Chapter 1

The Strategic Management Process

Strategic Charles W. L. Hill

Management Gareth R. Jones

PowerPoint Presentation
An Integrated Approach by Charlie Cook

Fifth Edition

Copyright 2001 Houghton

 Overview

Why do some firms succeed while others fail?

A central objective of strategic management is to
learn why this happens.
What is strategy?
An action a company takes to attain superior
performance.
What is the strategic management process?
The process by which managers choose a set of
strategies for the enterprise to pursue its vision.

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 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

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The Main
Components of
the Strategic
Planning
Process

FIGURE 1.1

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 Mission and Goals

Mission
Sets out why the organization
exists and what it should be doing.
Major goals
Specify what the organization hopes
to fulfill in the medium to long term.
Secondary goals
Are objectives to be attained that lead to superior
performance.

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 External Analysis

Identify strategic opportunities and threats in

the operating environment.

Immediate (Industry)

Macroenvironment National

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 Internal Analysis

Identify strengths
Quality and quantity of resources available
Distinctive competencies

Identify weaknesses
Inadequate resources
Managerial and
organizational deficiencies

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 SWOT and Strategic Choice

Strengths and Weaknesses

Opportunities and Threats
(SWOT Analysis)

Strategic Choice
Business
Functional
Global
Corporate

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 Business-Level Strategies

Cost leadership
Attaining, then using the lowest total cost basis as a
competitive advantage.
Differentiation
Using product features or services to distinguish the
firms offerings from its competitors.
Market niche focus
Concentrating competitively on
a specific market segment.

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 Functional-Level Strategies

Focus is on improving the effectiveness of

operations within a company.
Manufacturing
Marketing
Materials management
Research and development
Human resources

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 Global-Level Strategies

Multidomestic
International
Global
Transnational

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 Corporate-Level Strategies

Vertical integration
Diversification
Strategic alliances
Acquisitions
New ventures
Business portfolio
restructuring

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 Strategy Implementation
Designing organizational structure
Structure
Designing control systems
Market and output controls
Bureaucratic controls
Control through organizational culture
Controls
Rewards and incentives

Matching strategy, structure,

and controls
Congruence (fit) among strategy, Strategy
structure, and controls

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 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

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 Strategic Managers

General managers
Responsible for the overall (strategic) performance
and health of the total organization.
Operations managers
Responsible for specific business
functions or operations.

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 Strategic Managers for All Levels

FIGURE 1.2

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 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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 Strategy as an Emergent
Process
Strategy making in an unpredictable world
Creates the necessity for flexible strategic approaches.

Strategy making by lower-level managers

Strategy evolves through autonomous action.

Serendipity and strategy

Accidental discoveries and happenstances can have dramatic
effects on strategic direction.
Intended and emergent strategies
Realized strategies are combinations of intended and
emergent strategies.

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 Intended and Emergent
Strategies

FIGURE 1.3 Source: Reprinted from Strategy Formation in an Adhocracy,

by Henry Mintzberg and Alexandra McGugh, published in

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Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by
permission of Administrative Science Quarterly.
Strategy: A Pattern in a
Stream of Decisions
Some illustrations
Honda entering U.S. motorcycle market in
1960s and 70s.
Honda admitted that they had no
strategy other than the idea of seeing if we
could sell something in the United States.
General Mills cereal business (see the
following slides).
maintain premium pricing with coupons1-20
.
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Strategy Formulation as a Product of
Intended & Emergent Processes

Intended
Deliberate Realized
Strategy:
Strategy Strategy
"The Plan"

Unrealized Emergent
Strategy Strategy

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Strategy Formulation Activities at
General Mills Cereal Business

Intended
Strategy:
"The Plan"
Deliberate Realized
+ Maintain
Strategy Strategy
premium
prices
+ Couponing

Unrealized Emergent
Strategy Strategy

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Strategy Formulation Activities at General
Mills Cereal Business

Intended
Realized
Strategy: Deliberate
Strategy
"The Plan" Strategy
+ Premium
+ Maintain + Maintain
prices
premium premium
prices + Lower market
prices
+ Couponing share

Emergent
Unrealized Strategy
Strategy + Store brands,
+ Couponing generics

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The Strategic Management
Process for Intended and
Emergent Strategies

FIGURE 1.4

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 Strategic Planning in Practice
Planning under uncertainty
Scenario planning for dynamic environmental change
Ivory tower planning
Lack of contact with operational realities
The importance of involving operating managers
Procedural justice in the decision-making process
Engagement, explanation, and expectations

Planning for the present: Strategic Intent

Recognition of the static nature of the strategic fit model
Strategic intent in focusing the organization on winning by
achieving stretch goals

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 Improving Strategic Decision
Making
Cognitive biases systematically influence the
rationality of decision makers.

FIGURE 1.5

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 Groupthink and Strategic
Decisions
Pitfalls of groupthink
Failing to question underlying 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.

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Techniques for Improving Decision
Making
Two decision-
making processes
that counteract
cognitive biases
and groupthink.

FIGURE 1.6

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