The Nature of Strategic Management Strategic Management: Concepts & Cases All rights reserved by Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management Defined All rights reserved by Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow All rights reserved by Strategic Management In essence, the strategic plan is a companys game plan All rights reserved by3 Stages of the Strategic Management Process Strategy formulation Strategy implementation Strategy evaluation All rights reserved byVision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection All rights reserved byIssues in Strategy Formulation Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover All rights reserved byStrategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation All rights reserved byStrategy 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 All rights reserved byIssues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical All rights reserved byStrategy Evaluation Internal Review External Review Performance Measurement Corrective Action All rights reserved byPeter Drucker: Think through the overall mission of a business. Ask the key question: What is our Business? Prime Task of Strategic Management All rights reserved byThe strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Integrating Intuition & Analysis All rights reserved byIntuition is based on: Past experiences Judgment Feelings Integrating Intuition & Analysis Intuition is useful for decision making in conditions of: Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives All rights reserved byInvolve management at all levels Intuition & Judgment Influence all analyses Integrating Intuition & Analysis All rights reserved byOrganizations should continually monitor internal and external events and trends so that timely changes can be made as needed Adapting to Change All rights reserved byKey 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 All rights reserved byAnything that a firm does especially well compared to rival firms Strategic Management is Gaining and Maintaining Competitive Advantage All rights reserved by1. 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 All rights reserved byStrategists Gather Information Analyze Information Organize Information All rights reserved byVision Statement What do we want to become? Mission Statement What is our business? Vision and Mission Statements All rights reserved byExternal Opportunities and Threats Analysis of Trends Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors All rights reserved byBasic Tenet of Strategic Management External Opportunities and Threats Strategy Formulation Take advantage of External Opportunities Take advantage of External Opportunities Avoid/minimize impact of External Threats Avoid/minimize impact of External Threats All rights reserved by Controllable activities performed especially well or poorly Determined relative to competitors Internal Strengths and Weaknesses All rights reserved byTypically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development Management Information Systems Internal Strengths and Weaknesses All rights reserved byAssessing the Internal Environment Internal Strengths and Weaknesses Internal Factors Performance Measures Ratios Industry Averages Survey Data All rights reserved by Specific results that an organization seeks to achieve in pursuing its basic mission Long-term means more than one year Long-Term Objectives All rights reserved byLong-Term Objectives Essential for ensuring the firms success Provide direction Aid in evaluation Create synergy Reveal priorities Focus coordination Provide basis for planning, organizing, motivating, and controlling All rights reserved byMeans by which long-term objectives are achieved Strategies All rights reserved byStrategies Examples Geographic expansion Diversification Acquisition Product development Market penetration Retrenchment Divestiture Liquidation Joint venture All rights reserved bySample Strategies Table 1-1 Best Buy Levi Strauss New York Times Company All rights reserved byShort-term milestones that firms must achieve to reach long-term objectives Annual Objectives All rights reserved byMeans by which annual objectives will be achieved Policies All rights reserved by Strategic Management Process Dynamic & continuous More formal in larger organizations Strategic Management Model All rights reserved byStrategic Management Communication is a key to successful strategic management All rights reserved byBenefits of Strategic Management All rights reserved byBenefits 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 All rights reserved byWhy 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 All rights reserved byWhy 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 All rights reserved byPitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory All rights reserved byEffective 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 All rights reserved byEffective 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 All rights reserved byEffective 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 All rights reserved byComparing Business and Military Strategy Strategic planning started in the military Similarity Both business and military organizations must adapt to change and constantly improve Difference Business strategy assumes competition Military strategy assumes conflict All rights reserved byAll rights reserved. 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