An Overview of Strategic

Management

Dr M.K. Nandakumar
Fundamental Classification

Content Process

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 Content

• Porter 1991
• Inkpen & Choudhury1995
• Bauerschmidt 1996
• Inkpen 1996

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Three Essential Conditions for Firm Success
• 1. Develop internally consistent set of goals and functional policies that
collectively defined the firm’s position in the market.
• 2. The internally consistent goals aligns the firm’s strengths and
weaknesses to the external opportunities and threats. Strategy is the act of
aligning the firm and its environment.
• 3. The firm’s strategy is centrally concerned with the creation and
exploitation of its distinctive competences.
Porter, M. (1991) Towards a Dynamic Theory of Strategy, Strategic
Management Journal, 12, 95-117

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 Absence of Strategy
• Three conditions that could lead to an absence of strategy:
• 1. Failure of an organization could lead to an absence of strategy
• 2. There is no history of decisions in young firms which are in a
transitional phase. Hence there many not be an obvious strategy in these
firms.
• 3. Absence of strategy can be virtue. The management may deliberately
build strategic voids and apparent incoherency in decision making as
part of its organizational design. E.g. Honda’s entry to the US market. By
not articulating an explicit strategy, and organization can increase its
flexibility.
Inkpen, A. and Choudhury, N. (1995) The seeking of strategy where it is not: Towards a
theory of strategy absence, Strategic Management Journal, 16(4), 313-323

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 Arguments and Counter Arguments
• Absence of strategy is a consequence of organizational failure
(Bauereschmidt, A. 1996. Speaking of Strategy, Strategic Management
Journal, 17, 665-667)
• Although we challenged the conventional wisdom that every firm must
have an articulated strategy, instilling a new paradigm was not our
objective. Our main argument was that the concept of absence may help
strategy researchers better understand existing paradigms. (Inkpen,
1996, The Seeking Of Strategy Where It Is Not: Towards A Theory Of
Strategy Absence: A Reply To Bauerschmidt, Strategic Management
Journal, 17, 669-670)

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 Process
• Mintzberg 1990
• Ansoff 1991
• Mintzberg 1991
• Mintzberg & Lampel 1999

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 Ten Schools of Strategy Formation
• Design School
Treat strategy formation as a
• Planning School Prescriptive Schools process of conceptual design, of
formal planning and of analytical
• Positioning School positioning.

• Entrepreneurial School
• Cognitive School
Deal with specific aspects of the
• Learning School Descriptive Schools process in a descriptive way.

• Power School
• Cultural School
Delineates the stages and
• Environmental School sequences of the process and helps
Prescriptive and to place the findings of the other
• Configuration School Descriptive School schools in context.
Mintzberg, H., Ahlstrand, B., Lampel, J. (1998) Strategy Safari – A Guided Tour through the Wilds of Strategic Management,
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New York: Free Press
 Critique of Design School
• The need for a conscious assessment of strengths and weaknesses

• Assumed sequence of strategy followed by structure

• The premise that all strategies should be made explicit

• Assumed dichotomy between formulation and implementation

Mintzberg, H. (1990) The Design School: Reconsidering the basic premises of Strategic Management, Strategic Management Journal, Vol
11, 171-195.
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 Strategic Decision Making Framework
PESTEL

Industry
Analysis

Competitor
Analysis
Analysis of
the External
Environment
Strategic
Decision
Analysis of
the Internal
Resources and Business-
Capabilities level

Corporate-
Core
level
Competencies
and Competitive
Advantage Operational
-level

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What is Strategy? (cont’d)
Chaharbaghi (2007):
• A multi-dimensional, dynamic construct that allows organisations to align the
corporate, business and functional dimensions more effectively in making
progress and receiving more in terms of the results they want to achieve.

Johnson, Scholes & Whittington (2008):

• Strategy is the direction and scope of an organisation over the long term, which
achieves advantage in a changing environment through its configuration of
resources and competences with the aim of fulfilling stakeholder expectations.

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 Risk
An investor’s uncertainty about the
economic gains or losses that will result
from a particular investment
 Average and Above-average
Returns

• Average returns – returns equal to those an investor expects

to earn from other investments with a similar amount of risk

• Above-average returns – returns in excess of what an

investor expects to earn from other investments with a
similar amount of risk
 The Main Purpose of Strategy

Provide Above-average Returns to

the Investors

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 Economies of Scale and Scope
• Economies of scale are the cost advantages that a business
obtains due to expansion. They are factors that cause a
producer’s average cost per unit to fall as scale is increased.
Diseconomies of scale are the forces that cause larger firms to
produce goods and services at increased per-unit costs.
• Economies of scope refer to the efficiency gains that can be
made by applying the organisation’s existing resources or
capabilities to new markets and products or services.
Economies of scope exist in a firm when the value of the
products or services it sells increases as a function of the
number of businesses that firm operates in. Scope refers to
the range of businesses in which a diversified firm operates.
Only diversified firms can by definition exploit economies of
scope.
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Operational strategy
Business-level
strategy
Corporate-
level
strategy
Levels of Strategy
 Emergent and Deliberate
Strategies

Source: Adapted from H. Mintzberg and A. McGugh, Administrative 17

Science Quarterly, Vol. 30. No. 2, June 1985.
 Vision and Mission

Vision: The desired future state of the organisation

Mission: Explains the main purpose of existence of

the organisation

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Quality of Mission Statements
• Business domain
• Competencies
• Employees
• Society
• Should emphasise Values
• Emphasis on Diversity
• Concern for Environment

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THE IMPORTANCE OF
IMPLEMENTATION

“The important decisions, the

decisions that really matter,
are strategic . . . [But] more
important and more difficult is
to make effective the course of
action decided upon.”
– Peter Drucker

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