Strategic Management: a set of managerial decisions

and actions that determines the long-run performance

of a corporation.

Includes:
• Internal and external environment scanning
• Strategy formulation
• Strategy implementation
• Evaluation and control

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 Business Policy
• The study of strategic management,
emphasizes the monitoring and evaluating of
external opportunities and threats in light of a
corporation’s strengths and weaknesses
Originally called business policy.
• Such as strategic planning, environmental
scanning, and industry analysis.

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 Phases of Strategic Management:

• Phase 1: Basic financial planning

• Phase 2: Forecast-based planning
• Phase 3: Externally oriented strategic planning
• Phase 4: Strategic management

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 Basic Concepts of Strategic Management

1. Basic financial planning: initiate some

planning when they requested to set up their
budgets; considers activities for one year.
2. Forecast-based planning: consider projects
for more than a year. The time horizon is
usually 3-5 years. Extrapolate/estimate
current trends in the future.
3. Externally-oriented planning (strategic
planning): conduct strategic planning by top
management and they leave implementation
to low level.
4. Strategic management: planning by forming
a team from all levels in the company.
 Benefits of Strategic Management

• Clearer sense of strategic vision for the

firm
• Sharper focus on what is strategically
important
• Improved understanding of a rapidly
changing environment

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 Additional Benefits of Strategic Management:

• Improved organizational • Strategic thinking

performance • Organizational learning
• Achieves a match
between the
organization’s
environment and its
strategy, structure and
processes
• Important in unstable
environments

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 Impact of Globalization

Globalization: the integration and

internationalization of markets and corporations
has changed the way modern corporations do
business.

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 Impact of Environmental Sustainability

Environmental Sustainability: the use of business

practices to reduce a company’s impact on the natural,
physical environment.

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 Basic Concepts of Strategic Management

Electronic Commerce
Use of the Internet to conduct business
transactions
Basis for competition on a more
strategic level rather than traditional
focus on product features and costs.
Research indicated that industry
leaders are in the process of moving
60-100% of their transactions to the
internet.
 Basic Concepts of Strategic Management

Electronic Commerce – Trends

• Forcing company transformation to
use internet in their business.
• Market access & branding changing –
disintermediation of traditional
distribution channels; dealing direct
with end consumer.
• Balance of power shift to consumer:
customer became more
knowledgeable.
 Basic Concepts of Strategic Management

Electronic Commerce -- Trends

• Pace\speed of business increasing

• Internet purchasing beyond traditional
boundaries
• Knowledge key asset – source of
competitive advantage
Population ecology: established organizations are
unable to adapt to change

Institution theory: organizations adapt by imitating

successful organizations

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Strategic choice perspective: organizations adapt to
change and have the ability to reshape their
environment

Organizational learning theory: organizations

adapt defensively and use knowledge to improve their
relationship with the environment

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Strategic flexibility: the ability to shift from one
dominant strategy to another and requires:

• Long-term commitment to the development and

nurturing/promotion of critical resources
• Learning organization

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Learning organization: an organization skilled at
creating, acquiring, and transferring knowledge and at
modifying its behavior to reflect new knowledge and
insights

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 Learning Organization
• The process by which organizations develop new
knowledge and insights from the common
experiences of people, and has the potential to
influence behaviors and improve organizational
effectiveness.
(Senge, 1990; Slater & Narver, 1995)
• Learning organizations facilitate learning of all of
its members and continuously transform
themselves in order to meet their strategic goals.
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 Main activities of a learning organization include:

• Solving problems • Learning from past

systematically experience, history and
experiences of others
• Experimenting with new
approaches • Transferring knowledge
quickly and easily
throughout the
organization

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 Basic Elements of Strategic Management

1. Environmental scanning
2. Strategy formulation
3. Strategy implementation
4. Evaluation and control

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 Basic Elements of Strategic Management

Environmental Scanning is the monitoring, evaluating

and disseminating of information from the external
and internal environments to key people within the
organization

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 Basic Elements of Strategic Management

Strategy Formulation: the development of long-range

plans for the effective management of environmental
opportunities and threats in light of organizational
strengths and weaknesses (SWOT)

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 Basic Elements of Strategic Management

Mission- the purpose or reason for the organization’s

existence

Vision- describes what the organization would like to

become

Objectives- the end results of planned activity

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 Basic Elements of Strategic Management

Strategies- form a comprehensive master plan that

states how the corporation will achieve its mission
and objectives
– Corporate
– Business
– Functional
Policies- the broad guidelines for decision making
that links the formulation of a strategy with its
implementation

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 Hierarchy of Strategy
Corporate Strategy
• Company’s overall direction in terms of its
general attitude toward growth and the
management of its various businesses and
products.
• Stability Strategy,
• Growth Strategy
• Retrenchment Strategy

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 Basic Elements of Strategic Management

Strategy implementation: the process by which

strategies and policies are put into action through the
development of:

• Programs
• Budgets
• Procedures

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 Basic Elements of Strategic Management

Evaluation and control: the process in which

corporate activities and performance results are
monitored so that actual performance can be
compared to desired performance

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 Basic Elements of Strategic Management

Performance: the end result of organizational activities

Feedback/Learning Process: revise or correct

decisions based on performance

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 What Makes a Strategic Decision?

Strategic decision making focuses on the long-run

future of the organization

Characteristics of strategic decision making include:

• Rare
• Consequential=important
• Directive

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 Strategic Decision Making

Strategic Decisions

Rare: strategic decisions are

unusual, no precedent to follow.
Consequential : require
substantial/large resources and
commitment from all employees
level.
Directive: set precedent for future
action.
 Mintzberg’s modes of Strategic Decision Making

• Entrepreneurial
• Adaptive
• Planning
• Logical incrementalism (Quinn)

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 Mintzberg’s Modes
– Entrepreneurial mode: The strategy is made by
one powerful individual/the founder. The focus on
opportunities rather than problems.
– Adaptive mode: using reactive solution rather
than proactive.
– Planning mode: it uses reactive and proactive
mode. Data gathering and analysis and select
strategies.
– Logical incrementalism: strategy is set based on a
series of incremental commitment rather than
through global formulation of total strategies. This
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 Strategic Decision Making Process:

1. Evaluate current 5. Analyze strategic

performance results (SWOT) factors
2. Review corporate 6. Generate, evaluate and
governance select the best
3. Scan and assess the alternative strategy
external environment 7. Implement selected
4. Scan and assess the strategies
internal corporate 8. Evaluate implemented
environment strategies

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Strategic audit provides a checklist of questions, by
area or issue, that enables a systematic analysis to be
made of various corporate functions and activities

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 Readings on How to conduct
Strategic audit
• Reading and discussion in class
Wheelen page 34-41 13th ed

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