Course: Strategic Management
4th Year –Georgia program
All Majors : Finance + Marketing + Accounting
Instructor: Dr. Gamal Sayed Abdelaziz
Chapter 1
Strategic Management Essentials:
The Nature of Strategic Management
Ch 1 -1
Ch 1 -2
Strategic Management – Defined
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions
that enable an organization to
achieve its objectives.
Ch 1 -3
Strategic Management
In essence, the strategic
plan is a company’s game
plan.
Ch 1 -4
Strategic Management achieves a firm’s
success through integration --
Management Marketing
Finance/Accounting Production/Operations
Research & Development MIS
Ch 1 -5
Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch 1 -6
Strategy Formulation Decisions
What new businesses to enter
What businesses to abandon
yt5la 3anha
Whether to expand operations or diversify
Whether to enter international markets
Whether to merge or form a joint venture
How to avoid a hostile takeover
Ch 1 -7
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -8
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
Strategy Evaluation is to determine which strategies are
not working well
Ch 1 -9
Integrating Insights and Analysis
The strategic management
process attempts to organize
quantitative and qualitative
information under conditions of
uncertainty.
Ch 1 -10
Integrating Insights and Analysis
Insights is based on:
Past experiences
Judgment
Feelings
Insights is Useful for decision
making
Conditions of great uncertainty
Conditions with little model
Ch 1 -11
Strategic Management is Gaining and
Maintaining Competitive Advantage
“Anything that a firm does
especially well compared
to rival firms”
Ch 1 -12
Achieving Sustained Competitive
Advantage
1. Adapting to change in external
trends, internal capabilities and
resources
2. Effectively formulating,
implementing & evaluating
strategies
Ch 1 -13
Adapting to Change
Rate & magnitude of change
increasing dramatically
E-commerce
Demographics
Technology
Ch 1 -14
Adapting to Change
Effective Adaptation
Requires long-term focus
Ch 1 -15
Adapting to Change – Key Strategic
Management Questions
What kind of business should
we become?
Are we in the right fields
Are there new competitors
What strategies should we
follow?
How are our customers
changing?
Ch 1 -16
Key Terms
A vision statement answers
the question “What do we
want to become?”
A mission statement answers
the question “What is our
business?”
Ch 1 -17
Key Terms
Opportunities and Threats (External)
Largely beyond the control of a single
organization
Ch 1 -18
Key Terms
Opportunities & Threats (External)
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
Ch 1 -19
Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)
Process of conducting research
and gathering and assimilating
external information
Ch 1 -20
Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation
Avoid/minimize impact of
External Threats
Ch 1 -21
Key Terms
Strengths & Weaknesses (Internal)
Controllable activities performed
especially well or poorly
Ch 1 -22
Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
Ch 1 -23
Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios
Performance Metrics
Internal Factors
Industry Averages
Survey Data
Ch 1 -24
Key Terms
Long-term Objectives
Mission-driven chase of specified results
more than one year out
Ch 1 -25
Key Terms
Long-term Objectives
Essential for ensuring the firm’s success
• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and
controlling
Ch 1 -26
Key Terms
Strategies
Means by which long-term objectives are
achieved
Ch 1 -27
Key Terms
Strategies
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Reduction of expenditure
• Liquidation
• Joint venture
Ch 1 -28
Key Terms
Annual Objectives
Short-term milestones that firms must
achieve to attain long-term objectives
Ch 1 -29
Key Terms
Policies
Means by which annual objectives will be
achieved
Ch 1 -30
Strategic Management Model
1. Identify Existing --
• Vision
• Mission
• Objectives
• Strategies
Ch 1 -31
Strategic Management Model
2. Audit external environment
3. Audit internal environment
4. Establish long-term objectives
5. Generate, evaluate & select
strategies
6. Implement selected strategies
7. Measure & evaluate performance
Ch 1 -32
Benefits of Strategic
Management
• Proactive in shaping firm’s future
• Initiate and influence firm’s activities
• Formulate better strategies
•Systematic, logical, rational
Ch 1 -33
Benefits of Strategic
Management
Financial Benefits
• Improvement in sales
• Improvement in profitability
• Productivity improvement
Ch 1 -34
Benefits of Strategic
Management
Non-Financial Benefits
• Improved understanding of competitors strategies
• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
Ch 1 -35
Benefits of Strategic
Management (cont’d)
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
Ch 1 -36
Benefits of Strategic
Management (cont’d)
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
Ch 1 -37
Benefits of Strategic
Management (cont’d )
11. Encourages favorable attitude toward
change
12. Provides
discipline and formality to the
management of the business
Ch 1 -38
Benefits to a Firm That Does
Strategic Planning
Ch 1 -39
Why Some Firms Do No
Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
Ch 1 -40
Why Some Firms Do No
Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
Ch 1 -41
Disadvantages of International
Operations
Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currency
differences
Ch 1 -42
