Korbel Foundation College, Inc.

Purok Spring, Brgy. Morales, City of Koronadal

Tel Number 877-2051/0228-1996

THE NATURE OF STRATEGIC

MANAGEMENT
Subject Code: MNGT 5/ MNGT 6
Subject-Descriptive Title: STRATEGIC MANAGEMENT- Fred R. David

Prepared by:
JAIRYN A. FELONGCO

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 Learning Objectives
After studying this chapter, you should be able to:

 Describe the strategic management process.

 Explain the need for integrating analysis and intuition

in strategic management.
 Define and give example of key terms in strategic
management.
 Discuss the nature of strategy formulation,
implementation, and evaluation activities.
 Describe the benefits of good strategic management.

 Discuss how a firm may achieve sustained

competitive advantage.
Strategic Management Content
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Strategic Management-
Content Defined

Art and science of formulating,

implementing, and evaluating cross-
functional decision that enable an
organization to achieve its objectives.

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Purpose of StrategicContent
Management
To exploit and create new different opportunities for
tomorrow.

Strategic Management

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

plan.

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3 Stages of the Strategic

Content
Management Process

 Strategy formulation

 Strategy implementation

 Strategy evaluation

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Strategy
Formulation

Vision and Mission

External Opportunities and threats

Internal Strengths and Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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Issues in Strategy
Formulation

 What new business to enter

 What business to abandon
 How to allocate resources
 Expand operations or diversity
 Enter international markets
 Merge or form joint venture
 Avoidance of hostile takeover

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Strategy Content
Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

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Strategy Implementation Steps

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 Developing a strategy-supportive culture

 Creating an effective organizational structure
 Redirecting marketing efforts
 Preparing budgets
 Developing and utilizing information systems
 Linking employee compensation to organizational
performance

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Issues in Strategy
Implementation

Action Stage of Strategic

Management

 Mobilization of employee and

managers
 Most difficult stage
 Interpersonal skills critical

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Strategy Content
Evaluation

Internal Review

External Review

Performance Management

Corrective Action

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Strategy Evaluation Content

Final stage of strategic management:

 All strategies subject to future modification
 Success today is no guarantee of success tomorrow
 Success creates new and different problems
 Complacency leads to demise

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Integrating Intuition and Analysis

The strategic Management process attempts to organize quantitative and qualitative information under
conditions of uncertainty.

Intuition based on:

- Past experience
- Judgement
- Feelings
Useful for decision making:
- Conditions of great uncertainty
- Conditions with little precedent
- Highly interrelated variables
- Several plausible alternatives
Analytical thinking and intuitive thinking
- Complement each other

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Integrating Intuition and Analysis

Intuition and judgement

Involve management at all levels

Influence all analyses

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Adapting to Change
Organizations must monitor events
- On-going process
- Internal and external events
- Timely changes

Rate and magnitude of changes

- Increasing dramatically
• E-commerce
• Demographics
• Technology
• Merger-mania

- Effective adaptation
• Long-run focus

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Adapting to Change

Key strategic-management questions:

 What kind of business should we become?

 Are we in the right fields?
 Should we reshape our business?
 What new competitors are entering our industry?
 What strategies should we pursue?
 How are our customers changing?

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Key Terms in Strategic Management

 Competitive advantage
 Strategists
 Vision and mission statements
 External opportunities and threats
 Internal strengths and weaknesses
 Long-term objectives
 Strategies
 Annual objectives
 Policies

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Strategic Management is Gaining and Maintaining Competitive

Advantage

Anything that a firm does especially well compared to rival firms.

Achieving Sustained Competitive Advantage

1. Continually adapting to changes in external trends and events

and internal capabilities, competencies, and resources.
2. Effectively formulating, implementing, and evaluating strategies
that capitalize on those factors.

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Strategy
Evaluation Content
Gather Information

Analyze Information

Organize Information

Vision and Mission Statements

Vision statement-
What do we want to become?

Mission statement-
What is our business?

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External Opportunities and Threats

Refers to economic, social, cultural, demographic, environmental, political, legal,

governmental, technological, and competitive trends and events that could
significantly benefit or harm an organization in the future.

Basic Tenet of Strategic Management

Take advantage of
External Opportunities
Strategy
Formulation Avoid/minimize impact of
External Threats

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Internal Strengths and Weaknesses

An organization’s controllable activities that are performed especially well or poorly. They arise in the following functional areas of
the firm:
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research and Development
• Management Information Systems

Assessing the Internal Environment

Ratios

Performance Measures
Strategy
Formulation Industry Averages

Survey Data

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Long-term Objectives
• Defined as specific results that an organization seeks to achieve in pursuing its basic mission.
• Long term means more than 1 year.
• Essential for ensuring the firm’s success
 Provide direction
 Aid in evaluation
 Create synergy
 Reveal priorities
 Focus coordination
 Provide basis for planning, organizing, motivating, and controlling
Strategies
Means by which long-term objectives will be achieved. It includes geographic expansion, diversification,
acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures.

Annual Objectives
Short-term milestone that organizations must achieve to reach long-term objectives.
Policies
Means by which annual objectives will be achieved.

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The Strategic-Management Model

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Benefits of Strategic Management

Non-financial benefits

 Enhanced awareness of threats

 Improved understanding of competitor’s
strategies
 Increased employee productivity
 Reduced resistance to change
 Clearer understanding of performance-reward
relationship
 Enhanced problem-prevention capabilities

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Why Some Firms Do No Strategic Planning

• Lack of knowledge of strategic planning
• Poor reward structures
• Fire fighting
• Waste of time
• Too expensive Pitfalls in Strategic Planning
• Laziness
• Content with success
• Fear of failure Strategic planning is an involved, complicated,
• Overconfidence and complex process that takes an organization
• Prior bad experience into unexplored territory.
• Self-interest
• Fear of the unknown
• Honest difference of opinion
• suspicion

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Effective Strategic Planning is:
• A people process more than a paper
process
• A learning process
• Words supported by numbers
• Simple and nonroutine
• Varying assignments, team
memberships, meeting formats, and
planning calendars
• Challenging assumptions underlying
corporate strategy
• Welcome bad news
• Requires open-mindedness and a spirit
of inquiry
• Is not a bureaucratic mechanism
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• Is not ritualistic or stilted
• Is not too formal, predictable, or rigid
• Does not contain jargon or arcane
language
• Is not a formal system for control
• Does not disregard qualitative
information
• Is not controlled by “technicians”
• Does not pursue too many strategies at
once
• Continually strengthens the “good ethics
is good business policy”
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Comparing Business and Military Strategy

• Strategy planning in the military

• Similarity
- Both business and military organizations must adapt to change and constantly improve
• Difference
- Business strategy assumes competition
- Military strategy assumes conflict

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 Highlight Summary

• Strategic Management- Art and science of formulating, implementing, and evaluating cross-functional decision
that enable an organization to achieve its objectives.
• 3 Stages of the Strategic Management Process- Strategy formulation; Strategy implementation; and Strategy
evaluation.
• Integrating Intuition and Analysis - The strategic Management process attempts to organize quantitative and
qualitative information under conditions of uncertainty.
• Adapting to change- the strategic-management process is based on the belief that organizations should continually
monitor internal and external events and trends so that timely changes can be made as needed. The rate and
magnitude of changes that affect organizations are increasingly dramatically as evidenced how the global economic
recession has caught so many firms by surprise.
• Key Terms in strategic management- Competitive advantage; Strategists; Vision and mission statements; External
opportunities and threats; Internal strengths and weaknesses; Long-term objectives; Strategies; Annual objectives;
and Policies.
• The Strategic-Management Model- The strategic-management process can best be studied and applied using a
model. Every model represents some kind of process. This model does not guarantee success, but it does represent
a clear and practical approach for formulating, implementing, and evaluating strategies.
• Benefits of strategic management- Strategic management allows an organization to be more proactive than
reactive in shaping its own future; it allows an organization to initiate and influence (rather than just respond to)
activities-and thus to exert control over its own destiny.

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