Exam Notes Sample: Strategic Management Revision Notes

Model Answer

1. What Is Strategic Management?

• Strategic management is the ongoing process of formulating, implementing and evaluating cross-functional decisions that enable an organisation to achieve its long-term objectives and build a sustainable competitive advantage over rivals.
• It operates at three levels: corporate level (which industries and markets the organisation should compete in, and how the portfolio should be managed), business level (how each unit should compete within its chosen industry), and functional level (how individual departments — marketing, operations, HR, finance — support the chosen strategy).
• The strategic management process is usually presented as an iterative cycle: environmental analysis, strategy formulation, strategy implementation, and evaluation/control, with feedback looping continuously back into analysis as conditions change.
• A firm’s mission states its core purpose and reason for existing; its vision states its long-term aspiration; its objectives are specific, measurable, time-bound targets that operationalise both into things managers can actually plan against.
• Strategy can emerge in two ways: deliberate strategy (planned in advance, top-down) and emergent strategy (arising from patterns of decisions made in response to unforeseen events) — Mintzberg’s distinction is a common essay theme.

2. External Analysis: PESTEL

• PESTEL scans the macro-environment across six factors: Political (government stability, trade policy, taxation), Economic (interest rates, inflation, exchange rates, growth), Social (demographics, culture, consumer attitudes), Technological (innovation, automation, R&D), Environmental (sustainability regulation, climate risk), and Legal (employment law, competition law, data protection).
• PESTEL is descriptive rather than evaluative: it identifies relevant forces, but strategists must then judge which factors matter most and how they might change over the planning horizon.
• Good exam answers apply PESTEL to a specific organisation or scenario rather than listing generic factors — examiners reward analysis, not a recited checklist.

3. External Analysis: Porter’s Five Forces

• Developed by Michael Porter, the model assesses the intensity of competition and hence the profit potential of an industry through five forces.
• Threat of new entrants: constrained by barriers to entry such as economies of scale, capital requirements, brand loyalty and regulation.
• Bargaining power of suppliers: high when suppliers are concentrated, inputs are differentiated, or switching costs are high.
• Bargaining power of buyers: high when buyers are concentrated, purchase in volume, or products are standardised.
• Threat of substitutes: products or services from another industry that meet the same underlying customer need.
• Competitive rivalry: intensity of competition among existing firms, shaped by industry growth, exit barriers and the number and size of competitors.

4. Internal Analysis: VRIO and the Value Chain

• The VRIO framework tests whether a resource or capability can support sustained competitive advantage by asking whether it is Valuable, Rare, costly to Imitate, and whether the firm is Organised to exploit it.
• A resource that is valuable but common gives only competitive parity; valuable and rare but imitable gives a temporary advantage; valuable, rare and hard to imitate, exploited by the right organisation, gives sustained advantage.
• Porter’s value chain splits activities into primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (infrastructure, HR management, technology development, procurement), each a potential source of cost advantage or differentiation.

5. SWOT Synthesis

• SWOT combines internal analysis (Strengths, Weaknesses) with external analysis (Opportunities, Threats) into a single summary used to generate strategic options.
• Strong exam answers use a TOWS matrix approach, pairing internal and external factors (e.g. Strength + Opportunity = an offensive strategy option) rather than presenting four disconnected lists.
• SWOT should be evidence-based and specific to the organisation in the scenario — vague, generic points score poorly.

6. Corporate-Level Strategy: The Ansoff Matrix

• The Ansoff Matrix maps four growth strategies against existing/new products and existing/new markets.
• Market penetration (existing product, existing market): grow share through pricing, promotion or increased usage — lowest risk.
• Market development (existing product, new market): enter new geographic markets or customer segments with the current offering.
• Product development (new product, existing market): launch new or improved products to current customers.
• Diversification (new product, new market): highest risk, may be related (synergy with existing operations) or unrelated (conglomerate).

7. Business-Level Strategy: Porter’s Generic Strategies

• Cost leadership: become the lowest-cost producer in the industry through scale, efficiency and tight cost control, then compete on price or margin.
• Differentiation: offer a product or service perceived as unique along dimensions customers value (quality, design, brand, service), supporting a premium price.
• Focus: target a narrow segment with either a cost-focus or differentiation-focus approach, tailored more precisely than broad-market competitors.
• Porter warned firms risk becoming “stuck in the middle” if they fail to commit clearly to one generic strategy, achieving neither low cost nor meaningful differentiation.

8. Corporate-Level Strategy: Portfolio Analysis

• The BCG Matrix (Boston Consulting Group) classifies business units or products on two axes — relative market share and market growth rate — into four categories that guide investment decisions across a diversified portfolio.
• Stars (high share, high growth) need continued investment to defend position; Cash Cows (high share, low growth) generate surplus cash used to fund other units; Question Marks (low share, high growth) require a decision to invest heavily or divest; Dogs (low share, low growth) are usually candidates for divestment.
• Portfolio tools like the BCG Matrix are useful for allocating resources across a multi-business corporation but are criticised for oversimplifying competitive position to a single variable (market share) and ignoring synergies between units.

9. Strategy Implementation and Change

• Strategy formulation is only half the task; implementation requires aligned structure, culture, resource allocation, leadership and systems — a well-chosen strategy can still fail purely through poor execution.
• The McKinsey 7-S framework (Strategy, Structure, Systems, Shared values, Style, Staff, Skills) is a useful checklist for assessing whether an organisation is genuinely ready to implement a chosen strategy, since all seven elements must be mutually reinforcing.
• Resistance to change is common and predictable; Kotter’s eight-step model (creating urgency, building a guiding coalition, forming a strategic vision, communicating the vision, empowering broad-based action, generating short-term wins, consolidating gains and producing more change, anchoring new approaches in the culture) is a widely examined model for managing planned organisational change.
• Lewin’s three-stage model (unfreeze, change, refreeze) offers a simpler, complementary view: destabilise the current state, implement the change, then embed the new way of working so it does not revert.

10. Stakeholder Analysis

• Strategic decisions affect multiple stakeholders — shareholders, employees, customers, suppliers, government and the wider community — whose interests do not always align.
• The Mendelow Matrix maps stakeholders by power (ability to influence the organisation) and interest (level of concern with its activities), producing four management approaches: keep satisfied, manage closely, keep informed, and monitor with minimal effort.
• Balancing shareholder-focused and stakeholder-focused views of the firm is a recurring theme in strategy essays, particularly where profit-maximising decisions conflict with employee, community or environmental interests.

Exam Tips

• Never list a framework in isolation — always apply it to the scenario given in the question, naming specific factors from the case.
• Examiners consistently reward evaluation over description: after applying a framework, add a sentence on its limitations (e.g. PESTEL and Porter’s Five Forces are both static snapshots of a changing environment).
• Learn the Ansoff Matrix as a 2×2 grid, not a list — being able to sketch it quickly under time pressure saves valuable minutes.
• Link frameworks together where possible: a SWOT strength should be traceable to a VRIO-tested resource, and an opportunity should be traceable to PESTEL or Five Forces analysis.
• For essay questions, structure answers as: identify → apply framework → evaluate → recommend, mirroring the structure examiners use in mark schemes.
• For BCG Matrix questions, always justify the classification with data or scenario evidence before recommending an investment, hold or divest decision — a bare label (“this is a Star”) earns few marks alone.
• Where a question asks about implementation or change, name the specific model (7-S, Kotter, Lewin) and map at least two of its elements onto the given scenario rather than describing the model in the abstract.