© 2001 Prentice Hall Ch. 1-1 Strategic Management Concepts & Cases Strategic Management Concepts & Cases 8 th edition Fred R. David Chapter 1: The Nature.

© 2001 Prentice Hall

Ch. 1-1

Strategic ManagementStrategic ManagementConcepts & CasesConcepts & Cases

8th edition

Fred R. David

Chapter 1:The Nature of

Strategic Management

PowerPoint Slides By:

Anthony F. Chelte

Western New England College


Ch. 1-2

Organizing ThemesOrganizing Themes

• Global considerations impact virtually all strategic decisions.

• E-commerce has become a vital strategic management tool.

• The natural environment has become an important strategic issue.


Ch. 1-3

Strategic Management Strategic Management DefinedDefined

Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.


Ch. 1-4

Strategic Management Strategic Management ClubClub

Visit and join the club on-line:www.strategyclub.com


Ch. 1-5

TerminologyTerminology

“Strategic Management”Synonymous with

“Strategic Planning”

• Strategic managementUsed more often in academia

• Strategic planningUsed more often in the business world


Ch. 1-6

TerminologyTerminology

• Strategic managementRefers to:

Strategy formulation Strategy implementation Strategy evaluation

• Strategic planningRefers to:

Strategy formulation


Ch. 1-7

Brief HistoryBrief History

• 1950sTerm strategic planning originates

1960s – 1970sStrategic planning very popular

Widely viewed as panacea for problems


Ch. 1-8

Brief HistoryBrief History

• 1980sStrategic planning cast aside

Planning models did not yield higher returns

• 1990s–2000Revival of strategic planning

Widely practiced in business world


Ch. 1-9

Strategic-Management Strategic-Management Process Three StagesProcess Three Stages

Strategy Formulation

Strategy Implementation

Strategy Evaluation


Ch. 1-10

Strategy Formulation

Vision & Mission

Alternative Strategies

Long-Term Objectives

Strengths & Weaknesses

Opportunities & Threats

Strategy Selection


Ch. 1-11

Strategy Implementation

Motivate Employees

Policies

Annual Objectives

Resource Allocation


Ch. 1-12

Strategy Evaluation

Corrective Action

Measure Performance

ReviewExternal & Internal


Ch. 1-13

Key Strategic Management Key Strategic Management Terms (Cont’d)Terms (Cont’d)

1. Strategists2. Vision statements3. Mission statements4. External opportunities and threats5. Internal strengths and weaknesses


Ch. 1-14

Key Strategic Management Key Strategic Management Terms (Cont’d)Terms (Cont’d)

6. Long-term objectives7. Strategies8. Annual objectives9. Policies


Ch. 1-15

Strategic Management Strategic Management Terms (Cont’d)Terms (Cont’d)

Strategists • Usually found in high levels of management

(CEO)

Help organization gather, analyze, and organize information

Track industry and competitive trends

Develop forecasting model

Evaluate corporate and divisional performance


Ch. 1-16

Vision Statements • Answers the question: “What do we want to

become?”

First step in strategic planning

Oftentimes a single sentence

“Our vision is to take care of your vision.” (Stokes Eye Clinic, Florence, South Carolina)



Ch. 1-17

External Opportunities & Threats • Largely beyond the control of a single

organization

EconomicSocialCulturalDemographicEnvironmental



Ch. 1-18

External Opportunities & Threats (cont’d)

PoliticalGovernmentalTechnologicalCompetitive trends & events



Ch. 1-19

Internal Strengths & Weaknesses • Controllable activities that are

performed well or poorly relative to competitors

Based on functional analysis of activities in the firm’s:

Management Marketing Finance/accounting



Ch. 1-20

Internal Strengths & Weaknesses (Cont’d)

• Based on functional analysis of activities in the firm’s:

Production/operationsResearch and developmentComputer information systems

• Organizations strive to pursue strategies that capitalize on strengths and improve weaknesses



Ch. 1-21

Long-Term Objectives • Results to be achieved in pursuing the

organization’s mission. Time frame is beyond one year.State directionAid in evaluationCreate synergyReveal prioritiesFocus coordinationProvide basis for effective management



Ch. 1-22

Strategies • Potential actions that require top

management decisions and large amounts of firm’s resources

Mechanisms by which long-term objectives are realizedGeographic expansionDiversificationAcquisitionProduct development



Ch. 1-23

Strategies (cont’d)

• Mechanisms by which long-term objectives are realizedMarket penetrationRetrenchmentDivestitureLiquidationJoint venture



Ch. 1-24

Annual Objectives• Short-term milestones necessary to

achieve long-term objectives.

Represent the basis for allocating resources

Established at corporate, divisional, and functional levels



Ch. 1-25

Annual Objectives (cont’d)

• Stated in terms of accomplishments for:management marketing finance/accounting production/operations research and development information systems accomplishments



Ch. 1-26

Policies• Important in strategy implementation as the

means by which annual objectives will be achieved

Guide to decision making and address repetitive situations

Established at corporate, divisional, or functional levels

Allow consistency & coordination within and between organizational departments



Ch. 1-27

Comprehensive Strategic Management Comprehensive Strategic Management ModelModel

Vision &

Mission Statements

Chapter 2

ExternalAudit

Chapter 3

InternalAudit

Chapter 4

Long-TermObjectives

Chapter 5

Generate,Evaluate,

SelectStrategies

Chapter 6

ImplementStrategies:

Mgmt Issues

Chapter 7

ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8

Measure &Evaluate

Performance

Chapter 9


Ch. 1-28

• Proactive vs. ReactiveInitiate and influence activities

Helps shape firm’s own future

• Principal BenefitFormulate better strategies

Systematic, logical, and rational approach

• CommunicationKey to successful strategic management

Benefits of Strategic Benefits of Strategic ManagementManagement


Ch. 1-29

• Financial BenefitsMore profitable and successful

Improvements in sales, profitability, and productivity

High-Performing Firms Systematic planning

Fluctuations in external and internal environments

Benefits of Strategic Benefits of Strategic Management (Cont’d)Management (Cont’d)


Ch. 1-30

• Nonfinancial BenefitsEnhanced awareness of external threatsUnderstanding of competitors’ strategiesIncreased employee productivityReduced resistance to changeClear performance-reward relationshipsOrder and discipline to the firmView change as opportunity

Benefits of Strategic Benefits of Strategic Management (Cont’d)Management (Cont’d)


Ch. 1-31

• Poor reward structures• Fire-fighting• Waste of time• Too expensive• Laziness• Content with success

Why Some Firms Do Why Some Firms Do NoNo Strategic Planning Strategic Planning


Ch. 1-32

• Fear of failure• Overconfidence• Prior bad experience• Self-interest• Fear of the unknown• Suspicion

Why Some Firms Do Why Some Firms Do NoNo Strategic Planning (Cont’d) Strategic Planning (Cont’d)


Ch. 1-33

• Using to gain control over decisions & resources

• Doing only to satisfy regulatory requirements

• Moving hastily from mission to strategy formulation

• Failing to communicate to employees• Intuitive decisions that conflict with formal

plan• Top management not supportive of process

Pitfalls to Avoid in Pitfalls to Avoid in Strategic PlanningStrategic Planning


Ch. 1-34

• Failing to use as standard for performance measurement

• Delegating to a “planner” vs. involvement of managers

• Failing to involve key personnel• Failing to create collaborative environment• Formality that stifles creativity and

flexibility

Pitfalls to Avoid in Pitfalls to Avoid in Strategic Planning Strategic Planning (Cont’d)(Cont’d)


Ch. 1-35

Defined:Principles of conduct within organizations

that guide decision making and behavior

• Good business ethics is a prerequisite for good strategic management

• Good ethics is just good business!

Business Ethics & Strategic Business Ethics & Strategic PlanningPlanning


Ch. 1-36

• Strategists responsible for high ethical principles

• All strategic processes have ethical ramifications

• Formal codes of ethics are in place for many businesses

• Internet privacy emerging as ethical issue of immense proportions

Business Ethics & Strategic Business Ethics & Strategic Planning (Cont’d)Planning (Cont’d)


Ch. 1-37

Business actions always unethical include:

• Misleading advertising• Misleading labeling• Environmental harm• Poor product or service safety• Padding expense accounts• Insider trading• Dumping flawed products on foreign

markets

Business Ethics & Strategic Business Ethics & Strategic Planning (Cont’d)Planning (Cont’d)


Ch. 1-38

Nature of Global Nature of Global CompetitionCompetition

• Companies conduct business across bordersInternational or multinational

corporations Parent company Host country

• Strategy implementation more difficultCultural differences

Norms, values, work ethics


Ch. 1-39

Advantages of International Advantages of International OperationsOperations

• Absorb excess capacity• Reduce unit costs• Low-cost production facilities• Lower labor costs• Competition less intense


Ch. 1-40

Advantages of International Advantages of International Operations (Cont’d)Operations (Cont’d)

• Reduced tariffs, lower taxes• Favorable political climate• Economies of scale


Ch. 1-41

Communication difficulties between parent and subsidiaries• Based on cultural, political, social, language,

demographic, and competitive forces

Foreign-based competitors • Strengths underestimated• Weaknesses overestimated

Disadvantages of Disadvantages of International OperationsInternational Operations


Ch. 1-42

Key Terms & ConceptsKey Terms & Concepts

• Annual objectives• Business ethics• Code of ethics• E-commerce• Empowerment• Environmental

scanning• External

opportunities• External threats

• Internal strengths• Internal weaknesses• Intuition• Long-term objectives• Mission statements• Policies• Strategic

management• Strategic-

management model


Ch. 1-43

Key Terms & Concepts Key Terms & Concepts (Cont’d)(Cont’d)

• Strategic-management process

• Strategies• Strategists• Strategy evaluation• Strategy formulation• Strategy

implementation• Lobbying

• Vision statement• Vision• Host country • International firms• Long-range planning • Multinational

corporation

© 2001 Prentice Hall Ch. 1-1 Strategic Management Concepts & Cases Strategic Management Concepts & Cases 8 th edition Fred R. David Chapter 1: The Nature.

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