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1
The Nature of
Strategic Management
LEARNING OUTCOMES
By the end of this chapter you should be able to:
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3
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4 STUDY MATERIAL E2
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1.2.1 Common themes in strategy
From these different definitions strategy is concerned with:
● The purpose and long-term direction of the business.
● The scope of an organisation’s activities and actions required to meet its objectives
(broad or narrow).
● Meeting the challenges from the firm’s business external environment, such as competi-
tors and the changing needs of customers.
● Using the organisation’s internal resources and competencies effectively and building on
its strengths to meet environmental challenges.
● Delivering value to the people who depend on the firm, its stakeholders, such as custom-
ers and shareholders, to achieve competitive advantage.
Whatever interpretation is put on strategy, the strategic actions of an organisation will have
widespread and long-term consequences for the position of the organisation in the market-
place, its relationship with different stakeholders, and overall performance.
Corporate strategy
The corporate centre is at the apex of the organisation. It is the head office of the firm and
will contain the corporate board.
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ENTERPRISE MANAGEMENT 5
Figure 1.1 Organisation chart showing corporate, strategic business unit and functional strategies.
From GIDO/CLEMENTS. Successful Project Management with Microsoft Project CD, 1E.
© 1999 South-Western, a part of Cengage Learning, Inc. Reproduced by permission.
www.cengage.com/permissions
Corporate strategy is typically concerned with determining the overall purpose and scope
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of the organisation, in other words what type of business or businesses should the organi-
sation be in. Common issues at this level include:
● decisions on acquisitions, mergers and sell-offs or closure of business units;
● relations with key external stakeholders such as investors, the government and regulatory
bodies;
● decisions to enter new markets or embrace new technologies (sometimes termed diversi-
fication strategies);
● development of corporate policies on issues such as public image, employment practices
or information systems.
Decisions at this level tend to complex and non-routine in nature because they often
involve a high degree of uncertainty based on what might happen in the future.
The formal planning approach to strategy assumes that all strategy is formulated at cor-
porate level and then implemented in a ‘top-down’ manner by instructions to the business
divisions. During the 1980s, high-profile corporate planners like IBM, General Motors
and Ford ran into difficulties against newer and smaller ‘upstart’ competitors who seemed
to be more flexible and entrepreneurial. One consequence was the devolution of responsi-
bility for competitive strategy to strategic business units (SBUs).
Business strategy
This level of strategy is concerned with how an operating or strategic business unit
approaches a particular market.
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