Chapter 16: Introduction to Strategic Management
Strategic thinking: Asking three central questions that refer to an organization. These are:
Where are we now?
Where do we want to be?
How are we going to get there?
Strategic management: Responsible for ensuring that all 7 functional areas are working towards the same
goal under the business vision.
Non-financial benefits of Strategic Management:
1. It provides a way to anticipate future problems and opportunities
2. It provides employees with clear objectives and directions for the future of organization
3. It results in more effective and better performance compared to non-strategic management
organizations
4. It increases employee satisfaction and motivation
5. It results in faster and better decision and
6. It results on cost savings.
Process and personal benefits of Strategic Management:
1. It allows for identification, prioritization, and exploration of opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to identified opportunities.
7. It allows fewer resources and less time to be devoted to correcting erroneous (ad hoc) decisions.
8. It creates a framework for internal communication among personnel.
9. It helps to integrate the behavior of individuals into a total effort.
10. It provides a basic for the clarification of individual responsibilities.
11. It gives encouragement to forward thinking.
12. It provides a cooperative, integrated and enthusiastic approach to tackling problems and
opportunities.
13. It encourages a favorable attitude towards change.
14. It gives a degree of discipline and formality to the management of a business.
Organizations must adapt to change continuously because of the changing demands of consumers and
competition from other organizations for market share. Organizations must adapt to:
Changes in the external environment (opportunities and threats)
Changes in the internal environment (strengths and weaknesses)
The extent to which the chosen strategies have been successful
Because of the above, strategic management is not something that is done once. An organization should
implement a continuous process which is constantly evaluated, regardless of the type of industry
involved.
1|Page
, The strategic management process:
Strategic
direction
Strategic Through environmental analysis
objectives (internal and external)
Strategy
selection
Strategy
implementation
Strategic
control
The business environment is made up of two external environments. These are:
The macro environment: this contains factors which can affect an organization from the
technological, economic, social, physical, institutional-government and international
environments.
The market environment: factors such as consumers, competitors, intermediaries and suppliers
which can impact an organization.
An external environmental analysis is necessary to identify the key factors in these external environments
which can impact an organization in a positive or negative way. These are known opportunities and
threats. In the same way that an external analysis looks at factors outside the organization, and internal
analysis looks inside the organization. The purpose of an internal analysis is to identify the strengths and
weaknesses of the organization. This is done by assessing the resources and capabilities of the
organization. Resources could be factors such as large amount of cash or many factories. Capabilities
could be the ability to innovate or to make quality products.
Strengths, weaknesses, opportunities and threats are often summarized in a SWOT analysis. This is an
important strategic tool as a good strategy matches the strengths and weaknesses of an organization with
opportunities and threats in the environment.
2|Page
Strategic thinking: Asking three central questions that refer to an organization. These are:
Where are we now?
Where do we want to be?
How are we going to get there?
Strategic management: Responsible for ensuring that all 7 functional areas are working towards the same
goal under the business vision.
Non-financial benefits of Strategic Management:
1. It provides a way to anticipate future problems and opportunities
2. It provides employees with clear objectives and directions for the future of organization
3. It results in more effective and better performance compared to non-strategic management
organizations
4. It increases employee satisfaction and motivation
5. It results in faster and better decision and
6. It results on cost savings.
Process and personal benefits of Strategic Management:
1. It allows for identification, prioritization, and exploration of opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to identified opportunities.
7. It allows fewer resources and less time to be devoted to correcting erroneous (ad hoc) decisions.
8. It creates a framework for internal communication among personnel.
9. It helps to integrate the behavior of individuals into a total effort.
10. It provides a basic for the clarification of individual responsibilities.
11. It gives encouragement to forward thinking.
12. It provides a cooperative, integrated and enthusiastic approach to tackling problems and
opportunities.
13. It encourages a favorable attitude towards change.
14. It gives a degree of discipline and formality to the management of a business.
Organizations must adapt to change continuously because of the changing demands of consumers and
competition from other organizations for market share. Organizations must adapt to:
Changes in the external environment (opportunities and threats)
Changes in the internal environment (strengths and weaknesses)
The extent to which the chosen strategies have been successful
Because of the above, strategic management is not something that is done once. An organization should
implement a continuous process which is constantly evaluated, regardless of the type of industry
involved.
1|Page
, The strategic management process:
Strategic
direction
Strategic Through environmental analysis
objectives (internal and external)
Strategy
selection
Strategy
implementation
Strategic
control
The business environment is made up of two external environments. These are:
The macro environment: this contains factors which can affect an organization from the
technological, economic, social, physical, institutional-government and international
environments.
The market environment: factors such as consumers, competitors, intermediaries and suppliers
which can impact an organization.
An external environmental analysis is necessary to identify the key factors in these external environments
which can impact an organization in a positive or negative way. These are known opportunities and
threats. In the same way that an external analysis looks at factors outside the organization, and internal
analysis looks inside the organization. The purpose of an internal analysis is to identify the strengths and
weaknesses of the organization. This is done by assessing the resources and capabilities of the
organization. Resources could be factors such as large amount of cash or many factories. Capabilities
could be the ability to innovate or to make quality products.
Strengths, weaknesses, opportunities and threats are often summarized in a SWOT analysis. This is an
important strategic tool as a good strategy matches the strengths and weaknesses of an organization with
opportunities and threats in the environment.
2|Page
