Strategic Management –

Defined

Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve
its objectives.
Definition

“Strategic management consists of the

analysis, decisions, and actions an
organization undertakes in order to create
and sustain competitive advantages.”
 Important Definitions
• Strategic Competitiveness
– When a firm successfully formulates and
implements a value-creating strategy.
• Strategy
– An integrated and coordinated set of
commitments and actions designed to exploit
core competencies and gain a competitive
advantage.
• Competitive Advantage
– When a firm implements a strategy that its
competitors are unable to duplicate or find too
costly to try to imitate.
 Important Definitions (cont’d)
• Risk
– An investor’s uncertainty about the
economic gains or losses that will result from
a particular investment.
• Average Returns
– Returns equal to those an investor expects
to earn from other investments with a similar
amount of risk.
• Above-average Returns
– Returns in excess of what an investor
expects to earn from other investments with
a similar amount of risk.
 Basic Model of
Strategic Management

Four Basic Elements

1. Environmental Scanning
 2. Strategy Formulation
• Mission Statement
– Setting Objectives & Goals
– A statement of purpose (strategic
intent) committing the organization to
ambitious overarching (stretch)
objectives.
• Provides a sense of direction and
purpose.
• Drives strategic decision making
and resource allocations.
• Forces the seeking of significant
performance improvements to
attain objectives

– Customer Orientation and Business

Definition
– Abell’s Framework for Defining the
business
– Consumer-oriented
versus Product-oriented business
definition
 2. Strategy Formulation
• Selecting Strategy
– Corporate strategy (Stability, Growth,
Retrenchment)
– Business strategy (Competitive,
Cooperative)
– Functional strategy (Technological
Leadership, Technological Followership)
• Defining Policies
– Guidelines for decision making that links
formulation to implementation
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation
Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions
 Key Attributes of Strategic
Management
 Directs the organization toward overall
goals and objectives.
 Involves the inclusion of multiple
stakeholders in decision making.
 Needs to incorporate short-term and long-
term perspectives.
 Recognizes tradeoffs between efficiency
and effectiveness.
Achieving Sustained
Competitive Advantage

1. Adapting to change in external trends,

internal capabilities and resources

2. Effectively formulating, implementing &

evaluating strategies
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?
Key Terms

Vision Statement –
What do we want to become?

Mission Statement –
What is our business?
Opportunities & Threats (External)
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
Strengths & Weaknesses (Internal)

Typically located in functional areas of the firm

• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
Strategies

Means by which long-term objectives are

achieved
Benefits of Strategic
Management

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement
Benefits of Strategic
Management

Non-Financial Benefits

• Improved understanding of competitors strategies

• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
 Comprehensive strategic management
model

External
Audit

Vision Long-Term Generate, Implement Implement Measure &

& Objectives Evaluate, Strategies: Strategies: Evaluate
Mission Select Mgmt Issues Marketing, Performance
Strategies Fin/Acct,
R&D, CIS

Internal
Audit
• Strategic Management Process

– The full set of commitments, decisions, and

actions required for a firm to achieve strategic

competitiveness and earn above-average

returns.
 The Strategic Management Process Analyzing
Goals and
Objectives

Analyzing Analyzing
the External the Internal
Environment Environment

Assessing
Intellectual
Capital

Strategy Analysis

Formulating Implementation:
Business-Level Strategic
Strategies Controls
Formulating Formulating Implementation Strat Leadership:
Corporate-Level International : Organization Excellence,
Strategies Strategies Design Ethics & Change

Formulating Strategic
Internet Leadership:
Strategies Fostering
Entrepreneurship

Strategy Formulation Strategy Implementation

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
Advantages of International
Operations

Absorb excess capacity

Reduce unit costs
Spread risk over wider markets
Low-cost production facilities
Disadvantages of International
Operations

Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currency
differences