Lecture 3-Management and Entrepreneurship Skills

CHAPTER THREE: STRATEGIC MANAGEMENT

3.1 EVOLUTION OF THE CONCEPT OF STRATEGY
The word strategy derives its origin from the Greek word strategeia, which means the art or science of being a military general. Effective Greek military generals needed to lead an army to win wars and protect their cities from aggression and invasion. A strategy is therefore defined as the pattern of actual actions that are designed to counteract against enemy attack. To the Greeks strategy was more than fighting battles. Effective Greek generals had to determine the right amount of logistics needed to fight; where to fight and where not to fight; the army’s relationships with citizens, politician, diplomat, etc.
Strategy has both decision making component and planning component. Military Generals are therefore supposed to decide and plan strategically. These two components constitute the key elements to success in strategic management.



3.1.1 Definition of a strategy
Alfred Chandler Jr., defines strategy as ‘the determination of the basic long-term goals and objective of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. Implied in this definition is that strategy involves rational thinking/decision making and planning.
James B. Quinn argues that strategy is ‘the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive whole’.
William F. Glueck also sees strategy as a unified, comprehensive and integrated plan designed to ensure that the basic, objectives of the enterprise are achieved.
In summary, a strategy is the plan that integrates an organization’s major goals, policies and action sequence into a cohesive whole. It is a managerial game plan for running an organisation.

Since competitors often copy strategic, there is the need to always search for innovative strategies that have competitive edge. As a result of hyper competition, strategies must be aggressive, bold, and fast-moving.

Good strategy and good strategy implementation are the most trustworthy signs of good management. There is strong reason to associate good management with how well managers craft and execute strategies. The standards for judging whether an organisation is well managed, begins with good strategy-making, combined with good strategy execution. The better conceived an organization’s strategy and the more flawless its execution, the greater the chance that the organization will perform better. This is not to imply that good strategy implementation will automatically guarantee excellent organisational performance every year. Success will partly depend on the manager’s ability to adjust to competition and other environmental factors.


3.2 WHAT IS STRATEGIC MANAGEMENT?
Schermerhorn defines it as ‘the process of formulating and implementing strategies to advance an organisation’s mission and objectives and secure competitive advantage’.

James A F Stoner also define strategic management as ‘the management process that involves an organizations engaging in strategic planning and then acting on those planning and then acting on those plans’.
G.A. Cole go ahead to define it as ‘the process of determining, evaluating and adopting the aims or mission of an organization and the patterns of decisions that guide the achievement of those aims in a long-term’. According to Cole, the prime responsibility for strategic management lies with the top management of the organization e.g. Chief Executive and the board of directors.

Strategic Management is the process by which guiding members of a nation, community or organisation envision its future and implement the necessary strategies, operations and policies to realise that future. The essence of strategic management is to look ahead, understand, the environment and effectively position an organisation for competitive success in changing times.

3.3 ELEMENTS OF STRATEGIC MANAGEMENT DIRECTION
Vision
The vision of an organisation encapsulates the organisation’s values. An organisation or a person who is able to accurately predict what is likely to happen in the future and takes appropriate contingency measures to deal with such future events is regarded as visionary. To have a vision is to be proactive instead be being reactive.
Mission
Every company has a purpose or reason for existence. The company’s mission therefore defines its purpose. It indicates the domain of the company and therefore serves as a guide for all stakeholders. Mission statement should not be too broad otherwise it will lose focus. It should also not be too narrow otherwise they are short-lived and considered myopic. Thus mission statement should be market oriented and not product oriented. Market orientation means a definition which portrays the satisfaction of the needs of customers and not portraying the product that does the job. Corporate objectives are borne out of the mission statement. There could be multiplicity of objectives. It must be reviewed periodically and re-formulated to reflect environmental conditions. The Mission of every organisation should be clearly captured in its mission statement. All mission statements should be realistic, specific, based on distinctive competencies and motivating. For example, the mission statement of enterprise Insurance reads “To provide quality insurance services to individuals, companies and organisations, whilst returning good investment yields to our shareholders and job enrichment to our staff”.
Objectives
Objectives are ends the organisation seeks to achieve through its existence and operation. They are specific measurable and time bound results an organisation wants to achieve. Objectives are shorter term targets against which actual performance results can be measured as indicators of progress and improvement. Objectives of every organisation should be based on both the vision and the mission statements. There is no doubt that the vision, mission and the objectives of every organisation are inter-related. A good blend of these dements of strategic management direction is a recipe for success all other things being equal. Objectives are supposed to be specific, measurable, achievable, realistic and time related.



Core values
Values are broad beliefs about what is or not appropriate behaviour. Values also imply what the organization believes and how it will act.



3.4 STRATEGIC MANAGEMENT PROCESS
Charles W. L. Hill and Gareth R. Jones make mention that, ‘the major components of the strategic management process include defining the mission and major goals of the organisation; analysing the external and internal environment of the organisation; choosing strategies that align or fit the organisation’s strength and weaknesses with external environment opportunities and threats; and adopting organisational structures and control systems to implement the organisation’s chosen strategy’.

John R. Schermerhorn, Jr says that, ‘it is the process of formulating and implementing strategies to enhance an organisation’s mission and objectives and secure competitive advantage’.
According to Schermerhorn, the strategic management process involves the following;
 Strategy Formulation [creating strategies]
 Strategy Implementation [putting strategies into action]
 Strategy review [Evaluation to determine the success of the implemented strategy].

In a more specific and concise way, the strategic management process may be outlined as follow:

Environmental scanning
Since the environment is full of uncertainties, it is necessary for the strategic manager to be sensitive to the environment in order to scan the environment with a high degree of success. Environment scanning involves systematic collection of information on the external environment for the purpose of determining an organisation’s strategies. This process may consist of:
 Forecasting changing conditions
 Analysing the effects of change
 Making decisions- that is strategic thinking – making sense out of an uncertain future.
 Envisioning the organisation in the context of world trends of events, and identifying interferences.
 Focusing on how the organisation should act and react to emerging opportunities and threats.
 Need for strategic foresight to address issues such as what is to be done.

Strategy formulation
This is the stage where an actual strategy for dealing with a situation is initiated. The starting point for strategy formulation is the identification of current mission and objectives: analysis of values and corporate culture, internal strength and weakness; and environmental opportunities and threats. After the identification and analysis of all the issues involved in the strategy formulation, the next issue is to periodically revise the mission and objectives and where necessary, select new strategies. Strategy formulation should lead strategic plan.
Strategic plan
It is concerned with addressing long-term needs and set comprehensive actions and directions for an organisation or a subunit of it. Strategic planning is the prerogative of top management. Its scope involves determining objectives for the entire organisation and then deciding on the actions and resource allocation to achieve them.
The main components or outline of a strategic plan are:
Executive summary-This highlights the vision, mission objectives/goals and the strategies required to be used
Strategic diagnosis-This deals with swot analysis that is the strengths, weaknesses opportunities and threats.
Strategic intend and direction-This section deals with vision, mission, values, goals, objectives, strategies, plans etc.
Strategic implementation-Issues addressed in this section include leadership, organisational structure, culture, policies and procedures, human resource development, resource allocation etc.
Contingency plan-This should be able to deal with unforeseen circumstance which may derail the good intentions of the strategic plan
Financial plan-This should highlight all the financial implication of the plan. It should also address issues of cost-benefit analysis. Under financial plan, efforts should be made to lower cost and increase profit.


3.5 IMPLICATIONS OF STRATEGIC MANAGEMENT
The objective of strategic management is to find out why some organisations succeed while others fail; why success turns into failure and vice versa.
The three broad factors that may determine an organisation’s success include the following: the industry in which it is based, the country/countries in which it is based and the resources, capabilities and strategies available.