01 the Nature of Strategic Management (2)

7/28/2019 01 the Nature of Strategic Management (2)

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1

The Nature of StrategicManagement


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Ch 1 -2

The Nature of StrategicManagement

Objectives Describe the Strategic-management process Explain the need for integrating analysis and

intuition in strategic management

Define and give examples of key terms in SM

Discuss the nature of strategy formulation,implementation and evaluation activities

Describe the benefits of good SM Discuss the relevance of Sun Tzus The Art of

War to SM

Discuss how a firm may achieve sustained


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Ch 1 -3

Art & science of formulating,

implementing, andevaluating, cross-functionaldecisions that enable an

organization to achieve itsobjectives

Strategic Management Defined


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Ch 1 -4

Purpose of Strategic Management

To exploit and create new and

different opportunities fortomorrow; long-range planning.


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Ch 1 -5

Strategic Management

In essence, the strategic plan is acompanys game plan.

A strategic plan results from toughmanagerial choices among numerousgood alternatives, and its signals

commitment to specific markets,policies, procedures, and operations inlieu of other, LESS DESIRABLE courseof action


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Ch 1 -6

3 Stages of the StrategicManagement Process

Strategy formulation

Strategy implementation

Strategy evaluation


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Ch 1 -7

Developing- Vision & Mission

trategy FormulationIncludes

Identifying- External Opportunities & Threats

Determining- Internal Strengths & Weaknesses

Establishing -Long-Term Objectives

Generating -Alternative Strategies

Choosing- Particular Strategy Selection


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Ch 1 -8

Issues in Strategy Formulation

What Businesses to enterWhat Businesses to abandon

How to Allocation of resourcesWhether to Expansion ordiversificationWhether to enter InternationalmarketsWhether to Mergers or jointventures

How to Avoid hostile takeover

What Businesses to enterWhat Businesses to abandon

How to Allocation of resourcesWhether to Expansion ordiversificationWhether to enter International

marketsWhether to Mergers or jointventuresHow to Avoid hostile takeover


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Ch 1 -9

StrategyImplementationrequires

Establish Annual Objectives

Devise Policies

Motivate Employee

Allocate Resource

So that formulated strategies can be

executed


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Ch 1 -10

Strategy ImplementationSteps Developing a strategy-supportive

culture

Creating an effective organizationalstructure

Redirecting marketing efforts

Preparing budgets Developing and utilizing information

systems

Linking employee compensation to


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Ch 1 -11

Issues in Strategy

Implementation

Action Stage ofStrategicManagement

Mobilization ofemployees &managers

Most difficultstage

Interpersonalskills critical

Action Stage ofStrategicManagement

Mobilization ofemployees &managers

Most difficultstage

Interpersonal

skills critical


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Ch 1 -12

Strategy Evaluation

Internal & External Review

Performance Measurement

Corrective Action

Evaluation Very essential because success today isnot guarantee of success tomorrow


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Ch 1 -13

Strategy formulation,implantation, and evaluation

activities occur at threehierarchical levels . PeterDrucker: Think through theoverall mission of a business. Askthe key question:

What is our Business?

Prime Task of



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Ch 1 -14

The strategic management

process attempts to organizequantitative and qualitativeinformation under conditions of

uncertainty

Integrating Intuition & Analysis


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Ch 1 -15

Past experiencesJudgment Feelings

Recognize that Intuition is essential

to making good strategic decision.


Intuition isuseful for decision makingin conditions of:

Great uncertainty Little precedent ( model) Highly interrelated variables Several plausible( reasonable)

alternatives


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Intuitive flash of brilliance , Mr. Will

Durant never felt obliged to make anengineering hunt for the fact.

I believe in intuition and inspiration , Ifeel certain that I am right while notknowing the reason. Imagination ismore important than knowledge ,because knowledge is limited , whereas

imagination embraces the entire world.- --Sir Einstein

Ch 1 -16


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Ch 1 -17

Involve management at all levels

Intuition , Judgment &analytical Approaches

Influenceallanalyses



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Ch 1 -18

Organizations should continually monitor

internal and external events and trends so thattimely changes can be made as needed.

The need to adopt to change leads organizationto key strategic-management question . Suchas What kind of business should we become?

Are we in right field?

Should we reshape our business What new competitors are entering our industry

What strategy should purse

How are our customer changing

Are new technologies being developed that could put

Adapting to Change


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Ch 1 -19

Key Terms in Strategic Management

Competitive advantage Strategists

Vision and mission statements

External opportunities and threats Internal strengths and weaknesses

Long-term objectives

Strategies Annual objectives

Policies


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Ch 1 -20

Anything that a firm does especially wellcompared to rival firms.

During Global Recession Ample CashBalance, less fixed assets than rivals ,Internet provide major competitiveadvantages.

Normally competitive advantages only for

certain period due to rival firms imitating andundermining that advantages, So must striveto achieve sustained competitive advantagesby (a) continually adapting change withexternal events and internal capabilities,

Strategic Management is Gaining and

Maintaining Competitive Advantage


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Strategists are individual

who are responsible

for Success and failure

Help Gather Analyze & Organize Information

Track industry & competitors trend

Develop forecasting model and scenario analysi

Evaluate performance , spot opportunities ,identify threat and develop corrective plans

gist differ because of personal philosophies, social responsibilities, conprofitability, attitude, values, ethics, willingness to take risk etc


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Vision Statement What do we want to become?

Mission Statement What is our business? Identifies thescope of firms operations.

Vision and Mission Statements


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Ch 1 -23

External Opportunities and Threats

Analysis of Trends Economic

Social

Cultural Demographic/Environmental

Political, Legal, Governmental

Technological Competitors


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Ch 1 -24

Basic Tenet of StrategicManagement

External Opportunities and Threats

Strategy Formulation

Take advantage ofExternal

Opportunities

Take advantage ofExternal

Opportunities

Avoid/minimizeimpact of

External Threats

Avoid/minimizeimpact of

External Threats


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Ch 1 -25

Controllable activitiesperformed especially well orpoorly

Determined relative to

competitors ( deficiency orsuperiority)

Internal Strengths and Weaknesses


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Ch 1 -26

Typically located in functional areas ofthe firm

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

Management Information Systems



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Ch 1 -27

Assessing the InternalEnvironment


Internal FactorsPerformance Measures

Ratios

Industry Averages

Survey Data


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Ch 1 -28

Specific results that anorganization seeks to achieve inpursuing its basic mission

Long-term means more than oneyear

Long-Term Objectives


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Ch 1 -29

Long-Term Objectives

Objectives are essential for ensuring thefirms success

Provide direction

Aid in evaluation

Create synergy Reveal priorities

Focus coordination

Provide basis for planning, organizing,motivating, and controlling

Objectives should challenging, measurable,

consistent, reasonable, and clear.


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Ch 1 -30

Means by which long-term

objectives are achieved

Strategies


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Ch 1 -31

Strategies

Examples Geographic expansion

Diversification

Acquisition

Product development

Market penetration

Retrenchment

Divestiture Liquidation

Joint venture


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Short-term milestones that firms mustachieve to reach long-term objectives.Annual objectives should be

measurable, quantitative, challenging,realistic, consistent, and prioritizes.They should establish at every layersand functions of the organization

Annual Objectives


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Ch 1 -33

Means by which annual objectiveswill be achieved.

It is the guidelines , rules, andprocedures to support objectives.

It establish in corporate level andapply entire organization

Policies


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Ch 1 -34


Process can be best studiedand applied using a model.

Strategic Management Model


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Ch 1 -35


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Ch 1 -36

Identifying an organization vision,mission, objectives, and strategies islogical starting point for strategic

management because a firmspresent situation and condition maypreclude certain strategies and may

even dictate a particular course ofaction.



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Ch 1 -37

Strategic Management ProcessDynamic & continuousA change in any one components in

model can necessitate a change in any

or other components. Shift in economy could represent a major amajor opportunities/threats require achange in long-term objectives andstrategies

Failure of accomplish objectives requirechange in policy

competitors changes in strategy couldrequire to change in mission. So

formulation, implementation, and



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Ch 1 -38


Communication and feedbackis a key to successfulstrategic management


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Ch 1 -39

Benefits of Strategic Management

Proactive than Reactive in shaping futureHelp to formulate better strategies through

use of more systematic, logical, and rationalapproaches.

A major aim of the process is to achieve theunderstanding of and commitment from allmanagers and employees.EMPOWERMENT


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Benefits of Strategic Management Financial Benefits

Statistics showing improvement in sales ,profitability, and productivity.

Nonfinancial Benefits Enhanced awareness of threats Improved understanding of competitors

strategies Increased employee productivity Reduced resistance to change Clearer understanding of performance-

reward relationship

Enhanced problem-prevention capabilities


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Why Some Firms Do NoStrategic Planning

Lack of knowledge of strategic planning Poor reward structures :

assume success but fail to rewards success

Fire fighting Waste of time

Too expensive

Laziness Content with success

Today success may feel that there is no need to

plan as they are fine today.


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Why Some Firms Do NoStrategic Planning

(continued) Fear of failure

Overconfidence

Prior bad experience Self-interest

Fear of the unknown

Honest difference of opinion Suspicion


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Pitfalls in StrategicPlanning

Strategic planning is an involved,intricate, and complex process

that takes an organization intouncharted territory (not ready to

prescription for success)


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Effective Strategic Planningis: A people process more than a paper

process

A learning process

Words supported by numbers Simple and nonroutine

Varying assignments, team

membership, meeting formats, andplanning calendars

Challenging assumptions underlying

corporate strategy


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Effective Strategic Planningcontinued Welcomes bad news Requires open-mindedness and a

spirit of inquiry

Is not a bureaucratic mechanism Is not stilted Is not too formal, predictable, or rigid

Does not contain jargon or arcanelanguage


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Effective Strategic Planningcontinued Is not a formal system for control

Does not disregard qualitativeinformation

Is not controlled by technicians

Does not pursue too many strategiesat once

Continually strengthens the goodethics is good business policy


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Comparing Business andMilitary Strategy

Strategic planning started in themilitary

Similarity Both business and military

organizations must adapt to change

and constantly improve Difference Business strategy assumes

01 the Nature of Strategic Management (2)

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