Chapter 01

Introduction to Strategic
Management
Objectives
 Evolution of the Concept of Strategic
Management
 Importance of Strategic Management
 Components of Strategic Management
 The Three Levels of Strategy Planning
 Making Strategic Decisions

Introduction to Strategic Management 2

Evolution of the Concept of Strategic
Management
 The word ‘Strategy’ originated from the Greek word
‘Strategia’, means a General or Military Commander
 Contribution of war on business strategy
 ‘Attack Strength’ strategy
 ‘Attack Weakness’ strategy
 Bringing change to failing company
 Concentration of forces
 Forging a strategic alliance
 Patience and time
 Control the choke-point
 Containment is good enough
 A combat-ready company
Introduction to Strategic Management 3
Ansoff’s Strategic Success Paradigm
 Igor Ansoff pioneered the concept of strategy
 The strategic success paradigm identifies the conditions that
optimize profitability
 Key elements of paradigm
 No universal success formula
 Level of turbulence in the environment determines the strategy
required for the success
 Aggressiveness of strategy should be aligned with the turbulence in
the environment to optimize the firm’s success
 Management’s capabilities should be aligned with the environment to
optimize the firm’s success
 Internal capability variables jointly determine the firm’s success
 Cognitive, Psychological, Political, Anthropological and Sociological
Introduction to Strategic Management 4
Ansoff’s Strategic Success Paradigm
 Known as ‘Strategic Readiness Diagnosis’
 He introduced
 Gap Analysis
 Where you are today and where you want to be
 Concept of Synergy
 The whole is greater than the mere sum of the parts,
and it requires an examination of how opportunities fit
the core capabilities of the organization

Introduction to Strategic Management 5

Mintzberg: Strategy as Craft
 Manager’s personal side affects the strategic
management
 Intuitive view of strategic management
 Crafting Strategy
 More human approach to strategy formulation
and implementation
 Strategy formulation is a deliberate, delicate and
dangerous process
Introduction to Strategic Management 6
Mintzberg: Strategy as Craft
 Types of ‘ideal’ organizational structures
 Simple structure
 Machine bureaucracy
 Professional bureaucracy
 Divisionalized
 ‘Ad hoc’ racy

Introduction to Strategic Management 7

Peter Drucker’s Contributions
 Strategic management means - Taking action to make the desired results come to
pass
 Management by Objectives

Introduction to Strategic Management 8

Michael Porter: Strategy and Competitive
Advantage
 Introduced Generic Strategies - to reduce
uncertainty

Introduction to Strategic Management 9

Michael Porter: Strategy and Competitive
Advantage
 Five force model

Introduction to Strategic Management 10

Michael Porter: Strategy and Competitive
Advantage
 Value chain

 Porter’s work can be summarized as ‘Vigorous Domestic Rivalry’

Introduction to Strategic Management 11

Importance of Strategic Management
 Strategy
 The plans made and actions taken to enable an
organization fulfill its intended objectives
 Intended strategy
 Realized strategy
 The hierarchy of strategic intent
 Purpose of an organization strives to achieve
 Strategic ends
 Generic
 Focused

Introduction to Strategic Management 12

Components of Strategic Management
 Vision
 Company Mission
 Company Profile
 External Environment
 Strategic analysis and
choice
 Long-term objectives
 Annual objectives
 Grand Strategy
 Functional and
Operational Strategies
 Policies
 Institutionalizing the
strategy
 Control and evaluation

Introduction to Strategic Management 13

The Three Levels of Strategy Planning

Corporate
Level

Business Level

Functional Level

Introduction to Strategic Management 14

 Steps for Making Strategic Decisions
Assessing the
Formulate the Develop A Analyze the
Company’s
Company’s Company Company’s
External
Mission Profile Options
Environment

Identify Most
Desirable
Option

Develop Select a set

Evaluating the Annual of Long-term
Implement
Success of the Objectives and Objectives and
Strategies Short-term Grand Strategies
Strategies
Strategies
Introduction to Strategic Management 15
Characteristics of Strategic Management
Decisions
 Integrates various functions
 Considers a broad range of stakeholders
 Entails multiple time horizons
 Concerned with both efficiency and effectiveness

Introduction to Strategic Management 16

Developing a Strategic Perspective
 Reasons for failure in developing a strategic
perspective
 Lack of awareness within the top management team about
the organization’s real operating situations
 ‘Kidding themselves’ Syndrome
 Vested interests of the managers
 Excessive involvement in everyday operational problems
 Getting complacent after some initial success
 A change in direction is often misinterpreted
 Failure to locate its competitive edge

Introduction to Strategic Management 17

Summary
 Evolution of the Concept of Strategic
Management
 Importance of Strategic Management
 Components of Strategic Management
 The Three Levels of Strategy Planning
 Making Strategic Decisions

Introduction to Strategic Management 18