Ch 1 - Basic Concepts in Strategic Management

STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION

Basic Concepts in Strategic Management

What is Strategy?• A company’s strategy consists of the set of

competitive moves and business approaches that management is employing to run the company

• Strategy is management’s “game plan” to– Attract and please customers – Stake out a market position– Conduct operations– Compete successfully– Achieve organizational objectives

“Without a strategy the organization is like a ship without a rudder, going

around in circles.”

Joel Ross and Michael Kami

“Quote”

Strategic Management DefinedSet of managerial decisions and actions that determines the long-run performance of a firm.

Strategic Management• Strategic management is the art and science

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

• It is the process of specifying the organization's objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives.

Highly Rated Benefits

• Clearer sense of strategic vision• Sharper focus on strategic importance• Improved understanding of changing

environment

4 Phases of Strategic Management

1. Basic financial planning2. Forecast-based planning3. Externally-oriented planning4. Strategic management

Basic Elements of the Strategic Management Process

Strategic Management - Process

Environmental Scanning Defined

Monitoring, evaluation, and disseminating information from external and internal environments to key people in the firm

Environmental Variables

Environmental Scanning

SWOT Analysis

• Strengths – Weaknesses

• Opportunities - Threats

Strategy Formulation

Development of long-range plans for effective management of opportunitiesand threats in light of corporate Strengths and weaknesses

Strategy FormulationMission Statement

• Purpose / reason for organization• Promotes shared expectations• Communicates public image• Who we are; what we do; what we

aspire to

• Strategic Vision–A view of an organization’s future direction and business course; a guiding concept for what the organization is trying to do and to become.

• Organization Mission–Represents management’s customized answer to the question “what is our business and what will it be.” A mission statement broadly outlines the organization’s future direction and serves as a guiding concept for what the organization is to do and to become.

STRATEGY - Types

IntendedStrategy

RealizedStrategyUnrealized

Strategy

Deliberate Strategy

Emergent strategy

Adapted from: Mintzberg, H. “The Strategy Concept I: Five Ps for Strategy” California Management Review. Volume 30 Number1, Fall 1987.

SustainedSuperior

Performance

Hierarchy of Strategy

3 Levels of Strategy

– Corporate strategy– Formulated for the company as a whole

– Business strategy– Formulated for each separate business unit

– Functional strategy– Formulated by functional-area managers within each business unit

What is Corporate Strategy?• Overall GAME PLAN for DIVERSIFIED company

• Consists of – MOVES to establish business positions in different

industries

– APPROACHES to managing group of businesses company has diversified into

Tasks of Corporate Strategy• Making moves to achieve

DIVERSIFICATION • Initiating actions to BOOST PERFORMANCE

of businesses company has diversified into • Finding ways to capture SYNERGY among

related business units

2 + 2 = 5 effects!

• Establishing INVESTMENT PRIORITIES and steering corporate resources into most attractive business units

Corporate Strategy

–Stability–Growth–Retrenchment

What Is Business Strategy?• GAME PLAN for ONE LINE OF BUSINESS

• Central thrust is HOW to build and strengthen firm’s long-term competitive position

• Task separating POWERFUL from WEAK business strategies is forging a series of moves capable of producing – SUSTAINABLE COMPETITIVE ADVANTAGE

What Is Business Strategy?• Forming responses to changes in

– Industry – Economy – Regulatory and political arena

• Crafting competitive moves that lead to sustainable competitive advantage

• Uniting strategic initiatives of functional areas

• Addressing strategic issues related to firm’s competitive position and internal situation

Business Strategy

–Competitive strategies

–Cooperative strategies

Functional Strategies• GAME PLAN for running a particular

function within a business• Adds DETAIL to business strategy and governs HOW key

activities will be managed

• A business needs as many functional strategies as it has major functional activities

• Roles of functional strategies – Provide SUPPORT for overall business

strategy – Specify HOW functional managers plan

to achieve functional area performance objectives

Functional Strategy

–Technological leadership

–Technological followership

Operating Strategies• Concerns even narrower strategic approaches

for managing KEY OPERATING UNITS

• Designed to achieve strategy-critical performance targets of operating-level units

• Add detail to overall business plan and functional strategies but are of lesser scope

Strategic Decision Making

Strategic Decisions

–Rare

–Consequential

–Directive

Strategic Decision – Making Process

Mintzberg’s Modes

–Entrepreneurial mode–Adaptive mode–Planning mode–Logical incrementalism

Hambrick and Fredrickson – Good Strategy

5 Elements of Good Strategy

1. Arenas2. Vehicles3. Differentiators4. Staging5. Economic logic

Please prepareMission,Vision,

ObjectiveFor a

Company Of yourchoice