Strategic Management

SM01

REMEMBER
Strategic Management
(The art of creating the desired Future)

The greatest danger for most of us

is not to aim too high and miss it,
but to aim too low and reach it

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Prime Task of Strategic

Management
Think through the overall mission
of a business. Ask the key
question:
What is our Business?
Peter Drucker

Strategies
Means by which long-term objectives
are achieved

SM01

Strategic Thinkers
Non- strategists: See
abnormal things as normal.
Strategists: See normal
things as abnormal.

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Ch 1 -5

Strategic Thinkers
Great minds discuss ideas
Average minds discuss
events.
Poor minds discuss people.

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Ch 1 -6

Strategic Management:
Some Basic Assumptions
Plan or be planned for.
No planning is planning for failure.
If you think planning process is
expensive, try ignorance (no planning).
Sometimes planning is more important
than plans.
Good old days are not sufficient to
secure future success (Vision and
mission).
If you dont know where are you going,
any road will take there (strategic
direction).
SM01

are
t
a
W h ???
they

Strategic Thinking
Strategic thinking is done by maintaining focus,
thinking long term, sorting out what important vs.
what is noise and acting accordingly.
An organization can continuously regenerate itself
by envisioning its future, assessing what and where
it is currently, and determining what goals and
activities are necessary to move the organization
toward its intended future.
The key element that makes long-range planning
strategic is the process of creating and evaluating
alternatives possible outcomes (scenarios) based on
data collected from the many environments that
influence an organization (such as political,
economic, social, and technological environments).
Strategic thinking involves making some
assumptions about the future environments of an
organization.
SM01

Strategic Thinking
The gathering of environmental information and
adapting to environmental change are the
primary characteristics of planning that make it
strategic.
Strategic planning works best when the guiding
members of an organization revisit what
business they are in, who their customers and
stakeholders are, and what these constituents
need and expect.
Strategic thinking states how components of
the whole organization relate to each other
within their internal and external environments
both now and in the future. Because of this,
strategic thinking provides direction for, and
constraints on, long-range, intermediate, and
short-range planning.
SM01

Strategic Management
Defined
Art & science of formulating, implementing,
and evaluating, cross-functional decisions that
enable an organization to achieve its long term
.objectives

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Strategic Management
Defined
Strategic Management is that set of
managerial decisions and actions that
determines the long-run performance of a
corporation (Wheelen and Hunger).
It includes four stages:

Environmental scanning.
Strategy formulation.
Strategy implementation.
Strategy evaluation and control.

SM01

Ch 1 -11

Key Strategic Management

Questions
What kind of business
should we become?
Are we in the right fields
Are there new
competitors
What strategies should
we pursue?
How are our customers
changing?

SM01

Ch 1 -12

Strategic Management

In essence, the strategic plan is

.a companys game plan

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Strategic Management achieves

a firms success through
integration --

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

MIS

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Ch 1 -14

Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

SM01

Ch 1 -15

Issues in Strategy
Formulation

New
NewBusiness
Businessopportunities
opportunities

Businesses
Businessesto
toabandon
abandon

Allocation
Allocationof
ofresources
resources

Expansion
Expansionor
ordiversification
diversification

International
Internationalmarkets
markets

Mergers
Mergersor
orjoint
jointventures
ventures

Avoidance
Avoidanceof
ofhostile
hostiletakeover
takeover

SM01

Ch 1 -16

Strategy Implementation

Annual Objectives
Policies
Employee Motivation
Resource Allocation

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Ch 1 -17

Strategy Implementation

Action
ActionStage
Stageof
ofStrategic
Strategic
Management
Management

Most
Mostdifficult
difficultstage
stage

Mobilization
Mobilizationof
ofemployees
employees&&
managers
managers

Interpersonal
Interpersonalskills
skillscritical
critical

Consensus
Consensuson
ongoal
goalpursuit
pursuit

SM01

Strategy Evaluation

Internal Review
External Review
Performance Metrics
Corrective Actions

SM01

Ch 1 -19

Strategy Evaluation

Final
FinalStage
Stageof
ofStrategic
StrategicManagement
Management

Subject
Subjectto
tofuture
futuremodification
modification

Todays
Todayssuccess
successno
noguarantee
guaranteeof
of
future
futuresuccess
success

New
New&&different
differentproblems
problems

Complacency
Complacencyleads
leadsto
todemise
demise

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Ch 1 -20

Integrating Intuition and

Analysis
The strategic management process
attempts to organize quantitative
and qualitative information under
conditions of uncertainty.

SM01

Integrating Intuition and Analysis

Intuition is based on:

Past experiences
Judgment
Feelings

Intuition is Useful for decision making

Conditions of great uncertainty
Conditions with little precedent

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Integrating Intuition & Analysis

Intuition & Judgment

Involve Management at all levels

Influence all Analyses

SM01

Ch 1 -23

Integrating Intuition & Analysis

Analytical Thinking

Intuitive Thinking

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Ch 1 -24

Adapting to Change

Organizations must monitor

events
On-going process
Internal and external events
Timely changes

SM01

Strategic Management is Gaining

and Maintaining Competitive
Advantage

Anything that a firm does

especially well compared to rival
firms

SM01

Achieving Sustained Competitive

Advantage
1. Adapting to change in external
trends, internal capabilities and
resources

2. Effectively formulating, implementing &

evaluating strategies

SM01

Ch 1 -27

Adapting to Change
Rate & magnitude of change
increasing dramatically
E-commerce
Demographics
Technology

SM01

Ch 1 -28

Adapting to Change

Effective Adaptation

Requires long-term focus

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Ch 1 -29

Key Terms
Strategists Firms success/failure
Various Job Titles:
Chief Executive Officer (CEO)
Chief Strategy Officer (CSO)
President
Owner
Board Chair
Executive Director
SM01

Ch 1 -30

Key Terms

Vision Statement
What do we want to become?
Mission Statement
What is our business?

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Ch 1 -31

Key Terms

Opportunities and Threats (External)

Largely beyond the control of a single

organization

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Ch 1 -32

Key Terms
Opportunities & Threats (External)
Analysis of Trends:

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

SM01

Ch 1 -33

Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)

Process of conducting research and

gathering and assimilating external
information

SM01

Ch 1 -34

Key Terms Opportunities & Threats

Basic Tenet of Strategic

Management
Take
Takeadvantage
advantageof
of
External
ExternalOpportunities
Opportunities
Strategy Formulation

Avoid/minimize
Avoid/minimizeimpact
impactof
of
External
ExternalThreats
Threats

SM01

Ch 1 -35

Key Terms
Strengths & Weaknesses (Internal)

Controllable activities
performed especially well or
poorly

SM01

Ch 1 -36

Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

Computer Information Systems

SM01

Ch 1 -37

Key Terms
Strengths & Weaknesses
Assessing the Internal
Environment
Financial Ratios

Performance Metrics

Internal Factors
Industry Averages

Survey Data

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Ch 1 -38

Key Terms

Long-term Objectives

Mission-driven pursuit of specified

results more than one year out

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Key Terms
Long-term Objectives
Essential for ensuring the firms success

Provide direction

Aid in evaluation

Create synergy

Focus coordination

Basis for planning, motivating, and

controlling

SM01

Ch 1 -40

Key Terms
Strategies
Some Examples

Geographic expansion

Diversification

Acquisition

Market penetration

Retrenchment

Liquidation

Joint venture
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Ch 1 -41

Key Terms

Annual Objectives
Short-term milestones that firms must
achieve to attain long-term objectives

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Ch 1 -42

Key Terms

Policies
Means by which annual objectives will
be achieved

SM01

Ch 1 -43

Comprehensive strategic management model

External
Audit

Vision
&
Mission

Chapter 2

SM01

Chapter 3

Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Measure &
Evaluate
Performance

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Internal
Audit

Chapter 4

Ch 1 -44

Strategic Management Model

Strategic Management Process

Dynamic & Continuous
More formal in larger organizations

SM01

Ch 1 -45

Strategic Management Model

--Identify Existing. 1

Vision

Mission

Objectives

Strategies

SM01

Ch 1 -46

Strategic Management
Model
1. Audit external environment
2. Audit internal environment
3. Establish long-term objectives
4. Generate, evaluate & select
strategies
5. Implement selected strategies
6. Measure & evaluate performance

SM01

Ch 1 -47

Benefits of Strategic Management

Proactive in shaping firms future

Initiate and influence firms activities

Formulate better strategies
Systematic, logical, rational

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Ch 1 -48

Benefits of Strategic
Management
Financial Benefits

Improvement in sales
Improvement in profitability
Productivity improvement

Benefits of Strategic
Management

Improved understanding of competitors strategies

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Non-Financial Benefits

Enhanced awareness of threats

Reduced resistance to change
Enhanced problem-prevention capabilities
Ch 1
-50

Benefits of Strategic
Management (Greenley)
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives

SM01

Ch 1 -51

Benefits of Strategic
Management (Greenley contd)
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking

SM01

Ch 1 -52

Benefits of Strategic
Management (Greenley contd )

11. Encourages

favorable attitude toward

change
12. Provides

discipline and formality to the

management of the business

SM01

Ch 1 -53

Why Some Firms Do No

Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
SM01

Ch 1 -54

Why Some Firms Do No

Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
SM01

Ch 1 -55

Business Ethics & Strategic

Management

Business Ethics defined -Principles of conduct within

organizations that guide decision
.making and behavior

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Ch 1 -56

Business Ethics & Strategic

Management

Good business ethics

Prerequisite for good strategic
management

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Ch 1 -57

Business Ethics & Strategic

Management

Code of business ethics

Provides basis on which policies can
be devised to guide daily behavior and
decisions in the workplace

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Ch 1 -58

Business Ethics & Strategic

Management
Business practices always considered unethical
Misleading advertising
Misleading labeling
Harm to the environment
Insider trading
Dumping flawed products on foreign markets
Poor product or service safety
Padding expense accounts

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Ch 1 -59

Natural Environment
Perspective
ISO used to gain strategic advantage
ISO 9000 focuses on quality control
million companies incorporate ISO 1.5<

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Ch 1 -60

Natural Environment
Perspective
ISO 14000 standards
Voluntary standards
ISO 14001 standard for Environmental
Management System
Firms minimize harmful effects on
environment

SM01

Ch 1 -61

The Nature of Global

Competition
International/multinational corporations
Parent company
Host country

SM01

Ch 1 -62

The Nature of Global

Competition
Strategy implementation may be difficult
Cultural differences
Norms
Values
Work ethic

SM01

Ch 1 -63

Advantages of International
Operations
Absorb excess capacity
Reduce unit costs
Spread risk over wider markets
Low-cost production facilities

SM01

Ch 1 -64

Advantages of International
Operations (contd)

Less intense competition

Lower taxes
Economies of scale

SM01

Ch 1 -65

Difficult communications
Underestimate foreign competition

SM01

Disadvantages of
International Operations

Cultural barriers to effective management

Complications arising from currency
differences
Ch 1
-66