Strategic Management Chapter 01

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Copyright 2011 Pearson Education, Inc.Publishing as Prentice Hall

Ch 1 -1

Chapter 1

The Nature of Strategic Management

Strategic Management:Concepts & Cases

13th Edition

Fred David


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Ch 1 -2

Art & science offormulating,

implementing, andevaluating,cross-functional decisions that

enable an organization to achieve its

objectives

Strategic ManagementDefined


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Ch 1 -3

Purpose of Strategic Management

To exploit and create new and differentopportunities for tomorrow


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Ch 1 -4

Strategic Management

In essence, the strategic plan is acompanys game plan


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Ch 1 -5

3 Stages of the StrategicManagement Process

Strategy formulation

Strategy implementation

Strategy evaluation


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Ch 1 -6

Vision&Mission

StrategyFormulation

ExternalOpportunities&Threats

InternalStrengths&Weaknesses

Long-TermObjectives

AlternativeStrategies

StrategySelection


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Ch 1 -7

Issues in StrategyFormulation

Businesses to enterBusinesses to abandonAllocation of resourcesExpansion or

diversificationInternational marketsMergers or jointventuresAvoidance of hostiletakeover


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Ch 1 -8

StrategyImplementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation


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Ch 1 -9

Strategy Implementation Steps

Developing a strategy-supportive culture

Creating an effective organizational structure

Redirecting marketing efforts

Preparing budgets

Developing and utilizing information systems

Linking employee compensation toorganizational performance


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Ch 1 -10

Issues in StrategyImplementation

Action Stage of StrategicManagement

Mobilization of

employees & managers

Most difficult stage

Interpersonal skills

critical


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Ch 1 -11

Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action


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Ch 1 -12

Peter Drucker: Think through the

overall mission of a business. Askthe key question:

What is our Business?

Prime Task ofStrategic Management


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Ch 1 -13

The strategic management processattempts to organize quantitative andqualitative information under conditions ofuncertainty

Integrating Intuition & Analysis


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Ch 1 -14

Intuition is based on:

Past experiences

Judgment

Feelings


Intuition isuseful for decision making inconditions of: Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives


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Ch 1 -15

Involve management at all levels

Intuition & Judgment

Influenceallanalyses



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Ch 1 -16

Organizations should continually

monitor internal and externalevents and trends so that timely

changes can be made as needed

Adapting to Change


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Ch 1 -17

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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Copyright 2011 Pearson Education, Inc.

Publishing as Prentice HallCh 1 -18

Anything that a firm does especially

well compared to rival firms

Strategic Management isGaining and Maintaining

Competitive Advantage


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1. Continually adapting to changes inexternal trends and events and internalcapabilities, competencies, and resources

Achieving Sustained CompetitiveAdvantage

2. Effectively formulating, implementing, and

evaluating strategies that capitalize on thosefactors


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Strategists

Gather Information

Analyze Information

Organize Information


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Vision StatementWhat do we want to become?

Mission Statement

What is our business?

Vision and Mission Statements


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External Opportunities and Threats

Analysis of Trends Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological Competitors


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Basic Tenet of Strategic Management

External Opportunities and Threats

Strategy Formulation

Take advantage ofExternal Opportunities

Avoid/minimize impact ofExternal Threats


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Controllable activities performedespecially well or poorly

Determined relative to competitors

Internal Strengths and Weaknesses


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Typically located in functional areas of the firm

Management

Marketing Finance/Accounting

Production/Operations

Research & Development Management Information Systems



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Assessing the Internal Environment


Internal Factors

Performance Measures

Ratios

Industry Averages

Survey Data


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Specific results that an organization

seeks to achieve in pursuing its basicmission

Long-term means more than one year

Long-Term Objectives


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Long-Term Objectives Essential for ensuring the firms success

Provide direction

Aid in evaluation

Create synergy

Reveal priorities

Focus coordination

Provide basis for planning, organizing,motivating, and controlling


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Publishing as Prentice Hall

Ch 1 -29

Means by which long-term objectivesare achieved

Strategies


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Ch 1 -30

Strategies Examples

Geographic expansion

Diversification

Acquisition

Product development

Market penetration

Retrenchment

Divestiture

Liquidation

Joint venture


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Ch 1 -31

Sample Strategies Table 1-1

Best Buy

Levi Strauss

New York Times Company


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Ch 1 -32

Short-term milestones that firms mustachieve to reach long-term objectives

Annual Objectives


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Ch 1 -33

Means by which annual objectives willbe achieved

Policies


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Ch 1 -34


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Ch 1 -35

Strategic Management Process

Dynamic & continuousMore formal in larger

organizations

Strategic Management Model


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Ch 1 -36

Strategic Management

Communication is a key tosuccessful strategic management


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Ch 1 -37

Benefits of Strategic Management


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Ch 1 -38

Benefits of Strategic Management Nonfinancial Benefits

Enhanced awareness of threats

Improved understanding of competitors strategies

Increased employee productivity

Reduced resistance to change

Clearer understanding of performance-rewardrelationship

Enhanced problem-prevention capabilities


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Ch 1 -39

Why Some Firms Do No StrategicPlanning Lack of knowledge of strategic planning

Poor reward structures

Fire fighting

Waste of time

Too expensive

Laziness

Content with success


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Ch 1 -40

Why Some Firms Do No StrategicPlanning (continued)

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknown

Honest difference of opinion

Suspicion


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Ch 1 -41

Pitfalls in Strategic Planning

Strategic planning is an involved, intricate,

and complex process that takes anorganization into uncharted territory


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Ch 1 -42

Effective Strategic Planning is:

A people process more than a paper process

A learning process

Words supported by numbers

Simple and nonroutine

Varying assignments, team membership,meeting formats, and planning calendars

Challenging assumptions underlyingcorporate strategy


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Ch 1 -43

Effective Strategic Planningcontinued

Welcomes bad news

Requires open-mindedness and a spirit ofinquiry

Is not a bureaucratic mechanism Is not ritualistic or stilted

Is not too formal, predictable, or rigid

Does not contain jargon or arcane language


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Ch 1 -44

Effective Strategic Planningcontinued

Is not a formal system for control

Does not disregard qualitative information

Is not controlled by technicians

Does not pursue too many strategies at once

Continually strengthens the good ethics is

good business policy


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Ch 1 -45

Comparing Business and MilitaryStrategy

Strategic planning started in the military

Similarity

Both business and military organizations mustadapt to change and constantly improve

Difference

Business strategy assumes competition

Military strategy assumes conflict


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Copyright 2011 Pearson Education, Inc. Ch 1 -46

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Strategic Management Chapter 01

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