BASIC CONCEPTS IN STRATEGIC MANAGEMENT: PART ONE
Organisation is the system of combination of human and material resources to achieve target objectives. The major players that show direction which gives rise to
decision making for the organisation are members of the board of directors and the top managers. The concept of formulating and engaging long-term plans by these key players through decision-making process is called strategy. The major players in organisations are strategists,
Strategic management is the territory of many groups of strategists including but not restricted to
Family Business Executives
The Strategic Business Unit (SBU)
The Corporate Planners
Members of the Board of Directors
Entrepreneurs are owners of business. They mobilise capital for business and make decision for operating the business. They are risk bearer of the business and as such, concerned with strategic management process (SMP),
Family Business Executives
The family business executives are in two forms: Family operated business where only members of the family operate and family influenced business that family members of the family are not necessarily operating the business but have indirect influence on the
Top managers regarded as the main strategists in organisations. They are those executives at the pinnacle of an enterprise who are responsible for the survival and
success of the organisation. The team comprises the chief executive officer (CEO), the chief operating officer (COO). executive directors and other senior managers. The role of the chief strategists (top managers) to the success of the organisation strategy is paramount. They define what business there is and also responsible for matching the best product-market opportunity with the best use of enterprise resources. Top management sets the company’s mission, objectives, brand strategies and policies. The top management is the power house that conceptualise strategy and also set in motion the Strategic Management Process (SMP). In a large entity, the top management main functions include:
Chief Executive Officer (CEO): Takes responsibility for management functions such as personnel and financial functions.
Chief Operating Officer (COO): Oversees production, marketing and engineering functions.
According to Agbonifah (2012), a manager is one who, among other things performs certain functions whose purpose is to direct, coordinate and control the efforts of a work STOUD towards goal achievement. Some of the basic functions of top management include:
Providing executive leadership and focus
Implementing decisions and policies of the board.
.Formulating corporate level strategies.
To mobilise both human and material resource need of the entity.
To allocate resources to various functional areas of the organisation.
Evaluating and controlling overall organisational performance.
.To coordinate the activities of the entire management team.
In order to have a better understanding of the managerial roles in respect of what managers oo, Henry Mintzberg (1973) analysed the activities of managers in ten dimensions as presented in the table 2.1 below.
In an attempt to justify how managers perform their functions, management authorities
came to the conclusion that managers assume ten different roles in the course of their managerial work. These roles are classified into three:
1. Interpersonal roles
This has to do with manager relationship on communication with the internal and external stakeholders
The figurehead role – Involves representing the organisation in social and ceremonial activities.
Leadership role – giving directions, guiding and showing employees the way. hiring, training, motivating and inspiring them to achieve higher levels of productivity.
Liaison role – Involves playing the role of a coordinator or link especially with outsiders.
2. Informational roles
Concerned with gathering, receiving or disseminating information at work including:
The monitor role – To seek and receive information relevant to the organisation both from internal and external sources
Disseminator role – The manager receives information from relevant sources and passes such information to his superiors, peers and subordinate to enable them function well.
The spokesman role – This involves transmitting information to the outside world. It is a representation role whereby the manager stand-n for the organisation.
3. The decisional role
Managers take decisions in the course of performing u the following toe
Entrepreneurial role – A business owner in order to chart a course business has to initiate, generate new ideas, P rbound to happen in
Disturbance handler Conflicts and cs the role of disturbance products happens, managers assume the role of disturbance
Resource allocator Manager decides how human, financia ornatenal get things done through people within and outside the
Organisations. When handler in resolving and stabilising the situation resources should be allocated to various units of organisation.
Negotiator Oganisation, managers also play the role of a negotiator
Agoonitoh (2012) opined that managerial role approach is a more real managers do than managerial functions. He however emphasised that manager would be seen as a complement rather than a substitute to the funcional approach.
Organisation – especially large organisations have various functional units with diferent specialised areas. Managers have authority over only those actvities,
Functions or matters which fal within their jurisdiction. Apart from the so-called organic Functions of business, namely, production, finance, marketing, and human resources,
Technical Skills – Are skills that are required to accomplish specialized
actrvities. Line managers need and use more technical skills than middle and
Interpersonal Skills – Human relations skills required for influencing., inspiring, managers are involved with specialised skilled areas including: top management.
motivating and for emphatising with others. It is imperative for middle managers to get along well with people: subordinates, peers, superiors and other outside
stakeholders to achieve results.
Conceptual Skills Is the ablity to creatively analyse situations and use the power of imagination to resolve it in a way that benefits the organisation.
Conceptual skills are diagnostic and analytical skills required by top
management for planning and decision-making.
The Strategic Business Unit (SBU)
Strategic business unit is relevant to multi-business organisations. The organisation is a portrolio business with different business units. The executives of each unit will be the strategists. Their main functions are:
To implement the decisions and policies of the board in their various units.
Oversee the activities in their units and report back to the head office.
The Corporate Planners
The corporate planners within an organisation are strategists who are more or less staff specialists. Their functions include:
Assisting the CEO in formulating and updating over-time about the basic
Provide continuous staff input that will assist the CEO in defining and modifying
Help in identifying and evaluating specific business opportunities to which the concepts of where the business should be heading.
the basic business characteristics of the ope rating units of the business. company should divert its resources.
Monitoring. studying and making recommendations to the various business units in which the organisation is operating
Providing advice and staff support to top management about the effectiveness of R&D.
Monitor and receiving the strategic business and marketing planning that is taking place within the organisation’s operating units.
Maintaining a corporate intelligence functions as well as monitoring the inteligence functions of competing organisations.
Board of Directors
These are members of the group who are appointed or elected by business owmers to regulate the activities of the top managers. The Companies and Allied Matters Act,
section 650 defines director as any person occupying the position of director by whatever name called. The board of directors must be dully apPpointed by the corporation to direct the company by providing strategic guidance for the company.
The board of directors is mainly composed of internal and external directors.
The internal directors are further sub-classified as follows:
.Executive Directors: They are responsible for day-to-day administration of the top management activities.
Managing Director: He is appointable and removable by the board, He ceases to hold office if for any reason he ceases to hold office as a director.
Alternate Director: He is appointed by a director to sit on the board in his place under the powers contained in the articles.
Retired Directors: These are formal or retired directors that are retained on the board as outside directors. Example is African Independent Television chairman (AIT) who
remains the company’s director after he transferred the chairmanship of the company the son
Family Directors: It is common for the descendants of the founder of a corporation who own significant number of shares in the company to be a board member.
Nominee Directors: The representatives of lenders whose role is to protect the
interest of the long-term lending institution.
Affiliated Directors: They are not employed staff of the company but the survival of the corporation depends on them. The duties of the board of directors include:
Advising and endorsing organisational strategic direction, mission and vision.
Establishing and monitoring the infrastructure for proper governance of the company
.Ensuring accountability of the organisation to its owners and authorities.
Hiring and fining of top management officers,
Approving the annual budget.
Ensuring the integrity of the internal company’s internal control system.
Reviewing and approving the use of resources.
Approving remuneration of senior executives.
Tese are specialists in a specific business activity that the top managers may seek proressional advice/assistance from. Example of such specialist consultant is Jelani Aliu, the Nigerian man who designed Chivrolet vehicle and current Director Consultant for Nigeria Centre for Automobile Design.
Strategic elements must come first before strategic planning. The beginning of any strategic plan is seting of objectives by strategists.
Objectives are those environmental
parameters which the organisation seeks to achieve by its existence and operations. A mission statement is important, but it is not a substitute for more specific objectives that provide guidance in screening possible opportunities.
Objectives are predetermined statements that describe future desired results towards which organisation present efforts are directed.
It is the respons ibility of the board of directors and top management to provide the framework of objectives within which other managers will function. Such objectivess should be stated in clear and specific terms that are compartible with the company’s mission, otherwise frustration and even failure may result. Some examples of objectives of organisations include:
Profitability (net profits)
Efficiency (lower costs of production)
Utilisation of resources (ROCE or ROI)
Employees’ satisfaction and development (job security, wages etc.)
Reputation (being considered a top firm)
Quality products/services to clients or customers
Market leadership (market share)
Maximisation of shareholders’ dividends or share prices
Survival (avoiding bankruptcy and remain a going concern)
Adaptability – to the environment
Growth (increase in total assets, sales, etc.)
Technological leadership (innovations, creativity)
Contributions to society (Taxes paid, employment, charities, CSI)
Personal needs of top management.
Purpose of Objectives and Importance to Strategic Management
.Objectives help to define the organisation in its environment. Many organisations use this medium to justify their existence and legitimise themselves in the eyes of the government, customers and the society at large. By stating their objectives, they are able to attract people that identify
themselves with the objectives of the organisation.
Objectives define the organisation: Objectives help to coordinate decision making. This is because objectives when stated will direct the attention of employees to desirable standard of behavior. Also, they reduce conflict in
decision making because employees know why and what the objectives of the organisation are.
Objectives provide standard to assess organisation performance. Therefore, one can say that without objectives, organisation will have no objective way in evaluating its existence and performance. For instance the objectives of manufacturing strategy me states in terms of Sony flexibility
Objectives peecards the management process because istorie set that strategy can fine
Formulation of objectives
There are two ways through which organisational topctives are formed
A. Top-bottom Approach: Here, the obictives se set by to management and forced down the hierarchy. However, the following are considered priortise such formulations
The realities of the eternal power and external environmental relationship
The realities of the enterprise resources and internal power relationship The value system of top vecutives
This school of thought believes that objectives should be set by to management. They see it as one of their core responsibility
.b. Tricke-Up Theory: This is from bottom to top form of decision. That is objectives are formed when a consensus about what the objectives should be arises from the employees
Objectives are not the result of the board and management powers alons neither do they percolate up from the employees Objectives will result from managers trying to
satisfy the needs of all groups in the organisation. In this case, consideration is given to both internal and enternal coalitions that have stake in the organisation. For
instance, a firm needs a hierarchy of otipective – moving from company objectives to matting department objectives Ausetut way to represent marketing otjectives is to kok at hierarchy of marketing plans as shown.
Objective must be Specific
Strategy objectives must be arranged hierarchically, from the most to the least. Sonraobjectives are more important than others. However, the main strategy objectives might be identified as critical success factors, for which there are key performance
indicators For example, the business unit’s key objective for the period may be increase the rate of return on investment. This can be accomplished by increasing the
profit level and/or reducing the amount of invested capital. Profit itself can increased by increasing revenue and/or reducing costs. Revenue can be increased to turn by increasing market share and/or prices. By proceeding this way, the business can move from broad objectives to specific objectives for specific departments and individuals. Goals and objectives can therefore be used to convert an entity’s mission into specific strategies with strategic targets for achievement within a strategie
Objectives should be Measurable
Objectives should be stated quantitatively whenever possible. The objective increase the return on investment (ROI)” is better stated as “increase in ROI to 15 percent
Objectives should be Attainable
within two years No matter how fantastic the objective of building castle in the air is, it cannot be
attained. Objectives should be stated in such a way that the organisation resources to achieve it are available. Achieving 15 percent increase on ROI means the board and top management have to be on top of their game in co-opting the employees and materials to deliver result within the two year time frame.
Objective must be Realistic
Objectives must arise from an analysis of the business unit’s opportunities and strengths, not from wishful thinking. For instance, a company that maintains large
workforce and high expenses that erodes its profit base may have unrealistic objective of increasing its ROI if it fails to cut down on its costs.
Objective should be Time-bound
The company’s objectives should be consistent. It must be speculated within a particular time frame. Example is achieving 15 percent ROI within two years. The two years define the period under which objectives must be achieved.