Strategic Managment Chapter-1

8/3/2019 Strategic Managment Chapter-1

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Strategic ManagementConcepts & Cases

Fred R. DavidChapter 1:

The Nature of Strategic

Management


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Organizing Themes

Global considerations impact virtually all

strategic decisions. E-commerce has become a vital

strategic management tool.

The natural environment has becomean important strategic issue.


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Strategic Management Defined

Art and science of formulating,implementing, and evaluating cross-functional decisions that enable anorganization to achieve its objectives.


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Strategic Management Club

Visit and join the club on-line:

www.strategyclub.com


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Terminology

Strategic Management

Synonymous with

Strategic Planning

Strategic management

Used more often in academia

Strategic planning

Used more often in the business world


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Terminology

Strategic managementRefers to:

Strategy formulation Strategy implementation

Strategy evaluation

Strategic planningRefers to:

Strategy formulation


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Brief History

1950s

Term strategic planning originates

1960s 1970s

Strategic planning very popular

Widely viewed as panacea for problems


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Brief History

1980sStrategic planning cast aside

Planning models did not yield higher returns

1990s2000

Revival of strategic planning Widely practiced in business world


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Strategic-Management ProcessThree Stages

Strategy Formulation

Strategy Implementation

Strategy Evaluation


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Strategy Formulation

Vision & Mission

Alternative Strategies

Long-Term Objectives

Strengths & Weaknesses

Opportunities & Threats

Strategy Selection


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Strategy Implementation

Motivate Employees

Policies

Annual Objectives

Resource Allocation


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Strategy Evaluation

Corrective Action

Measure Performance

Review

External & Internal


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Key Strategic Management Terms(Contd)

1. Strategists

2. Vision statements

3. Mission statements

4. External opportunities and threats

5. Internal strengths and weaknesses


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Key Strategic Management Terms

(Contd)

6. Long-term objectives7. Strategies

8. Annual objectives

9. Policies


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Strategic Management Terms

(Contd)Strategists

Usually found in high levels of management(CEO)

Help organization gather, analyze, andorganize information

Track industry and competitive trends

Develop forecasting model

Evaluate corporate and divisional performance


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Vision Statements

Answers the question: What do we want tobecome?

First step in strategic planning

Oftentimes a single sentence

Our vision is to take care of your vision.

(Stokes Eye Clinic, Florence, South Carolina)


(Contd)


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External Opportunities & Threats

Largely beyond the control of a single organization

EconomicSocial

Cultural

DemographicEnvironmental


(Contd)


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External Opportunities & Threats (contd)

PoliticalGovernmental

Technological

Competitive trends & events


(Contd)


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Internal Strengths & Weaknesses

Controllable activities that are performedwell or poorly relative to competitors

Based on functional analysis of activities inthe firms:

Management Marketing

Finance/accounting


(Contd)


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Internal Strengths & Weaknesses(Contd)

Based on functional analysis of activities inthe firms:

Production/operations

Research and development

Computer information systems

Organizations strive to pursue strategiesthat capitalize on strengths and improveweaknesses


(Contd)


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Long-Term Objectives

Results to be achieved in pursuing theorganizations mission. Time frame is beyond oneyear.

State direction

Aid in evaluation

Create synergy

Reveal prioritiesFocus coordination

Provide basis for effective management


(Contd)


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Strategies Potential actions that require top

management decisions and large amounts

of firms resourcesMechanisms by which long-term objectives arerealized

Geographic expansion

DiversificationAcquisition

Product development


(Contd)


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Strategies (contd)

Mechanisms by which long-term objectives arerealized

Market penetration

Retrenchment

Divestiture

Liquidation

Joint venture


(Contd)


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Annual Objectives

Short-term milestones necessary to

achieve long-term objectives.

Represent the basis for allocating resources

Established at corporate, divisional, andfunctional levels


(Contd)


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Annual Objectives (contd)

Stated in terms of accomplishments for:management

marketing

finance/accounting

production/operations

research and development

information systems accomplishments


(Contd)


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Policies

Important in strategy implementation as themeans by which annual objectives will be achieved

Guide to decision making and address repetitivesituations

Established at corporate, divisional, or functional levels

Allow consistency & coordination within and betweenorganizational departments


(Contd)


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Comprehensive Strategic Management Model

Vision&

MissionStatements

Chapter 2

ExternalAudit

Chapter 3

InternalAudit

Chapter 4

Long-TermObjectives

Chapter 5

Generate,Evaluate,

SelectStrategies

Chapter 6

ImplementStrategies:

Mgmt Issues

Chapter 7

ImplementStrategies:

Marketing,Fin/Acct,R&D, CIS

Chapter 8

Measure &Evaluate

Performance

Chapter 9


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Proactive vs. ReactiveInitiate and influence activities

Helps shape firms own future Principal BenefitFormulate better strategies

Systematic, logical, and rational approach

CommunicationKey to successful strategic management

Benefits of Strategic

Management


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Financial BenefitsMore profitable and successful

Improvements in sales, profitability, andproductivity

High-Performing Firms Systematic planning

Fluctuations in external and internal environments

Benefits of Strategic

Management (Contd)


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Poor reward structures

Fire-fighting

Waste of time Too expensive

Laziness

Content with success

Why Some Firms Do No

Strategic Planning


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Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknown

Suspicion

Why Some Firms Do No

Strategic Planning (Contd)

f


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Using to gain control over decisions &resources

Doing only to satisfy regulatory requirements

Moving hastily from mission to strategyformulation

Failing to communicate to employees

Intuitive decisions that conflict with formalplan

Top management not supportive of process

Pitfalls to Avoid in StrategicPlanning


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Failing to use as standard for performancemeasurement

Delegating to a planner vs. involvement ofmanagers

Failing to involve key personnel

Failing to create collaborative environment Formality that stifles creativity and flexibility

Pitfalls to Avoid in StrategicPlanning (Contd)


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Defined:

Principles of conduct within organizationsthat guide decision making and behavior

Good business ethics is a prerequisitefor good strategic management

Good ethics is just good business!

Business Ethics & Strategic

Planning


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Strategists responsible for high ethicalprinciples

All strategic processes have ethicalramifications

Formal codes of ethics are in place formany businesses

Internet privacy emerging as ethicalissue of immense proportions


Planning (Contd)


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Business actions alwaysunethical include:

Misleading advertising

Misleading labeling

Environmental harm

Poor product or service safety

Padding expense accounts Insider trading

Dumping flawed products on foreign markets


Planning (Contd)


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Nature of Global Competition

Companies conduct business acrossborders

International or multinational corporations Parent company

Host country

Strategy implementation more difficultCultural differences

Norms, values, work ethics


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Advantages of InternationalOperations

Absorb excess capacity

Reduce unit costs Low-cost production facilities

Lower labor costs

Competition less intense


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Advantages of InternationalOperations (Contd)

Reduced tariffs, lower taxes

Favorable political climate

Economies of scale


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Communication difficulties between parent andsubsidiaries

Based on cultural, political, social, language,demographic, and competitive forces

Foreign-based competitors

Strengths underestimated Weaknesses overestimated

Disadvantages of InternationalOperations


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Key Terms & Concepts

Annual objectives Business ethics

Code of ethics

E-commerce

Empowerment

Environmental scanning

External opportunities

External threats

Internal strengths Internal weaknesses

Intuition

Long-term objectives

Mission statements

Policies

Strategic management

Strategic-managementmodel


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Key Terms & Concepts (Contd)

Strategic-managementprocess

Strategies

Strategists

Strategy evaluation

Strategy formulation

Strategyimplementation

Lobbying

Vision statement Vision

Host country

International firms

Long-range planning

Multinationalcorporation

Documents

Strategic Managment Chapter-1