Strategic Management

Concepts of Strategic ManagementFred R. DavidPrentice-Hall, Inc.Sixth Edition

Chapter 1The Nature of Strategic Management

Three Themes in the TextGlobal Considerations Impact Virtually All Strategic DecisionsInformation Technology Has Become a Vital Strategic Management ToolPreserving the Natural Environment is an Important Strategic Issue

Chapter ObjectivesDescribe the strategic management processExplain the need for integrating analysis and intuition in strategic managementDefine and give examples of key terms in strategic managementDiscuss the nature of strategy formulation, implementation, and evaluation activitiesDescribe the benefits of good strategic managementExplain why good ethics is good business in strategic management

Should weimport?Will NAFTA affect our firm?Should weexport?Should I learn a foreignlanguage?Global Considerations Impact Virtually All Strategic Decisions

Should we outsource MIS?Should we buyour sales stafflaptops?Should we upgrade ourPCs?Should we setup a Web site?Information Technology Has Become A Vital Strategic Management Tool

Should werecycle?Will Congresspass tougherlaws?Should weburn low-sulfurcoal?Is our firmenvironmentallyfriendly?Preserving the Natural Environment is an Important Strategic Issue

The Definition of Strategic ManagementThe Art and Science of Formulating, Implementing, and Evaluating Cross-Functional Decisions That Enable an Organization to Achieve Its Objectives

The Stages and Activities in the Strategic Management ProcessStagesActivities Strategy formulation Strategy evaluationStrategy implementationConduct researchEstablish annual objectivesReview internal and external factorsIntegrate intuition with analysisDevise policiesMeasure performanceMake decisionsAllocate resourcesTake corrective action

The Basis for Good Strategic DecisionsIntuition + AnalysisEffective Strategic Decisions

Global PerspectiveThe Worlds Largest CompaniesThe Worlds Ten Largest Companies in Rank Order Based on 1994 Revenues1. Mitsubishi6. Marubeni2. Mitsui7. Ford Motor3. Itochu8. Exxon4. Sumitomo9. Nissho Iwai5. General Motors 10. Royal Dutch/Shell Group

Conveys strong sense of vision 75% 98%Links compensation to performance 66% 91%Communicates frequently with employees 59% 89%Emphasizes ethics 74% 85%Plans for management succession 56% 85%Communicates frequently with customers 41% 78%Reassigns or terminates 34% 71%Rewards loyalty 39% 44%Makes all major decisions 39% 21%Behaves conservatively 32% 13%

What Traits CEOs Have Now - And Will Need in the Year 2000Personal Behaviors Now Year 2000

Strategy formulation 68% 78%Human resource management 41% 53%International economics and politics 10% 19%Science and technology 11% 15%Computer literacy 3% 7%Marketing and sales 50% 48%Negotiation 34% 24%Accounting and finance 33% 24%Handling media and public speaking 16% 13%Production 21% 9%

What Traits CEOs Have Now - And Will Need in the Year 2000 (cont.)Knowledge and SkillsNowYear 2000

Ten Key External ForcesEconomicSocialCulturalDemographicEnvironmentalPoliticalLegalGovernmentalTechnologicalCompetitive

Fourteen Key Internal ForcesManagementMarketingDistributionProduction/OperationsResearch & DevelopmentPurchasingManufacturing

Key Internal Forces (cont.)Finance/AccountingPackagingComputer Information SystemsEmployee/Manager RelationsHuman Resource ManagementVendor RelationsPromotion

Business MissionStrategy FormulationExternal Opportunities and ThreatsInternal Strengths and WeaknessesKeys to Formulating Strategies

A Comprehensive Strategic Management ModelEstablish Policies and Annual ObjectivesEstablish Policies and Annual ObjectivesDevelopMissionStatementEstablish Long-term ObjectivesGenerate,Evaluate,andSelectStrategiesEstablish Policies andAnnualObjectivesAllocateResourcesMeasureandEvaluatePerformancePerformExternalAuditPerformInternalAuditFeedbackStrategy FormulationStrategy ImplementationStrategy Evaluation

Forces Influencing Design of Strategic Management SystemsToward more formality and more detailsToward less formality and fewer detailsManagement StylesPolicy makerDemocratic-permissiveAuthoritarianDay-to-day operational thinkerIntuitive thinkerExperienced in planningInexperienced in planningOrganizationSmall one-plant companiesLarge companies

Forces Influencing Design of Strategic Management SystemsToward more formality and more detailsToward less formality and fewer detailsComplexity of EnvironmentStable environmentTurbulent environmentLittle competitionMany markets and customersSingle market and customerCompetition severe

Forces Influencing Design of Strategic Management SystemsToward more formality and more detailsToward less formality and fewer detailsComplexity of Production ProcessLong production lead timesShort production lead timesCapital intensiveLabor intensiveIntegrated manufacturing processesSimple manufacturing processesHigh technologyLow technologyMarket reaction time for newproduct is shortMarket reaction time is long

Forces Influencing Design of Strategic Management SystemsToward more formality and more detailsToward less formality and fewer detailsNature of ProblemsFacing new, complex, tough problems having long-range aspects

Facing tough short-range problems

Purpose of Planning SystemCoordinate division activitiesTrain managers

Benefits of Strategic Management- Improved Communication- Increased Understanding- Enhanced Commitment- Greater Productivity- More Effective Strategies- Higher Productivity- Allow Firm to Influence, Initiate, and Anticipate- Be Proactive Rather Than Reactive

How to Create an Ethical CultureDevelop a Code of Business EthicsAsk All Managers and Employers to Sign the CodeOffer Business Ethics WorkshopsInclude Ethics Factors in Performance Appraisal InstrumentsLink Compensation to Ethical Behavior

How to Create an Ethical Culture (cont.)Encourage Whistle BlowingEncourage Good Business Ethics BehaviorPublicize Good Business Ethics BehaviorReward Good Business Ethics BehaviorSet a Good Example

The Communications Benefits of Engaging In Strategic ManagementManagers from all functional areas listen and discuss their views in strategic management meetings. This interaction yields learning, appreciation, and understanding among managers who otherwise do not communicate with each other