FALL 2022-23 Chapter

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BUSN 461 - Strategic Planning & Management Basic
Concepts
of
Strategic
Manage
ment
TOPIC 1: BASIC CONCEPTS OF STRATEGIC
MANAGEMENT
Learning Objectives
- Discuss the benefits of strategic management
-Explain how globalization, innovation, and
environmental sustainability influence strategic
management
-Discuss the differences between the theories of
organizations
-Discuss the activities where learning organizations
excel

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Learning Objectives (cont.)
- Describe the basic model of strategic management
and its components
- Identify some common triggering events that act
as stimuli for strategic change
-Explain strategic decision-making modes

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The Study of Strategic Management
Strategic Management
◦ a set of managerial decisions and actions that determines
the long-run performance of a corporation.

It includes:
Internal and external environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control

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STRATEGIC MANAGEMENT & BUSINESS POLICY
13TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
Phases of Strategic Management
As managers attempt to better deal with their changing
world, a firm generally evolves through the following four
phases of strategic management:
Phase 1: Basic financial planning (inward looking
orientation)
Phase 2: Forecast-based planning (inward looking
orientation)
Phase 3: Externally oriented strategic planning (outward
looking orientation)
Phase 4: Strategic management (more integrative
orientation with equal emphasis on both external & internal
environments)

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Benefits of Strategic Management

The attainment of an appropriate match, or “fit,”

between an organization’s environment and its
strategy, structure, and processes has positive
effects on the organization’s performance.
Strategic planning becomes increasingly important
as the environment becomes more unstable.

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Benefits of Strategic Management
(cont.)
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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 Impact of Globalization
Globalization
◦ the integrated internationalization of markets and corporations
◦ has changed the way modern corporations do business

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Impact of Innovation
Innovation
◦ describes new products, services, methods, and organizational approaches
that allow the business to achieve extraordinary returns

It is the implementation of potential

innovations that truly drives businesses to be
remarkable.

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Impact of Sustainability
Sustainability
◦ refers to the use of business practices to manage the triple bottom line

-The triple bottom line is a business concept that posits firms should commit to
measuring their social and environmental impact—in addition to their financial
performance—rather than solely focusing on generating profit, or the standard
“bottom line.” It can be broken down into “three Ps”: profit, people, and the
planet.

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The interconnection of the elements of the Triple Bottom Line
concept (Researchgate, 2021)

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 Impact of Sustainability (cont.)

The triple bottom line involves:

1. the management of traditional profit/loss
2. the management of the company’s social
responsibility
3. the management of its environmental responsibility

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 Theories of Organizational Adaptation
Population ecology Institution theory
◦ Once an organization is ◦ Organizations can and
successfully established in do adapt to changing
a particular environmental conditions by imitating taklit

niche, it is unable to adapt other successful

to changing conditions. organizations.

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Theories of Organizational Adaptation
(cont.)
Strategic choice perspective
◦ not only do organizations adapt to a changing environment, but also have
the opportunity and power to reshape their environment

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Theories of Organizational Adaptation
(cont.)
Organizational learning theory
ayarlanabilir
◦ an organization adjusts defensively to changing environment and uses
knowledge offensively to improve fit between itself and its environment

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Creating a Learning Organization
(1)
Strategic flexibility
◦ the ability to shift from one dominant strategy to
another
◦ demands long-term commitment to development
and nurturing of critical resources
◦ also demands that the company become a learning
organization

demands:talepler

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Creating a Learning Organization
(2)
Learning organization
-an organization skilled at creating, acquiring, and
transferring knowledge and at modifying its
behavior to reflect new knowledge and insights
Organizational learning is a critical component of
competitiveness in a dynamic environment.

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 Creating a Learning Organization
(3)
Learning organizations are skilled at four main activities:
1. Solving problems systematically
2. Experimenting with new approaches
3. Learning from the organization’s own experiences
and past history as well as from the experiences of
others
4. Transferring knowledge quickly and efficiently
throughout the organization

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Basic Model of Strategic Management (1
of 9)
Strategic management consists of four basic elements:

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

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Figure 1-1: Basic Elements of the Strategic
Management Process

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Figure 1-2: Strategic Management Model

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Basic Model of Strategic Management (2
of 9)
Environmental Scanning
◦ the monitoring, evaluating and disseminating of information from the
external and internal environments to key people within the organization

◦ SWOT analysis: simple way to conduct environmental scanning

S- Strengths
W- Weaknesses
O- Opportunities
T-Threats

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Figure 1-3: Environmental Variables

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Basic Model of Strategic Management (3
of 9)
Strategy formulation
◦ process of investigation, analysis, and decision-making that provides the
company with the criteria for attaining a competitive advantage
◦ includes defining the competitive advantages of the business, crafting the
corporate mission, specifying achievable objectives, and setting policy
guidelines

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Basic Model of Strategic Management (4
of 9)
Mission
◦ purpose or reason for the organization’s existence

Vision
◦ describes what the organization would like to become

Objectives
◦ results of planned activity

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Example
(Source: http://panmore.com/starbucks-coffee-vision-statement-mission-statement)
Starbucks Mission Statement
“To inspire and nurture the human spirit – one person, one cup and one
neighbourhood at a time”.
Corporate Vision Statement
Starbucks Coffee’s corporate vision is “to establish Starbucks as the premier
purveyor (source/spreader)of the finest coffee in the world while
maintaining our uncompromising (rigid) principles while we grow.” This
corporate vision statement has the following components relevant to the
business:
-Premier purveyance
-Finest coffee in the world
-Uncompromising principles
-Growth

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Basic Model of Strategic Management (5
of 9)
Strategy
◦ forms a comprehensive master approach that states how the corporation
will achieve its mission and objectives
◦ maximizes competitive advantage and minimizes competitive disadvantage
◦ corporate, business, functional

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Figure 1-4: Hierarchy of Strategy

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Basic Model of Strategic Management (6
of 9)
Policy
◦ a broad guideline for decision-making that links formulation of a strategy
with its implementation

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Basic Model of Strategic Management (7
of 9)
Strategy implementation
◦ process by which strategies and policies are put into action through the
development of programs, budgets, and procedures

Programs- activities needed to accomplish a plan

Budgets-cost of the programs
Procedures-sequence of steps needed to do the job (sometimes termed as
Standard Operating Procedures –SOP)

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Example to programs – a set of programs used by
BMW to achieve its objective of increasing
production efficiency by 5% each year :
a)Shorten new model development time from 60
to 30 months,
b)Reduce preproduction time from a year to no
more than five months,
c)Build at least two vehicles in each plant so that
production can shift among models depending
upon demand

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Example to Procedures:

Both UPS & FedEx put emphasis on consistent,

quality service that both companies have strict
rules for employee behaviour, ranging from how a
driver dresses to how keys are held when
approaching customer's door.

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Basic Model of Strategic Management (8
of 9)
Evaluation and control
◦ a process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired
performance

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Basic Model of Strategic Management (9
of 9)
Performance
◦ result of activities
◦ includes actual outcomes of the strategic management process

Feedback/learning process
◦ revise or correct decisions based on performance

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Initiation of Strategy:
Triggering Events
Tetikleyici olay

Triggering event
uyaran
◦ something that acts as a stimulus for a change in strategy and can include:
◦ new CEO
◦ external intervention
◦ threat of change of ownership
◦ performance gap
◦ strategic inflection point
EXAMPLE –check triggering event at Unilever, page 24-Wheelen
textbook

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Source: Wheelen & Hunger, p. 24

New CEO: By asking a series of embarrassing questions, a new CEO cuts through the
veil(cover) of complacency(gratitude) and forces people to question the very reason for
the corporation’s existence.

araya girmek,müdahale
External intervention: A firm’s bank suddenly refuses to approve a new loan or suddenly
demands payment in full on an old one. A key customer complains about a serious
product defect.

Threat of a change in ownership: Another firm may initiate a takeover by buying a

company’s common stock.

Performance gap: A performance gap exists when performance does not meet
expectations. Sales and profits either are no longer increasing or may even be falling.
bukulme, kvrlma

Strategic inflection point: Coined by Andy Grove, past-CEO of Intel Corporation, a

strategic inflection point is what happens to a business when a major change takes place
due to the introduction of new technologies, a different regulatory environment, a change
in customers’ values, or a change in what customers prefer

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Strategic Decision-making
Strategic decisions
◦ deal with the long-term future of an entire organization and have three
characteristics:
1. rare nadir
2. consequential sonuçsal

3. directive

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Three Characteristics of
Strategic Decisions
Rare nadir

◦ Strategic decisions are unusual and typically have no

precedent to follow.
Consequential
◦ Strategic decisions commit substantial resources and
demand a great deal of commitment from people at all
levels.
Directive
◦ Strategic decisions set precedents for lesser decisions and
future actions throughout an organization.

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Mintzberg’s Modes of Strategic Decision-
making (1 of 2)
Entrepreneurial mode girisimci mod

◦ strategy is made by one powerful individual (ex: Jeff Bezos-

Amazon)

Adaptive mode Uyarlanabilir mod

◦ characterized by reactive solutions to existing problems, rather than

a proactive search for new opportunities.
•Strategy is developed to move a corporation forward incrementally
(ex: universities, large hospitals, large number of governmental agencies,
large corporations)

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Mintzberg’s Modes of Strategic Decision-
making (2 of 2)
Planning mode
◦ involves the systematic gathering of appropriate information for situation
analysis, the generation of feasible alternative strategies, and the rational
selection of the most appropriate strategy (proactive search for new
activities & reactive solution of existing problems)

Logical incrementalism
◦ a synthesis of the planning, adaptive, and, to a lesser
extent, the entrepreneurial modes

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 Strategic Decision-making Process
1. Evaluate current performance results.
2. Review corporate governance.
3. Scan and assess the external environment.
4. Scan and assess the internal corporate environment.
5. Analyze strategic factors.
6. Generate, evaluate, and select the best alternative strategies.
7. Implement selected strategies.
8. Evaluate implemented strategies.

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Figure 1-5: Strategic Decision-Making Process (1 of 2)

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Figure 1-5:
Strategic Decision-making Process (2 of 2)

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 Stratejik Denetim

The Strategic Audit:

Aid to Strategic Decision-making
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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