david_sm13_ppt_01

Chapter 1 The Nature of Strategic Management

Strategic Management: Concepts & Cases13th EditionFred David

Copyright 2005 Prentice Hall

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management Defined


Purpose of Strategic ManagementTo exploit and create new and different opportunities for tomorrow


In essence, the strategic plan is a companys game planStrategic Management


3 Stages of the Strategic Management Process

Strategy formulation

Strategy implementation

Strategy evaluation


Vision & MissionStrategy FormulationExternal Opportunities & ThreatsInternal Strengths & WeaknessesLong-Term ObjectivesAlternative StrategiesStrategy Selection


Issues in Strategy FormulationBusinesses to enter Businesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover


Strategy ImplementationAnnual ObjectivesPoliciesEmployee MotivationResource Allocation


Strategy Implementation StepsDeveloping a strategy-supportive cultureCreating an effective organizational structureRedirecting marketing effortsPreparing budgetsDeveloping and utilizing information systemsLinking employee compensation to organizational performance


Issues in Strategy ImplementationAction Stage of Strategic Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical


Strategy EvaluationInternal ReviewExternal ReviewPerformance MeasurementCorrective Action


Peter Drucker: Think through the overall mission of a business. Ask the key question: What is our Business?

Prime Task of Strategic Management


The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty

Integrating Intuition & Analysis


Intuition is based on:Past experiencesJudgmentFeelings

Integrating Intuition & Analysis Intuition is useful for decision making in conditions of:Great uncertaintyLittle precedentHighly interrelated variablesSeveral plausible alternatives


Involve management at all levelsIntuition & JudgmentInfluence all analysesIntegrating Intuition & Analysis


Organizations should continually monitor internal and external events and trends so that timely changes can be made as neededAdapting to Change


Key Terms in Strategic ManagementCompetitive advantageStrategistsVision and mission statementsExternal opportunities and threatsInternal strengths and weaknessesLong-term objectivesStrategiesAnnual objectivesPolicies


Anything that a firm does especially well compared to rival firmsStrategic Management is Gaining and Maintaining Competitive Advantage


1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources

Achieving Sustained Competitive Advantage 2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors


Vision Statement What do we want to become?

Mission Statement What is our business?Vision and Mission Statements


Analysis of TrendsEconomicSocialCulturalDemographic/EnvironmentalPolitical, Legal, GovernmentalTechnologicalCompetitorsExternal Opportunities and Threats


Basic Tenet of Strategic ManagementExternal Opportunities and ThreatsStrategy Formulation Take advantage of External Opportunities Avoid/minimize impact ofExternal Threats


Controllable activities performed especially well or poorly

Determined relative to competitorsInternal Strengths and Weaknesses


Typically located in functional areas of the firm

ManagementMarketingFinance/AccountingProduction/OperationsResearch & DevelopmentManagement Information SystemsInternal Strengths and Weaknesses


Assessing the Internal EnvironmentInternal Strengths and WeaknessesInternal FactorsPerformance MeasuresRatiosIndustry AveragesSurvey Data


Specific results that an organization seeks to achieve in pursuing its basic mission

Long-term means more than one yearLong-Term Objectives


Essential for ensuring the firms successProvide directionAid in evaluationCreate synergyReveal prioritiesFocus coordinationProvide basis for planning, organizing, motivating, and controlling

Long-Term Objectives


Means by which long-term objectives are achievedStrategies


ExamplesGeographic expansionDiversificationAcquisitionProduct developmentMarket penetrationRetrenchmentDivestitureLiquidationJoint venture

Strategies


Table 1-1

Best Buy

Levi Strauss

New York Times Company

Sample Strategies


Short-term milestones that firms must achieve to reach long-term objectivesAnnual Objectives


Means by which annual objectives will be achievedPolicies


Strategic Management ProcessDynamic & continuousMore formal in larger organizationsStrategic Management Model


Strategic Management

Communication is a key to successful strategic management


Benefits of Strategic Management


Benefits of Strategic Management

Nonfinancial BenefitsEnhanced awareness of threatsImproved understanding of competitors strategiesIncreased employee productivityReduced resistance to changeClearer understanding of performance-reward relationshipEnhanced problem-prevention capabilities


Why Some Firms Do No Strategic Planning

Lack of knowledge of strategic planningPoor reward structuresFire fightingWaste of timeToo expensiveLazinessContent with success


Why Some Firms Do No Strategic Planning (continued)Fear of failureOverconfidencePrior bad experienceSelf-interestFear of the unknownHonest difference of opinionSuspicion


Pitfalls in Strategic PlanningStrategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory


Effective Strategic Planning is:A people process more than a paper processA learning processWords supported by numbersSimple and nonroutineVarying assignments, team membership, meeting formats, and planning calendarsChallenging assumptions underlying corporate strategy


Effective Strategic Planning continuedWelcomes bad newsRequires open-mindedness and a spirit of inquiryIs not a bureaucratic mechanismIs not ritualistic or stiltedIs not too formal, predictable, or rigidDoes not contain jargon or arcane language


Effective Strategic Planning continuedIs not a formal system for controlDoes not disregard qualitative informationIs not controlled by techniciansDoes not pursue too many strategies at onceContinually strengthens the good ethics is good business policy


Comparing Business and Military StrategyStrategic planning started in the militarySimilarity Both business and military organizations must adapt to change and constantly improveDifference Business strategy assumes competitionMilitary strategy assumes conflict


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