STRATEGIC MANAGEMENT

MODULE –I
A.) STRATEGIC MANAGEMENT :
Overall Definition:
Johnson and Scholes (Exploring Corporate Strategy) define strategy as follows:
"Strategy is the direction and scope of an organization over the long-term: whic
h achieves advantage for the organization through its configuration of resources
within a challenging environment, to meet the needs of markets and to fulfill
stakeholder expectations".
Strategy at Different Levels of a Business
Strategies exist at several levels in any organization - ranging from the overal
l business (or group of businesses) through to individuals working in it.
Corporate Strategy - is concerned with the overall purpose and scope of the busi
ness to meet stakeholder expectations. This is a crucial level since it is heavi
ly influenced by investors in the business and acts to guide strategic decision-
making throughout the business. Corporate strategy is often stated explicitly in
a "mission statement".
Business Unit Strategy - is concerned more with how a business competes successf
ully in a particular market. It concerns strategic decisions about choice of pro
ducts, meeting needs of customers, gaining advantage over competitors, exploitin
g or creating new opportunities etc.
Operational Strategy - is concerned with how each part of the business is organi
sed to deliver the corporate and business-unit level strategic direction. Operat
ional strategy therefore focuses on issues of resources, processes, people etc.
How Strategy is Managed - Strategic Management
In its broadest sense, strategic management is about taking "strategic decisions
" - decisions that answer the questions above.

In practice, a thorough strategic management process has three main components,

shown in the figure below:
Strategic Analysis
This is all about the analysing the strength of businesses' position and underst
anding the important external factors that may influence that position. The proc
ess of Strategic Analysis can be assisted by a number of tools, including:
PEST Analysis - a technique for understanding the "environment" in which a busin
ess operates
Scenario Planning - a technique that builds various plausible views of possible
futures for a business
Five Forces Analysis - a technique for identifying the forces which affect the l
evel of competition in an industry
Market Segmentation - a technique which seeks to identify similarities and diffe
rences between groups of customers or users
Directional Policy Matrix - a technique which summarises the competitive strengt
h of a businesses operations in specific markets
Competitor Analysis - a wide range of techniques and analysis that seeks to summ
arise a businesses' overall competitive position
Critical Success Factor Analysis - a technique to identify those areas in which
a business must outperform the competition in order to succeed
SWOT Analysis - a useful summary technique for summarising the key issues arisin
g from an assessment of a businesses "internal" position and "external" environm
ental influences.
Introduction to Stakeholders in Business
A stakeholder is any individual or organization that is affected by the activiti
es of a business. They may have a direct or indirect interest in the business, a
nd may be in contact with the business on a daily basis, or may just occasionall
y.
The main stakeholders are:
Shareholders (not for a sole trader or partnership though) – they will be interest
ed in their dividends and capital growth of their shares.
Management and employees – they may also be shareholders – they will be interested i
n their job security, prospects and pay.
Customers and suppliers.
Banks and other financial organizations lending money to the business.
Government – especially the Inland Revenue and the Customs and Excise who will be
collecting tax from them.
Trade Unions – who will represent the interests of the workers.
Pressure Groups – who are interested in whether the business is acting appropriate
ly towards their area of interest.
Stakeholders versus Shareholders :
It is important to distinguish between a STAKEHOLDER and a SHAREHOLDER. They sou
nd the same – but the difference is crucial!
Shareholders hold shares in the company – that is they own part of it.
Stakeholders have an interest in the company but do not own it (unless they are
shareholders).
Often the aims and objectives of the stakeholders are not the same as shareholde
rs and they come into conflict.
The conflict often arises because while shareholders want short-term profits, th
e other stakeholders’ desires tend to cost money and reduce profits. The owners of
ten have to balance their own wishes against those of the other stakeholders or
risk losing their ability to generate future profits (e.g. the workers may go on
strike or the customers refuse to buy the company’s products).
Social Responsibility :
Social responsibility is the duty and obligation of a business to other stakehol
ders.
Stakeholder Example of responsibility to that stakeholder
Shareholder Good return on investment
Employee Fair pay and working conditions
Supplier Regular business and prompt payment
Customer Fair price and safe product
Local community Jobs and minimum disruption
Government Employment for local community
Environment Less pollution
Social responsibility for one group can conflict with other groups, especially b
etween shareholders and stakeholders.
Ethics :
Ethics refers to the moral rights and wrongs of any decision a business makes. I
t is a value judgement that may differ in importance and meaning between differe
nt individuals.
Businesses may adopt ethical policies because they believe in them or they belie
ve that by showing they are ethical, they improve their sales.
Two good examples of businesses that have strong ethical policies are The Body S
hop and Co-Op.Some examples of ethical policies are:
• Reduce pollution by using non-fossil fuels.
• Disposal of waste safely and in an environmentally friendly manner.
• Sponsoring local charity events.
• Trading fairly with developing countries