Chapter 1
The Nature of Strategic Management
Ch 1 -1
Strategic Management –Defined
Art & science of formulating,
implementing, and evaluating, cross-
functional decisions that enable an
organization to achieve its objectives
Ch 1 -2
Purpose of Strategic Management
To exploit and create new and different
opportunities for tomorrow
Ch 1 -3
Strategic Management
In essence, the strategic plan is a company’s
game plan
Ch 1 -4
3 Stages of the Strategic Management Process
Strategy formulation
Strategy implementation
Strategy evaluation
Ch 1 -5
Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch 1 -6
Issues in Strategy
Formulation
Businesses
Businesses to
to enter
enter
Businesses
Businesses to
to abandon
abandon
Allocation
Allocation of
of
resources
resources
Expansion
Expansion or
or
diversification
diversification
International
International markets
markets
Mergers
Mergers or
or joint
joint
ventures
ventures
Avoidance
Avoidance of
of hostile
hostile
takeover
takeover
Ch 1 -7
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -8
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 to
organizational performance
Ch 1 -9
Issues in Strategy
Implementation
Action
Action Stage
Stage of
of
Strategic
Strategic Management
Management
Mobilization
Mobilization of
of
employees
employees && managers
managers
Most
Most difficult
difficult stage
stage
Interpersonal
Interpersonal skills
skills
critical
critical
Ch 1 -10
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
Ch 1 -11
Prime Task of
Strategic Management
Peter Drucker: Think through the overall
mission of a business. Ask the key
question:
“What is our Business?”
Ch 1 -12
Integrating Intuition & Analysis
The strategic management process attempts
to organize quantitative and qualitative
information under conditions of
uncertainty
Ch 1 -13
Integrating Intuition & Analysis
Intuition is based on:
Past experiences
Judgment
Feelings
Intuition is useful for decision making in
conditions of:
Great uncertainty
Little precedent
Highly interrelated variables
Several plausible alternatives
Ch 1 -14
Integrating Intuition & Analysis
Intuition & Judgment
Involve management at all levels
Influence all analyses
Ch 1 -15
Adapting to Change
Organizations should continually monitor
internal and external events and trends so
that timely changes can be made as needed
Ch 1 -16
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
Ch 1 -17
Strategic Management is Gaining and
Maintaining Competitive Advantage
Anything that a firm does especially well
compared to rival firms
Ch 1 -18
Achieving Sustained Competitive Advantage
1. Continually adapting to changes in
external trends and events and internal
capabilities, competencies, and resources
2. Effectively formulating, implementing,
and evaluating strategies that capitalize
on those factors
Ch 1 -19
Strategists
Gather Information
Analyze Information
Organize Information
Ch 1 -20
Vision and Mission Statements
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Ch 1 -21
External Opportunities and Threats
Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
Ch 1 -22
External Opportunities and Threats
Basic Tenet of Strategic Management
Take
Takeadvantage
advantageof
of
External
ExternalOpportunities
Opportunities
Strategy Formulation
Avoid/minimize
Avoid/minimizeimpact
impactof
of
External
ExternalThreats
Threats
Ch 1 -23
Internal Strengths and Weaknesses
Controllable activities performed
especially well or poorly
Determined relative to competitors
Ch 1 -24
Internal Strengths and Weaknesses
Typically located in functional areas of the
firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Management Information Systems
Ch 1 -25
Internal Strengths and Weaknesses
Assessing the Internal Environment
Ratios
Performance Measures
Internal Factors
Industry Averages
Survey Data
Ch 1 -26
Long-Term Objectives
Specific results that an organization
seeks to achieve in pursuing its basic
mission
Long-term means more than one year
Ch 1 -27
Long-Term Objectives
Essential for ensuring the firm’s success
Provide direction
Aid in evaluation
Create synergy
Reveal priorities
Focus coordination
Provide basis for planning, organizing,
motivating, and controlling
Ch 1 -28
Strategies
Means by which long-term objectives are
achieved
Ch 1 -29
Strategies
Examples
Geographic
expansion
Diversification
Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture
Ch 1 -30
Annual Objectives
Short-term milestones that firms must
achieve to reach long-term objectives
Ch 1 -31
Policies
Means by which annual objectives will be
achieved
Ch 1 -32
Ch 1 -33
Strategic Management Model
Strategic Management Process
Dynamic & continuous
More formal in larger organizations
Ch 1 -34
Strategic Management
Communication is a key to successful
strategic management
Ch 1 -35
Benefits of Strategic Management
Ch 1 -36
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-reward
relationship
Enhanced problem-prevention capabilities
Ch 1 -37
Why Some Firms Do No Strategic Planning
Lack of knowledge of strategic planning
Poor reward structures
Fire fighting
Waste of time
Too expensive
Laziness
Content with success
Ch 1 -38
Why Some Firms Do No Strategic Planning
(continued)
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Honest difference of opinion
Suspicion
Ch 1 -39
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate,
and complex process that takes an
organization into uncharted territory
Ch 1 -40
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 underlying corporate
strategy
Ch 1 -41
Effective Strategic Planning continued
Welcomes bad news
Requires open-mindedness and a spirit of
inquiry
Is not a bureaucratic mechanism
Is not ritualistic or stilted
Is not too formal, predictable, or rigid
Does not contain jargon or arcane language
Ch 1 -42
Effective Strategic Planning continued
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
Ch 1 -43
