Chapter 1

The Strategic Management Process

Strategic Management
An Integrated Approach

Charles W. L. Hill
Gareth R. Jones
PowerPoint Presentation by Charlie Cook

Fifth Edition
Copyright © 2001 Houghton Mifflin Company. All rights reserved.

Overview
Why do some firms succeed while others fail?
 A central objective of strategic management is to

learn why this happens.

What is strategy?
 An action a company takes to attain superior

performance.

What is the strategic management process?
 The process by which managers choose a set of

strategies for the enterprise to pursue its vision.
Copyright © 2001 Houghton Mifflin Company. All rights reserved. 1-2

All rights reserved.Strategic Planning Rational planning by top management? Basic Strategic Planning Model Defining the Mission and Setting Top-Level Goals External Analysis of Opportunities and Threats Internal Analysis of Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Chosen Strategies Copyright © 2001 Houghton Mifflin Company. 1-3 .

All rights reserved.The Main Components of the Strategic Planning Process FIGURE 1. 1-4 .1 Copyright © 2001 Houghton Mifflin Company.

Secondary goals  Are objectives to be attained that lead to superior performance. 1-5 . All rights reserved. Copyright © 2001 Houghton Mifflin Company. Major goals  Specify what the organization hopes to fulfill in the medium to long term.Mission and Goals Mission  Sets out why the organization exists and what it should be doing.

External Analysis Identify strategic opportunities and threats in the operating environment. Immediate (Industry) Macroenvironment National Copyright © 2001 Houghton Mifflin Company. All rights reserved. 1-6 .

Internal Analysis Identify strengths  Quality and quantity of resources available  Distinctive competencies Identify weaknesses  Inadequate resources  Managerial and organizational deficiencies Copyright © 2001 Houghton Mifflin Company. All rights reserved. 1-7 .

1-8 . All rights reserved.SWOT and Strategic Choice Strengths and Weaknesses Opportunities and Threats (SWOT Analysis) Strategic Choice Business Functional Global Corporate Copyright © 2001 Houghton Mifflin Company.

Market niche focus  Concentrating competitively on a specific market segment. Differentiation  Using product features or services to distinguish the firm’s offerings from its competitors. Copyright © 2001 Houghton Mifflin Company. then using the lowest total cost basis as a competitive advantage.Business-Level Strategies Cost leadership  Attaining. 1-9 . All rights reserved.

All rights reserved. 1-10 .Functional-Level Strategies Focus is on improving the effectiveness of operations within a company.  Manufacturing  Marketing  Materials management  Research and development  Human resources Copyright © 2001 Houghton Mifflin Company.

Global-Level Strategies Multidomestic International Global Transnational Copyright © 2001 Houghton Mifflin Company. All rights reserved. 1-11 .

Corporate-Level Strategies Vertical integration Diversification Strategic alliances Acquisitions New ventures Business portfolio restructuring Copyright © 2001 Houghton Mifflin Company. 1-12 . All rights reserved.

1-13 . and controls  Congruence (fit) among strategy. and controls Strategy Copyright © 2001 Houghton Mifflin Company. structure.Strategy Implementation Designing organizational structure Designing control systems  Market and output controls  Bureaucratic controls  Control through organizational culture  Rewards and incentives Controls Structure Matching strategy. All rights reserved. structure.

1-14 .Managing Strategic Change The only constant is change. All rights reserved. Success requires adapting strategy and structure to a changing world. Operational Business Functional Copyright © 2001 Houghton Mifflin Company. The feedback loop in Corporate strategic planning.

Strategic Managers General managers  Responsible for the overall (strategic) performance and health of the total organization. All rights reserved. Operations managers  Responsible for specific business functions or operations. 1-15 . Copyright © 2001 Houghton Mifflin Company.

All rights reserved.Strategic Managers for All Levels FIGURE 1.2 Copyright © 2001 Houghton Mifflin Company. 1-16 .

and consistency Commitment to the vision Being well informed Willingness to delegate and empower Astute use of power Emotional intelligence Copyright © 2001 Houghton Mifflin Company. 1-17 . All rights reserved. eloquence.Strategic Leadership Vision.

All rights reserved. 1-18 . Intended and emergent strategies  Realized strategies are combinations of intended and emergent strategies.Strategy as an Emergent Process Strategy making in an unpredictable world  Creates the necessity for flexible strategic approaches. Copyright © 2001 Houghton Mifflin Company. Strategy making by lower-level managers  Strategy evolves through autonomous action. Serendipity and strategy  Accidental discoveries and happenstances can have dramatic effects on strategic direction.

” by Henry Mintzberg and Alexandra McGugh. 1-19 . 2.3 Copyright © 2001 Houghton Mifflin Company. Source: Reprinted from “Strategy Formation in an Adhocracy. Vol. No. June 1985. published in Administrative Science Quarterly. 30. by permission of Administrative Science Quarterly. All rights reserved.Intended and Emergent Strategies FIGURE 1.

Copyright © 2001 Houghton Mifflin Company.” General Mills’ cereal business (see the following slides). •Honda admitted that they “…had no strategy other than the idea of seeing if we could sell something in the United States. maintain premium pricing with coupons.Strategy: A Pattern in a Stream of Decisions Some illustrations Honda entering U. motorcycle market in 1960s and 70s. All rights reserved. 1-20 .S.

All rights reserved.Strategy Formulation as a Product of Intended & Emergent Processes Intended Strategy: "The Plan" Deliberate Strategy Realized Strategy Unrealized Strategy Emergent Strategy Copyright © 2001 Houghton Mifflin Company. 1-21 .

Strategy Formulation Activities at General Mills’ Cereal Business Intended Strategy: "The Plan" + Maintain premium prices Deliberate Strategy Realized Strategy + Couponing Unrealized Strategy Copyright © 2001 Houghton Mifflin Company. All rights reserved. Emergent Strategy 1-22 .

generics 1-23 . Emergent Strategy + Store brands.Strategy Formulation Activities at General Mills’ Cereal Business Intended Strategy: "The Plan" + + Maintain premium prices Couponing Deliberate Strategy + Maintain premium prices Realized Strategy + Premium prices + Lower market share Unrealized Strategy + Couponing Copyright © 2001 Houghton Mifflin Company. All rights reserved.

4 Copyright © 2001 Houghton Mifflin Company. 1-24 .The Strategic Management Process for Intended and Emergent Strategies FIGURE 1. All rights reserved.

and expectations Planning for the present: Strategic Intent  Recognition of the static nature of the strategic fit model  Strategic intent in focusing the organization on winning by achieving stretch goals Copyright © 2001 Houghton Mifflin Company. 1-25 .Strategic Planning in Practice Planning under uncertainty  Scenario planning for dynamic environmental change Ivory tower planning  Lack of contact with operational realities  The importance of involving operating managers  Procedural justice in the decision-making process  Engagement. explanation. All rights reserved.

All rights reserved. 1-26 . FIGURE 1.Improving Strategic Decision Making Cognitive biases systematically influence the rationality of decision makers.5 Copyright © 2001 Houghton Mifflin Company.

 Filtering out conflicting information.  Coalescing around a single person or policy. All rights reserved.Groupthink and Strategic Decisions Pitfalls of groupthink  Failing to question underlying assumptions. Copyright © 2001 Houghton Mifflin Company.  Developing after-the-fact rationalizations.  Having an emotional (nonobjective) commitment to an action. 1-27 .

FIGURE 1. 1-28 . All rights reserved.6 Copyright © 2001 Houghton Mifflin Company.Techniques for Improving Decision Making Two decisionmaking processes that counteract cognitive biases and groupthink.