Chapter 1 The Nature of Strategic Management Strategic Management –Defined

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

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Ch 1 -1

Strategic Management

In essence, the strategic plan is a company’s game plan

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Ch 1 -2

Strategic Management achieves a firm’s success through integration ––

Management Finance/Accounting Research & Development

Marketing Production/Operations MIS

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Ch 1 -3

Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection Copyright 2007 Prentice Hall Ch 1 -4 .

Strategy Implementation (action stage) Annual Objectives Policies Employee Motivation Resource Allocation Copyright 2007 Prentice Hall Ch 1 -5 .

Strategy Evaluation .primary means for determining whether a particular strategy is working or not working well Internal Review External Review Performance Metrics Corrective Actions Copyright 2007 Prentice Hall Ch 1 -6 .

Integrating Intuition and Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Copyright 2007 Prentice Hall Ch 1 -7 .

Integrating Intuition and Analysis Intuition is based on:  Past experiences  Judgment  Feelings Intuition is useful for decision making in:  Conditions of great uncertainty  Conditions with little precedent Copyright 2007 Prentice Hall Ch 1 -8 .

Integrating Intuition & Analysis Intuition & Judgment Involve Management at all levels Influence all Analyses Copyright 2007 Prentice Hall Ch 1 -9 .

Integrating Intuition & Analysis Analytical Thinking Intuitive Thinking Copyright 2007 Prentice Hall Ch 1 -10 .

Adapting to Change Organizations must monitor events On-going process  Internal and external events  Timely changes  Copyright 2007 Prentice Hall Ch 1 -11 .

Competitive Advantage “Anything that a firm does especially well compared to rival firms” Achieving Sustained Competitive Advantage 1. internal capabilities and resources 2. implementing & evaluating strategies Copyright 2007 Prentice Hall Ch 1 -12 . Adapting to change in external trends. Effectively formulating.

Adapting to Change Rate & magnitude of change increasing dramatically E-commerce Demographics Technology .An effective adaptation requires longterm focus Copyright 2007 Prentice Hall Ch 1 -13 .

Key Terms Strategists – Firm’s success/failure Various Job Titles: •Chief Executive Officer (CEO) •Chief Strategy Officer (CSO) •President •Owner •Board Chair •Executive Director Copyright 2007 Prentice Hall Ch 1 -14 .

Key Terms Vision Statement – What do we want to become? Mission Statement – What is our business? Copyright 2007 Prentice Hall Ch 1 -15 .

Governmental Technological Competitors Ch 1 -16 Analysis of Trends: Copyright 2007 Prentice Hall .Key Terms Opportunities & Threats (External)  Largely beyond the control of a single organization • • • • • • • Economic Social Cultural Demographic/Environmental Political. Legal.

Key Terms Opportunities & Threats Basic Tenet of Strategic Management Take advantage of External Opportunities Strategy Formulation Avoid/minimize impact of External Threats Copyright 2007 Prentice Hall Ch 1 -17 .

Key Terms Strengths & Weaknesses (Internal)  Controllable activities performed especially well or poorly • Management Typically located in functional areas of the firm • • • Marketing Finance/Accounting Production/Operations • • Research & Development Computer Information Systems Ch 1 -18 Copyright 2007 Prentice Hall .

Key Terms Strengths & Weaknesses Assessing the Internal Environment Financial Ratios Performance Metrics Internal Factors Industry Averages Survey Data Copyright 2007 Prentice Hall Ch 1 -19 .

Key Terms Long-term Objectives  Mission-driven pursuit of specified results more than one year out Essential for ensuring the firm’s success • • • • • Provide direction Aid in evaluation Create synergy Focus coordination Basis for planning. motivating. and controlling Ch 1 -20 Copyright 2007 Prentice Hall .

Strategies have multifunctional or multidivisional consequences and require consideration of both the external and internal factors facing the firm.Key Terms Strategies  Means by which long-term objectives are achieved Strategies are potential actions that require top management decisions and large amounts of the firm’s resources. Some Examples • Geographic expansion • Diversification • Acquisition • Market penetration • Joint venture Ch 1 -21 Copyright 2007 Prentice Hall . and thus are future-oriented. typically for at least five years. strategies affect an organization’s long-term prosperity. In addition.

Policies are guides to decision making and address repetitive or recurring situations. Ch 1 -22 Copyright 2007 Prentice Hall . Like long-term objectives. rules. annual objectives should be measurable. and prioritized Policies  Means by which annual objectives will be achieved. and procedures established to support efforts to achieve stated objectives. realistic. Policies include guidelines.Key Terms Annual Objectives Short-term milestones that firms must achieve to attain long-term objectives. challenging. quantitative. consistent.

CIS Measure & Evaluate Performance Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Internal Audit Chapter 4 Copyright 2007 Prentice Hall Ch 1 -23 . Select Strategies Implement Strategies: Mgmt Issues Implement Strategies: Marketing.Comprehensive strategic management model External Audit Chapter 3 Vision & Mission Long-Term Objectives Generate. Fin/Acct. R&D. Evaluate.

Strategic Management Model Strategic Management Process   Dynamic & Continuous More formal in larger organizations Copyright 2007 Prentice Hall Ch 1 -24 .

3. 7. Vision Mission Objectives Strategies Audit external environment Audit internal environment Establish long-term objectives Generate. 6. 4.Strategic Management Model 1. evaluate & select strategies Implement selected strategies Measure & evaluate performance Ch 1 -25 Copyright 2007 Prentice Hall . 5. Identify Existing -• • • • 2.

is the opportunity that the process provides to empower individuals. and strategies.Benefits of Strategic Management • Proactive in shaping firm’s future • Initiate and influence firm’s activities • Formulate better strategies •Systematic. Copyright 2007 Prentice Hall Ch 1 -26 . then. rational Managers and employees become surprisingly creative and innovative when they understand and support the firm’s mission. logical. A great benefit of strategic management. objectives.

Benefits of Strategic Management Financial Benefits • Improvement in sales • Improvement in profitability • Productivity improvement Non-Financial Benefits • Improved understanding of competitors strategies • Enhanced awareness of threats • Reduced resistance to change • Enhanced problem-prevention capabilities Copyright 2007 Prentice Hall Ch 1 -27 .

Improved coordination & control 4. Decisions that better support objectives 6. Objective view of management problems 3.Benefits of Strategic Management (Greenley) 1. Effective allocation of time & resources Copyright 2007 Prentice Hall Ch 1 -28 . Identification of Opportunities 2. Minimizes adverse conditions & changes 5.

Encourage forward thinking 11.Benefits of Strategic Management (Greenley – cont’d) 7. Clarify individual responsibilities 10. Integration of individual behaviors 9. Internal communication among personnel 8.Provides discipline and formality to the management of the business Copyright 2007 Prentice Hall Ch 1 -29 .Encourages favorable attitude toward change 12.

Why Some Firms Do No Strategic Planning Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion Copyright 2007 Prentice Hall Ch 1 -30 .

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