Lecture 1: Introduction to Strategic Management (Chapter 1

Instructor: Moses Acquaah, Ph.D. 377 Bryan Building Phone: (336) 334-5305 Email: acquaah@uncg.edu

Lecture Objectives 

By the end of this lecture, students should be able to:
1. Explain the functions of management 2. Define and explain strategy and strategic management 3. Explain why strategic management is important 4. Explain the strategic management process 5. Describe the levels of organizational strategies 6. Discuss the misconceptions about strategy and strategic


& Controlling (PLOC)  Planning ± defining goals and objectives ± deciding what type of activities the company will engage in ± determining the resources needed to achieve the organization¶s goals & objectives. .OBJECTIVE #1 Functions of Management  Planning. Leading. Organizing.

± Specifying job responsibilities ± Grouping jobs into work units ± Marshalling and allocation of resources ± Creating good working conditions .Functions of Management  Leading ± Attracting people to the organization.

± Identification of performance problems & actions to correct problems. individually & in groups. and communication with employees. ± Provision of feedback or information about progress. ± Conflict resolution.  Controlling ± Monitoring performance of people & units. .Functions of Management  Organizing ± Directing. motivating.

originated from Business Policy. ± Organizational Behavior primarily from the leading function. ± Human Resources Management primarily from the organizing function. ± Strategic Management. . but focuses on overall management ± PLOC ± and beyond.Disciplinary Focus  Various disciplines in ³management´ emerge from the functions of management: ± Business Policy (formally called Strategic Planning) from the planning function.

coordination. communication.OBJECTIVE #2 What¶s Strategy?  Strategy is management¶s overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environment ± to achieve it¶s mission. & action . vision and objectives ± to establish a favorable competitive position.  Strategy involves: ± An organization¶s goals ± A series of related decisions & actions ± Takes into account key internal strengths & weaknesses and external opportunities threats ± Analysis.

  Strategic management is therefore concerned with overall PLOC Four aspects that set strategic management apart: ± ± ± ± Interdisciplinary External focus Internal focus Future directions ³Big picture´ view of an organization influenced by its external environment . and evaluate strategies aimed at developing and maintaining competitive advantage: ± the reason some firms enjoy higher levels of performance than their rivals or competitors.What is Strategic Management?  Focuses on how managers formulate and implement.

 Level of Analysis ± The economy ± Industries & markets ± Firms & businesses ± Investment Projects ± Products & services ± Individuals & Groups ± Tasks & Structure ± Plants . Behavior ± Human Resource Mgmt.Strategic Management¶s Uniqueness  Field of Study ± Macroeconomics ± Microeconomics ± Strategic Management ± Finance ± Marketing ± Org. ± Operations Mgmt.

allocation of resources and management of people to be based on a firm¶s strategic plan ± Success as a manager (as measured by your promotion. not just those in management ± Allows decision-making. and pay increases) is often determined by your efforts & departments contribution to overall organization¶s success  Makes a difference in performance levels ± Research suggest that successful companies use strategic management concepts & techniques ± Success evolves from ³knowing what you¶re doing´ and often implies having a strategic plan . job security.OBJECTIVE #3 Importance of Strategic Management  Gives every employee a role to play in making the firm successful ± Applies to all professional employees.

must be recognized and analyzed.Importance of Strategic Management  Provides systematic approach to uncertainties that organizations face ± Competitive & global environment are dynamic (changing) ± Change. whether significant of minor. coordination. & dealt with ± Strategic management allows for the analysis of the situation (identifying the sources of change in environment)  Coordinates and focuses employees to achieve organization¶s goals ± Allows for team effort which is coordinated for firm success ± Allows for development of a plan. & cooperation among diverse depts & functions . communication.

OBJECTIVE #4 Strategic Management Process  Establishing a mission. vision and objectives  Environmental Analysis  Internal Analysis  Strategy Formulation  Strategy Implementation  Strategic Control and Performance Evaluation .

The Strategic Management Process Internal Analysis Mission. Vision & Objectives Strategy Formulation Strategy Implementation Strategic Eval. & Control Environ. Analysis .

). society. etc.  The vision goes beyond the mission statement ± clarifies the long-term direction of the company (where the company is going) ± reflects management¶s aspirations for the company .customers.Mission. employees. Vision & Objectives  A company¶s mission is a statement of ± the basic purpose or reason for its existence ± its values (role to stakeholders .

).g.g. ROE.Mission. ± Strategic performance objectives (e. innovation leader. ROI. market share. etc. ± Financial performance objectives (e. community & environmental responsibility.) . Stock price. growth. Vision & Objectives  Objectives are yardsticks for tracking a company¶s performance or end result. etc. ROA. customer service. Dividend growth...

± Vision: Opening air travel to a wider group of leisure travelers while infusing the organization with a sense of fun. .Examples of Mission & Vision  Southwest Airlines: ± Mission: To provide high quality service at a lower price in the airline industry. ± Vision: One person. one computer.  Apple Computer: ± Mission: To bring the best personal computing products and support to consumers around the world.

. ± Strategic: To become most competitive enterprise in the world by being #1 or #2 in market share in every business the company is in.  GE ± Financial: To achieve an average of 10 inventory turns and a corporate operation profits margin of 16% by 1998.Financial & Strategic Objectives  Alcan Aluminum ± Financial: To outperform the average return on equity of the S&P¶s industrial stock index. ± Strategic: To be lowest-cost producer of aluminum.

Environmental Analysis  Involves the evaluation of the business environment of the organization. and (2) Micro-environment or task environment.  Environment of firm classified by proximity into (1) Macro-environment. ± All external influences that impact a company¶s decision and performance. .

owners and shareholders.  The micro-environment consists of ± The industry environment such as competitors. customers. suppliers. changes in demographic structures.Environmental Analysis  The macro-environment consists of ± The international/national economy. technology. social and political trends. etc. and the natural environment. . unions and employees.

. ± Capabilities or competencies: managerial ability. specialized skill & knowledge base of employees. organizational culture. reputation (product & firm). etc.  Resources/Capabilities can be classified as: ± Tangible resources: Financial or physical assets ± Intangible resources: brand name. etc.Internal Analysis  Involves the evaluation of the inventory of the firm¶s resources and capabilities.

 Actual strategy of a company involves: ± Planned or Intended Actions (Deliberate & purposeful actions). ± Reactive or Emergent Actions (As-need reactions to unanticipated events in firm¶s micro and macro environments). .Strategy Formulation  The strategy formulation process ± involves designing a course of action for addressing strategic issues facing the firm after going through the external and internal evaluation processes.

Competitive strategies: How to compete in specific business or industry ± Functional areas -.Corporate strategies: Deals with businesses company wants to be in & how to manage those businesses ± Businesses -.Strategy Formulation  Strategy formulation is concerned with the following parts of a company: ± Corporate (whole company) -. .Functional strategies: short goal-directed decisions & actions of an organization¶s various functional departments.

Strategy Implementation  Strategy implementation is the process of putting a company¶s various strategies into action ± development of programs.  Most difficult part of the strategy process.  The job of implementing strategy involves managers at all levels . policies. budgets & procedures.  It can take several months to years to complete.

competitor actions. new market opportunities. . & objectives) are compared with realized outcomes to determine if there are gaps.Strategic Control & Evaluation  Process by which desired outcomes (mission. customer needs & expectations.  Initiate corrective actions by monitoring changes in environment . vision.

Strategic Management Process  On-going and continuous cycle of ± Situation Analysis : Internal evaluation & Environmental scanning ± Strategy formulation ± Strategy implementation ± Strategy evaluation .

Misconceptions about Strategy & Strategic Management  Strategy & strategic planning are dead ± Every organization needs the focus and direction provided by its strategies and the strategic management process  Strategy is strictly for top management ± Top management play a crucial role. . but everyone in the organization has a part to play. but also about doing.  Strategy is about planning ± Strategic management process shows that strategy is not only about planning.

implement.Misconceptions about Strategy & Strategic Management  Strategy is stable and constant ± Organizations compete in dynamic environments. & evaluate appropriate strategies. & strength and weaknesses  Strategic management outlines ultimate destination & route ± It establishes a systematic approach to analyzing relevant information & using it to design. Flexibility and change needed to respond to environmental opportunities & threats. .

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