Page 12 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes ICO. The difference arises mainly because of Iridium's numerous satellites and their use of
more power to maintain their low earth orbit. This also shortens their life span to
5 - 7 years. ICO's satellites, on the other hand, fly about 6000 miles higher in medium-earth
orbit and have a life span of 12 years. With Iridium being forced to charge prices far lower
than it had planned, and two low cost operators about to enter the market, Iridium's future
is uncertain.
Questions

1. Analyze the role of poor strategic management at Motorola in Iridium's failure.
2. What steps do you think should have been collectively taken by Motorola, Kyocera,
Sprint and Telecom Italia to save Iridium?

Source: Adapted from The Economist, July 17, 1999.

1.5 Benefits of Strategic Management

“We are tackling 20-year problems with five-year plans staffed with two-year personnel funded by one–year
appropriations”.
– Harlan Cleveland

The above quotation sums up why today’s decision-makers must plan and manage strategically.
In developing as well as in industrialized countries, the increasingly rapid nature of change as
well as a greater openness in the political and economic environments, requires a different set
of perspective from that needed during more stable times.
When a certain degree of equilibrium existed in the environment, as during the 1950s, with
constant positive economic growth, low debt, manageable budgets and relative environmental
stability, managers could concentrate almost exclusively on the internal dimensions of their
organisations and assume constancy in the external environment. Forward calculations were
simple, inputs were predictable, and planning was mostly an arithmetic exercise.

Now, systems are much more open, environment is characterized by increasingly unstable
economic growth, budgets are constantly revised, inputs are thoroughly unpredictable, and
planning in the traditional sense is no longer tenable.
Therefore, today’s enterprises need strategic management to reap the benefits of business
opportunities, overcome the threats and stay ahead in the race. The purpose of strategic
management is to exploit and create new and different opportunities for tomorrow; while long-
term planning, in contrast, tries to optimize for tomorrow the trends of today.

Today, all top companies are involved in strategic management. They are finding ways to
respond to competitors, cope with difficult environmental changes, meet changing customer
needs and effectively use available resources. At a time when the business environment is
changing rapidly, even established firms are paying more attention to strategy because they
may face new competitors who threaten their core business. Should a firm compete in all areas
or concentrate on one area? Should a company try to extend the brand to even more diverse
areas of activity, or would it gain more by building profits in the existing areas, and achieving
more synergies across the group? Should the company continue the current strategy as it is now,
or would it initiate a radical review of its strategy? These are just a few examples of the strategic
part of the management tasks.

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