Part II - Strategic Management
Process
Chapter Four – Setting Strategic
Direction
Freeman, E.R.1984. Strategic
Management: A Stakeholder
Approach
Too often we take too narrow a view of strategy….
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Strategic Management is a continuous process, and even
though discrete points in time must be chosen for the
purpose of making a decision, it must be done year-round,
not just the yearly “planning meetings”.
How direction can be set using the stakeholder concept,
and in particular make clear that the concept is useful in
looking at the role of an organization in society.
Major contributions of the implementation of strategic
management has been that executives can examine where
the firm is headed, what the nature of its business will be
and how changes in directions can be made.
Strategic decisions are intentional actions which are
designed to exert some measure of control over the future
(and the present) state of the corporation.
Traditional Directions Setting Questions
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Corporate Level
◦ What is our Business?
◦ What Business are we
in?
◦ What Business do we
want to be in?
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Division Level
◦ What are the synergies
among the division’s
businesses?
◦ What is our division’s
Portfolio?
◦ How do we succeed in this
family of businesses?
Business Level
◦ How do we succeed in this business (or with these
products?)
◦ Where are we going with this business?
◦ Should we be a “low cost producer”or should we “find a
niche”)
Enterprise Strategy
Stakeholder
Analysis
• Who are our
stakeholders?
• What effects do we have
on each in political,
economic and social
terms?
• How theses stakeholders
perceive these effects?
Value Analysis
• What are the dominant
organizational values?
• What are the values of
the key executives and
board members?
• What are the values of
the key stakeholders
Social Issues
• What are the major
issues facing our
society over the next
10 years?
• How to these issues
affect our organizations
and our stakeholders?
Enterprise Strategy: What Do We Stand For?
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Every Managers knows that value judgements are a
primarly ingredient of a successful strategy
The strategy of those affected by it must also be
factored into the equation.
Corporation is “value-laden”
Understanding the impact of changes in business
strategy on the underlying values of the firm, and to
understand the new relationships which will be charted.
The task of setting direction involves understanding the
role of a particular firm as a whole, and its relationships
to other social institutions.
Stakes of Important Stakeholders:
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Economic effects: actions may affect the
profitability, the cash flow or the stock price of
the firm
Technological effects: by enabling or preventing
the firm from using or producing core
technologies
Social effects: altering the position of the firm in
society
Political effects: to achieve some social purpose
Managerial effects: by forcing it to change its
management system and processes, and even its
managerial style and values.
Value Analysis:
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Are we to understand the dominant values that
are present in organizations?
1. We need to be more precise about the nature of
values
2. We need to understand how personal values and
organizational values fit together
3. We need to know how organizational values fit
among several different organizations
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Intrinsic values are basic
Instrumental values are means to intrinsic values
Organizational values will reflect history, will be
slow to change over time and may be the
amalgamation of the values of many individuals.
Social Issues Analysis:
What are the major issues facing society today?
The analysis of social issues can be combined with
stakeholder analysis to look at the impact of
current and future social issues on the
stakeholders of the firm.
 By combining an understanding of the stakeholders
in an organization, the values of the organization
and an account of the social issues which affect the
firm now and in the future,
 We can articulate a statement of either where the
organization currently is, with respect to its
enterprise strategy, or we can formulate a new
direction for the enterprise.
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