Chapter 1

The Nature of Strategic Management

Strategic Management: Concepts & Cases 13th Edition Fred David

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Ch 1 -1

Strategic Management Defined

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
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Ch 1 -2

Purpose of Strategic Management

To exploit and create ne and different opportunities for tomorro

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Ch 1 -3

Strategic Management

!n essence, the strategic plan is a compan"#s game plan

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Ch 1 -

$ Stages of the Strategic Management Process

Strateg" formulation Strateg" implementation Strateg" evaluation

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Strateg" Formulation
!ision & Mission E#ternal $pportunities & Threats %nternal Strengths & &ea'nesses (ong)Term $*+ectives ,lternative Strategies Strateg" Selection

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Ch 1 -"

%ssues in Strateg" Formulation

-usinesses -usinessesto toenter enter -usinesses -usinessesto toa*andon a*andon ,llocation ,llocationof ofresources resources E#pansion E#pansionor or diversification diversification %nternational %nternationalmar'ets mar'ets Mergers Mergersor or+oint +oint ventures ventures ,voidance ,voidanceof ofhostile hostile ta'eover ta'eover

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Ch 1 -#

Strateg" %mplementation

,nnual $*+ectives .olicies Emplo"ee Motivation /esource ,llocation

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Ch 1 -$

Strateg" !mplementation Steps

%eveloping a strateg"-supportive culture &reating an effective organizational structure 'edirecting mar(eting efforts Preparing budgets %eveloping and utilizing information s"stems )in(ing emplo"ee compensation to organizational performance
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%ssues in Strateg" %mplementation

,ction ,ctionStage Stageof ofStrategic Strategic Management Management Mo*ili0ation Mo*ili0ationof of emplo"ees emplo"ees& &managers managers Most Mostdifficult difficultstage stage %nterpersonal %nterpersonals'ills s'ills critical critical

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Ch 1 -10

Strateg" Evaluation

%nternal /evie1 E#ternal /evie1 .erformance Measurement Corrective ,ction

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Ch 1 -11

.rime Tas' of Strategic Management

Peter %ruc(er* Thin( through the overall mission of a business+ As( the (e" ,uestion* -&hat is our -usiness23

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Ch 1 -12

%ntegrating %ntuition & ,nal"sis

The strategic management process attempts to organize ,uantitative and ,ualitative information under conditions of uncertaint"

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Ch 1 -13

%ntegrating %ntuition & ,nal"sis

%ntuition is *ased on: Past experiences .udgment /eelings %ntuition is useful for decision ma'ing in conditions of: 0reat uncertaint" )ittle precedent 1ighl" interrelated variables Several plausible alternatives Copyright 2011 Pearson Ch 1 -1 Education, Inc.

%ntegrating %ntuition & ,nal"sis

!ntuition & .udgment

%nvolve management at all levels

%nfluence all anal"ses

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Ch 1 -1!

,dapting to Change

$rgani0ations should continuall" monitor internal and e#ternal events and trends so that timel" changes can *e made as needed

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Ch 1 -1"

2e" Terms in Strategic Management

&ompetitive advantage Strategists 3ision and mission statements 4xternal opportunities and threats !nternal strengths and ea(nesses )ong-term objectives Strategies Annual objectives Policies
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Strategic Management is 4aining and Maintaining Competitive ,dvantage

An"thing that a firm does especiall" ell compared to rival firms

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Ch 1 -1$

,chieving Sustained Competitive ,dvantage

5+ &ontinuall" adapting to changes in external trends and events and internal capabilities, competencies, and resources

6+ 4ffectivel" formulating, implementing, and evaluating strategies that capitalize on those factors
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Ch 1 -1%

Strategists
4ather %nformation ,nal"0e %nformation $rgani0e %nformation

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Ch 1 -20

!ision and Mission Statements

!ision Statement &hat do 1e 1ant to *ecome2

Mission Statement &hat is our *usiness2

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Ch 1 -21

E#ternal $pportunities and Threats Anal"sis of Trends

4conomic Social &ultural %emographic74nvironmental Political, )egal, 0overnmental Technological &ompetitors

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E#ternal $pportunities and Threats -asic Tenet of Strategic Management

Ta'e Ta'eadvantage advantageof of E#ternal E#ternal$pportunities $pportunities Strateg" Formulation

,void5minimi0e ,void5minimi0eimpact impactof of E#ternal E#ternalThreats Threats

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Ch 1 -23

%nternal Strengths and &ea'nesses

&ontrollable

activities performed especiall" ell or poorl" relative to competitors

%etermined

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Ch 1 -2

%nternal Strengths and &ea'nesses

T"picall" located in functional areas of the firm Management Mar(eting /inance7Accounting Production78perations 'esearch & %evelopment Management !nformation S"stems

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Ch 1 -2!

%nternal Strengths and &ea'nesses ,ssessing the %nternal Environment

/atios

.erformance Measures

%nternal Factors
%ndustr" ,verages

Surve" Data

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Ch 1 -2"

(ong)Term $*+ectives

Specific results that an organization see(s to achieve in pursuing its basic mission )ong-term means more than one "ear

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Ch 1 -2#

(ong)Term $*+ectives

Essential for ensuring the firm6s success .rovide direction ,id in evaluation Create s"nerg" /eveal priorities Focus coordination .rovide *asis for planning7 organi0ing7 motivating7 and controlling
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Strategies

Means b" hich long-term objectives are achieved

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Ch 1 -2%

Strategies

4xamples 0eographic expansion %iversification Ac,uisition Product development Mar(et penetration 'etrenchment %ivestiture )i,uidation .oint venture Copyright 2011 Pearson Education, Inc. Ch 1 -30

Sample Strategies

Table 5-5

9est 9u" )evi Strauss :e ;or( Times &ompan"

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,nnual $*+ectives

Short-term milestones that firms must achieve to reach long-term objectives

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Ch 1 -32

.olicies

Means b" hich annual objectives be achieved

ill

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Ch 1 -33

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Ch 1 -3

Strategic Management Model

Strategic

Management Process %"namic & continuous More formal in larger organizations

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Ch 1 -3!

Strategic Management

&ommunication

is a (e" to successful strategic management

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Ch 1 -3"

-enefits of Strategic Management

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Ch 1 -3#

-enefits of Strategic Management

:onfinancial 9enefits

4nhanced a areness of threats !mproved understanding of competitors# strategies !ncreased emplo"ee productivit" 'educed resistance to change &learer understanding of performance-re ard relationship 4nhanced problem-prevention capabilities
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Ch 1 -3$

&h" Some Firms Do No Strategic .lanning

)ac( of (no ledge of strategic planning Poor re ard structures /ire fighting <aste of time Too expensive )aziness &ontent ith success
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&h" Some Firms Do No Strategic .lanning 8continued9

/ear of failure 8verconfidence Prior bad experience Self-interest /ear of the un(no n 1onest difference of opinion Suspicion
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Pitfalls in Strategic Planning

Strategic planning is an involved, intricate, and complex process that ta(es an organization into uncharted territor"

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Ch 1 - 1

4ffective Strategic Planning is*

A people process more than a paper process A learning process <ords supported b" numbers Simple and nonroutine 3ar"ing assignments, team membership, meeting formats, and planning calendars &hallenging assumptions underl"ing corporate strateg"
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4ffective Strategic Planning continued

<elcomes bad ne s 'e,uires open-mindedness and a spirit of in,uir" !s not a bureaucratic mechanism !s not ritualistic or stilted !s not too formal, predictable, or rigid %oes not contain jargon or arcane language
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Ch 1 - 3

4ffective Strategic Planning continued

!s not a formal s"stem for control %oes not disregard ,ualitative information !s not controlled b" -technicians= %oes not pursue too man" strategies at once &ontinuall" strengthens the -good ethics is good business= polic"

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Ch 1 -

&omparing 9usiness and Militar" Strateg"

Strategic planning started in the militar" Similarit"

9oth business and militar" organizations must adapt to change and constantl" improve 9usiness strateg" assumes competition Militar" strateg" assumes conflict
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%ifference

Ch 1 - !

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Ch 1 - "