The world is changing very fast. People are changing: processes, methods, procedures, thinking, performance, results and believe systems. Everything is changing. Your ability to keep up with this changing trend will determine your accomplishment in business and career.
Today, there are many blessings: vast improvements in mechanization, modern medicine, high productivity rate resulting from hybrid plants and animals, automation and digitization, the promise of computers, the internet, the IT and ICT, the rapid growth of local and international trade with the end of local champion’ syndrome have seen business organisations possessing the capacity to network business beyond their local environment. But in these blessings is the persistence of intractable problems: poverty, religious conflicts, ethnic conflicts, political dictatorship, corruption, kidnapping (in the physical space and ‘cyber-kidnapping’ of encrypted data in the virtual realm) militancy insurgence, the danger terrorism, environmental pollution and degradation.
All these and other threats are ever-mutating monster that pose a clear and present danger to business organisations in their environment.
Leaders who must plot the future of their organisations are challenged find a path that makes the most sense.
In the past, business policy was the name embraced in engaging a conducive or simple business environment by managers but today, business environment is not only dynamic but complex because change is occurring at an accelerating rate. Today is not like yesterday and tomorrow will be different from today. Continuing today’s strategy is risky; so is turning to a new strategy.
The unavoidable certainties point to the fact that, first; global forces will continue to affect everyone’s business and personal life. Manufacturing will become more economically favourable.
Second, technology will continue to advance and amaze us. The stem cell transplant technology in medicine, the transgender ‘brouhaha,’ the attempt to construct floating estates for man’s habitation on the lagoon, the attempt by man to mine asteroids for minerals in the outer space and also extend habitation other planets only signify that the future is now.
The digital revolution is daily contracting the space in commerce to a virtual realm where business transactions have gone beyond physical contact and structure to a realm where distance no more constitute a barrier challenge.
Digital technology is also releasing ‘artificial intelligence’ to perform many human intelligent tasks, smart chips to make smart cars, smart phones, smart homes and even smart clothes. We are at the threshold of era when intelligent robots called “humanoid” will do much of our work for us and even provide alternative succor such as intelligent wife doll that delivers the desired pleasurable fantasy a woman can give her husband.
Third, collaboration and extensive networks will continue to dominate the 21st century business sphere.
Fourth, there is a continuous push toward deregulation of the economic sector. People are more convinced that organisations function better under relatively free economy where buyers can decide what and where to buy and companies are free to decide what to make and sell. Competitive economies produce more wealth than highly regulated or planned economies. A country like Nigeria is privatising state-owned companies to unleash the benefits of competition.
In spite of the global economic meltdown, downturn or depression, these four developments globalization, technological advances, strategic alliances and deregulation spell endless opportunities for organisations. This is a wake-up call to managers and investors alike. Modern organisations are experiencing business environments that are not only changing rapidly but are increasingly subject to sudden irregularities.
The realities of these environmental possibilities including benefits and constraints contribute to business success or failure. Despite many threatening environmental constraints confronting businesses, some firms have sustained success over the years and maintained distinctive competence over their competitors.
Hence, the sustained corporate success that extends decades and expands continuously has come to be luxury enjoyed by few companies.
Three broad factors determine the success of an organisation:
The industry where it is based
The country where it is located and
How its own resources, capabilities and strategies are managed.
Strategic Management is by far the strongest determinant of success or failure of any organisation. Some organisations managed to thrive in the hostile industries and environment. Some failed and died in the process, while others braze up to the challenge by taking advantage of the complex environmental circumstance and manage their business environment effectively.
Historical Overview of Strategic Management
The genesis of strategic management began in 1911, when Harvard Business School introduced an integrative course in management aimed at the creation of general management capability. This course was based on case studies which had been in use at the school for instructional purposes since 1908.
However, strategic management was first recognised as a subject in the early 1960s. It originated in integrative management courses taught at the Harvard Business School, and in works such as Ansoff (1969) and Andrew (1971). Strategic management was then equated with corporate planning the preparation of quantitative forecast or targets for five or more years ahead.
From the US, the practice of including business policy in the management curriculum spread to other parts of the world including Nigeria. The contents of the course and teaching methodology, though new to Nigeria, vary from institution to institution.
It is basically taught to students who have previous knowledge of core management courses. Traditionally, the course was called ‘business policy’, but current dynamism in business environment has led to the adoption of the title, Strategic Management.
Definitions Of Strategic Management
The term “Strategy” was derived from the Greek name Strategos, an elected general in ancient Athens who employed the art of military, economic, political and other resources of the country to achieve the objectives of war. Because strategy is about the relationship between means and ends, the term has applications beyond prosecution of war. It is now used with reference to business.
Management was derived from the Italian word “managgiare” meaning to train horses. It was originally used to initiate the process of managing, training or directing sporting activities. Later, it was extended to the operations of government and business. What then is strategic management and what does it have to do with these issues? Strategic Management is concerned with organisation coordinated efforts geared toward achievement of its long-term objectives. One of the shortest definitions of strategic management is “winning ways profitably.”
Strategy has been variously defined by different authors:
Peter Drucker defined strategy as “a pattern of activities that seek to m achieve the objectives of the organisation and adapt its scope, resources and operations to environmental changes in the long term.”
Chandler defined strategy as ‘the determination of the basic long-term goals and the objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.’
Johnson, Scholes and Whittington, defined strategy as “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 stakeholders’ expectations.
Strategic management is the formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners based on consideration of resources and an assessment of internal and external environments in which the organisation competes (Wikipedia).
In summary, strategic management can be defined as a set of activities articulated by an organisation to achieve its long-term objectives through the allocation of its resources to navigate the changing environmental possibilities profitably.
From the definition of strategic management provided, the essential features to be identified are as follows:
• Set of activities: To decide the scope of the entity and relate it to the environment in which it operates. The question of what we should be in, where are we going, where are we now, what are we doing now, how are we doing now and how to get to where we want to be are given attention.
• Organisation: Peoples’ coordinated effort (often in enterprise related activities) geared towards efficient and effective utilisation of resources to achieve objectives.
• Target objectives: Simply put; “defined purpose on aim.” It is often assumed that the objective of a company is to maximise the wealth of the shareholders within a specified time frame but other than that is to also fulfill other stakeholders’ expectations.
• Resource allocation: Appropriation of the ‘resource capability to operate in its selected areas of activities. This means the entity has enough employees with the right skills, access to sufficient funds, raw materials and other supplies, enough equipment, suitable IT systems that can match the implementation requirement of the strategy.
• Navigating changing environmental realities: To provide a high level but flexible framework for detailed decision-making, looking at the long-term direction by adapting the entity resources successfully to its dynamic environment through a systematic control measure.
Benefits Of Strategic Management
Strategic management is important for organisations because it brings several benefits in that:
It helps organisations identify and develop a competitive advantage.
It provides direction for members in the focus of their efforts.
It helps to drive performance at all levels of the organisation.
It highlights the need for innovation and stimulates new ideas related to strategies.
Managers at various levels who are involved in strategic planning clearly understand the strategic plans and are committed to their implementation.
Nature Of Organisation Strategy
The characteristics of business strategic decisions are:
• Mainly concerned with the scope of an organisation activities e.g. does the organisation produce only one or many products?
• Basically matching the activities of an organisation to the resource capacity of the organisation.
• Matching of the activities of an organisation with the environment in which it operates. An organisation should be dynamic in accordance with the changing environment.
• Often concerned with major resource implications for an organisation. Additional product line means additional resources to match production requirements.
• Not only a function of environmental factors and resource factors but also is affected by values and expectations of the people who are in position to influence the strategy.
• Often very complex in nature involving many considerations including things within and outside the organisation (external and internal environments).
Models for Strategies
Strategic management is a terrain that deals with complexities of a phenomenon. Models help us to simplify the complex elements in a relationship in a way to enhance easy understanding. We shall adopt models as management tools for abstraction from reality in this text.
This way, we are able to focus on the important elements of phenomenon and their logical relationships. Some of the models used in this book include:
Verbal models – They are direct descriptions of a phenomenon that communicate the complex relationships among variables. When we identify planning, goals, vision/mission, objectives, implementation and control as components of strategic management, we are describing them as strategic management model. Verbal models may be presented in a graphical form. Example is organisation structure.
Analogical models – This type of models are used to convey ideas about a phenomenon where the process is less clearly explained. An example of analogical model is life cycle models that barely explain the transition from one stage to another.
Quantitative models – They are types of models that are expressed in symbols or abbreviations to show the functional relationships between variables. For example, SM= f(SA, SC, SI) indicates that strategic management, is a function of strategic analysis, strategic choice and strategic implementation. Strategic management adopts both dynamic and static models.
Dynamic models are mostly used to incorporate feedback mechanism that enables us to predict the phenomenon under conditions of change. Static models indicate the relationships between variables at a particular point in time. The model, SM = f(SA, SC, SI) attempts to depict strategic management in a shorthand form. The nature of relationships between the variables is not specified but the model is useful to the managers because the key elements in understanding strategic management are indicated.
Strategy Development
There is no single ‘straight’ approach to strategy development. Strategy may evolve in different ways. One way of explaining how strategies are developed is to make a distinction between deliberate strategy, emergent strategy and incremental strategy.
Deliberate Strategy
Deliberate strategy is a rationally-planned strategy by the management of an organisation. It forms the outcome of a formal strategic management process in which the management:
Emergent Strategy
This strategy does not follow a formally planned process. It emerges in response to unforeseen developments and opportunities. Ideas that evolve from employees or fairly junior managers, rather than senior management might be harmonised to form strategy, or may eventually become a part of deliberate strategy in future.
Incremental Strategy
Whenever unexpected opportunities or circumstances arise, management may decide to make small changes to existing strategy. Incremental strategy develops slowly over time as the business environment is changing and the management adds small changes to existing strategy. However, such eventual adjustments to strategies may not ensure the survival of the entity, which associate incremental strategy with lack of strategic direction or ‘strategic drift.’
Strategy Lenses
Different approaches to understanding strategy development have been suggested by many authors. Johnson and Scholes (2017) have suggested three different ways of looking at strategy development. They use ‘strategic lens’ to describe these three ways.
Each approach depends on the situations or circumstances that demand the strategy development. analyse the environment of the business carry out a strategic position analysis identify and evaluates the strategic alternatives make strategic choices, and implement the chosen strategies.
Strategy as Design
Strategy can be visualised as the result of a design process emanating from logical, analytical and planned reasoning. The characteristics of the design lens include:
- Strategy as design
- Strategy as experience
- Strategy as ideas
- A formal and deliberate process
- Strategies are logical and clear
- Strategic choices are made by senior management
- Making strategic choices out of the thinking process precedes the implementation of strategy
It is well-suited to a hierarchical management structure, where employees are used to receiving directions from their senior managers
‘Strategy as design’ is similar to deliberate strategy.
Some of the underlying assumptions of ‘strategy as design’ are:
• The quality of strategic decision-making is improved by carefully planned and systematic thinking, especially when the business environment is complex and the future is uncertain
• Strategic development needs formal planning and control
• The quality of strategic planning is improved by analytical tools and
techniques, and business modeling.
Strategy as Experience
Strategy development may evolve as a result of adapting and introducing fairly small changes to current strategies. Strategic thinking and strategic choices are influenced by:
The company culture and the attitudes, aspirations and beliefs of the people who work for the company
The company’s history.
Experience from the ‘old ways’ of doing things that worked in the past is a recipe for the development of current strategy.
The characteristic of seeing strategy development as a design process are:
The strategic direction of the entity will be strongly influenced by bargaining and negotiation between managers: strategic development is often the outcome of compromises
Strategies will develop incrementally
It is similar to incremental strategy with associated ‘strategic drift’ as a weakness.
Strategy as Ideas
Johnson and Scholes suggested that innovation is likely to come from this third perspective on strategy: strategy as ideas. Their question is “if new strategic ideas do not come from ‘strategy as design’ and ‘strategy as experience, where do they come from?
Some characteristics of seeing strategy development as an idea process are as follows:
Many different ideas compete for the support of management among individuals with innovative thinking
Rely radically on new ideas which may not necessarily come from the senior management. Other individuals within the entity might bring about innovation
Innovation happens as a result of variety and diversity. A changing and
competitive environment encourages major innovation
Innovative thinking may not happen within an organisation with a traditional hierarchical management structure, centralization and a formal line of authority and responsibility ‘Strategy as ideas’ is similar to emergent strategy.
Some underlying assumptions of strategy as ideas development approach include:
New idea generation is not the exclusive terrain of the top management. Top managers are to create enabling environment for their staff innovation to thrive
Management should relax control to accommodate staff to use their intuition and initiatives in the working environment
The management must recognise that strategies developed from ideas this way are not perfect. They must make improvement to the weaknesses found in new ideas from staff.
Each of the strategy lense provides a different insight into strategy, but looking at strategy through just one lense can be risky. It is advisable m therefore to use all three lenses to view all aspects of strategy.
Mitzberg’s 5Ps for Strategy
Mintzberg in one of his historic articles summarized strategy into ‘5Ps,’ which also provides a useful analysis of how strategy develops. He suggested that strategy is used in different ways and that there are five different definitions as presented by his 5Ps’ for strategy:
- Plan
- Ploy
- Pattern
- Position
- Perspective.
Strategy as a plan: In this definition, strategy as a plan implies a conscious means of attaining, making and implementing decision.
Strategy as a ploy: Means an intended manoeuvre to outwit an opponent or competitor.
Strategy as a pattern: Mintzberg sees strategy as a consistency in behaviour whether as a plan or as a ploy.
Strategy as a position: As a position refers to positioning an organisation in its environment and deciding the position it should be within its markets.
Strategy as a perspective: Mintzberg defines strategy in terms of corporate personality and mirrors the entity in terms of its culture and its members management and employees.
Strategic Planning Frameworks
An organised process of strategic planning and implementation help to provide framework for understanding the issues in strategic management and business analysis. Two strategic frameworks that come handy are:
Rational planning model and
Strategic gap analysis.
The Rational Planning Model
This strategic management framework:
• Sees the purpose of strategy as the achievement of clearly-established objectives
• Considers strategic management to be formal process led by senior management
• Sees strategic management as a multi-layered process, with corporate strategy, business strategy and functional strategy.
Gap Analysis Approach to Strategic Development
Gap analysis provides an alternative model for planning and developing strategy in a formal way. This approach consists of the following stages:
• Identifying objectives and setting targets: where do we want to be?
• Establishing the current position. Where are we now?
• Measuring the diference between where we are and where we want to be as a strategic gap.
The purpose of strategy development should be to choose and implement strategy that will fill this gap so that the target objective can be achieved. Filling the gap requires:
• An analysis of environmental threats and opportunities and the internal strengths and weaknesses of the entity
• Identifying the competitive advantage that the entity enjoys
• Re-stating the business objectives as a result of this strategic analysis, so that objectives are realistic and achievable: this will change the size of the strategic gap
• Identifying alternative strategies, evaluating them and selecting m strategies to fill the strategic gap
• Implementing the selected strategy.
• Evaluation of strategy performance and control of any gap for feedback to ensure such gap(s) are correctly filled.