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University of Nigeria Research Publications
ATTANSEY, Agatha Ebelechukwu
Aut
hor
PG/MBA/97/20406
Title
Strategic Management in a Dynamic Economy: A Case Study of some Selected
Companies
Facu
lty
Business Administration
Dep
artm
ent
Management
Dat
e
January, 2001
Sign
atur
e
Strategic Management in a dynamic Economy
( A Cnsc Sludy ol'so~nc sclcctccl C ~ I ~ I P ~ I I I ~ C S )
Attansey Agatha Ebelechukwu
A I'rqjcct si~bmittcd in partial li~llil~ncnt ol ' t l~c requircmcnt lor the award of
degree of Mastcr of Rusincss Administration (MRA) in Management.
Department of Management
I-;~culty 01' t3~1siness Administration
University of Nigeria
CERTIFICATION
Attansey Agatha Ebelechukwu, a Postgraduate Student of Department
of Management with Registration Number PG/MBA/97/20406 has
satisfactorily completed the requirement for the course and research work for
the Postgraduate (MBA) in Business Administration in Management.
The work embodied in this. report is original and has not been
submitted in part or full for any other Diploma or degree of this or any other
university.
Chief J. Eze
(Supervispr)
Dr. U. J. F.'Ewurum
Head of Department.
Dedication
To God be all the Glory
Acknowledgement The Successful completion of this work is due to the numerous support and
contribution of quite a number of individuals.
Firstly, I wish to express my appreciation to my parents, who made it possible
for me to complete this work both financially and morally and my entire family
for their moral support throughout the course of this work.
Also, I owe a special thanks to my supervisor Chief J. Eze for his intellectual
guide, constructive criticism and most especially his priceless support which has
brought out the best in this work.
I must not fail to express my sincere gratitude to my friends for showing so
much care and understanding during this work and the management and staff of
my case study companies for their willingness, attention and sincerity.
I am also grateful to the staff of the University of Nigeria Library, and staff of
the State and National Library for their cooperation during the data collection.
My unreserved appreciation also go,es to the typist of this work and to
everybody who contributed in one way or the other towards the success of this
work.
Above all, I thank the Almighty God who is the foundation of all knowledge and
the source of all wisdom for his grace and blessings which saw me through the
entire project.
March 1999 Attansey Agatha E. PG/MBA/97/20406 (Dept. Of Management)
In an economy that is dynamic, there is so much in planning and decision
making. The management of organisation faces the risk of making ineffective
decisions in a bid to combat environmental changes.
This study is an effort put together responsively to rescue organisations f ron~ the
risk of malting inadequate planning, ineffective decisions which could lead to
organisation collapse. It attempts , to extricate the efficacy of strategic
management in curbing such inefficiencies in organisations. The benefits of
strategic management to organisations are nui~~erous but in summary, it can be
said to offer organisations the opportunity to determine their risk exposures
thereby enabling them to operate within the dictates of their environment.
The study guided by a hypothesis and some supporting research questions
attempts at providing an improvement in the level of understanding of the
relationship between strategic management and organisations profitability and
success. The recoinmendation packaged as a set of prescriptions for revamping
distress organisations and strengthening organisations. It should be found useful
to organisation management, academicians, students of business administration
and the general public.
Strategic management as a forward looking approach to management,
continuously, anticipates and adapts to changing environment, and in so doing,
offers organisations the opportunity to prudently operat ithin the limits and
dictates of an environment that is constantly changing.
d Organisations do not exist in a vacuum but are subject to the larger environment
in which they f?nd themselves. On its own part, the environment is dynamic,
that is, it changes with time. As a result, organisations can not afford to be
static, but has to evolve with the environment.
In the face of the changing nature of the external environment, organisations
make plans to enable tliem adapt and respond to external environment. How
able an organisation is to move with the tide of change is mainly a function of
the organisations ability to plan. Every organisation tries to give reason for its
existence and to ensure its continued existence. This is only possible if
organisational goals and objectives are achieved within specified time.
Strategic management establishes that each organisation needs to be able to
manage its resources effectively and efficiently.
The study was carried out in five chapters. The first chapter which dealt with
the introduction and formulation of the problem that was studied. The second
chapter dealt with the review of relevant literature, the third chapter discussed
the methodology of the study, the fort11 chapter analysed the data collected and
the fifth chapter discussed the findings and conclusion and recon~mendation.
List of Figures
FIG 1.0: RESPONSIBILITIES OF LEVELS OF MANAGEMENT IN STRATEGIC MANAGEMENT
PROCESS. 2 3
FIG. 2.0: THE MANAGEMENT CONTROL PROCESS 4 7
Table of Contents CERTIFICATION ........................................................................................................ 2
DEDICATION ............................................................................................................. 3
ACKNOWLEDGEMENT ............................................................................................. 4
................................................................................................................ ABSTRACT 5
LIST OF FIGURES ..................................................................................................... 7
TABLE OF CONTENTS ....................................................................................... 8
CHAPTER ONE ....................................... : ................................................................ 10
Introduction ................................................................................................................................................... 10
Statement of the problem ........................................................................................................................ I 3
Ob. jective of the study ................................................................................................................................ I4
Significilnce of the study ........................................................................................................................... I5
Limitation of the study .............................................................................................................................. 16
.................................................................................................................................... Time constraints I G Financial constraints ....................................................................................................................... 16 Transportation cost .............................................................................................................................. 16
Statement of hypothesis ...................................................................................................................... 16
CHAPTER TWO ...................................................................................................... 17
Literature Review ....................................................................................................................................... 17
Concept of strategic management .................... .. ................................................................................ 17
Stable Growth Strategy .................... ... ........................................................................................... 18 Growlh strategies .............................................................................................................................. 19
Scope of strategic nialiagenient ............................................................................................................... 21
Importance And Objectives Of Strategic Management ............................................................................. 23
The Strategic Management Process .......................................................................................................... 25
Defining The Organisation's Mission ............................................................................................... 26 Long And Short Range Objectives .................................................................................................... 28 Formulating Polices ............................................................................................................................. 30 Intergrating Mission Statement. Policies. Objectives And Strategy .................................................... 31
Strategic Business Units (SBU) ................................................................................................................. 32 7 7 Strategic Planning .................................................................................................................................. 3 3
b
Strategy Evaluation And Selection ............................................................................................................ 36
Merger's ............................................................................................................................................... 36 ...................................................................................................................................... Joint Ventures 36
Harvesting Strategies .......................................................................................................................... 37 Retrenchment Strategies ................... .. .......................................................................................... 37
.......................... Combination Strategies .............. ................................................................................ 38 Strategy Implenlentation ................... ... ............................................................................................. 43
Developing the organisatio~l structure ................................................................................................. 43 . Managing organisatio~ial activities ................... .. ........................................................................... 45
................................................................................................................... Strategic Control Process 46 ....................................................................................... Strategic management in a dynamic econoniy 48
References
CHAPTER 3 ............................................................................................................. 53
Research Met hotlology ................................................................................................................................. 53
Primary Sources ...................................................................................................................................... 53
Seconda~y sources ..................................................................................................................................... 53
..................... Research instr~~ment ........................................................................................................... 53
................................................................................................................................... Sampling procedure 54
....................................................................................... Fornulation of Hypothesis .......................... .. 54
Data Analysis techniques .......................................................................................................................... 55
Popi~lation .................................................................................................................................................. 56
Sampling Plan .................... .... ............................................................................................................ 56
CHAPTER 4 .......................................................................................................... 57
Presentation and Analysis of Data ............................................................................................................. 57
Analysis and Interpretation of Data ........................................................................................................... 57
Testing Interpretation of Hypothesis .................................................................................................... 57
CHAPTER 5 .................................... .... ..................................................................... 66
Summary. Recontntenclation and Conclusio~l ............................................................................................. 66
BIBLIOGRAPHY ...................................................................................................... 73
.................................................................................................... QUESTIONNAIRE 77
Chapter C I n t r o d u c t i o n
In an economy that is becoming more'dynamic or competitive, with businesses
springing up here and there, small, medium and large scale. Especially, with
government awareness on the need to industrialise, develop and self reliant,
moreso, customers are more enlightened on existing products and aware of what
they need.
Management of both foreign and local businesses alike have realised the need
for a more dynamic business policy and decisions. Strategic management seems
to have it all. Strategic management is one management philosophy that has
been in existence for a long time but rather looming in a beclouded environment
of unawareness and unacceptability. But with recent developments in the
business environment (economic, social, technical etc.), organisations have
realised the need to become alert to its environmental needs and active rather
than reactive in order to at least have its head above the waters, hence, the recent
emphasis on strategic management by most organisations in recent times.
Strategic management is applied in all aspects of a business or organisation -
finance, marketing, production etc.
Strategic management is concerned with making decisions about an
organisations future direction and implementing those decisions. Over the
years, .some organisation have grown extremely large and profitable as a result
of effective strategic management. On the other hand, many others have failed
or have not been as successful as they might have been because of ineffective
strategic management.
During the 1980's and 1990's increased foreign competition, the increasing
scarcity and cost of natural resources and a continuing lack of growth in
productivity rates within Nigeria, have made strategic management even more
important and difficult. Organisations have adapted to change over their
corporate life and the continuing success of organisations in the future will
require more innovative, strategic decisions.
Because of the general economic recession in the world especially in the third
world countries and Nigeria as a case in point, organisations have to devise
means and strategies and innovations to remain in business and if possible oust
its competitors from the market. The economic recession such as
unemployment, economic instability, low per capital income, exchange rate
instability, political instability, corruption, excess capacity utilisation, industries
operating below full capacity, all these have led to uncertainties and therefore a
lull in the business environment, companies have resorted to strategic
management to keep afloat. Therefore, we often hear of businesses
restructuring, re-engineering, re-organising, down-sizing etc. All these are
terms associated with strategic management.
The strategic management process is equally applicable to public, private, non-
profit and religious organisations. "The concepts and application of strategic
management are as useful to a local restaurant, a sinall office supplies firm, or a
college football team as to giant corporations such as Coca-kola, IBM or
General motors.'
The economy is highly dynamic because of changes in enviroimental factors
within which businesses are carried out economic dynamism could be changing
consumer needs and tastes income, competition, government laws, policies,
scarcity of resources these economic factors are continuously changing and each
change affects an organisation either positively or negatively. Management is
therefore at alert to these changes. It is therefore necessary to put in place
facilities to enable it adjust to these changes as any delay could be destructive or
affect the business adversely. Management is therefore urged to plan ahead to
anticipate such future probable problems and map out courses of action to take
or possible solutions to such problems.
Strategic management is distinct from any other management activities or
routine planning in the sense that it takes a corporate view of the corporate goal,
it starts right from the top to the lower cadre and in the process pulling
everybody along. The essence of strategic management is for growth, increased
market share and profitability. How management achieves these depends on the
strategies employed or adopted by management. In this study, the various
strategies available to management will be examine and the effect on the success
of an organisation will equally be examined.
The importance of strategic management in organisations can not be over
emphasised. Little wonder, management of so many organisations have come to
realise its place in business success and hence its adoption by them. Strategic
management plays an important role in organisational success in an environment
that is becoming highly dynamic.
Stcrtenzent of the problem Customers needs are ever changing, customers have different needs and
problems, and divergent expectations. The essence of any organisation is to
make sales and realise profit, be it production or service industry. Management
has the obligation to provide customers with high quality goods, and satisfy their
desires and meet their needs in order to remain in business and achieve their
objectives.
Management must be dynamic, have the ability to pre-empt customers needs,
the environment in which it is operating and act accordingly.
In an economy that is dynamic, this is a Herculean task for management, it is
therefore necessary for management to adopt strategic management. Here
comes another big question, what are the strategies available, which strategies
do we adopt, which is the best way to determine the strategies available, having
chosen a strategy or strategies which is the best way to apply these strategies in
order to meet corporate goals and objectives.
All these are what this study intends to examine and proffer possible solutions to
evident problems encountered by organisations.
Objective offhe study This study aims at accomplishing the following:
To describe the strategic management process
To present the responsibilities of various levels of management in the
strategic management process.
To present the basic factors that signal the need for a change in an
organisat ion's strategy.
To demonstrate the relationship between effective strategic management and
organisational success.
To examine strategies of a company that has adopted strategic management;
problems encountered and control measures taken.
To make recommendations as to the bests possible methods to apply strategic
management and achieve organisational success.
SigniJicunce of the study
Organisations and corporate bodies are made aware of the need to adopt
strategic management changes in the business environment and achieve co-
operate or organisational success, goals and objectives.
In an economy that is dynamic, there is need to change technology, change
organisational structure, marketing policy and manufacturing techniques many
times and expect to go on changing. Management should realise that the only
constant thing in business is change, and in order to survive and achieve success,
it must have a sound set of beliefs on which it premises all its policies and
actions. That most important single 'factor in corporate success is faithful
adherence to those beliefs and finally believes that if an organisation is to meet
the challenges of a changing world it must be prepared to change everything
about itself except those beliefs as it moves through corporate life. But all
through this change its beliefs will remain and steer its course by those stars.,
Some organisations employ strategic management and yet remain unsuccessf~il,
what could be the major problem with these organisations? Is it in the
management style, culture or competence, or probably no adequate strategic
planning was done or proper strategic implementation carried out. This study
addresses the need for strategic management, its planning and implementation to
meet management corporate objectives,
Linzitcition of the study
Although, the work has been successfully completed, more could have been
done if not for some militating factors encountered by the author in the course
of this research. Such limiting factors include:
Time constraints
There was no sufficient time to carry out extensive and thorough research on
this work due to the nature of the academic session.
Financial constraints
This author was limited by poor fund which limited movement and procurement
of other relevant materials and information.
Transportation cost
The cost of transportation as a result of the incessant fuel scarcity and
consequent rise in fuel price constrained the movement of the writer.
Stlitenzent of hypothesis 1 . Strategic management is the key to achieving organisational success in an
economy or environment that is dynamic.
2. Strategic management process must involve every cadre of management and staff for its effectiveness.
3. Strategic management must be reviewed continuously to ensure adherence by all concerned and to detect and correct deviations.
4. Strategic management should be cost effective to ensure organisation reap the benefits from it.
5. There is need for a formal strategic management process.
Chapter Two Literature Review
Concept of strutegic mnnrrgement
The word "Strategy" came from the Greek word Strategos, which means "a
general". At that time, strategy literally meant the art and science of directing
military forces. Today, the term strategy is used in business to describe how an
organisation intends to achieve its objectives and mission. Most organisations
have several options for accomplishing their objectives and mission. Strategy is
concerned with deciding which option is going to be used. Strategy includes the
determination and evaluation of alternative paths to achieve an organisations
objectives and mission and eventually, a choice of the alternative that is to be
adopted.
Strategic management is concerned with making decisions about an
organisations future direction and implementing those decisions. It is composed
of two phases - strategic planning and strategy implementation.
Strategic planning is concerned with malting decisions with regard to
determining the organisations mission, formulating policies, establishing
objectives, and determining the strategy that is to be used in achieving the
organisations objectives.
Strategic implementation is concerned with making decisions with regard to
developing an organisational structure to achieve the strategy, staffing the b
structure, providing leadership and motivation to the staff, and monitoring the
effectiveness of the strategy in achieving the organisation's objectives.
Strategy describes how an organisation intends to achieve it objectives and
mission. The strategies available to an organisation can range from a
continuation of its present strategy to a complete change in direction. Inherent
in the process of strategy selection is the requirement that strategic alternatives
must be identified. In choosing a strategy, an organisation has 2 options either:
1. To maintain a stable growth.
2. To adopt growth strategies.
Stable Growth Strategy A stable growth strategy can be characterised by the organisation that is
satisfied with its past performance and decides to continue to pursue the same or
similar objectives, each year the level of achievement that is expected is
increased by approximately the same percentage. The organisation continues to
serve its customers with basically the same products or services.
A stable growth is a relatively low-risk strategy and is quite effective for
successful organisations in an industry that is growing and in an environment
that is not volatile.
Management often adopt stable growth strategy because it may not wish to take
the risk of greately modifying its present strategy as change threatens those
people who employ previously learned skill when new skills are required. It
also threatens old position of influence. Furthermore, management of successful
organisatiori quire frequently assume$ that strategies that have been proved
successful in the past will continue to be successful in the future. Also changes
in strategy require changes in resource allocations and such changes in pattern
of resource allocation in an established organisation are difficult to achieve and
frequently require long periods of time. Management of organisation rnay.not
keep up with or be aware of changes that may affect its product and market.
Generally, organisations that pursue a stable growth strategy concentrates on
one product or service. They grow by maintaining their share of the steadily
increasing market by slowly increasing their share of the market, by adding new
products or service(s). Only after extensive marketing research, or by
expanding their market coverage geographically. Many organisations within the
public utility, transportation, banking & insurance industries follow a stable
growth strategy.
Growth strategies Organisations pursing a growth strategy do not necessarily grow faster than the
economy as a whole but do grow faster than the markets in which their products
are sold. They tend to have larger than average profit margins. Postpone or
even eliminate the danger of price competition in their industry, regularly
develop new products and instead of adapting to changes in the outside world,
they tend to adapt the outside world to themselves by creating something or add
something which did not exist before. Organisations pursuing growth strategies
are not confined to growth industries. They can be found in industries with
relatively fixed markets and long-established product lines. Growth strategies
lead to better organisational performance and that is why some organisations
decide to pursue a growth strategy, moreover, some top managers equate growth
with their own personal effectiveness, growth in stock price and consequently,
growth in their own net worth.
While growth strategies are often appealing to managers, stock holders, and
investment analysts, a word of caution seems appropriate at this point. Peter
Ducker phrased the caution as follows:
The securities market would be well advised to put a discount on growth stocks
and growth industries rather than a premium. For growth is a risk. There is no
virtue in a company's getting bigger. The right goal is to become better.
Growth to be sound should be the result of doing the right things. By itself,
growth is vanity and little else.2
Too much growth in the short-run can result in inefficiencies that can prove
disastrous in the long-run. However, when a growth strategy is properly
selected and implemented, it can be very effective,
Growth strategies include:
I. Concentration on a single product or service.
2. Concentric Diversification (adding new products or services that are similar
to t h ~ organisations present products or services).
3. Vertical Integration (extending an organisation's present business in two
possible directions - Forward Integration or Backward Integration).
4. Horizontal Diversification (Buying one of an organisation's competitors).
5. Conglomerate Diversification (adding new products or services that are
significantly different from the organisation's present products or services).
Scope of strntegic nrmngermnt Within large organisation, Management personnel fall into one of 3 categories:
General (also called top or executive) Management, Middle Management and
Supervisory Management (also cadled lower Management). General
Management normally includes people with job titles such as chairman of the
board, chief executive officer, chief operating officer, president, senior vice-
president, executive vice-president, group vice president, or general manager.
However, job titles cannot always be used to determine a person's level of
~ a n a ~ e i i i e n t . For example, in many large banks vice presidential titles are
frequently given to people who may not have any managerial responsibilities.
Strategic Management is a function and responsibility of managers at all levels
of the organisation, but the tinal responsibility rests with general Manageinent.
The strategic Management responsibilities of managers at lower levels of the
organisation vary depending on the nature and size of their organisation and
their location within the organisational hierarchy.
To illustrate this point figure 1.0 provides a typical description of the types of
strategies that can developed by various levels of Management within an
organisation.
The general management of the organisation has the final responsibility for
developing the organisation's mission and objectives and for selecting a strategy
to achieve the mission ob-jectives. This is sometimes called the corporate
strategy. Tlte vice-presidents in conjunction with their iniddle managers are
responsible for developing a strategy for their respective areas that will facilitate
the achievement of the organisation's objectives. This is sometimes called a
program strategy. The same process is repeated for each level of Management
within the organisation.
In some larger organisations, corpdrate planning departments have been
established to assist general Management in making strategic Management
decisions. While in some small organisations, the owner or operator generally
has the total responsibility for performing the strategic Management process.
In summary, the scope of strategic Management depends on the size of the
organisation, the sesources at its disposal, the quality of Management, staff, the
quality of personnel, the environmental factors within which an organisation
operates, the awareness of Management and personnel staff.
Fig 1.0: Responsibilities of levels of Management in strategic Management process.
Type of Strategy - -
Corporate Strategy (also called master strategy, grand strategy, or long-range planning
Strategy that is concerned with how original objectives to be attained (also called program strategy)
Strategies to implement program strategies (also called substrategies)
Short-range, step-by-step methods to be used (also called tactics)
Responsibility
General or top management
Top manager in a particular area of the organisation in conjunction with his or her middle managers
Middle managers in a particular area of the organisation with his or her supervisors
Managers and supervisors in a particular area of the organisation with their employers
The type of organisational structure in existence, style of Management, the
capabilities of the Management, sltills and abilities of the work force.
How elaborate a strategic Management system depends on the needs of the
organisation and the commitment of Management staff. 3, c>.';ny OF NfRFpl)
lraplqph Importnnce And Objectives Of Strategic Mrrntgement - Most organisat ion are in business to achieve certain object ices which includes
(fiom order of ranking) organisational efficiency, high productivity, profit
maximization, organisational growth, industrial leadership, organisational
stability, Employee welfare, social welfare etc. Management of organisation
tries to develop and adapt strategies that will aim at achieving such objectives.
Strategies are identified, adopted and implemented.
Strategic Management is therfore a means through which organisations can
achieve their objectives.
Strategic Management enables Management to make a self assessment of the
organisation to determine where the organisation is, where it wants to be and
strategies to be adopted to get to the desired position.
Strategic Management helps an organisation to have a focus and determines its
direction and future course.
Strategic Management helps organisations to operate within the limits and
dictates of their environment such as changes in government policies, rules and
regulations, competition etc. It helps to curb organisations from undertaking
some execessive rislts and prevent it from incurring unbearable losses.
It helps organisations to combat increasing competition particularly in these
days of narrowing spreads, deregulation and increased competition among
organisations. It provides guideline for decision-making and the necessary
action throughout the organisations, through gathering translating, understading
and cominunicating information that enables Management to improve current
decisions which are based on future expectations.
Strategic Management is neccessary for organisations to anticipate and cope
with ihcreasing pressures arising from increasing unionisation of labour,
. . 24
sophistication of shareholders demands for more and better services and high
dividends, and with uncertainties and changes in the environment, new
dimension to products and services beign introduced by technological
innovations.
Stategic Management is neccessary and all embracing towards the achievement
of organisational success and survival of any organisation.
The Strategic M(umgenzent Process In describing strategic Management, various terms and expressions are used
that have a variety of meanings and interpretations depending on the author and
source. Some of the phrases used interchangeably with strategic Management
are strategy's pol icy formulation, long-range planning, and business policy.
As was stated earlier, strategic Management is concerned with making decision
about an organisations's future direction and implementing those decision.
Basically, strategic Management while it can be broken down into 2 phases:
strategic planning and strategy implementation, is a continous process which
includes:
1 . Defining the organisation's mission
2. Formulating policies
3. Long & Short Range Objective
4. Intergrating mission statements, policies, objectives and strategy.
Defining The Organisation's Mission An organisation's mission includes a statement of both organisational
philosophy and organisational purpose. An organisational philosophy
establishes the values, beliefs, and guidelines for the manner in which the
organisation is going to conduct its buiiness.
Any organisation, in order to survive and achieved success, must have a sound
set of beliefs on which it premises all its policies and actions. The most
important single factor in corporate success is faithful adherence to those beliefs
and if an organisation is to meet the challenges of a changing world, it mus't be
prepared to change everything about itself except those beliefs as it moves
through corporate life.'
Osganisational purpose defines the activities that the organisation performs or
intends to perform and the kind of organisation that it is or intends to be. The
establishment of an organisation's purpose is critical, without a concrete
statenlent of purpose it is virtually impossible to develop clear cut objectives and
strategies.
Fui-therinore, an organisation's purpose must be defined not only at its inception
but also must be redefined regularly during both difficult and successf~~l periods.
An organisation's purpose is defined by its customers. I11 this regard Peter
Drucker has stated: to know what a business is, we have to start with its purpose.
Its purpose must be outside of the business itself. In fact, it must lie in society &
since business enterprise is an organisation of society. There is only one
definition of business purpose: to create a custo~ner.~
Thus, defining an organisation's purpose starts with defining its present and
potential customers. Some questions that need to be answered in defining the
present customers are:
Who is the customer? Where is the customer located? How does the
customer buy? How can the customer be reached?
What does the customer buy?
What does the customer consider value? (1.e what he or she looks for when
buying the product)
In defining an organisation's potential customers, the questions need to be
answered:
What are the market trends and market potential?
What are the changes in market structure that might occur as a result of
economic developments, changes in styles or fashions, or moves by the
competition?
What innovations will alter the customers buying habits ?
What needs does the customer currently have that are not being adequately
met by available products and services?
One final question needs to be addressed in determining an organisation's
purpose. Is the organisation in the right business or should we change its
bu'siness?.
Ideally, an organisation's philosophy should rarely change. However, an
organisation's purpose should be analysed periodically to determine if changes
need to be made. Changes in competitive position, top-level Management
personnel new technologies, availability and cost of resources, market
demographics, government regulation, and customer demand can result in the
need to change an organisation's purpose.
Change in an organisation's purpose can lead to major changes in an
organ isat ion's operation.
The need for change is often sensed by Management in such vague 01- undefined
terms such as declining profits, or more share.
Long And Short Range Objectives Long-range objectives specify the results that are desired in pursuing. the
organisation's purpose and normally extend beyond the current fiscal year of the
organisation. they are not vague and abstract but are specific, concrete, and
measurable results that must be achieved if the organisation is to be successfi~l
in attaining its mission.
An organisation's objectives depends on the particular organisation and its
mission. Although objectives can vary widely from organisation to
organisation, normally they can be categorised as follows: profitability market
share, productivity, financial resources, organisational structure and activities,
physical facilites, product, research & innovation. Human resources, customer
service, social responsibility etc.
All organisations do not have objectives in all of these areas. Generally long
range objectives need to be established for every ares of the organisation where
performance and results directly influence the survival and prosperity of the
organi~ation.~
Long-range objectives must support and not be in conflict with the
organisation's mission. They should be clean concise, and quantified whenever
possible and should be detailed enough so that the organisation's personnel can
clearly understand what the organisation intends to achieve. They should span
all significant units or areas of the organisation's and not concentrate on just one
area.
Objectives for different areas of the organisation can serve as checks on each
other, but should be reasonably consistent each other. Finally, objectives should
be dynamic in fact they need to be re-elvaluated in light of changing conditions.
Short-range objectives are performance tragets, normally of less than one year
duration; that are used by management to achieve the organisation's long range
objectives . Short range objectives should be detailed from an in-depth
evaluation of the organisation's long-range objectives . Such an evaluation
should result in listing of priorities of the objectives .Once the priorites have
been determined, short-range objectives can be set to achieve the long-range
objectives .
Long-and short-range objectives for departments, units, and sub units of an
organisation are based on the long-and-short-range ob-jectives of the total
organisation. Long-and short-range objectives at any level of the organisation
must be coordinated with the, and subordinated to the long and short range
objectives of the next higher level. Such a system ensures that all objectives are
consistent with each other.
Formulating Polices Polices can be defined as general guides to action that out line the framework
withih which objectives are established and strategies are selected and
implemented. Polices should flow locally from the organisations philophy and
objectives. Polices help to ensure that all units of an organisation operate under
the same ground rates. They also facilitate coordination and communication
between various organisational units.
Several factors infulence the formulation of polices. One important factor has
been federal, state and local governmdnt. Government regulates organisations
in areas such as competition (antitrust and monopoly), product standard (safety
& 'quality), pricing (utilities), hiring practices (civil right), working conditions
(occupational safety and health Administration) , and insurance of stock
(securities and exchange commission). Policies need to be developed in order to
quide an organisation's employees in lneeing each of these regulation.
Policies of competitors also influence an organisation's policies. This is
especially true to personnel policies such as employee wages and benefits ,and
working conditions.
An extremely important consideration in policy formillation is that policies
should facilitate successf~il accomplish~nent of organisational objectives and
implementation of strategy. All too frequently policies emerge from history,
tradition, and earlier events. Changing environmental conditions and changed
organisational objectives should trigger an evaluation of organisational policies
to ascertain if they are still appropriate or should be changed.
In tergra ting Mission Statement, Policies, Objectives And Strategy
Organisational mission statments, policies, objectives , and strategy are not
mutuallly exclusive components of the strategic planning process rather, they
are highly interdependent and inseperable- one can not talk about attaining
objectives without knowing policies that must be followed, similarly, a strategy
cannot be determined without first knowing the objectives that are to be pursued
and the policies that are to be followed. Furthermore, strategy implementation
impacts upon the strategic planning process.
It is therefore necessary in strategic planning to integrate mission statements,
policies, objectives and strategy as .there is no thick line demacating all. b
Furthermore, the organisation's purpose and direction is seen by clearly and
therefore not misleading or misunderstood by all concerned. The organisation
activities are stream lined as all is aimed toward a common purpose - achieving
corporate objectives and goals.
Mission statements and objectives give direction to organisation while policies
give guidelines for strategies to be adopted to psopel the organisation in the right
direction.
Strategic Bcrsiness Units (SBU) Many large organisations such as conglon~erates and multiple -industry
organisations find it useful to break down their scope of options into strategic
business units (SUB). SUB are units in a large organisation that sell a product or
service to an identifiable and distinct group of customers or clients.
In organisations each operating groups under the management are SUB'S. In
these organisations each SUB performs its own strategic management process
within the objectives and strategy that are set at the corporate level. The SUB'S
operations are either strengthened or weakened depending on the resources that
are allocated to it at the corporate level. Within the objectives and strategy that
are set at the corporate level and using the resources provided by the corpo,rate
level, each -SUB determines the most effective strategy to achieve its objectives.
Sf rtr tcgic Planning The management of any organisation guides or directs the employees of the
organisation toward the accomplishment of organisational objectives. The entire
management process center around organisational objectives. Frequently
objectives are informally established and not clearly c.onlimmicated to
employees. Management can not be properly practised and organisations cannot
be as successf~~l as they should be without pursuing specific objectives. As was
earlier explained long-range objectives specify the results that are desired in
pursuing the organisations mission and mormally extend beyond the current
fiscal year of the organisation. While short-range objectives are performance
targets, normally of less than one year's duration, that are used by management
in achieving the organisation's long-range objectives.
The objectives of organisation are determined by the interaction among the
present condition of the organisation and the present environment condition.
Before an organisation can set realistic objectives it must determine its present
status. He must answer the question where are we now? In terms of fnancial
position, quality, marketing capacity, research and development, productline,
competivie position etc. Determining present environmental conditions is also
. part of the process of answering the question. Environmental conditions
includes those factors that may influence the success of the organisation but are
external to and not under the total control of the organisation. Developing an
awai-ene& of the present external environment enables the organisatiori to
respond more effectively to the change. Organisation's effectiveness is related to
the amount of environmental analysis it performs.6
Developing an industry profile is an important element in understanding present
envi~onmental conditions. It answers question about key areas of a particular
industry such as marketing practises, ~narltet structure, financial condition,
competition, operating conditions and production techniques. The industry
environment is also influenced by forces outside the industry itself such as
political, economic, social and technological forces.
All of the economic forces such as depression, recession, recovery, or
prosperity, unemployment, inflation etc have the potential to influence the
strategic management process in an organisation. In order to be successfi~l, the
management of an organisation must identify the key economic forces that are
most likely to have an impact on its strategic process.
An organisation not only must analyse its present environmental conditions. but
must also forecast its future environmental condition. Establishing
organisational objectives is much easier under stable environmental conditions.
However, establishing organisational objective is most useful when
environmental change is greatest.
Having established the fact that many factors in an organisation environment
are changing, the obvious question is how can these changes be forecast.
Regardless of the strong possibilty of error, to be s~iccessful, organisations must
forecast their future environment.
Another factor affecting the establishmht of an organisational objectives are the
value systen~s,culture and power relationships that specific modes of conduct are
preferable to opposite or converse mode of conduct. Value systems limits the
number of options considered in any decision situation.
The term organisational culture has been used to describe the value that set a
pattern for an organisation's activities and actions. An organisatiional cultures
can be its major strenth when it is consistent with its objectives and strategy.
However, a culture can prevent a company from meeting competitive threats or
from adapting to changing economic or social environments.
An analysis of the organisation and its present environment leads to a
description of the strengths and weakness of the organisation. Overlapping all of
these factors are the value systems, culture, and power relationship within the
organisation ideally, objectives should
1. Match strength to opportunities.
2. Mini~nise threats to the organisation
3. ~ i imina te weakness in the organisation.
In the final airalysis, objectives must be set in every area of the organisation
where performance and result determine the success of the organisation.
Strotegy Evtrlcttrtion And Selection Several stable growth and growth strategies can
mergers, joint ventures, harvesting strategies
coin bination strategies etc.
Merger's
be indentied these include:
retrenchment strategies,
Merger is a frequently used methods for iinplen~enting the previously described
diversification strategies. Organisations have combined in numerous ways to
form new organisations. It includes horizontal mergers (a combination of two or
more organisations that are direct competitors), concentric mergers (a
combination of two or more organisations that have similar products or services
in terms of technology, product line, distribution channels, or customer base),
vertical mergers (a combination of two or more organisations that extends an
organisation into supplying products or services or extends an organisation into
distributing or selling its own product or services), conglomerate mergers (a
combination of two or more organisations that are producing products or
services that are significantly different from each other). Mergers can also take
place between organisations in different countries.
Joint Ventures A joint venture is a separate corporate entity jointly owned by two or more
' parent organisations. It combines the feature of a partnership with those of
corporation, thus, representing one organisational form for achieving organisal
objectives that neither organisation could normally attain, acting alone.
Harvesting Strategies
his involves reducing the investment in a particular area of an organisation
either a strategic business unit (SBU), a division product line, specific product
or br.and with the purpose of cutting cost and improving cash flows. The cash
flow that is generated is then used to provide the cash needs of new or growing
areas of the organisation.
Under harvesting strategy, sales, volulne and/or market share are generally
expected to decline, but the cost revenue is anticipated to be more than offset by
the reduced cost.
Retrenchment Strategies
Retrenchment strategies are most frequently used during economic recessions
and during times when the organisation is having poor financial performance.
Generally, organisations intend to pursue a retrenchment strategy only on a
short-run basis. The basic purpose of the retrenchment strategy is to enable the
orgaliisation to weather the storm and return to using another strategie
alternative. Three retrenchment strategies employed by organisations are
turnaround. divesment and liquidation.
Turnaround strategy is an attmept to improve efficiency of operations during a
decline in an organisations financial situation. Such as change in management
personnel (both top and lower levels), cut back on capital expenditures,
centralise decision making in an attempt to control costs, cut back on hiring new
personnal, reduce advertising and promotion expenditures, general belt
tightening, including the firing of some personnel; increase emphasis on cost
control, and budgeting, sell off some assets, tightening inventory control,
improve the collection of accounts reckivable etc. Almost every organisation at
one time or another, must use a turnaround strategy. The key to upturn in the
turnaround strategy is management. The key to successf~~l use of a turnaround
strategy is a well formulated concept of strategic management.'
Divestment strategy involves selling of a major part of the business which 'can
be an SUB, a product line, or a division.
Liquidation strategy involves terminating organisation existence either by
selling of its assets or by shutting down the entire operation. Obviously,
liquidation is a most unattractive strategy for the management of any
organisation and is normally used when all else fails.
Corn bina tion Strategies Most of the previously described strategies can be used either individually or in
combination. In fact, most large organisations do not pursue only one strategy -
combination strategies which can be either sin~ultaneously or sequential are the
norm.
Simultaneous involves using different strategies in different areas it could be
divesting an SBU, productline, or division while adding other SBU's ,
productline or division or retrenching in certain areas or products while pursuing
a growth strategy in other areas or products, or using a harvesting strategy on
certain products and growth strategies on other products.
Sequential involves using one strategy for sometime and, adopting another
strategy when things inprove.
The entire strategy-selection process is conlposed of the following steps.
1. Recognising the need for a change in strategy
2. Deteming the strategie alternatives available to the organisation
3. Evaluating the strategie alternatives
4. Selecting the alternative that is to be adopted.
Sometimes the need for a change in strategy is quite obvious sudden decline in
profitabiity, new competion, dramatic environmental changes, technological
advancements that threaten an organisations product line, and numerous other
situations may require strategie changes.
If an organisation waits until the situation reaches the crisis stage, smooth, and
efficient changes in strategy become much more difficult. One key to effictive
strategic change is in recognising the'need for change before crises develop.
Analysing an organisation's prevent environmental conditions and forecasting
future environmental conditions can signal a need for strategic change.
Strategic change is often recongised and verbalised in vague terms such as
organisational overlap, product proliferation, excessive exposure in one market
or lack, of focus and motivation. Early signals on the need for strategic change
may come from anywhere and are often difficult to recognise. However, the
success or failure of any organisation is dependent on its management's ability
to recognise when a strategic change is necessary.
A number of techniques have been developed for use in evaluating strategic
alternatives. An organisation's strategy should move the organisation from its
present position to its desired position. The reason for evaluating strategic
alternatives is to choose the strategy that is most likely to accomplish this move.
According to the Boston Consulting Group. Separate strategy must be
developed for each business within a business portfolio. An organisation's
relative con~petitive position and the business growth rate are the two
fundamental parameters that determine the strategy that should be followed by a
particular business unit within an organisation's overall business portfolio.x
Recognising the need for a change in strategy, determining strategic alternatives
and evaluating alternatives are necessary pre-requisites to strategy selection.
Strategy selection involves a decision to select a particular strategic alternative.
If the strategy evaluation process offers one cleearly superior alternative, then
the choice is simple. However, in most cases, the strategy evaluation process
offers the decision maker several acceptable alternatives.
What approach do top managers use in selecting an organisational strategy.
Henry Mintzberg argues that strategy selection is not merely one decision but is
a pattern in a stream of decisions.' In otherwords, when a stream of decisions in
some area exhibits a consistency overtime, a strategy is considered to have
formed.
Strategic decision makers constantly reassess the future, find new congruencies
as.events unfold, and blend the organisation's resources into new balances
meet the constantly changing conditions. The decision process is tota
dynamic, with no real beginning or end.
Some factors play a key role in the stream of decision making process such as
1 . past organisation strategies.
2. Managerial attitudes toward risk
3. degree of external dependence
4. organisational culture and power relationships
5 . impact of lower level managers and staff personnel
6. competitive actions and reactions
7, timing
For most organisations, past strategy serve as a beginning point in the strategy
selection process. A natural result is that the number of strategic alternatives
considered is limited based on past organisational strategy.
Risk generally refers to those factors that can negatively influence planned
results. No amount of strategy evaluation can eliminate risk in the final strategy
selection decision. Investing resources today in expectation of future conditions
is in and of itself a risk-taking adventure. Organisations and managers develop 4
attitudes toward risk that influence the strategic choice decision. Some
managers seem to be eager to assume risk while others have a strong aversion to
risk. Risk assumers generally adopt an offensive strategy in that they react to
environmental change before they are forced to react, while risk avoiders
generally adopt a defensive strategy in that they only react to environmental
change when forced to do so by circun-ktances.
Strategy Implementnt iun
Strategy implen~entation involves those activities necessary in carrying out the
chosen strategy. These activities involve developing an organisational structure,
managing the day-to-day organisational activities, and evaluating , the
effectiveness of the strategy. Existing organisations must determine if their
present organisational structure is right for implementing the chose strategy and,
if not, what changes need to be made.
Newly formed organisations must develop an appropriate structure. After
developing an appropriate structure, each of the units of the organisation must
develop strategies and policies that are*in agreement with corporate policies and
that assist in achieving the organisation's strategy. Furthermore, effective I
leadership and motivation are essential if the organisation is to achieve the
objectives. Finally, control systems must be developed to determine how
effectively the implemented strategy is accomplishing the organisation's
objectives.
Strategies are casried out through organisation's."' An organisation is a group of
people working together in a co-ordinated effort to attain a set of objectives. An
organisation provides a means for accon~plishing objectives that could not be
achieved by individuals working separately. Organising involves grouping of
activities necessary to attain the set of ob.jectives and the assign~nent of each
grouping to a person who has the authority necessary to manage the people
performing the activities. Thus, organising basically involves a division of
labour accompanied by the delegation of authority. The framework that defines
the boundaries of the organisation and .within which the organisation operates is
the organisational structure.
Developing the organisation structure There is a relationship between organisation structure and strategy. A new
strategy required a new or at aleast refashioned structure if enterprise was to be
operated efficiently. Most current studies on the relationship between structure
and strategy have developed the following general conclusions.
1 . Management's strategic choices shape the organisation's structure.
2. Strategy and structure must be properly aligned if the organisation is to be
successful in achieving its objectives.
3. Organisational structure constrains strategy
4. An organisation can seldom veer' substantially from its current strategy
without major alterations in its structure.
One of the primary reasons for establishing an organisational structure is to
establish lines of authority that enable management to exercise the necessary
degree of control over the organisation. Authority is the right to expend
resources. Establishing lines of authority creates order in an organisation. Top
management has the responsibility for achieveing organisational objectives.
Delegating authority to lower levels of management enables management to
hold lower levels of management responsible for achieving sub-unit objectives
which in turn, enables top management to achieve the overall organisational
objectives.
Secondly, an organisational structure enhances the likelihood of accoinplishing
organisational objectives because of synergism. Synergism occurs when
organisational units work together to produce a whole greater than the sum of
the parts.
A13 organisational structure facilitates coilmunication between the various
organisational units. The structure clearly defines the channels of
communication among the various members and units in the organisation.
ow ever, lines of authority do not establish all channels of con~munication.
Considerable communication must cut across the lines of authority if the
organisation is to be effective. When coininunication across the lines of
authority is discouraged conflict and inefficiencies result.
A number of viable organisational structure options exist which includes
structures based on functions performed, product or service produced,
geographical coverage, type of custon~er served, process of production and
semi-independent product decisions or groups.
Managing organisational activities Developing an organisational structure, allocating resources and developing
functional area strategies and policies are essetial fol- achieving organisational
objectives. Another
organisation's leaders.
critical ingredient is the sltills and abilities of the
All managers in an organisation are in a leadership
position, however, not all managers perform the role effectively. The
effectiveness of the management of an organisation is measured by the success
or failure of the organisation in achieving its objectives.
The development of objectives, goals, strategies, organisational strucure for the
organisation as a whole or for strategic business units (SBU) in an organisation
are normally performed by top management. Eventually, however, the
corporate or master strategy must be carried out by lower level managers and
operative personnel. Resources must be allocated to the various organisational
units. Effective leadership and the use of motivational incentives are also
needed in successfully implementing corporate strategies.
Resources can be deployed through budgeting or the budget process. Another
aspect is the development of f~mctional strategies which describes the means or
methods for carrying out the organisational strategy.
Strategic Control Process The basic premise of strategic management is that the chosen strategy will
+ achieve the osganisation's objectives. However, the possibility of this not
occuring gives rise to the need for the strategic control process. In the control
phase of the strategic management process, top management determines how
well or whether the chosen strategy is a'chieving the organisation's objectives.
The control phase of strategy implementation is similar to strategic planning in
that it addresses the basic questions of where the organisation is now, where
does it want to be, and how can it get there from where it is. The difference is - 0 that .controlling takes place after the strategic planning process has been
completed and after the organisational activities necessary to implement the
chosen strategy have been started. Comparatively speaking, control is after the
h c t and strategic planning is before the fact. However, control is not exercised
only after problems occur. Control can be preventive. Furthermore,
information gathered during the control phase can also affect future strategic
planning decisions. 7
The basic idea behind all management controls is to alert management to a
problem or potential problem before the problem becomes critical. Control is
accom~lished by comparing actual performance to predetermined objectives or
standards and then taking action to correct any deviations from the objs or
standards. The need for control is essential. However, control is only one phase
in the strategic management process and is not an end in itself. Controls must
facilitate the accoinplishment of organisational objectives.
Fig. 2.0: The management control process
Strategic planning
Controlling
I Desired results 1 objectives) w
Development of criteria I for eva~uation I Evaluating
performance
I Control methods and systems I
Organisational activities
-b
The management control nrocess
Fig. 2 is a model of the management control process. As can be seen, the
strategic planning process and the management control process overlap each
other. The desired results objectives of an organisation are established during
the strategic planning process. The development of criteria for evaluation can
be viewed as a part of either strategic planning or inanagement control.
The criteria for evaluation are used as a point of reference for determining how
well or whether an organisation is achieving its objectives. The criteria for
evaluation are derived from an organisation's objectives. Budgets are criteria
for eyaluation.
Evaluating performance takes place when the outputs of the control systenl are
compared to the criteria for evaluation. Control systems are designed to
measure outputs from organisational activities. Finally, the information gained
in the evaluation of performance must be used. Corrective action must be taken
if the criteria for evaluation are not being met. The corrective action taken can
range from changing the desired of results (i.e. changing the objectives of the
organisation) to changing some organisational activities. On the other hand, if
the control system indicates that organisational activities are achieving the
organisation's objectives, then no corrective action is necessary.
Strategic nzcrncrgenzent in a dyncrmic economy
An &conomy is said to be dynamic when it is easily affected by factors on and
external to its environment. An economy that is dynamic is competitive. b
Different organisations struggling for the limited resources within the economy.
Competition could be in form of suppliers of human and material resources,
buyers of products and services, channels of distribution etc. All these in turn
could be affected by factors within and outside the economy within which they
operate. Such forces include political, social, cconomic and technological.
Political forces: Government over the years, federal, state and local govts have
increasingly passed laws that influence how organisations operate. Federal laws
have been passed that influence the hiring and firing of employees,
compensation, working hours, and working conditions, laws have also been
passed that influence advertising practices, pricing of products, and corporate
growth by merger and acquisition. In addition these laws, governmental tax
policies influence the financial structure and investment decisions. of
organisations.
Economic forces: The general state of the economy - depression, recession,
recovery or prosperity significantly influence organisation. The level of interest
paid by corporations and individuals, the unemployment rate, the level of
consumer income are key economic variables incorporate investment,
employment, and pricing decisions. The rate of inflation and the growth rate of
the gross national product are additional economic variables that must be
considered in the strategic management process.
All of the economic forces mentioned in this section have the potential to
influence the stratetic management processs in an organisation. In order to be
successfi~l, the management of an organisation must identify the key economic
forces that are more Iiltely to have an impact on its strategic decisions.
Social forces: Social forces include those factors that date to the values,
attitudes, and demographic characteristics of an organisation's custonlers and
employers. Dynamic social forces can significantly influence the demand for an
organisation's customer and employers. Dynamic social forces can signficantly
influence the demand for an organisation products or services and can alter its
strategic decisions. Determining the exact impact of social forces on an
organisation's objectives is difficult at best. Nevertheless, assessing the
changing values, attitudes, and demographic characteristics of an organisation,
customers and objectives is an essential element in establishing organisational
objectives.
Technological forces: Technological forces influence organisations in several
ways'. First, technological developnlents can significantly alter the demand for
an organisation or industry's products or services. Technological developments
by an organisation's competitors can make its products or services obsolete or
overpriced. New technology also influenees organisation in that it can reduce
costs ranging all the way from better use of elements to energy conservation.
Ascertaining the impact of technological developinents on a particular
organisation objectives is an essential and yet difficult task. Organisation that
identify and capitalise on the key technological developments for their industry
have a definite conlpetitive advantage over other firms in the industry.
An organisation operating in a dynamic economy must be constantly at its wit,
~nanageinent must ensure that
caught unawares and forced
decisions. For management to
it is abreast of developments to avoid being
to constantly react to coinpetitors strategic
have a successful strategic nlanagement system
and 'consequently, reap the benefits of such a system, it rnust be ready to
commit resources and time to achieving success and capable of outwiting all
competitors strategic decisions.
R E F E R E N C E S
Llyod L. Byars, "Strategic Management - Planning and Implementation", Happer and Row Publishers, New Yorlt, 1984 pg 6.
Peter Druclter, "Management ; Task, Responsibilities and Practices", Haper and Row Publishers, New York, I974 pg 772
Thomas J. Watson, Jr, "A Business and Its Beliefs", Mcgraw-Hill, New York, 1963 pg 5
Peter Drucker, "Management; Tasks, Responsibilities and Practices", pg 6 1
Drucker, "Management, Tasks, Res'ponsibilities and Practices", pg 100
Danny Miller and Peter H. Friesen, "Strategy - Making in Context: Ten empirical Archetypes", Journal of Management Studies, Vol. 14 No. 3 (October 1977), pp 253 - 280
Dan Schendel, G. R. Patton and James Riggs, "Corporate Turnaround Strategies : A Study of Profit Decline and Recovery", Journal of General Management, Vol. 3 No. 3 1976 pg 1 1
Barry Hedley, "Strategy and the Business Portfolio", Long Range Planning, Vol. 10 No. 1 (February 1977) , pg 935
Henry Mintzberg, "Patterns in Strategic Foundation", Management Science, Vol. 24 No. 9 (May 1978), pg 935
10. Leslie W. Rue and Llyod L. Byars, "Management Theory and Application", 3d ed., Homewood, 1 1 1. Richard D. Irwin, Inc, 1983, Chapters 7 and 8
11. Alfred D. Chandler jr., "Strategy and Structure", Garden City, New York, Doubleday, 1962, pg 15
Chapter 3 R e s e a r c h M e t h o d o l o g y
Dutri Collection metlrod
In carrying out this study, data was collected from both primary and secondary
sources.
Primary Socirces
Data was collected basically through informal interviews and with top
management and people who are vast in the field and also personal opinions of
friends were sought. Finally, data was collected through questionnaire designed
in a way to provide vital answers not only for the testing of the hypothesis, but
also for other relevant questions emanasing from the problem analysis, statement
of purpose and literature review.
Seconclcity sources
Matesials used in this study work comprised of desk research - information and
data were collected from previous works of authors, researchers on the topic of
the 'study, reports and working papers or sheets of executives of the
organisations used as the case study.
Resecirch imtrciment
The research instrument used intensively in this study is the questionnaire. The
questionnaire consists of 38 questions. The questionnaire is divided into 3
section. 'A' contains questions relating to the respondent and 'B' relating to the
topic of the study. The questionnaire was designed in such a way that all levels
of staff could answer the question.
Srrmpling procedure Random sampling procedure was used in which every member of the population
was given an equal opportunity of being selected. All levels of staff and
management were well represented. Finally, the random sampling method
adopted was the direct method, whereby questionnaire were personally
distributed and collected.
Formulntion of Hj~poth esis Having reviewed, analysed and understood works of previous researchers, the
propositions, conclusions and facts put forward by these researchers were turned
into assumptions and hypothesis. These assumptions and hypothesis were
formulated to clarify the study by either accepting or nullifying them. The
hypothesis and assumptions were formulated under the null and alternative
hypothesis concept so that if the null hypothesis is tested and rejected, the
alternative hypothesis will then be automatically accepted.
Null Hypothesis "H," ----
That the primary reasons for strategic management are to ensure management success, organisational survival and growth
That all levels of management and staff should be involved in strategic management process.
Strategic management should be a continuous or going exercise of management.
That strategic management should be cost effective to ensure organisations reap the benefits of it.
There is need for a formal strategic management process.
Alternative Hypothesis "H,"
that the primary reason or strategic management is not necessarily for success, survival and growth
That only top management should be involved in strategic management process.
That strategic management should be an adhoc or one-off event, only when the needs arises.
That strategic managenlent need not be cost effective as the benefits will always outweigh the costs.
Strategic management need not be a formal process.
D m A n d p i s techniques
To analyse the data collected, simple percentages and chi-square (a') were the
statistical methods used. All were worked at 95% confidence level or 5%
significance level. The significance level is the probability of rejecting H,, when
it is true. The critical region is define4 as a set of all possible values of the test
statistic that leads to the rejection of the H,,. On the other hand, the acceptance
region is'detined as a set of all possible values of the test statistic that leads to
the acceptance.
The Null Hypothesis (H,,) will be accepted where the calculateda2 is less than
the value on the chi-square table and rejected where the calculated a2 is greater
than the value on the table. The value of the a2 on the table will be determined
at 95% significance level and at the appropriate degrees of fieedom (n) in this
case will be calculated as thus,
(number of row - 1 ) x ( number of column - 1).
Populcrtioii For a better insight into the study, the researcher decided to make use of various
sectors of the economy viz, the manufacturing, sales and service. The
companies were those in Lagos for easy accessibility. On the whole, there were
about 20 companies made up of 8 manufacturing companies, 6 sales companies
and 6 service companies. A total of 170 questionnaires were distributed and 156
collected.
Sampling Plcm Since all levels of staff and management are involved in the strategic
management, all levels of staff of all the organisations used as case study were
represented accordingly
Chapter 4 Presentat ion and Analys i s o f Data
Analysis and Interpretation of Dcrtcr . In this chapter, efforts will be made to find out to what extent the collected data
proves or disproves the hypothesis.
The data will be analysed based on the chi-square (a2) test in which each
hypothesis will either be proved positive or negative.
Each hypothesis has been considered under one of the questions administered
through the questionnaire and interviews. The test will be carried out from the
answers given in relation to its corresponding variable.
The study involves the administration of questionnaires to the lower cadre of
staff and interviews of the management staff. A total of 200 companies were
picked and 170 questionnaires were administered of which 156 were returned
back. Analysis will be based on the 1 56 questionnaires collected back.
The questions have been tabulated and percentages of respondents calculated
and outlined for clarity and easy understanding, on page 8 1
Testing / Itzterpretcrtion of H-ypotlzesis ~ ~ ~ ~ t l t e s i s I
The primuy. reasons .for strategic management are to enszrre nzcrnagen~ent
success, or~ganisntio~icrl scrrvivnl and growth.
The kim of this is to test the hypothesis that the primary reasons for strategic
management are to ensure management success, organisational survival and
growth. Most organisations operate in an environment of uncertainties and
therefore there is the need to adopt strategies to help the organisations wade the
tide of environmental dynamism. The hypothesis will be testing using questions
17 & 28.
Question 17
Organisational success
Manufacturing 1 Sales 1 Service 1 Total 1 I I I I
Successful 1 40 / 50 136 1 126
a* = ( 0 , - E,)' where 0, = observed frequency; E, = expected frequency
Unsuccessful
Don',t know
Row x Col
Expected Frequency = Grand Total
10
-
5
3
7
5
22
8
Degree of freedom = (number of row - 1) (number of column - 1)
= ( 3 - 1 ) (3 - 1 ) = 4
Since a' = 8.071 5 < 9.48773, we accept the H, Hypothesis.
Question 28
Degree of freedom = (2 - 1) (3 - 1) = 2
Organisational success
Yes
Since 2.2883 < 5.99147 we accept H,, Hypothesis.
b
Manufacturing
45
Sales
52
Service
38
Total
135
Hypothesis 2 This is to test the hypotl7esis that all levels of management and stcrffshould be
involved in strcitegic rnanagenwnt process.
It is believed that all levels of management and staff should be involved in
strategic management process, this is because all issues and probleins non-
evident to top management but evident to other staff could be highlighted as
they are more in touch with variables in the economy.
Question 16 which asked the level of inanageinent involved in the strategic
inanageinent process in organisations. Majority of respondents were of the view
that all members of staff should be involved in the strategic management
process. This is tested as before by the a2.
Sales Service Total I Qcrestiol~ 16
Levels of inanageinent
Top management
All levels of management
All members of staff
Manufacturing
10
14
26
Since a2 = 3.0994 < 9.48773 accept H,, Hypothesis.
Hypothesis 3 Stmtegic rnniicgement should be a co~tinuous 017-going exwcise of'
mumgement.
Since the environment is constantly changing, strategies should be continuously
reviewed to ensure faithful adherence and to determine when strategies are no
longer applicable or need to be reversed. This hypothesis is tested by question
22 which asked how often do you review your strategic management process.
Question 22
a' = 5.197 < 9.48773 therefore accept H,, Hypothesis.
Often
Occasionally
As the need arises
Sti-ategic management shozdd be cost effective to e17sz11-e orgai7isations reap the
Strategic management review
benclfits o f it.
Sales Manufacturing
20
10
12
Service
39
9
7
Total
37
15
7
96
34
26
For strategic management to be of use and benefit to organisation, there is need
to have a form of control on costs to check excesses. So much time and effort
should not be wasted, if management is convinced that it is not worth it.
- - - - - - - - - -
a' = 2.0026 1 < 5.99 147 therefore accept the H,, Hypothesis.
Question 2 7
Hypotl~esis 5
T17eu.e is needfor. n fonnal st/-ategic nmnagen7ent process.
Strategic managenlent cost effective
Yes
No
n = ( 3 - 1) (2- 1 ) = 2
Service
42
19
6 1
Manufacturing
-- 77
18
40
Total
99
57
156
Sales
35
20
55
the
sure
,and
Formalising the strategic management process is in order to streamline
activities of all the departments and units within the organisations and to en
that all activities are towards the achievement of the corporate goals
objectives.
Question 21
a2 = 0.977 < 5.99 147 therefore accept the H, Hypothesis.
Formal Strategic management system
Yes
No
Sales
36
22
58
Manufacturing
28
22
50
Service
3 1
17
48
Total
95
6 1
156
Chapter 5 Summary , Recommendat ion and Conc lus ion
From the analysis of the data collected through the questionnaire, it will be seen
that strategic management is one management philosophy that is gaining ground
and acceptability within most organisations. All levels of management and staff
have realised the need to adopt strategic management in order to keep abreast of
changes in the economy so as to remain in business.
Environmental changes are known to exert direct influence on the risks on
businesses, thereby making the relative practise of "change management"
imperative for survival and growth of every organisation. The foregoing
requires a forward looking approach to management that would ensure
continous anticipation and adaptatiop to environmental changes which in
essence is what strategic management is.
Strategic management is a process that relate an organisation to its dynamic
environment. In so doing; it defines corporate mission, set objectives and
formulates strategies. It also requires the control of costs. Identification of
organisational strengths and weakness, opportunities and threats, and also the
inducement of corninitment to organisational objectives through effective
motivation of employees.
The manner in which an organisation deploys its resources and capitalises on its
strengths as it goes exploiting opportunities determines the success it achieves in
terms of profitability and service delivery i.e customer commitn~ent.
Organisations should endeavour to balance its strengths and weakness with its
opportunities and threat through strategies identified and selected through
strategic management process.
As strategic management helps organisations to operate within the limits and
dictates of their environment, it is necessary for management and staff to
understand the basic principles and logic of strategic management and in so
doing employ the process and reap the benefits associated.
In an era when economic, social, technological and political forces on both. The
national and international level are influencing the destiny of every business
unit, top management should adopt strategic nlanagement in order to survive
and grow. Corporate planning should be developed to give a company
direction, focus and anticipation. The top management should introduce a
formal strategic management system, not necessarily anything elaborate, to act
as a moderator and monitoring committee.
Strategic management should involve all levels of staff, no one individual is "all
knowing", something that might not be apparent to management may be glaring
to 'other staff. Moreover, the staff are directly involved in the daily operations of
the business and therefore are in better positions to know what challenges they
face, problems eminent to the smooth operation of the business .and
opportunities available to them. Where everybody is involved in the process,
there is greater commitment and loyalty by all concerned and therefore greater
chances of success.
The goals of the business, the visions of the future, are not imposed by top
management alone, "Our view point is not formed by the business manager
alone or by the director of research along or by the development engineer alone.
The responsibility for decision itself is the product of multiple judgement.'
Therefore, in the planning and strategic development stage, management should
try as much as possible to involve all concerned but the final strategy selection is
a sole responsibility of top management.
To enable the knowledge workers to make their contribution, a business
therefore needs:
a. A clear view both of what is needed and of what is feasible.
b. A closely reasoned determination of the best course for achieving the desired
results.
c. A dependable measure of the means already available and those that must
still be discovered.
It is top management that faces the challenge of setting directions for the
enterprise, of managing the fundamentals. It is top management that will have
to restructure itself to meet the challenges of the "sea-change", it is top
management above all that will have to concern itself with the turbulence in the b
environment, the emergence of the world economy, the emergence of the
en~ployee society, and the need for the enterprises in its care to take the lead in
respect to political process, political concepts and social concepts.'
Chief Executive should be fully invloved because whether strategic
management is successful or not depends on the acceptability and belief of the
chief executive and top management. Strategic nlanagement is a futile exercise
if it does not have the continuing and visible support of the top management.
Strategic management in order to be effective should be reviewed continously,
in order to detect strategies which are no longer applicable as a result of changed
conditions and strategies which is necessary for the change 01- anticipated
change. As Peter Drucker rightly said, no matter how well suited to the needs of
today's business, organisation must be i-eviewed as the business changes '. For the success of strategic management, strategies developed must be properly
implemented and controlled. Proper implementation and control ensures that
strategic decision are tollowed to the letter. Any deviation from strategic plans
will be immediately detected and corrected and if there is any need for change,
this will be highlighted through the control process.
Strategic goals and decisions should be clearly defined and communicated to
prevent ambiquity and to ensure all units and organisations are working towards
the achievement of the corporate goals and objectives. Strategic management
req~~ires~that, an organisation clealy states its mission, detlne its corporate goals
and objectives and in line with these goals and objectives, develop strategies and
alternatives, select strategies aimed at achieving these goals and objectives.
However, it is necessary in setting goals and objectives for top management to
consider opportunities and threats, its strengths and weaknesses so that goals and
objectives are within its limits and st~ategies selected are feasible. This is to
ensure continuity and growth and survival of the business.
For organisations to reap the benefits of strategic management, management
should ensure that it does not over shoot its budget, so that the future of the
organisation is not jeopardised due to excesses in form of costs. Cost
effectiveness is the word in any strategic management. Management should not
engage in any elaborate system where it is absolutely not necessary.
In conclusion, strategic management despite its benefits is not the answer to
every problem an organisation is facing nor will it guarantee business success.
For some companies a continuing flow of imaginative idea is the only thing that
can bring success; while a completely unexpected and unpredictable event will
bring failure despite sophisticated strategic management system. Some
companies will succeed without strategic management. What we have; whether
it be scientific discoveries; technological advances, economic trends or the
broadest of social changes, is an enormous spectrum of future events with
broadly varying probabilities of occurrence, and equally varied degree of
relationship with the past and the present, and an even greater spread of b
knowledge and ignorance on our past as to the relationships. Thus, for all
practical purposes, some events are "predictable" and others "unpredictab.le".
Environment may not merly be organisation-determing, it may also be
organisation-determined.' ,Am*
The point here is that all things being eqaul, strategic mai~ageinent will yield
much better results than if it is not done at all. It will provide a useful frame
work for better understanding, innovation; creativity, vision, decision-making,
reaction and adaptation to changing environment. Whatever, the situation when
starategic management is applied effectively, the average frequency amd
amplitude of adjustments are sinaller than the more disruptive ups and downs
which occur without it.
REFERENCE 1. Peter Drucker Managing for result, Heinemann London 1964 pg 207
2.. Peter Druclter Managing in trubulent times, Heinemann London 1980 p. 227.
3. Peter Druclter Managing for results, Heine~nann London 1964 pg 202.
4. Sherman Krupp, Pattern I n Organisation Analysis, Acritical Examination,
Holt, Rillehart and Winston, Inc. Pg 185.
BIBLIOGRAPHY Books 1. Llyod L. Byars, "Strategic management - Planning and implementation"
Harper & Row Publishers, N. York, 1984
2. Peter Drucker, management: Task, responsibilities and practices N. York:
Harper & Row, 1974
3. Thomas J. Watson, Jr. A business and its benefits. N. York McGraw Hill,
1963.
4. Leslie W. Rue and Lloyd L. Byars management theory and application 3rd
ed. Hon~ewood, 111 Richard D. Irwin, Inc, 1983
5 . Alfred D. Chandler, Jr. Strategy and structure - Garden city, N.Y. Double
day, 1962.
6. William F. Glueck, Business Policy and Strategic management, 3rd ed. N.Y.
McGraw Hill, 1980
7. Arthur A. Thompson and A.J. Strickland, Strategy and Policy concepts and
cases. Dallas, Texas: Business Publications, Inc. 1978.
8. Gene Dalton and Paul Lawrence, Motivation and Control in organisations.
Hoinewood, 111: Richard D. Irwin, 197 1
9. George Steiner, Strategic factors in business success. N. Y. Financial
exec~tives research foundation, 1969.
10.K.J. Radford, Information systems for strategic decisions. Reston, Va:
Reston Publishing Company, 1978.
11.Stanley Thene and Robert House, "Where long range planning pays off '
Business Horizons, August 1970.
1 3.H. Igor Ansoff, Corporate Strategy N.Y. McGraw Hill, 1965
13.Richard Ruinelt, "Evaluation of Strategy: Theory and Models" in Strategic
management: A new view of business policy planning, Pan E. Schendel and
Charles W. Hofer (eds). Boston: Little Brown 1979.
14.Hofer, Charles W., and Dan E. Schendel. Strategy Formulation Analytical
Concepts, St. Paul, Minn: West Publishing Co. 1978
15. Peter Druclter, Managing for Results, Heineinann, London. 1964
16.Peter Druclter, managing in turbulent times, Heinemann London 1980
17.Sherinan Krupps, Pattern in organisation Analysis; A critical examination,
Holt, Renehart and Winston, Inc.
Journnls 1 . Danny Muller and Peter H. Friescn, "Strategy - Making in context: Ten
empirical archetypes, "Journal of. management studies", vol. 14 No. 3
(October 1977)
2. Dan Schendel, G.R. Patton and 'James Riggs, "Corporate Turnaround
Strategies: A study of profit decline and recovery", Journal of general
management, Vol. 3, No. 3 (1976)
3. Barry Hedley, "Strategy & the business portfolio", "Long range planning,
V.01. 10, No. 1 (February 1977).
4. Henry Mintzberg, "Patterns in strategy formulation, "nlanagement science,
Vo 1 . 24, No. 9 (may 1978).
5 . S.J.Q. Robinson, R.E. Hitchens, and D.P. Wade, "The Directional Policy
matrix - tool for strategic planning, "Long range planning, Vol. 11, No. 3
(June 1978)
6. J.B. Quinn, "Strategies change: Logical Incrementation', "Sloan management
review, Vol. 20, No. 1 (1978).
7. Richard E. Walton and John M. Dutton, "The management of
interdepartmental conflict: A model and review, "Administrative science
quarterly, Vol. 14, No. 1, (March 1969).
Inter view Guide 1. Do you have a strategic management system?
2. What is your business mission?
3. How do you try to predict the future?
4. How do you react to environinental factors?
5. What environment factors or changes do you experience that affects your
business?
6. What are the necessary information needed in your strategic management
and how do you get themr?
7. How do you reconcile your plans with frequently changing economic
conditions?
8. Is your strategic management process clearly defined?
9. Does it involve other members of staff or just management staff?
1 0 . ~ 0 ~ do you predict environmental changes?
1 1. What steps do you take in your strategic management process?
l2.What other issues or problems have you encountered which have not been
discussed?
Questionnaire Universitv of Nigeria, En ugu Campus Deprrrtmenf of Mrrnagentent I am an MBA student of management fiom the University of Nigeria Enugu
Campus, researching on Stsategic management in a dynanlic economy.
This questionnaire is designed to find out the extent to which the staff and the
company management value strategic management and the extent to which
every member of staff and management are involved. Please feel free to express
your opinion as all responses will be treated as confidential.
Tick as appropriate
Section A. 1. Sex
2. Age
3. Educational Qualification
Male Female Under 25 26 - 35 36 - 45 46 above WASCIGCEIO' Level GCEIA'LevellNAT Diploma HNDIBSc.
.Others 4. Present status in the company Manager
Non-manager 5. How long have you been in the Under Syrs
company's employment? 5- 10 yrs
b
11-15 yrs
6. What business does your company do (a) Manufacturing (b) Sales ( c )
services (d) Others
7. Who are your customers (a) Government (b) Corporate bodies (c)
Individuals (d) General
8. How can you describe your market (a) Highly competitive (b) Stable (c)
Fairly competitive (d) Uncompetitive
9. How will you describe the market within which you operate in terms of
size (a) Large (b) Small (c) Medium
10. What makes your market competitive (a) Large sellers (b) Limited
customers (c) Large buyers (d) Limited resources for production (e) others.
1 1 . Do you understand the term strategic management. Yes No
12. What do you think it entails (a) Define mission (b) Formulate corporate
objectives and goals (c) Formulate strategies to achieve corporate goals .and
objectives (d) Implement strategies (e) All of the above.
1 3. Does your company have a strategic management process. Yes No
14. When was it introduced? (a) recently (b) A long time ago (c) Don't know
15. Whatled to its adoption (a) Low sales (b) Low stock prices (c) Increased
competition (d) Dwindling earnings per share (e) Others
16. Who are those involved in the strategic management process in your
company? (a) Top management only (b) All levels of inanagement (c) All
members of Staff
17. By your assessment, how has strategic inanagement process hired in your
organisation? (A) Successful (b) Unsuccessti~l (c) Don't know
18. What has led to its success (a) management commitment (b) staff
commitment (c) Adequate planning & implementation (d) Others
19. What is responsible? (A) Inadequate planning (b) Inadequate
implementation (c) Lack of proper control (d) Lack of coininitinent (e) Others.
20. In your opinion, what has been the impact of strategic management on
your organisation in terms of sales, stock prices, earnings per share, return on
equity and return on capital (a) Greatly improved (b) No improvement (c) Fairly
improved (d) Don't know
2 1. Does your company have a formal strategic management system Yes No
22,. How often do you review your strategic management process (a) Often
(b) Occasionally (c) As the need arises (d) Others
23. How often do you think it should be reviewed (a) Annually (b) .Bi-
annually (c.) 5 years (d) As the need arises (e) Others
24. Do you have a system of strategic management control Yes No
25. What are the strategic management control tools used (a) Budget (bj
Audits (c) Management by objectives (d) MIS (e) All of the above (f) Others
26. Why do you think it is necessary to have a strategic management control
system in place (a) to ensure successful strategic inanagement implementation
(b) to ensure that strategy iinplementation is in line with plan (c) for corrective
purposes (d) for cost effectiveness (e) All of the above (t) Others
27. Do you think strategic managemint process should be cost effective? Yes
No
28. By your opinion do you think strategic management is necessary for
organisational success. Yes No
Question Variables Sample Size Actual YO
No Response
1 Sex 156
Male 96 62%
Female 60 3 8%
2. Age - Under 25 156 - 3 I (YO
26 - 35 60 3 8%)
36 - 45 5 2 33%
48 Above 42 42%
3. Educational Qualification 156
- WASCIGCE 0' LEVEL 4 3%
HSCIGCEIA' LEVEL 15 10%
Others
4. Present Status in the Company 156
Manager 50 32%
Non Manager 106 68%
5. How long have you been in the 156
company's Employn~ent?
lJ~lder 5 yrs
5 - 1 oyrs
1 1 - 15yrs
Over 15yrs
6. , What business does your company do? 156
8 1
Sales 5 8 3 7%
Services 48 31%
7. Who are your customers? 156
Government 2 1%
Corporate bodies 10 6%
Individuals 15 1 0%)
General 129 83O!
8: HOW can you describe your market? 156
Highly conipetitive 118 76Y0
Fairly competitive 34 22%
Un competitive 4 2%
9. How will you describe the market within 156
which you operate in t e r m of size?
Large 120 77%
Small 30 19%
Medium 6 4%
10. What makes your inarliet competitive? 156
Large Sellers 120 77%
Limited customers 119 7 6 (YO
Large buyers
Limited resources for production
Others
1 1. Do you understand the term strategic 156
management'?
Yes
N o 14 9%
12. What do you think it entails? 156
Makes a mission Statement 10 6%
Formulate corporate ob-jectives and goals 10 6%
Formulate strategies to achieve corporate -
goals and objectives
implement strategies
All of the above 146 94 % P
13. Does your company have a strategic 156
management?
Yes 110 77%
No 3 6 23%
14. When was it introduced? 156
Recently 28 18%
Long time ago 120 77%
Don't know 8 5%
15. What led to its adoption ? 156
Low Sales 148 95%
Low stock prices
Increased con~petition
Pondling earnings per share
Others
16. Who are those involved in the strategic 156
, management process in your company?
Top management only b
All levels of management
All members of stall 8 6 55%
17 By your assessment how has strategic 156
management process faired in your
organisation?
Successful 126 81%
IJ nsuccessful 2 2 14%
Don't know 8 5%
18. What has led to its success? 156
Management conmitment 120 77%
Staff conmitn~ent 124 79%
Adequate planning & implenlentation 115 74%
All of the above 2 1%
Others
19. If unsuccessful what is responsible? 156
Inadequate planning 2 1 130/0
Inadequate implementation 2 0 13%
Lack of proper control 15 10%
Lack of conlmitn~ent 16 1%
All of the above 20 13%
Others 2 1%
20. In your opinion, what has been the 156
impact of strategic managenlent on your
'organisation per share, return on capital?
Greatly improved
No improvement
Fairly inlproved
Don't know
21. Does your con~pany have a formal 156
strategic management system
Yes 9 5 61%
22. How often do you review your strategic 156
managenlent process
Often
Occnssionaly 3 4 22%
As the need arises 2 6 17%
33. How often do you think it should be 156
reviewed
Often
Occassionally 2 6 17%
As the need arises 10 6%
24. Do you have a system of strategic 156
nlanagement control
Yes 140, 90%
. No 16 10%
25. What are the strategic management 156
control tools used.
Budget
Audit
Management by objectives
Mcs b
Others
26 Whydo you think it is necessary to have 156
strategic management control system in
place?
To ensure successfi~l strategic
management implementation
To ensure that strategic implementation
is in line with plan
For connective purposes 149 96%
For cost effectiveness 109 70Y0
All of the above 148 95%
Others 2 1%
27 Do you think that strategic management 156
process should be cost effective?
Yes 99 63 5
N o 5 7 3 7%
28 By your opinion do you think strategic 156
inanagement is necessary for
organisational success
Yes
N o