CHAPTER ONE BASIC CONCEPTS OF STRATEGIC MANAGEMENT
ESSENTIALS OF STRATEGIC MANAGEMENT
5TH EDITION
J. DAVID HUNGER THOMAS L. WHEELEN
1.1 The Study of Strategic Management
Key Strategic Questions:
Where is the organization now? If no changes are made, where will the organization be in one year? Two years? Five years? Ten years? Are the answers acceptable? If the answers are not acceptable, what specific actions should management undertake? What risks and payoffs are involved?
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1.1 The Study of Strategic Management
Strategic Management: a set of managerial decisions
and actions that determines the long-run performance of a corporation.
Includes:
Internal and external environment scanning Strategy formulation Strategy implementation Evaluation and control
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1.1 The Study of Strategic Management
Phases of Strategic Management:
Phase Phase Phase Phase 1: 2: 3: 4: Basic financial planning Forecast-based planning Externally oriented strategic planning Strategic management
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1.1 The Study of Strategic Management
Strategic flexibility: the ability to shift from one dominant strategy to another and requires:
Long-term commitment to development and nurturing of critical resources Becoming a learning organization
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1.1 The Study of Strategic Management
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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1.2 Initiation of Strategy
Triggering event: something that acts as a stimulus for
a change in strategy and can include: New CEO External intervention Threat of change of ownership Performance gap Strategic inflection point
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1.3 Basic Model of Strategic Management
Basic Elements of Strategic Management
1. 2. 3. 4. Environmental scanning Strategy formulation Strategy implementation Evaluation and control
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1.3 Basic Model of Strategic Management
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1.3 Basic Model of Strategic Management
Environmental Scanning is the monitoring, evaluating
and disseminating of information from the external and internal environments to key people within the organization
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1.3 Basic Model of Strategic Management
Strategy Formulation: the development of long-range
plans for the effective management of environmental opportunities and threats in light of organizational strengths and weaknesses (SWOT)
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1.3 Basic Model of Strategic Management
Strategy Formulation: Mission- the purpose or reason for the
organizations existence
like to become
Vision- describes what the organization would
(What, when, how much)
Objectives- the end results of planned activity
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1.3 Basic Model of Strategic Management
Strategy Formulation: Strategies- form a comprehensive master plan
that states how the corporation will achieve its mission and objectives Corporate Business Functional that links the formulation of a strategy with its implementation
Policies- the broad guidelines for decision making
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1.3 Basic Model of Strategic Management
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1.3 Basic Model of Strategic Management
Strategy implementation: the process by which
strategies and policies are put into action through the development of: Programs Budgets Procedures
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1.3 Basic Model of Strategic Management
Evaluation and control: the process in which
corporate activities and performance results are monitored so that actual performance can be compared to desired performance
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1.3 Basic Model of Strategic Management
Evaluation & Control
Performance: the end result of organizational activities Feedback/Learning Process: revise or correct
decisions based on performance
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1.4 Strategic Decision Making
What Makes a Strategic Decision? Strategic decision making focuses on the long-run future of the organization
Characteristics of strategic decision making:
Rare Consequential Directive
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1.4 Strategic Decision Making
Mintzbergs Modes of Strategic Decision Making
Entrepreneurial Adaptive Planning Logical incrementalism (Quinn)
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1.4 Strategic Decision Making
Strategic Decision Making Process:
1. Evaluate current performance results 2. Review corporate governance 3. Scan and assess the external environment 4. Scan and assess the internal corporate environment
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5. Analyze strategic (SWOT) factors 6. Generate, evaluate and select the best alternative strategy 7. Implement selected strategies 8. Evaluate implemented strategies
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Discussion Questions
1. Why has strategic management become so important to todays corporations? 2. How does strategic management typically evolve in a corporation? 3. What is a learning organization? Is this approach to strategic management better than the more traditional top-down approach in which strategic planning is primarily done by top management? 4. Why are strategic decisions different from other kinds of decisions? 5. When is the planning mode of strategic decision making superior to the entrepreneurial and adaptive modes?
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PowerPoint created by:
Ronald Heimler
&
J. David Hunger
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