CIMA: EM: Strategic Management

The strategic management area of the EM syllabus seems quiet muddled up and seems to contain a lot of theories unrelated to each other. But when considering the whole topic strategic management has a nice and meaning full flow to its theories complementing each other. Having this topic area shortlisted as below helps to get the overall view of the topic and to know what areas should be known. 

Strategic Management

Rational approach to strategy development

Rational strategy process

1 . Mission and Objectives

Objectives must be SMART

Specific 

Measurable

Realistic

Timebound

Objectives should facilitate, (PRIME)   

Planing - objectives are a framework for planing

Responsibility - objectives are communicated to the relevant responsible manager/department

Integration - would help to gain goal congruence 

Motivation - could be used to motivate management to achieve objectives

Evaluation - senior management could evaluate performance using objectives as benchmarks

2 . Corporate Appraisal(SWOT analysis)

  i . Internal analysis - Internal resources would be categarised under,
                Threshold resources
                Threshold competencies
                unique resourses
                Core competencies 
            

           Porters Value Chain
                Primary activities
                    Inbound logistics
                    Operations
                    Outbound logistics
                    Marketing and sales
                    Service
                Secondary activities
                    Firm infrastructure
                    Human resource management
                    Technology development
                    Procurement

 ii . External analysis
            PESTEL framework
                Political
                Economic
                Social
                Technological
                Environmental
                Legal

            Porters five Forces
Rivalry amung existing firms
Threat of new entry
Substitute products
Bargaining power of buyers
Bargaining power of suppliers

Using the details from the internal analysis and the external analysis a SWOT analysis would take place

Strengths - internal analysis

Weaknesses - internal analysis

Opportunities - external analysis

Threats - external analysis

3 . Strategic option generation

4 . Strategy evaluation and choice

5 . Strategy implementation

6 . Review & control

Formal top-down strategy process

• A separate designated team for strategy development
• Formal collection of information for strategy generation
• Decision making by the senior management team
• A process for communicating and implementing the strategy
• Regular review and control

Benifits of top-down strategy process

Avoids short-termist behaviour
Helps identify strategic issues
Goal congruence
Improves the stakeholders impreshion of the business
Provides a basis for strategic control

Drawbacks of top-down strategy process

Its too infrequent to let the buisness to be dynamic
Forbids radical and innovative action
Difficulties of implementation
Demotivation
Impossible in unsertain buisness environments
Not suitable for small businesses

                 Reasons for top-down strategy not suiting small business

                          - There is no goal congruence issues

                          - Limited choices in products and markets
                          - Limited resources
                          - The organisational structure

Achieving competitive advantage

1 . Positioning approach(outside-in)

Super normal profits by adjusting to the porters five forces.

Developing long term relations with stakeholders
   

Criticisms of positioning approach
        - Competitive advantage gaind by positioning approach is not sustainable
        - Environments change quickly(dynamic environments) making it impossible for the firm to adjust fast to implement an effective positioning approach
        - Changing the environment rather than changing the firm would be a better/easier alternative

2 . Resource based view(inside-out)   

Companies shold use its resources to out perform its rivals in,
        Speed
        Consistency
        Acuity
        Agility
        Innovativeness
The resources in the firm should be, (according to Barney)
         Valuable
        Rare
        Imperfectly imitable
        Not substitutable
Capabilities should arice from, (according to Kay)
        Competitive architecture
        Reputation
        Innovative ability
        Ownership of strategic assets
Core-competencies could be identified by, (according to Prahalad and Hamel)
        Must provide acces to a wide market
        Must provide significant contribution to costomer benifits
        Must be deficult for competitors to imitate

 Critisisms of resource based view
        - Conflicts with the positioning approach
        - Challenges the rational model of strategy
        - Resource based view can lead to different conclusions

Alternative strategy options

1 . Emergent Strategy 

2 . Logical incremental'ism (muddle through)

Stakeholders

Reasons for the management to consider stakeholders when formulating strategy
    -Issue of stakeholder power
    -Issue of stakeholder legitimacy
Stakeholders can be devided using Mendelow matrix

Conflict between stakeholders

Conflicting objectives can have following problems,
    - Difficulty in development of a consistent strategy
    - Conflicts in deciding between strategic options
    - Difficulties in developing appropriate perfomance measures
Resolving conflicting objectives
    Prioritization
    Weighting and scoring
    Creation of composite measures
    Satisfying
    Sequential attention
    Side payments
    Exercise of power

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Understanding the flow of the theories and inter relationship among the theories helps a lot to understand and remember this strategic management section of the EM syllabus