Strategic Management Summer 2013 Chapter 1

Strategic Management- The set of decisions and actions that result in the formulation and implementation
of plans designed to achieve a company’s objectives.

Critical Task in Strategic Management

1. Formulate the company’s mission

2. Develop a company profile
3. Assess the company’s options
4. Analyze the company’s options
5. Identify the most desirable option
6. Select a set of long-term objectives/grand strategies
7. Develop annual objectives/short-term strategies
8. Implement strategic choices
9. Evaluate the success of the strategic process

A strategy is a company’s “game plan”. It provides a framework for managerial decisions and reflects a company’s
awareness of how, when and where it should compete; against whom it should compete; and for what purposes it
should compete.

Dimensions of Strategic Decisions

What decisions facing a business are strategic and therefore deserve strategic management attention?

1. Top-Management Decisions
2. Large amount of the Firm’s Resources
3. Affect the Firm’s Long-Term Prosperity
4. Future Oriented
5. Multifunctional/Multibusiness Consequences
6. Considering the Firm’s External Environment

THREE LEVELS OF STRATEGY

• CORPORATE LEVEL- BOD, CEO, AO

• BUSINESS LEVEL- business and corporate managers
• FUNCTIONAL LEVEL- managers of products, geographic and functional areas

CHARACTERISTICS OF STRATEGIC MANAGEMENT DECISIONS

• CORPORATE LEVEL- risk, potential, flexibility, time horizons

• FUNCTIONAL LEVEL- operational issues, low risk, modest cost, minimal cooperation, concrete and
quantifiable, critical attention and analysis
• BUSINESS LEVEL- bridge decisions at the corporate and functional levels

Formality refers to the degree to which participants, responsibilities, authority, and discretion in decision
making are specified.

• The Strategy Makers-

a. Top management shoulders broad responsibility for all the major elements of
strategic planning and management.
b. General managers at the business level typically have principal responsibilities for
developing environmental analysis and forecasting, establishing business
objectives, and developing business plans prepared by staff groups.

• The Benefits-
a. Strategy formulation activities enhance the firm’s ability to prevent problems.
b. Group-based strategic decisions are likely to be drawn from the best available
alternatives
c. The involvement of employees in strategy formulation improves their
understanding of the productivity-reward relationship in every strategic plan and,
thus, heightens their motivation.
d. Gaps and overlaps in activities among individuals and groups are reduced as
participation in strategy formulation clarifies differences in roles.
e. Resistance to change is reduced.
 Strategic Management Summer 2013 Chapter 1

• The Risks
a. The time spent by managers on the strategic management process may have a
negative impact, thus, on operational responsibilities
b. If the formulators of strategies are not intimately involved in its implementation,
they may shirk their individual responsibility for the decisions reached.
c. Strategic managers must be trained to anticipate and respond to the disappointment
of participating subordinates over unattained expectations

• Executives’ View
How do managers and corporate executives view the contribution of strategic management to the
success of their firms?

COMPONENTS of the STRATEGIC MANAGEMENT MODEL

1. Company Mission
2. Company Profile
3. External Environment
4. Strategic Analysis and Choice
5. Long-term objectives
6. Grand Strategy
7. Annual Objectives
8. Functional Strategies
9. Annual Objectives
10. Functional Strategies
11. Policies
12. Institutionalizing the Strategy
13. Control and Evaluation