Prentice Hall, Inc. © 20081-1 Basic Concepts of Strategic Management Environmental Variables.

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Basic Concepts of Strategic Management

Environmental Variables

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Environmental Scanning

SWOT Analysis

• Strengths – Weaknesses

• Opportunities – Threats

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Strategy Formulation

Developing long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses

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Strategy Formulation – How to Codify a Strategy

Mission Statement

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

aspire to

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Organizational Adaptation

Organization “fit” with environment

• Theory of population ecology• Institution theory• Strategic choice perspective• Organizational learning theory

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Organizational Adaptation

Strategic flexibility

• Demands long-term commitment to development of critical resources

• Demands firm become a learning organization

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Learning Organizations

Learning Organization:An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights

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Learning Organizations

4 Chief Activities of a Learning Organization

• Systematic problem solving• New approach experimentation• Learning from experiences• Intra-organization knowledge transfer

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Basic Concepts of Strategic Management

Hierarchy of Strategy

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Goals & Objectives

Corporate Goals/Objectives

–Profitability (net profit)–Growth–Resource utilization (ROE, ROI)–Market leadership

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Basic Concepts of Strategic Management

3 Types of Strategy

–Corporate strategy

–Business strategy

–Functional strategy

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Basic Concepts of Strategic Management

Corporate Strategy seeks one of these:

–Stability–Growth–Retrenchment

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Basic Concepts of Strategic Management

Business Strategy

–Competitive strategies

–Cooperative strategies

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Basic Concepts of Strategic Management

Functional Strategy

–Technological leadership

–Technological followership

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Basic Concepts of Strategic Management

Strategic Decision-Making

Process

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Strategic Decision Making

Strategic Decisions

– Rare

– Consequential

– Directive

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Strategic Decision Making

Mintzberg’s Modes of Strategy Decision Making

–Entrepreneurial mode – CEO-driven–Adaptive mode – ‘muddling through’–Planning mode – process-driven–Logical incrementalism - mixture

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Hambrick and Fredrickson – Good Strategy

5 Elements of Good Strategy

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