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Chapter 1 The Nature of Strategic Management

Strategic Management

Opening case


Strategy is
A plan / course of action leading to a direction. It is related to companys activities. It deals with uncertain future. It depends on vision / mission of the company to reach its current position.

A Company's strategy is management action plan for running the business and conducting operations. It consists of the competitive moves And business approaches that mangers are employing to grow the business, Attract and please customers, Compete successfully, Conduct operations and Achieve the targeted levels of organizational performance.

Business level strategy is lower-level than corporate strategy that applies to a single division or business unit. strategic issues include pricing and marketing strategies. Business-level strategies are normally decided by midlevel managers who are responsible for the business unit or division.

Corporate-Level Strategy
Corporate strategy refers to all strategic decisions that affect the firm as a whole. Often, corporate-level strategies will have an affect on several business units. Corporate strategic issues include the financial structure of the firm, mergers and acquisitions, and the allocation of resources to individual business units.

Steve Jobs of Apple will decide the corporate strategy of his companies SBU's by deciding which area should receive the most attention. From this, the heads of these SBU's which range from computers, phones, to MP3 players, will then decide the business strategy for each product, they will have complete authority within their own unit (own product) while those involved in corporate strategy have authority over all business units

Why is strategic management important?

Gives everyone a role Makes a difference in performance levels Provides systematic approach to uncertainties Coordinates and focuses employees

Characteristics of Strategic Management

Co-ordinate and integrate business activities. Strengthens the competitive position. Satisfies customers Works towards achieving performance targets. Adaptive

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Strategic Management Process

Missions vs. Strategic Visions

A mission statement focuses on current business activities -who we are and what we do

A strategic vision concerns a firms future business path -- where we are going

Current product and service offerings Customer needs being served Technological and business capabilities

Markets to be pursued Future technologyproduct-customer focus Kind of company that management is trying to create

Examples: Mission and Vision Statements

Our vision: Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intels core mission is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being

connected is now at the center of peoples computing experience. We are helping to expand the capabilities of the PC platform and the Internet.

Strategic Management Process (Cont..)

Step 1: Identifying the organization's current mission, objectives, and strategies Mission: the firms reason for being Who we are, What we do, and Where we are now Goals: the foundation for further planning
Measurable performance targets

Strategic Management Process (Cont..)

Step 2: Conducting an external analysis The environmental scanning of specific and general environments Focuses on identifying opportunities and threats

Step 3: Conducting an internal analysis Assessing organizational resources, capabilities, activities and culture: Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm. Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.

Strategic Management Process (Cont..)

Step 4: Formulating strategies Develop and evaluate strategic alternatives Select appropriate strategies for all levels in the organisation that provide relative advantage over competitors Match organizational strengths to environmental opportunities Correct weaknesses and guard against threats

Strategic Management Process (Cont..)

Step 5: Implementing strategies Implementation: effectively fitting organizational structure and activities to the environment Effective strategy implementation requires an organizational structure matched to its requirements.

Step 6: Evaluating results How effective have strategies been? What adjustments, if any, are necessary?

Relationship between companys strategy and business models.

1st Assignment Submission date 26-08-2013

Adapting to Change Key Strategic Management Questions

What kind of business should we become? Are we in the right fields Are there new competitors What strategies should we pursue? How are our customers changing?

Three levels of Strategy


Corporate Level Strategies


by CEO and Board of Directors Horizon: long term Focus on domain selection:

What business sectors to enter/invest ? How should the resources be allocated across the businesses ?

Three levels of Strategy


Business Level Strategies

by Business Managers Horizon: Medium
Functional Business

Focus on competitive tactics:

How to compete in this business sector? What markets to concentrate on ?

Three levels of Strategy

Functional Level Strategies

Business Functional

By functional managers, e.g. marketing manager

Short Term
Focus on functional efficiency
Annual objectives & decisions within functional areas Improving efficiency within functional areas