Strategic Management: Planning For Long-Term Success

Chapter 7
(Lecture Outline and

Line Art Presentation)
Strategic
Management
Planning for Long-Term
Success
Chapter Objectives
1. Define the term strategic management and explain its

relationship to strategic planning, implementation, and
control.
2. Explain the concept of synergy and identify four kinds
of synergy.
3. Describe Porter’s model of generic competitive
strategies.
4. Identify and explain the major contribution the
business ecosystems model makes to strategic
thinking.
Copyright © Houghton Mifflin Company. All rights reserved. Lecture Outline and Line Art Presentation, 7–2
Chapter Objectives (cont’d)
5. Identify and discuss at least four e-business lessons

from the Internet revolution.
6. Identify and describe the four steps in the strategic
management process.
7. Explain the nature and purpose of SWOT analysis.
8. Describe the three types of forecasts.
Why All Managers Need an Understanding
of Strategic Management
• A strategic orientation encourages far-

sightedness in managers.
• Employees who think in strategic terms tend to
understand better how top managers think and
why they make the decisions they do.
• The trend toward greater teamwork and
cooperation throughout the planning cycle is
eroding the traditional distinction between those
who plan and those who implement plans.
Insert Table 7.1 here
Strategic Management = Strategic Planning +
Implementation + Control
• Strategic Management
• The ongoing process of ensuring a competitively
superior fit between an organization and its changing
environment.
• Includes budget control, long-range planning, and
strategic planning.
• Merges strategic planning, implementation, and
control to create a dynamic process.
• Requires every employee to consider the “big
picture.”
• Involves strategy innovation in rethinking the basis
for competition (business model) in the industry.
Strategic Management = Strategic Planning +
Implementation + Control (cont’d)
• Strategy
• An integrated externally-oriented perception of how to
achieve the organization’s mission.
• Strategic Planning
• The process of determining how to pursue the
organization’s long-term goals with resources
expected to be available.
Thinking Strategically
• Synergy
• The concept that the whole is greater than the sum of
the parts.
• Types of synergy
• Market synergy: extending products to new markets.
• Cost synergy: savings from combinations of common-
base operations, resources, and facilities.
• Technological synergy: the transfer and application of
technologies to new markets.
• Management synergy: complementary skills that
make for more effective overall management.
Porter’s Generic
Competitive Strategies
• Model’s Competitive Variables
• Competitive advantage: how to compete in a market.
• Competitive scope: how broad of a market to target.
• Cost Leadership Strategy
• Having the lowest overall cost in a market provides a
competitive advantage in pricing over competitors.
• Differentiation Strategy
• Providing unique and superior value for the customer
that builds brand loyalty.
Figure 7.1
Porter’s Generic Competitive Strategies
Source: Reprinted with the permission of The Free Press, a division of Simon & Schuster from THE COMPETITIVE
ADVANTAGE OF NATIONS by Michael E. Porter. Copyright © l990 by Michael E. Porter.
Porter’s Generic
Competitive Strategies (cont’d)
• Cost Focus Strategy
• Attempting to gain a competitive edge in a narrow (or
regional) market segment by controlling (competitively
dominating) the segment.
• Focused Differentiation
• Involves achieving a competitive edge by delivering a
superior product and/or service to a limited audience.
Business Ecosystems
• Business Ecosystem
• An economic community of organizations and all their
stakeholders, including suppliers and customers.
• Organizations need to be as good at cooperating as
they are at competing if they are to succeed.
• Coevolving: key organizations selectively
cooperating and competing to achieve both their
individual and collective goals, which they could
not achieve on their own.
• Greater strategic cooperation is needed to foster the
the spread of realized innovation.
Thinking Strategically (cont’d)
• E-Business Strategies for the Internet

• The Internet changes everything–but it doesn’t
change everything overnight.
• Some of the old rules still apply–an investment should
still either save you money or make you money.
• First, we overestimated the Internet; don’t
underestimate it now–its long-term impact will likely
exceed expectations.
• Evolving Internet technologies are still emerging.
• There is no one-size-fits-all Internet strategy.
Thinking Strategically (cont’d)
• Five Lessons from the Dot-com World

• There are still a lot of ways to make money on the
Internet.
• Customer loyalty is built with reliable brand names
and “sticky” web sites.
• Bricks and mortar must earn their keep.
• Cannibalism can pay.
• E-business partnering should not dilute strategic
control or ethical standards.
The Strategic
Management Process
• Four Steps in the Strategic Management
Process
1. Formulation of a grand strategy.
2. Formulation of strategic plans.
3. Implementation of strategic plans.
4. Strategic control.
Figure 7.2
The Strategic
Management
Process
Formulation of a Grand Strategy
• Grand Strategy
• A general explanation of how the organization’s
mission is to be accomplished.
• Situational Analysis
• Finding the organization’s niche by performing a
SWOT (Strengths, Weaknesses, Opportunities, and
Threats) analysis to match unfolding opportunities
with resources being acquired.
• Capability profile: identifying the organization’s
strengths and weaknesses.
Figure 7.3
Determining Strategic Direction Through Situational (SWOT) Analysis
Formulation of a Grand Strategy (cont’d)
• Situational Analysis (cont’d)

• Key capabilities for today’s companies
• Quick response to market trends.
• Rapid product development.
• Rapid production and delivery.
• Continuous cost reduction.
• Continuous improvement of processes, human
resources, and products.
• Greater flexibility of operations.
Formulation of Strategic Plans
• Criteria for Formulating Strategic Plans
• Develop clear results-oriented objectives stated in
measurable terms.
• Identify activities required to accomplish the objectives.
• Assign specific responsibilities to the appropriate
personnel.
• Estimate times to accomplish activities and their
appropriate sequencing.
• Determine resources required to accomplish the
activities.
• Communicate and coordinate the above elements and
complete the action plan.
Strategic Implementation
and Control
• Implementation of Strategic Plans
• Developing a systematic filtering down process that
facilitates the implementation process and builds
middle-manager commitment requires considering
1. organizational structure.
2. people.
3. culture.
4. control systems.
and Control (cont’d)
• Strategic Control
• A formal control system should be developed that
helps keep strategic plans on track by
• setting up and testing channels for information on
progress, problems, and the fit of strategic
assumptions to the environment.
• using software programs for real-time tracking of
production, financial, and marketing reports.
and Control (cont’d)
• Corrective Action Based on Evaluation and
Feedback
• Negative feedback should prompt corrective action at
the step immediately before the problem occurs.
• Possible corrective actions include
• updating strategic assumptions.
• reformulating strategic plans.
• rewriting policies.
• making personnel changes.
• modifying budget allocations.
Forecasting
• Forecasts
• Predictions, projections, or estimates of future
situations.
• Types of Forecasts
• Event outcome forecasts: predictions of the outcome
(effects) of highly probable future events.
• Event timing forecasts: predictions of when a given
event will occur.
• Time series forecasts: estimates of future values in a
statistical sequence (e.g., sales forecast).
Forecasting Techniques
• Informed judgment
• Forecasts relying on intuitive judgments that are
based on how well informed the forecaster is.
• Scenario analysis
• Preparing written descriptions of alternative but
equally likely future situations.
• Longitudinal scenarios: describing how the future
situations will evolve from the present.
• Cross-sectional scenarios: describing future
situations at a given point in time.
Forecasting Techniques (cont’d)
• Surveys
• A forecasting technique involving face-to-face
interviews and mail or e-mail questionnaires.
• Problems with surveys
• Construction of the survey instrument.
• Cost of administration.
• Errors in data collection and interpretation.
• Trend Analysis
• The hypothetical extension of a past series of events
into the future.

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Chapter 7

(Lecture Outline and

1. Define the term strategic management and explain its

5. Identify and discuss at least four e-business lessons

• A strategic orientation encourages far-

• E-Business Strategies for the Internet

• Five Lessons from the Dot-com World

• Situational Analysis (cont’d)

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