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The Nature of Strategic Management
The Nature of Strategic Management
PowerPoint Slides by
Anthony F. Chelte
Western New England College
Ch. 1-1
Fred R. David
Prentice Hall
The Nature of Strategic
Management
• A global perspective is a matter of
survival for businesses.
• E-commerce is a vital strategic
management tool.
• The natural environment is an important
strategic issue.
Ch. 1-2
Fred R. David
Prentice Hall
Strategic Management Achieves
Organizational Success
Process of Integrating:
– management
– marketing
– finance/accounting
– production/operations
– research and development
– computer information systems
Ch. 1-3
Fred R. David
Prentice Hall
Three-Stage Process
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Ch. 1-4
Fred R. David
Prentice Hall
Strategy Formulation
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch. 1-5
Fred R. David
Prentice Hall
Strategy Formulation
Issues include:
– What new businesses to enter
– What businesses to abandon
– How to allocate resources
– Expand operations or diversify
– Enter international markets
– Merge or form joint venture
– Avoidance of hostile takeover
Ch. 1-6
Fred R. David
Prentice Hall
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch. 1-7
Fred R. David
Prentice Hall
Strategy Implementation
Ch. 1-8
Fred R. David
Prentice Hall
Strategy Evaluation
Internal Review
External Review
Performance Measurem
Corrective Action
Ch. 1-9
Fred R. David
Prentice Hall
Strategy Evaluation
Ch. 1-10
Fred R. David
Prentice Hall
Prime Task of Strategic
Management
Ch. 1-11
Fred R. David
Prentice Hall
Integrating Intuition and Analysis
Ch. 1-12
Fred R. David
Prentice Hall
Integrating Intuition and Analysis
Ch. 1-14
Fred R. David
Prentice Hall
Adaptation to Change
Ch. 1-15
Fred R. David
Prentice Hall
Adaptation to Change
Ch. 1-16
Fred R. David
Prentice Hall
Adaptation to Change
Ch. 1-17
Fred R. David
Prentice Hall
Key Terms
Strategists
– Most responsible for success or failure of an
organization
– Various job titles:
• Chief executive officer
• President
• Owner
• Chair of the Board
• Executive Director
• Entrepreneur
Ch. 1-18
Fred R. David
Prentice Hall
Key Terms
Vision Statement
– What do we want to become?
Mission Statement
– What is our business?
Ch. 1-19
Fred R. David
Prentice Hall
Key Terms
Environmental Scanning
– Industry Analysis
• Process of conducting research and
gathering and assimilating external
information
Ch. 1-22
Fred R. David
Prentice Hall
Key Terms
– Financial ratios
– Measuring performance
– Industry averages
– Survey data
Ch. 1-24
Fred R. David
Prentice Hall
Key Terms
Long-term objectives:
Strategies:
– Means by which long-term objectives will be
achieved.
– May include:
• Geographic expansion, diversification
• Acquisition
• Product development, market penetration
• Retrenchment, divestiture
• Liquidation, joint venture
Ch. 1-26
Fred R. David
Prentice Hall
Key Terms
Annual Objectives:
– Short-term milestones that organizations must
achieve to reach long-term objectives.
Ch. 1-27
Fred R. David
Prentice Hall
Key Terms
Policies:
– Means by which annual objectives will be
achieved.
Ch. 1-28
Fred R. David
Prentice Hall
Comprehensive Strategic Management Model
External
Audit
Chapter 3
Internal
Audit
Chapter 4
Ch. 1-29
Fred R. David
Prentice Hall
Strategic-Management Model
Strategic-Management Process –
Ch. 1-30
Fred R. David
Prentice Hall
Strategic-Management Model
Ch. 1-31
Fred R. David
Prentice Hall
Strategic-Management Model
Ch. 1-32
Fred R. David
Prentice Hall
Benefits of Strategic
Management
Ch. 1-33
Fred R. David
Prentice Hall
Benefits of Strategic
Management
• Financial benefits
– Improvement in sales
– Improvement in profitability
– Improvement in productivity
Ch. 1-34
Fred R. David
Prentice Hall
Benefits of Strategic
Management
• Non-Financial benefits
– Enhanced awareness of xternal threats
– Improved understanding of competitors’
strategies
– Increased employee productivity
– Reduced resistance to change
– Understanding of performance-reward
relationships
– Enhances problem-prevention capabilities
Ch. 1-35
Fred R. David
Prentice Hall
Benefits of Strategic
Management
1. Identification of opportunities
2. Objective view of management problems
3. Improved coordination and control
4. Minimizes adverse conditions and
changes
5. Decisions to better support objectives
6. Effective allocation of time and resources
7. Internal communication among personnel
Ch. 1-36
Fred R. David
Prentice Hall
Benefits of Strategic
Management
Ch. 1-37
Fred R. David
Prentice Hall
Why Some Firms Do No
Strategic Planning
Ch. 1-38
Fred R. David
Prentice Hall
Why Some Firms Do No
Strategic Planning (Cont’d)
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Suspicion
Ch. 1-39
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Ch. 1-40
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Ch. 1-41
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Ch. 1-42
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Internet privacy
Ch. 1-43
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Internet and business ethics --
• Misleading advertising
• Misleading labeling
• Environmental harm
• Poor product or service safety
• Padding expense accounts
• Insider trading
• Dumping flawed products on foreign markets
Ch. 1-45
Fred R. David
Prentice Hall
Nature of Global Competition
Ch. 1-46
Fred R. David
Prentice Hall
Advantages of International
Operations
• Absorb excess capacity
• Reduce unit costs
• Spread economic risks over wider
markets
• Low-cost production facilities
• Competition may be less intense
• Reduced tariffs, lower taxes
• Economies of scale
Ch. 1-47
Fred R. David
Prentice Hall
Disadvantages of International
Operations
• Different social, cultural demographic,
legal forces may create difficult
communication
• Weaknesses of foreign competition may
be underestimated
• Barriers to communication and effective
management of personnel
• Complications from different monetary
systems
Ch. 1-48
Fred R. David
Prentice Hall