INTRODUCTION TO

STRATEGIC CONCEPTS

Dr. John Hatzinikolakis

 Learning Objectives

 Examine the historical origins of strategic management

 Identify the schools of thought on strategic management

 Describe the strategic management framework and its objectives

 Define key terms pertaining to strategic management

 Assess various perspectives of strategic management and their

significance
 What is strategic management?

 Strategic management is a field of study that includes a

process through which a firm is able to set its mission, vision,
goals, and objectives as well as craft and execute strategies at
various levels of its hierarchy in order to create and sustain
competitive advantage.

 Are there other definitions of strategic management?

 Does your national culture, gender, age, or other factors
impact upon how you view/define the role or usefulness of
strategic management- Discuss.
 What is strategy?

 Strategy entails futuristic thinking and developing a course of

action to meet goals and objectives

 A strategy should be able to define and address the following:

 Our current position (where are we now?)

 Our intended future position (where do we want to go?)

 Our growth from the current position to the future position

(how do we get there?)
 Aims of Strategic Management

 A firm is in business to create value for its stakeholders

 Value is created if firms are able to possess a competitive edge

over its market rivals

 A definitive and formalized approach should be at the core of

the process

 Relying on luck and intuition may not be the way to create and
sustain a competitive advantage in the firm’s market domain
 Aims of Strategic Management
 The firm should engage in constant evaluation of its market
position, including benchmarking

 This enables the firm to develop a strategic perspective to the

value creation process

 Changing factors in the external and internal environments affect

the process of creating and sustaining competitive advantage

 Creating competitive advantage and sustaining it over a period of

time requires definitive strategy formation and implementation
processes
 A Historical Perspective

 The term strategy comes from “strategos” which in Greek means

“general”

 In literal terms, it means “leader of the army”

 Strategic management as a domain of study has evolved over the

past 50 years
 A Historical Perspective

 In the 1950s and 1960s strategic management was viewed from a

general management perspective with emphasis on the role of the
leader

 The focus was on leadership, interpersonal relationships, and the

systems, processes, and structure within organizations

 Firms used the top-down approach, with the top management at

the core of the decision-making process

 The strategic management process was not formalized and explicit

during this phase; instead it was more implicit and informal
 A Historical Perspective

 During the late 1960s, the 70s, and the early part of the 80s,
firms adopted the strategic planning approach with emphasis
on analysis and formalized planning, with teams identified
within organizations to develop plans

 There was increased emphasis on formal planning and

financial returns
 A Historical Perspective

 In the 1980s and 1990s, scholars emphasized more on strategy

implementation as a process

 There was a shift in emphasis from the leader to the development

of organizational culture and its role in defining and
implementing strategies

 Globalization led to the growth of the multidivisional corporation

 Scholars focused on firms’ competencies to explain strategy

 A Historical Perspective

 In the 1990s, globalization led to the emergence of network

strategies and strategic alliances became the focal point
 There was more focus on the firm’s internal competencies that
enabled them to sustain competitive advantage
 The shift toward internal competencies also saw a shift in
perspective toward the knowledge-based view and learning at the
core of strategic competitive advantage in the late 1990s.
 There have been continued efforts using the knowledge
perspective during the 2000s, with increased emphasis on
corporate social responsibility
THE STRATEGIC MANAGEMENT FRAMEWORK

Mission, Vision, Goals, and Objectives

Internal analysis External analysis

Strategic analysis
(Strengths & Weaknesses) (Opportunities & Threats)

Strategy formation

Corporate level, Business level, and Functional level

strategies

Strategy implementation

Strategy control
 The Strategic Management Framework

 Mission and vision statements

 Goals and objectives that are linked to the mission and vision

 Strategies and tactics that help achieve the goals and objectives

 Strategic analysis provides the firm with a clear picture of its

situation, which includes internal and external analysis
 The Mission Statement

 The mission is a brief description of the very purpose of

creating the organization

 The mission statement includes a clear purpose and states why

the organization is in existence
 The Mission Statement

 Four Seasons Hotels and Resorts have the following corporate

mission statement:

“Four Seasons is dedicated to perfecting the travel experience

through continual innovation and the highest standards of
hospitality. From elegant surroundings of the finest quality, to
caring, highly personalised 24-hour service, Four Seasons
embodies a true home away from home for those who know
and appreciate the best. The deeply instilled Four Seasons
culture is personified by its employees – people who share a
single focus and are inspired to offer great service.”
Source: http://www.fourseasons.com/about_us/
 The Vision Statement

 The vision describes where the organization wants to go from

where it is at present

 Hilton Hotels Corporation defines its vision as

“Our vision is to be the first choice of the world’s travellers”
Source: http://company.monster.com/promus/index.html
 Goals
 Goals are more specific compared to vision in terms of what the
organization aims to achieve in a definite period of time, for
example:
 Increase revenues
 Reduce labor turnover
 Goals are planned over the short and long terms
 Short-term goals are set for a period not exceeding one year
 Long-term goals are set for a period of time exceeding three to
five years
 Goals need to be linked to objectives
 Note that goals are more abstract than objectives
 Objectives

 Objectives need to be definite, quantifiable, and measurable,

for example:
 Increase sales revenue by 15% compared to last year
 Reduce our annual labor turnover ratio this year to 22%

 Strategies clearly identify how the objectives will be met in

terms of the plan

 Tactics are the actions that operationalize the strategy, those

that lead to the attainment of goals and objectives
 Strategic Decision Making

 Strategic decisions pertain to choosing an alternative among a

set of alternatives that leads to strategy-related success

 Strategic decisions are based on pros and cons analysis of the

various alternatives

 These decisions have an effect on the firm’s long-term

orientation and direction
 Strategy Formation

 Strategic management includes two distinct phases: the

strategy formation phase and the strategy implementation
phase

 Strategic formation is the process of defining the direction of

the firm’s futuristic course of action
 This would enable the firm to allocate resources in order to
achieve the set goals and objectives

 An internal and external environment analysis is part of the

assessment before strategy is formulated at the corporate,
business, and functional levels
 Strategy Implementation

 Strategy implementation is the process of putting strategy into

action

 This includes designing the organizational structure and

related systems

 This leads to effective resource allocation processes, including

programs and activities such as setting budgets, developing
support systems, recruiting, hiring, and training, as well as
designing performance evaluation and rewards systems
 Strategic Control

 Strategic control refers to monitoring how the strategy

implementation process is progressing and whether the
intended outcomes are achieved.

 It helps the organization to monitor the process and take any

corrective actions

 Strategy control is linked back to both strategic analysis and

strategy implementation
 Levels of Strategy

 The three levels of strategy are:

 Corporate level

 Business level

 Functional level
 Corporate Level Strategy

 At the corporate level, strategy is about asking questions about:

 What business the firm is in or would like to be in

 The firm’s potential to create value by being in the business or

expanding into a new line of business

 The resources and capabilities it has/needs to have to create

and sustain competitive advantage in its business or businesses
 Business Level Strategy
 At the business level, firms need to ask the following questions:

 How could it create competitive advantage in its product-market

domains in each of its strategic business units (SBUs)?
 SBU is defined as a unit within a given corporate identity that is distinctly
different from other units within the corporation in terms of products and
services as well as the markets it serves

 A SBU has a distinct profit-making capability of its own

 How could it continue to be an overall cost leader or a broad

differentiator, or, for that matter, have a cost focus or be a
focused differentiator in its market domain?
 Functional Level Strategy

 The firm’s objective at the functional level is to sustain its

advantage by focusing on efficiencies related to operations,
marketing, human resources, finance and accounting, and
other support functions

 It also engages in constant innovation to ensure new

product/service development rollout

 This level also entails activities that lead to service and

product quality assurance as well as customer satisfaction
Summary of key elements
we will be focussing on
(among many others)…
The strategic management process
External stakeholders and the mission
statement
 ‘Alternative’ strategy concepts
Concept mapping (idea networks), and pragmatism (evaluates
theories or beliefs in terms of the success of their practical
application.)
SWOT analysis
(Davidson et al 2009, p212)
Analysis of industry and environment
(Porter’s five forces model)
Levels of strategy in organisations
Porter’s generic strategies framework:
motor vehicle industry examples
The product life cycle
The BCG Matrix
Approaches to organizational
effectiveness…
Models of organizational effectiveness

1. Systems resource approach focuses on the

extent to which an organization can acquire the
resources it needs- raw materials, labour, finance
and information

2. The internal processes approach focuses on the

internal mechanisms of the organization. It aims to
minimise strain, integrate individuals and the
organization, conducting smooth and efficient
operations. Maintaining employee satisfaction and
morale subscribes to this view
Models of organizational effectiveness
cont...
3. The goal approach to effectiveness focuses on the
degree to which an organization achieves its goals, for
example ‘increasing sales by 10% per annum’

4. The strategic constituencies approach focuses on

the groups that have a stake in the organization-
suppliers, customers, employees and managers,
owners, lenders etc. Satisfying the demands and
expectations of all these groups summarizes this
approach
 …Or…Models of organizational
effectiveness cont...
Model of Organizational Effectiveness (Davidson et al 2009, p145)