Strategic Managment

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Strategic Management Concepts & Cases 8th edition Fred R. DavidChapter 1:The Nature of Strategic ManagementPowerPoint Slides By:Anthony F. ChelteWestern New England College

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2001 Prentice HallCh. 1-*Organizing ThemesGlobal considerations impact virtually all strategic decisions.E-commerce has become a vital strategic management tool.The natural environment has become an important strategic issue.

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2001 Prentice HallCh. 1-*Strategic Management Defined Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

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2001 Prentice HallCh. 1-*Strategic Management Club

Visit and join the club on-line:www.strategyclub.com

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2001 Prentice HallCh. 1-*TerminologyStrategic ManagementSynonymous with Strategic Planning

Strategic managementUsed more often in academia

Strategic planningUsed more often in the business world

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2001 Prentice HallCh. 1-*TerminologyStrategic managementRefers to:Strategy formulationStrategy implementationStrategy evaluation

Strategic planningRefers to:Strategy formulation

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2001 Prentice HallCh. 1-*Brief History1950sTerm strategic planning originates

1960s 1970sStrategic planning very popularWidely viewed as panacea for problems

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2001 Prentice HallCh. 1-*Brief History1980sStrategic planning cast asidePlanning models did not yield higher returns

1990s2000Revival of strategic planningWidely practiced in business world

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2001 Prentice HallCh. 1-*Strategic-Management Process Three StagesStrategy FormulationStrategy ImplementationStrategy Evaluation

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2001 Prentice HallCh. 1-*Strategy FormulationVision & MissionAlternative StrategiesLong-Term ObjectivesStrengths & WeaknessesOpportunities & ThreatsStrategy Selection

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2001 Prentice HallCh. 1-*Strategy ImplementationMotivate EmployeesPoliciesAnnual ObjectivesResource Allocation

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2001 Prentice HallCh. 1-*Strategy EvaluationCorrective ActionMeasure PerformanceReviewExternal & Internal

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2001 Prentice HallCh. 1-*Key Strategic Management Terms (Contd)1. Strategists2. Vision statements3. Mission statements4. External opportunities and threats5. Internal strengths and weaknesses

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2001 Prentice HallCh. 1-*Key Strategic Management Terms (Contd)6. Long-term objectives7. Strategies8. Annual objectives9. Policies

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2001 Prentice HallCh. 1-* Strategic Management Terms (Contd)Strategists Usually found in high levels of management (CEO)

Help organization gather, analyze, and organize information

Track industry and competitive trends

Develop forecasting model

Evaluate corporate and divisional performance

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2001 Prentice HallCh. 1-* Vision Statements Answers the question: What do we want to become?

First step in strategic planning

Oftentimes a single sentence

Our vision is to take care of your vision. (Stokes Eye Clinic, Florence, South Carolina)

Strategic Management Terms (Contd)

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2001 Prentice HallCh. 1-*External Opportunities & Threats Largely beyond the control of a single organization

EconomicSocialCulturalDemographicEnvironmental


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2001 Prentice HallCh. 1-*External Opportunities & Threats (contd)

PoliticalGovernmentalTechnologicalCompetitive trends & events


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2001 Prentice HallCh. 1-*Internal Strengths & Weaknesses Controllable activities that are performed well or poorly relative to competitors

Based on functional analysis of activities in the firms:ManagementMarketingFinance/accounting


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2001 Prentice HallCh. 1-*Internal Strengths & Weaknesses (Contd)Based on functional analysis of activities in the firms:Production/operationsResearch and developmentComputer information systemsOrganizations strive to pursue strategies that capitalize on strengths and improve weaknesses


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2001 Prentice HallCh. 1-*Long-Term Objectives Results to be achieved in pursuing the organizations mission. Time frame is beyond one year.State directionAid in evaluationCreate synergyReveal prioritiesFocus coordinationProvide basis for effective management


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2001 Prentice HallCh. 1-*Strategies Potential actions that require top management decisions and large amounts of firms resourcesMechanisms by which long-term objectives are realizedGeographic expansionDiversificationAcquisitionProduct development


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2001 Prentice HallCh. 1-*Strategies (contd)

Mechanisms by which long-term objectives are realizedMarket penetrationRetrenchmentDivestitureLiquidationJoint venture


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2001 Prentice HallCh. 1-*Annual ObjectivesShort-term milestones necessary to achieve long-term objectives.

Represent the basis for allocating resources

Established at corporate, divisional, and functional levels


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2001 Prentice HallCh. 1-*Annual Objectives (contd)

Stated in terms of accomplishments for:management marketing finance/accounting production/operations research and development information systems accomplishments Strategic Management Terms (Contd)

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2001 Prentice HallCh. 1-*PoliciesImportant in strategy implementation as the means by which annual objectives will be achieved

Guide to decision making and address repetitive situationsEstablished at corporate, divisional, or functional levelsAllow consistency & coordination within and between organizational departments


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2001 Prentice HallCh. 1-*Comprehensive Strategic Management ModelVision & Mission Statements

Chapter 2ExternalAudit

Chapter 3InternalAudit

Chapter 4Long-TermObjectives

Chapter 5Generate,Evaluate,SelectStrategies

Chapter 6ImplementStrategies:Mgmt Issues

Chapter 7ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8Measure &EvaluatePerformance

Chapter 9

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2001 Prentice HallCh. 1-*Proactive vs. ReactiveInitiate and influence activities Helps shape firms own futurePrincipal BenefitFormulate better strategiesSystematic, logical, and rational approachCommunicationKey to successful strategic management

Benefits of Strategic Management

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2001 Prentice HallCh. 1-*Financial BenefitsMore profitable and successful

Improvements in sales, profitability, and productivity

High-Performing FirmsSystematic planning Fluctuations in external and internal environments Benefits of Strategic Management (Contd)

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2001 Prentice HallCh. 1-*Nonfinancial BenefitsEnhanced awareness of external threatsUnderstanding of competitors strategiesIncreased employee productivityReduced resistance to changeClear performance-reward relationshipsOrder and discipline to the firmView change as opportunity Benefits of Strategic Management (Contd)

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2001 Prentice HallCh. 1-*Poor reward structuresFire-fightingWaste of timeToo expensiveLazinessContent with success

Why Some Firms Do No Strategic Planning

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2001 Prentice HallCh. 1-*Fear of failureOverconfidencePrior bad experienceSelf-interestFear of the unknownSuspicion

Why Some Firms Do No Strategic Planning (Contd)

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2001 Prentice HallCh. 1-*Using to gain control over decisions & resourcesDoing only to satisfy regulatory requirementsMoving hastily from mission to strategy formulationFailing to communicate to employeesIntuitive decisions that conflict with formal planTop management not supportive of process Pitfalls to Avoid in Strategic Planning

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Failing to use as standard for performance measurementDelegating to a planner vs. involvement of managersFailing to involve key personnelFailing to create collaborative environmentFormality that stifles creativity and flexibility

Pitfalls to Avoid in Strategic Planning (Contd)

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2001 Prentice HallCh. 1-*Defined:Principles of conduct within organizations that guide decision making and behavior

Good business ethics is a prerequisite for good strategic management

Good ethics is just good business! Business Ethics & Strategic Planning

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2001 Prentice HallCh. 1-*Strategists responsible for high ethical principlesAll strategic processes have ethical ramificationsFormal codes of ethics are in place for many businessesInternet privacy emerging as ethical issue of immense proportions Business Ethics & Strategic Planning (Contd)

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2001 Prentice HallCh. 1-*Business actions always unethical include:

Misleading advertisingMisleading labelingEnvironmental harmPoor product or service safetyPadding expense accountsInsider tradingDumping flawed products on foreign markets Business Ethics & Strategic Planning (Contd)

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2001 Prentice HallCh. 1-*Nature of Global CompetitionCompanies conduct business across bordersInternational or multinational corporationsParent company Host country

Strategy implementation more difficultCultural differencesNorms, values, work ethics

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2001 Prentice HallCh. 1-*Advantages of International OperationsAbsorb excess capacityReduce unit costsLow-cost production facilitiesLower labor costsCompetition less intense

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2001 Prentice HallCh. 1-*Advantages of International Operations (Contd)

Reduced tariffs, lower taxesFavorable political climateEconomies of scale

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2001 Prentice HallCh. 1-*Communication difficulties between parent and subsidiariesBased on cultural, political, social, language, demographic, and competitive forces

Foreign-based competitors Strengths underestimatedWeaknesses overestimatedDisadvantages of International Operations

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2001 Prentice HallCh. 1-*Key Terms & ConceptsAnnual objectivesBusiness ethicsCode of ethicsE-commerceEmpowermentEnvironmental scanningExternal opportunitiesExternal threatsInternal strengthsInternal weaknessesIntuitionLong-term objectivesMission statementsPoliciesStrategic managementStrategic-management model

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2001 Prentice HallCh. 1-*Key Terms & Concepts (Contd)Strategic-management processStrategiesStrategistsStrategy evaluationStrategy formulationStrategy implementationLobbyingVision statementVisionHost country International firmsLong-range planning Multinational corporation

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Strategic Managment