6.1. What is strategic management?

Question 1

Define corporate strategy

Answer 1

: a long term plan of action for the whole organisation, designed to achieve a particular goal

Question 2

Define tactic

Answer 2

short-term policy or decision aimed at resolving a particular problem or meeting specific part of the overall strategy

Question 3

Define strategic management

Answer 3

the role of management when setting long term goals and implementing cross-functional decisions that should enable a business to reach these goals.

Question 4

Benefits of strategic management

Answer 4

• Assessing the current position of the company in relation to its market, competitors and external environment
• Taking important long term decisions that will push business towards the objectives set
• Integrate and coordinate the activities of different functional areas
• Provide a clear end purposes to work towards to. This enables everyone in the organisation to focus on the work, check on progress and make improvements
• Allocating sufficient resources to put decisions into effect
• Evaluate success

Question 5

4 key features of strategic management

Answer 5

• Strength of the business: applying specialised skills/capabilities that the businesses have to differentiate itself from the competitors and ensure higher chances of success with future strategies.
• Resources available: resources are finite => scarcity imposes an opportunity costs and force firms to choose which strategies to proceed with
• Competitive environment: competitors’ actions are major constraint on business strategy as innovations made by competitors may be difficult to copy or to better
• Objectives: provide a clear end purposes to work towards to and thereby, evaluate effectiveness/efficiency in order to make improvements

Question 6

What is the relationship between corporate strategy and organisational structures?

Answer 6

Alfred Chandler - thesis of “structure follows strategy” - investigating 4 companies Du Pont (chemicals) GM (vehicles). Sears Roebuck (retailing) and Standard Oil

Results:

• Acquired labour and raw materials to allow for growth that required the buildup of marketing and distribution channels
• Established a functional/departmental structure to improve specialisation and efficiency
• Growth-and-diversification strategies - new markets and new products to overcome the limits of the original home market
• Developed divisional organisational structures → geographical and product groups gain independence but are controlled by a centralised headquarters . This is the M-form organisational structure
• e.g. merger with the strategic objetive of creating product-focused profit centres, strategy of conglomerate to cut costs and increase flexibility - automation, rationalisation, research and development

Question 7

The link between strategy and competitve advantage

Answer 7

• Lower costs - helps to identify possible opportunities that have not yet been exploited
• Differentiated product - helps to identify the strength of the business and the resources needed to do so
• Clear corporate strategy helps focus on plans that should allow the achievement of long term goals