Chapter 1

The Nature of Strategic

Management
Strategic Management:
Concepts and Cases. 9th edition
Fred R. David

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.

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 Strategic Management Achieves
Organizational Success
Process of Integrating:
– management
– marketing
– finance/accounting
– production/operations
– research and development
– computer information systems
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Three-Stage Process

Strategy Formulation

Strategy Implementation

Strategy Evaluation
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Strategy Formulation

Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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 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
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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

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 Strategy Implementation

Action Stage of strategic management:

– Most difficult stage
– Mobilizing employees and managers
– Interpersonal skills are critical
– Consensus on pursuing goals

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Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

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 Strategy Evaluation

Final stage of strategic management:

– All strategies subject to future modification
– Success today is no guarantee of success
tomorrow
– Success creates new and different problems
– Complacency leads to demise

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 Prime Task of Strategic
Management

According to Peter Drucker…

The prime task is to think through the
overall mission of a business
Ask the question:
What is our Business?

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 Integrating Intuition and Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under
conditions of uncertainty.

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 Integrating Intuition and Analysis

Intuition based on:

– Past experiences
– Judgment
– Feelings
Useful for decision making
– Conditions of great uncertainty
– Conditions with little precedent
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 Integrating Intuition and Analysis

Intuition and judgment

– Management at all levels
– Analyses are influenced

Analytical thinking and intuitive thinking

– Complement each other

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 Adaptation to Change

Organizations must monitor events

– On-going process
– Internal and external events
– Timely changes

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 Adaptation to Change

Rate and magnitude of changes

– Increasing dramatically
• E-commerce
• Demographics
• Technology
• Merger-mania
– Effective Adaptation
• Long-run focus
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 Adaptation to Change

Key strategic-management questions:

– What kind of business should we become?
– Are we in the right fields?
– Should we reshape our business?
– What new competitors are entering our
industry?
– What strategies should we pursue?
– How are our customers changing?
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 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
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 Key Terms

Vision Statement
– What do we want to become?

Mission Statement
– What is our business?

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 Key Terms

External Opportunities and Threats

– Significantly benefit or harm the organization in the
future.

– Include the following trends:

• Economic
• Social
• Cultural
• Demographic Environmental
• Political, legal, governmental
• Technological
• Competitive trends
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 Key Terms

External Opportunities and Threats

– Largely beyond the control of a single
organization.

– Basic tenet of strategic management

• Strategy formulation to:
– Take advantage of external opportunities
– Avoid or reduce impact of external threats
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 Key Terms

Environmental Scanning

– Industry Analysis
• Process of conducting research and
gathering and assimilating external
information

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 Key Terms

Internal Strengths and Weaknesses

– Controllable activities performed especially
well or poorly.

– Arise in functional areas of the business:

• Management
• Marketing
• Finance/accounting
• Production/operations
• Research & development
• Computer Information Systems
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 Key Terms

Long-term objectives:

– Mission-driven pursuit of specific results more

than one-year out.
– Essential for organizational success
• State direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating and controlling
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 Key Terms

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

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 Key Terms

Annual Objectives:
– Short-term milestones that organizations must
achieve to reach long-term objectives.

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 Key Terms

Policies:
– Means by which annual objectives will be
achieved.

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 Comprehensive Strategic Management Model

External
Audit

Chapter 3

Long-Term Generate, Implement Implement Measure &

Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9

Internal
Audit

Chapter 4

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 Benefits of Strategic
Management

• Financial benefits
– Improvement in sales
– Improvement in profitability
– Improvement in productivity

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 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

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 Why Some Firms Do No
Strategic Planning

• Poor reward structures

• Fire-fighting
• Waste of time
• Too expensive
• Laziness
• Content with success

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 Business Ethics and Strategic
Management

Business ethics defined:

– Principles of conduct within
organizations that guide decision
making and behavior.

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 Business Ethics and Strategic
Management

Good business ethics:

– prerequisite for good strategic

management

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 Business Ethics & Strategic
Planning
Business actions always unethical include:

• Misleading advertising
• Misleading labeling
• Environmental harm
• Poor product or service safety
• Padding expense accounts
• Insider trading
• Dumping flawed products on foreign markets

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