STRATEGIC MANAGEMENT:

AN OVERVIEW

T. Hani Handoko, Ph.D

Universitas Gadjah Mada

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The History of
Strategic Management Course (1)
1912-Harvard Business School (HBS) introduced the
course of Administrative (Business) Policy for the first
time.
Interactive discussion between executives and students to
discuss business and management issues, both strategic
and operational, find solutions – introducing case method
The concept of general management and “administrative
point of view”

1946-HBS revised its curriculum and the course of

Business Policy (BP) became compulsory.

BP became a “capstone course”

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The History of
Strategic Management Course (2)
1959-The Study of Gordon and Howell (1959)
recommended Strategic Management to be
an integrating course in the curriculum of
business education.
Late 1970s-The course of Strategic
Management “officially announced,” and
in the year of 1981 the Strategic
Management Society was founded.

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 The Short History of
Strategic Management

1940s-Budgetting and Financial Objectives

1950s-Long-Range Planning and Formal Models
1960s-Growth and Business Scope, and Corporate
Identity
1970s-Analysis of Competitive Advantage
1980s-Strategy Implementation, Capability-Based
Strategy, and Strategic alignment
1990s-Strategic Leadership and Strategic Change
2000s-Dynamic Strategy Making and Continuous
Renewal

Sumber: Greiner, Bhambri, dan Cummings (2003)

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 The Evolution of
Strategic Management (1)
Period 1950s 1960s 1970s

Dominant Budgetary planning Corporate planning Corporate strategy

theme and control

Financial control Planning growth Portfolio planning

Main Focus through operating
budgets

 Financial budgeting  Market forecasting  SBU as unit of analysis

Principal  Investment  Diversification  Portfolio planning matrices
concepts and planning  Analysis of experience
 Analysis of synergy
curve and returns to
techniques  Project appraisal market share

Financial  Development of  Integration of financial

Organizational management as key corporate planning & strategic control
implications corporate function departments  Strategy as dialogue
 Rise of conglomerates between corporate HQ
 Diffusion of M-form and the divisions

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 The Evolution of Strategic Management (2)
Period Late 1970s and Late 1980s and Late 1990s
early 1980s early 1990s
Dominant Analysis of industry and The quest of competitive The development of competencies
theme competition advantage

Choice of industries, Analysis of sources of Analysis of acquisition, utilization, and

Main focus markets, and segments, competitive advantage within deployment of resources, assets,
and positioning within the firm, and dynamic aspects capabilities and skills
them of strategy
 Analysis of industry  Resource analysis  Analysis of competence leveraging
Principal structure  Analysis of organizational  Analysis of competence building
concepts and  Competitor analysis capability  Analysis of cognition in managing
techniques  Analysis of strategic  Analysis of customer values competencies
group  Analysis of speed and  Organizational learning
responsiveness

 Divestment of  Corporate restructuring and  Building strategic vision

Organizational unattractive business Business Process  Developing organizational and
implications units Reengineering managerial cognition
 Active asset  Building capabilities through  Creating and managing knowledge
management MIS, HRM, strategic  Building organizational/strategic
alliances, organizational learning capabilities
forms

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 What is Strategy?
The word strategy is derived from the Greek word ‘strategos’:
art of the general.

Strategy is the pattern of major goals and objectives,

and the essential policies and plans for achieving
these goals.
Strategy is the match between the firm and the
environment.
Strategy is an integrated set of actions aimed at
securing sustainable competitive advantage
Strategy is the overall plan for deploying resources
to established a favorable position.

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 Defining the Concept of Strategy:
Six Dimensions of Strategy

 Strategy as a coherent, unifying, and integrative pattern of

decisions
 Strategy as a means of establishing an organization’s
purpose in terms of its long-term objectives
 Strategy as a definition of a firm’s competitive domain
 Strategy as a response to external opportunities and
threats and to internal strengths and weaknesses as a
means of achieving competitive advantage
 Strategy as a logical system for differentiating managerial
tasks at corporate, business, and functional levels
 Strategy as a definition of the economic and noneconomic
contribution the firm intends to make to its stakeholders
Sumber: Hax (1990)

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 “Five Ps for Strategy”
Strategy as Plan
•some sort of consciously intended course of action
•a guideline (or set of guidelines) to deal with a situation
Strategy as Ploy
•specific ‘maneuver’ intended to outwit an opponent or
competitor
Strategy as Pattern
•a pattern in a stream of decisions and actions
Strategy as Position
•a means of locating a firm in an ‘environment’
Strategy as Perspective
•an ingrained way of perceiving the world
Source: Mintzberg (1987)
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 Strategic Planning System
A structured process that organizes and
coordinates the activities of the managers
who do the planning.

Value:

 Explicit analysis
 Sense of direction
 Organizational commitment
 Improves communication

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The Benefits of a Strategic
Approach to Managing
Strategic management is a philosophy, perspective, or
way of managing an organization.
The advantages of first-rate strategic thinking and
strategic management include
 providing better guidance to the entire organization on
the crucial point of “what it is we are trying to do”
 making all managers more alert to new opportunities
and threatening developments
 helping to unify the firm
 creating a more proactive management posture
 promoting the development of a constantly evolving
business model
 providing managers with a rationale for allocating
resources
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 Basic Model of Strategy Formulation
Strategic
Vision

Analysis of Environmental Analysis of internal

Factors: Trends, events, resources and capabilities
directions and ideals

Business Strengths and Weaknesses

Opportunities and Threats of the firm

Key Success Factors Competitive Advantage

Creation of Strategy Evaluation and Strategic plans

choice of strategy

Managerial values Social responsibility

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The Five Tasks of
Strategic Management
Charting a strategic vision of what the company’s
future business make up will be and where the
organization is headed.
Setting objectives.
Crafting a strategy to achieve the desired outcomes.
Implementing and executing the chosen strategy
efficiently and effectively.
Evaluating performance and initiating corrective
adjustments in vision, long-term direction,
objectives, strategy, or execution in light of actual
experience, changing conditions, new ideas, and new
opportunities.

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 Tests of a Good Strategy
Consistency: The strategy must not present mutually
inconsistent goals, policies, and plans.
Consonance: The strategy must represent an adaptive
response to the external environment and to the critical changes
occurring within it - well matched to the industry and
competitive conditions, market opportunities and threats, and
other aspects of the external environment.
Advantage: The strategy must provide for the creation and/or
maintenance of a sustainable competitive advantage in the
selected area of activity.
Feasibility: The strategy must neither overtax available
resources nor create unsolvable subproblems.
Performance: The strategy must boost company
performance.
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Why Strategic Planning Fails
Strategic planning system is not complete - a
calendar-driven planning system is not the only
form of a formal planning system
Three fallacies of strategic planning (Mintzberg, 1994):
The fallacy of prediction
The fallacy of detachment
The fallacy of formalization
Insufficient strategic information
Managers lack strategic management skills
Lack of an integration with other formal
management systems
Resistance to change - threat to existing power
structure and culture
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Effective Strategic Management
Clarity of strategic direction
Profound understanding of the competitive environment
Objective appraisal of resources and capabilities
Process, not an activity
Line ownership
Support of top management (strategic leadership)
Tailor-made approach
Evolving approach
Action oriented
Team approach
‘Down the line’ involvement
Alignment with other systems
Effective implementation
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