1. 2 Learning Objectives To understand: the elements or stages of the strategic management process the different perspectives on strategy development

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Learning Objectives

To understand:

• the elements or stages of the strategic management process

• the different perspectives on strategy development

• the implications of social responsibility, organizational ethics and the increasingly global business environment

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Strategic Management

is the process through which organizations…

analyze and learn from stakeholders inside and outside of the organization,

establish strategic direction, create strategies that are intended to help achieve

established goals, and execute those strategies….

all in an effort to satisfy key

organizational constituencies (stakeholders).

Strategic Management

is the process through which organizations…

analyze and learn from stakeholders inside and outside of the organization,

establish strategic direction, create strategies that are intended to help achieve

established goals, and execute those strategies….

all in an effort to satisfy key

organizational constituencies (stakeholders).

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StrategicStrategicDirectionDirection

Strategy FormulationStrategy Formulation(corporate and (corporate and business level)business level)

Strategy ImplementationStrategy Implementationand Controland Control

Strategic RestructuringStrategic Restructuring

Internal and External Internal and External AnalysisAnalysis

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THE TASK ENVIRONMENTTHE TASK ENVIRONMENT

THE BROAD ENVIRONMENTTHE BROAD ENVIRONMENT

THE ORGANIZATIONTHE ORGANIZATION

suppliers

government

unions

activists

local communities

financialintermediaries

customers

competitors

global socio-culturalforces

global socio-culturalforces

global technological forces

global technological forces

global economicforces

global economicforces

owners/board of directorsmanagers employees

global political/legal forcesglobal political/legal forces

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External Environmental Analysis

• The external environment of business may be divided into two sectors:

BroadTask

• All trends and stakeholders in the external environment should be analyzed at both the domestic and international level

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Broad Environment

The broad environment consists of domestic and global forces such as

socio-cultural trends (e.g. demographics)technological trends (e.g. internet)political trends (e.g. open markets) economic trends (e.g. growing economy)

The broad environment forms the context within which the firm and its task environment exist.

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Task Environment

The task environment consists of external stakeholders -- groups or individuals outside the organization that are significantly influenced by or have a major impact on the organization -- such as\

CustomersSuppliersCompetitors

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Internal Environmental Analysis

• Internal stakeholders include managers, employees and the owners and their representatives (e.g., board of directors).

• Internal analysis includes an evaluation of internal stakeholders and the organization’s resources and capabilities

• Purpose of internal analysis to determinestrengths and opportunities for competitive advantage,

and weaknesses and organizational vulnerabilities that should

be corrected.

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Strategic Direction

Strategic direction involves

• setting long-term goals and objectives, such as mission and vision

• defines the purposes for which an organization exists and operates

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Strategy Formulation

• Strategy is an organizational plan of action intended to accomplish goals.

• Corporate strategy formulation refers to domain definition, or the choice of business areas. Usually decided by the CEO and the board of directors.

• Business strategy formulation involves domain direction and navigation, or how to compete in a given area. Usually decided by division heads and business unit managers.

• Functional strategy formulation contains the details of how the functional areas such as marketing, operations, finance, and research should work together to achieve the business-level strategy.

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Strategy Implementation and Control

• Strategy implementation involves creating the functional strategies, systems, structures, and processes needed by the organization in achieving strategic ends.

• Strategic control refers to the processes that lead to adjustments in strategic direction, strategies, or the implementation plan when necessary.

• Strategic restructuring involves a renewed emphasis on what an organization does well.

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Alternative Perspectives on Strategy Development


Traditional Strategic Management Process

• Situation Analysis--Strengths, Weaknesses, Opportunities and Threats (SWOT)

• Strategies should take advantage of strengths and opportunities or neutralize or overcome weaknesses and threats

• Environmental Determinism--the best strategy involves adapting to environmental, technical and human forces

• Strategy is deliberate (always planned and intended by management)

Traditional Strategic Management Process

• Situation Analysis--Strengths, Weaknesses, Opportunities and Threats (SWOT)

• Strategies should take advantage of strengths and opportunities or neutralize or overcome weaknesses and threats

• Environmental Determinism--the best strategy involves adapting to environmental, technical and human forces

• Strategy is deliberate (always planned and intended by management)

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Contemporary Views

• Adaptation--strategy involves submitting to existing forces.

• Enactment--firms can, in part, create their environments.

• Deliberate--intended by management (planned)

• Emergent--organizations learn as they go by trial and error. Strategy is the pattern in a stream of decisions.

Stakeholder view

• Organizations are at the center of a network of contacts

• Increasing use of partnering

Contemporary Views

• Adaptation--strategy involves submitting to existing forces.

• Enactment--firms can, in part, create their environments.

• Deliberate--intended by management (planned)

• Emergent--organizations learn as they go by trial and error. Strategy is the pattern in a stream of decisions.

Stakeholder view

• Organizations are at the center of a network of contacts

• Increasing use of partnering



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Resource-based View• Organization is made up of resources: financial, physical, human, general

organizational (structure, systems, culture, reputation, relationships with stakeholders).

• Sustainable competitive advantage--Comes from a resource that is valuable in the market, possessed by only a small number of firms (rare), and costly or difficult to imitate in the short term.

• Effective development or acquisition of organizational resources may be the most important reason that some organizations are more successful than others.

Resource-based View• Organization is made up of resources: financial, physical, human, general

organizational (structure, systems, culture, reputation, relationships with stakeholders).

• Sustainable competitive advantage--Comes from a resource that is valuable in the market, possessed by only a small number of firms (rare), and costly or difficult to imitate in the short term.

• Effective development or acquisition of organizational resources may be the most important reason that some organizations are more successful than others.



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• Identifying and Prioritizing Key

Stakeholders

• Assessing Their Needs

• Collecting Ideas From Them

• Integrating this Knowledge into

the Strategic Management Process

• Identifying and Prioritizing Key

Stakeholders

• Assessing Their Needs

• Collecting Ideas From Them

• Integrating this Knowledge into

the Strategic Management Process

The Most Successful Organizations Analyze and Manage Their

Stakeholders Well


Stakeholders Well

Stakeholder AnalysisStakeholder Analysis

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Stakeholder ManagementStakeholder Management


Stakeholders Well


Stakeholders Well

• Communicating with Stakeholders

• Negotiating and Contracting with

Them

• Managing Relationships with Them

• Motivating Them to Act in Beneficial

Ways

• Communicating with Stakeholders

• Negotiating and Contracting with

Them

• Managing Relationships with Them

• Motivating Them to Act in Beneficial

Ways

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Organizational EthicsOrganizational Ethics

Personal Ethics--value system that helps determine what is right. “Ground rules” for behavior.

Organizational Ethics--value system that has been widely adopted by members of an organization.

• Worth of customers/employees vs. focus on profit

• Value of honesty vs. getting the job done

• Work ethic

Personal Ethics--value system that helps determine what is right. “Ground rules” for behavior.

Organizational Ethics--value system that has been widely adopted by members of an organization.

• Worth of customers/employees vs. focus on profit

• Value of honesty vs. getting the job done

• Work ethic

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• Economic responsibilities

• Legal responsibilities

• Moral obligations

• Discretionary

responsibilities

• Economic responsibilities

• Legal responsibilities

• Moral obligations

• Discretionary

responsibilities

SOCIAL RESPONSIBILITYSOCIAL RESPONSIBILITY

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INCREASING NEED FOR ETHICAL BEHAVIOR


Global Competition Global Competition

Technological ComplexityTechnological Complexity

Increasing OrganizationalInterdependence

Increasing OrganizationalInterdependence

Increasing Need for Trust

Increasing Need for Trust

Trustworthy BehaviorTrustworthy Behavior

Behaviorthat Violates Trust and Fairness


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Trustworthy BehaviorTrustworthy Behavior

Committed Effort by StakeholdersCommitted Effort by Stakeholders

Stakeholders Eagerto Conduct Business Stakeholders Eagerto Conduct Business

Good ReputationGood Reputation

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Stakeholders AvoidTransactions When Possible

Stakeholders AvoidTransactions When Possible

Stakeholders Not Committed to OrganizationStakeholders Not Committed to Organization

Legal Suits, Walkouts, Boycotts, etc. Legal Suits, Walkouts, Boycotts, etc.

Poor ReputationPoor Reputation

Documents

1. 2 Learning Objectives To understand: the elements or stages of the strategic management process the different perspectives on strategy development