Chapter 1

The Strategic Management Process

Strategic subtitle style Click to edit Master Management

An Integrated Approach

Charles W. L. Hill Gareth R. Jones

PowerPoint Presentation by Charlie Cook

Fifth Edition

Copyright 2001 Houghton Mifflin Company. All rights reserved.

Overview
Why do some firms succeed while others fail?
v A central objective of strategic

management is to learn why this happens.

What is strategy?
v An action a company takes to attain

superior performance.

What is the strategic management process?

v The process by which managers
Copyright 2001 Houghton Mifflin Company. All rights reserved.

choose a set of strategies for the enterprise to pursue its vision.

21-2

Strategic Planning
Rational planning by top management?
Basic Strategic Planning Model
Defining the Mission and Setting Top-Level Goals External Analysis of Opportunities and Threats Internal Analysis of Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Chosen Strategies Copyright 2001 Houghton Mifflin Company. All rights reserved. 31-3

The Main Components of the Strategic Planning Process

Company. All rights reserved.

FIGURE 1.1 Copyright 2001 Houghton Mifflin

41-4

Mission and Goals

Mission
v Sets out why the organization

exists and what it should be doing.

Major goals
v Specify what the organization hopes

to fulfill in the medium to long term.

Secondary goals
v Are objectives to be attained that lead

to superior performance.

Copyright 2001 Houghton Mifflin Company. All rights reserved.

51-5

External Analysis
Identify strategic opportunities and threats in the operating environment.
Immediate (Industry) Macroenvironm ent National

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61-6

Internal Analysis
Identify strengths
v Quality and quantity of resources

available v Distinctive competencies

Identify weaknesses
v Inadequate resources v Managerial and

organizational deficiencies

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71-7

SWOT and Strategic Choice

Strengths and Weaknesses Opportunities and Threats (SWOT Analysis)

Strategic Choice
Business Functional Global Corporate

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81-8

Business-Level Strategies
Cost leadership
v Attaining, then using the lowest total

cost basis as a competitive advantage.

Differentiation
v Using product features or services to

distinguish the firms offerings from its competitors.

Market niche focus

v Concentrating competitively on

a specific market segment.

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91-9

Functional-Level Strategies
Focus is on improving the effectiveness of operations within a company.
v Manufacturing v Marketing v Materials management v Research and development v Human resources

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101-10

Global-Level Strategies
Multidomestic International Global Transnational

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111-11

Corporate-Level Strategies
Vertical integration Diversification Strategic alliances Acquisitions New ventures Business portfolio restructuring

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121-12

Strategy Implementation
Designing organizational structure Designing control systems
v Market and output controls v Bureaucratic controls v Control through organizational culture Contro ls v Rewards and incentives
Struct ure

Matching strategy, structure, and controls

v Congruence (fit) among strategy, Strateg y structure, and controls

Copyright 2001 Houghton Mifflin Company. All rights reserved.

131-13

Managing Strategic Change

The only constant is change. Success requires adapting strategy and structure to a changing world. The feedback loop in strategic planning. Corporate
Operational Business

Functional Copyright 2001 Houghton Mifflin Company. All rights reserved. 141-14

Strategic Managers
General managers
v Responsible for the overall (strategic)

performance and health of the total organization.

Operations managers
v Responsible for specific business

functions or operations.

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151-15

Strategic Managers for All Levels

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FIGURE 1.2

161-16

Strategic Leadership
Vision, eloquence, and consistency Commitment to the vision Being well informed Willingness to delegate and empower Astute use of power Emotional intelligence

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171-17

Strategy as an Emergent Process

Strategy making in an unpredictable world
v Creates the necessity for flexible strategic

approaches.

Strategy making by lower-level managers

v Strategy evolves through autonomous

action.

Serendipity and strategy

v Accidental discoveries and happenstances

can have dramatic effects on strategic direction.

Intended and emergent strategies

v Realized strategies are combinations of
Copyright 2001 Houghton Mifflin intended and emergent Company. All rights reserved.

strategies.

181-18

Intended and Emergent Strategies

Copyright 2001 Houghton Mifflin Company. All rights reserved.

FIGURE 1.3

Source: Reprinted from Strategy Formation in an Adhocracy, by Henry Mintzberg and Alexandra McGugh, published in Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by permission of Administrative Science Quarterly.

191-19

The Strategic Management Process for Intended and Emergent Strategies

Copyright 2001 Houghton Mifflin Company. All rights reserved.

FIGURE 1.4

201-20

Strategic Planning in Practice

Planning under uncertainty
v Scenario planning for dynamic

environmental change

Ivory tower planning

v Lack of contact with operational realities v The importance of involving operating

managers v Procedural justice in the decision-making process

u

Engagement, explanation, and expectations

Planning for the present: Strategic Intent

strategic fit model v Strategic intent Copyright 2001 Houghton Mifflinin focusing the organization 211-21
v Recognition of the static nature of the

Company. All rights reserved.

Improving Strategic Decision Making

Cognitive biases systematically influence the rationality of decision makers.

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FIGURE 1.5

221-22

Groupthink and Strategic Decisions

Pitfalls of groupthink
v Failing to question underlying v v v v

assumptions. Coalescing around a single person or policy. Filtering out conflicting information. Developing after-the-fact rationalizations. Having an emotional (nonobjective) commitment to an action.
231-23

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Techniques for Improving Decision Making

Two decisionmaking processes that counteract cognitive biases and groupthink.

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FIGURE 1.6

241-24