1
MNG3701
NOTES
, 2
STRATEGIC MANAGEMENT IN THE CONTEXT OF EXISTING MANAGEMENT PRINCIPLES
Organisations operate in changing environments.
An interdependent relationship between the organisation and the environment.
Systems theory concept: the organisation is a system that operates in a specific environment.
Synergy: the whole is greater than the sum of its parts. The organisation consists of subsystems that
work together to achieve goals and objectives
Management levels: top management, also known as strategic management (CEO and the board of
directors), middle management is the functional managers (HR, Finance managers etc.) and lower/first-line
managers are the supervisors they have more technical skills and are involved in day-to-day operations.
Skills for sound management: conceptual skills, interpersonal skills and technical skills.
Management decisions are made at different levels: the tactical level and the strategic level.
DEFINING STRATEGIC MANAGEMENT
Management: planning, leading, organizing and controlling
Strategy: an effort or deliberate action that an organisation implements to outperform its rivals. An
organisations theory about how to gain competitive advantage.
Strategic management: the process whereby all the organisational functions and resources are
integrated and coordinated to implement formulated strategies which are aligned with the environment, in
order to achieve the long-term objectives of the organisation and therefore gain a competitive advantage
through adding value for the stakeholders.
The art and science of formulating, implementing and evaluation cross-functional decisions that enable
an organisation to achieve its objectives. The purpose of strategic management is to exploit and create new
and different opportunities for tomorrow.
The set of decisions and actions that result in the formulation and implementation of plans designed to
achieve a company’s objectives
The process by which a firm incorporates the tools and frameworks for developing and implementing a
strategy
All the decisions and actions arising from the formulation and implementation of strategies with the aim
of achieving the organisations objectives
Competitive advantage: the edge that an organisation has over others. To achieve this an organisation
needs to meet he needs of stakeholders, which means adding value
Stakeholders: anyone who is directly or indirectly influenced by the acts of the organisation. Long-term
wealth maximization is for stakeholders and short-term profit maximization is for shareholders.
Shareholders, media/press, government, suppliers, community, employees, financial institutions and
customers
Wealth maximization incorporates all spheres of the organisation and emphasises sustainability and
survival in the long term.
Profit maximization emphasises maximum profits and therefore focuses only on turnover, sales and
marketing
The people involved in strategic management: environmental analysis is the responsibility of every
manager. A strategy formulation is mainly the responsibility of top management. Strategic implementation
can only be achieved with communication from all the parties involved
Qualitative and quantitative decisions. Qualitative decisions are based on intuition, whereas qualitative
decisions are built on proper strategic analysis and choice. Both should be used in conjunction with the
other.
Levels of strategy: 3 levels- corporate level, business level and functional level.
Corporate strategy: for guiding a firms entry into and exit from different businesses, for determining how
a parent company add value to and manages its portfolio of businesses, and for creating value through
diversification
Business strategy: developing and sustaining a competitive advantage for the goods and services that
are produced. Strategy for competing against competitors within a particular industry
Functional level: decisions involve the development and coordination of resources through which
business unit level strategies can be executed efficiently and effectively.
THE CONTEMPORARY BUSINESS ENVIRONMENT
Organisations have to adapt rapidly to change
, 3
Non-profit organisations also need to apply strategic management.
Globalization involves more strategic management options
Technology affects the business environment as does the political, social, economic environments.
Technology has brought about change in the marketing aspects of business and as well as change in
the processes, production methods and new ways to make an established product.
Partnerships, outsourcing, flexible labour, work-around-the-clock and interim managers are different
ways of creating a competitive advantage
THE STRATEGIC MANAGEMENT PROCESS AND STRATEGIC PLANNING
Organisational direction: developed on the basis of ethical behaviour and corporate governance.
Direction is provided by the vision and the mission statement of the organisation.
Environmental analysis: evaluating and analyzing the external environment for opportunities and threats,
and the internal environment for strengths and weaknesses (SWOT analysis)
Strategy formulation: long-term goals are developed- derived from the mission statement and a generic
strategy is chosen and grand strategies developed
Strategy implementation: strategic drivers are implemented i.e. leadership, culture, reward systems,
organisational structures and allocation of resources. Improvement through strategic control and evaluation.
WEALTH MAXIMISATION v PROFIT MAXIMISATION
Wealth maximization modifies the goal of profit maximization in order to deal with the complexities of the
business environment- both the external and the internal environment. It takes the long-term view of the
success of the organisation, which is often in conflict with the short-tem yardstick of profit maximization
SUCCESS IN STRATEGIC MANAGEMENT TERMS
Strategic competitiveness implies that an organisation has created a competitive advantage which other
organisations are unable to duplicate or find too costly to imitate.
Above average returns are returns in excess of what an investor expects to earn from other investments
with a similar exposure to risk.
By exploiting its competitive advantage and realizing above average returns the organisation will achieve
its primary objective of wealth maximization
Strategic management is about surviving in a changing environment, and to do this strategic managers
will have to make decisions that allow them to achieve a competitive advantage and above average returns.
CORPORATE GOVERNANCE
MNG3701
NOTES
, 2
STRATEGIC MANAGEMENT IN THE CONTEXT OF EXISTING MANAGEMENT PRINCIPLES
Organisations operate in changing environments.
An interdependent relationship between the organisation and the environment.
Systems theory concept: the organisation is a system that operates in a specific environment.
Synergy: the whole is greater than the sum of its parts. The organisation consists of subsystems that
work together to achieve goals and objectives
Management levels: top management, also known as strategic management (CEO and the board of
directors), middle management is the functional managers (HR, Finance managers etc.) and lower/first-line
managers are the supervisors they have more technical skills and are involved in day-to-day operations.
Skills for sound management: conceptual skills, interpersonal skills and technical skills.
Management decisions are made at different levels: the tactical level and the strategic level.
DEFINING STRATEGIC MANAGEMENT
Management: planning, leading, organizing and controlling
Strategy: an effort or deliberate action that an organisation implements to outperform its rivals. An
organisations theory about how to gain competitive advantage.
Strategic management: the process whereby all the organisational functions and resources are
integrated and coordinated to implement formulated strategies which are aligned with the environment, in
order to achieve the long-term objectives of the organisation and therefore gain a competitive advantage
through adding value for the stakeholders.
The art and science of formulating, implementing and evaluation cross-functional decisions that enable
an organisation to achieve its objectives. The purpose of strategic management is to exploit and create new
and different opportunities for tomorrow.
The set of decisions and actions that result in the formulation and implementation of plans designed to
achieve a company’s objectives
The process by which a firm incorporates the tools and frameworks for developing and implementing a
strategy
All the decisions and actions arising from the formulation and implementation of strategies with the aim
of achieving the organisations objectives
Competitive advantage: the edge that an organisation has over others. To achieve this an organisation
needs to meet he needs of stakeholders, which means adding value
Stakeholders: anyone who is directly or indirectly influenced by the acts of the organisation. Long-term
wealth maximization is for stakeholders and short-term profit maximization is for shareholders.
Shareholders, media/press, government, suppliers, community, employees, financial institutions and
customers
Wealth maximization incorporates all spheres of the organisation and emphasises sustainability and
survival in the long term.
Profit maximization emphasises maximum profits and therefore focuses only on turnover, sales and
marketing
The people involved in strategic management: environmental analysis is the responsibility of every
manager. A strategy formulation is mainly the responsibility of top management. Strategic implementation
can only be achieved with communication from all the parties involved
Qualitative and quantitative decisions. Qualitative decisions are based on intuition, whereas qualitative
decisions are built on proper strategic analysis and choice. Both should be used in conjunction with the
other.
Levels of strategy: 3 levels- corporate level, business level and functional level.
Corporate strategy: for guiding a firms entry into and exit from different businesses, for determining how
a parent company add value to and manages its portfolio of businesses, and for creating value through
diversification
Business strategy: developing and sustaining a competitive advantage for the goods and services that
are produced. Strategy for competing against competitors within a particular industry
Functional level: decisions involve the development and coordination of resources through which
business unit level strategies can be executed efficiently and effectively.
THE CONTEMPORARY BUSINESS ENVIRONMENT
Organisations have to adapt rapidly to change
, 3
Non-profit organisations also need to apply strategic management.
Globalization involves more strategic management options
Technology affects the business environment as does the political, social, economic environments.
Technology has brought about change in the marketing aspects of business and as well as change in
the processes, production methods and new ways to make an established product.
Partnerships, outsourcing, flexible labour, work-around-the-clock and interim managers are different
ways of creating a competitive advantage
THE STRATEGIC MANAGEMENT PROCESS AND STRATEGIC PLANNING
Organisational direction: developed on the basis of ethical behaviour and corporate governance.
Direction is provided by the vision and the mission statement of the organisation.
Environmental analysis: evaluating and analyzing the external environment for opportunities and threats,
and the internal environment for strengths and weaknesses (SWOT analysis)
Strategy formulation: long-term goals are developed- derived from the mission statement and a generic
strategy is chosen and grand strategies developed
Strategy implementation: strategic drivers are implemented i.e. leadership, culture, reward systems,
organisational structures and allocation of resources. Improvement through strategic control and evaluation.
WEALTH MAXIMISATION v PROFIT MAXIMISATION
Wealth maximization modifies the goal of profit maximization in order to deal with the complexities of the
business environment- both the external and the internal environment. It takes the long-term view of the
success of the organisation, which is often in conflict with the short-tem yardstick of profit maximization
SUCCESS IN STRATEGIC MANAGEMENT TERMS
Strategic competitiveness implies that an organisation has created a competitive advantage which other
organisations are unable to duplicate or find too costly to imitate.
Above average returns are returns in excess of what an investor expects to earn from other investments
with a similar exposure to risk.
By exploiting its competitive advantage and realizing above average returns the organisation will achieve
its primary objective of wealth maximization
Strategic management is about surviving in a changing environment, and to do this strategic managers
will have to make decisions that allow them to achieve a competitive advantage and above average returns.
CORPORATE GOVERNANCE
