Strategic Management
Basic Elements of the Strategic Management
Process

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Strategy Formulation
Mission Statement
• Purpose/reason for organization
• Promotes shared expectations
• Communicates public image
• Who we are; what we do; what we aspire
to

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Basic Concepts of Strategic Management
Hierarchy of
Strategy

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Goals & Objectives
Corporate Goals/Objectives
–Profitability (net profit)
–Growth
–Resource utilization (ROE, ROI)
–Market leadership

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Basic Concepts of Strategic Management
3 Types of Strategy
–Corporate strategy
–Business strategy
–Functional strategy

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Basic Concepts of Strategic Management
Corporate Strategy
–Stability
–Growth
–Retrenchment

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Basic Concepts of Strategic Management
Business Strategy
–Competitive strategies
–Cooperative strategies

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Basic Concepts of Strategic Management
Functional Strategy
–Technological leadership
–Technological followership

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Hambrick and Fredrickson – Good Strategy
5 Elements of Good Strategy
1. Arenas
2. Vehicles
3. Differentiators
4. Staging
5. Economic logic

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Mission Statements
•Enduring statement of purpose
•Distinguishes one firm from another
•Declares the firm’s reason for being

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The Bellevue Hospital, with respect, compassion,
integrity, and courage, honors the individuality and
confidentiality of our patients, employees, and
community, and is progressive in anticipating and
providing future health care services.
Mission Statement Examples
-- The Bellevue Hospital

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Importance of Mission
Mission
Resource Allocation
Unanimity of Purpose
Organizational Climate
Focal point for work
structure
Benefits from a strong mission

45. Ch 2 -45
Social Policy & Mission
Social policy should be integrated in all
strategic-management activities
Mission should convey the social responsibility
of the firm

46. Ch 2 -46
Mission
Elements
Customers
Markets
Employees
Public
Image
Self-Concept Philosophy
Survival
Growth
Profit
Products
Services
Technology

47. Vision/Mission Statements
• Statements that explain who we are
– Type of organization
– Products/services
– Needs we fill
• Statements that explain our direction, our purpose,
our reason for being
– What difference do we make?
• Statements that explain what makes us unique
– Values
– People
– Combination of products and services

48. Business Vision Statement
A statement that clearly defines the firm’s
“reason” for being in business
– Should significantly stretch the resources and
capabilities of the farm
– Should inspire people in the organization to
achieve things they never thought possible
– Should unite people in the organization toward
the pursuit of one common goal

49. Business Vision Statement
• A guiding philosophy
• Consistent with organizational value
• Influenced by the strengths and weaknesses
of the business

50. Components of a Vision Statement
• Core ideology
– Core Values - timeless guiding principles
– Core Purpose - reason for being
• Envisioned future
– Big Hairy Audacious Goals (BHAG) -
clearly articulated goals
– Vivid description - a graphic description of what
success and the future will be like
• Recognition of service to stakeholders
– Owners/creditors
– Employees
– Customers

51. Mission Statements
• The mission statement of an organization is
normally short, to the point, and contains the
following elements:
– Provides a concise statement of why the
organization exists, and what it is to achieve;
– States the purpose and identity of the organization;
– Defines the institution's values and philosophy; and
– Describes how the organization will serve those
affected by its work.

52. Vision vs. Mission
• The vision is more broad and future oriented –
the goal on the horizon
• The mission is more focused – how you will
get to the horizon

53. Examples of Vision Statements
Ben & Jerry’s
Product: To make, distribute, and sell the finest quality all
natural ice cream and related products in a wide variety of
innovative flavors made from Vermont dairy products.
Economic: To operate the Company on a sound financial basis
of profitable growth, increasing value for our shareholders
and creating career opportunities and financial rewards for
our employees.
Social: To operate the Company in a way that actively
recognizes the central role that business plays in the
structure of society by initiating innovative ways to improve
the quality of life of a broad community: local, national, and
international.

54. Vision
• A future view of what an organization
would like to become
– Be the hospital of choice in the region
– Be national recognized as a best
research center in the field
– Etc…
IS 531 : Lecture 3 54

55. Goals and Objectives
• Goal—explains how the mission will be
realized ; describes what is to be
accomplished
• Objectives—specify how and when
goals will be met
IS 531 : Lecture 3 55

56. Strategy
• Strategy is a comprehensive plan that
states how its mission, goals, and
objectives will be achieved.
• Understanding the endpoint (mission,
goals, and objectives) is critical to the
development of the plan.
IS 531 : Lecture 3 56

57. Strategic Planning
• Led by upper management
• Requires participation by middle managers
• Lower-level managers are responsible for
supporting the planning process by
providing information and insight
IS 531 : Lecture 3 57

58. Strategic Planning
• Chief Executive Officer( CEO)
• Chief Information Officer (CIO) helps
management see the role of IT in meeting
goals
• Chief Financial Officer (CFO) looks at
costs/benefits
• Chief Medical Informatics Officer (CMIO)
• Chief Nursing Informatics Officer (CNIO)
• Chief Strategy Officer (CSO) oversees the
detailed plan
IS 531 : Lecture 3 58

59. Strategic Management
IS 531 : Lecture 3 59

60. SWOT Analysis
IS 531 : Lecture 3 60

61. SWOT Analysis …
IS 531 : Lecture 3 61

62. Strategic Planning in
Healthcare Informatics
• Strengths, Weaknesses, Opportunities,
Threats (SWOT) analysis
• Determine available options
• Provide directions for all IT initiatives,
establish priorities, eliminate all
duplications, ensure the wise use of IT
resources
IS 531 : Lecture 3 62

63. Planning for HIS
• Realize need for change.
• Prioritize requirements.
• Develop a master plan that fits into the
organization’s plan.
• Review/revise plan periodically to keep
up with changing needs.
• Identify project
champion/manager/teams.
IS 531 : Lecture 3 63

64.  Definition:
• Globalization is the growing integration of the world’s
economy. It is suggested that economic decision
taken in one part of the world will affect other parts
of the worlds so businesses need to base their
business decision-making on what is happening in the
world market rather than the national market.
• There are three important features or aspects of
globalization, which can be seen as follows:
1. The increasing importance o f international trade
2. More and more multinational companies
3. More and more businesses thinking globally about
their strategy.
Globalization and Business
-What Is Globalization?

65. What Is Globalization?
• Globalization is a process of closer integration and exchange
between different countries and peoples worldwide.
• Made possible by:
– Falling trade and investment barriers
– Advanced telecommunications
– Reduced transportation costs
– Importance of MNEs and FDIs
10–65

66. What Is Globalization?
• Multinational Enterprise (MNE)
– Deploys resources and capabilities in the procurement,
production, and distribution in at
least two countries
• Less than 1% of firms, BUT employ 19% of U.S. workforce
– 74% of private sector R&D spending
• Foreign Direct Investment (FDI)
– Investments in value chain activities abroad
• Global Strategy
– To sustain a competitive advantage
– Competing against foreign and domestic companies
around the world
10–66

67. Why Global?
• Gain access to a larger market
– Capitalize on market potential, such as China, India,
and emerging economies
• Gain access to low-cost input factors
– Labor, natural resources, technology, logistics
• Managing corporate risk
• Leverage core competencies
• Develop new competencies
– Location economies
– Unique locational advantages
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STRATEGY HIGHLIGHT 10.1 Stages of Globalization
• Globalization 1.0: 1900–1941
 Only sales and distribution took place overseas
• Globalization 2.0: 1945–2000
Duplicating business functions overseas
• Globalization 3.0: 21st century
MNEs become global collaboration networks
(see Exhibit 10.2)

69. Four Global Strategies
• International strategy
– Leveraging home-based core competencies
– Selling the same products or services in both domestic
and foreign markets
• Example: Selling Starbucks coffee internationally
• Localization (product differentiation) strategy
– Maximize local responsiveness via a
multi-domestic strategy
– Consumers will perceive them to be domestic
companies
• Example: Nestlé’s customized product offerings in
international markets
10–69

70. Four Global Strategies
• Global standardization (cost leadership) strategy
– Economies of scale and location economies
– Pursuing a global division of labor based on best-of-
class capabilities reside at the lowest cost
• Example: Lenovo’s R&D in Beijing, Shanghai, and Raleigh;
production center in Mexico, India, and China
• Transnational strategy
– Combination of localization strategy (high
responsiveness) with global standardization strategy
(lowest cost position attainable)
• Example: German multimedia conglomerate Bertelsmann
: Caterpillar’s earth-moving equipment

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Impact of Globalization:
Globalization: the integration and internationalization of
markets and corporations

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Impact of Environmental Sustainability:
Environmental Sustainability: the use of business
practices to reduce a company’s impact on the natural,
physical environment

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• Regulatory risk
• Supply chain risk
• Product and technology
risk
• Litigation risk
• Reputational risk
• Physical risk
Risks of Climate Change include:
Impact of Environmental Sustainability

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What Makes a Strategic Decision?
Strategic decision making focuses on the long-run future of
the organization
Characteristics of strategic decision making include:
• Rare
• Consequential
• Directive

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Mintzberg’s Modes of Strategic Decision Making
• Entrepreneurial
• Adaptive
• Planning
• Logical incrementalism (Quinn)

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Strategic Decision Making Process:
1. Evaluate current
performance results
2. Review corporate
governance
3. Scan and assess the
external environment
4. Scan and assess the
internal corporate
environment
5. Analyze strategic
(SWOT) factors
6. Generate, evaluate and
select the best
alternative strategy
7. Implement selected
strategies
8. Evaluate implemented
strategies

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Strategic audit provides a checklist of questions, by
area or issue, that enables a systematic analysis to be
made of various corporate functions and activities

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