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Strategic Management

STRATEGIC MANAGEMENT & BUSINESS POLICY


12TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER

What is Strategy?
The term strategy is derived from the Greek word strategos, which means generalship- the actual direction of military force, as distinct from the policy governing its deployment. According to Alfred D Chandler , Strategy is the determination of the basic long term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals.

Strategic Management: a set of managerial decisions and actions that determines the long-run performance of a corporation. Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Philip Selznick, Igor Ansoff, and Peter Drucker. Includes: Internal and external environment scanning Strategy formulation Strategy implementation Evaluation and control

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Phases of Strategic Management:


Phase Phase Phase Phase 1: 2: 3: 4: Basic financial planning Forecast-based planning Externally oriented strategic planning Strategic management

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Benefits of Strategic Management: Clearer sense of strategic vision for the firm Sharper focus on what is strategically important Improved understanding of a rapidly changing environment

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Additional Benefits of Strategic Management:


Improved organizational performance Achieves a match between the organizations environment and its strategy, structure and processes Important in unstable environments Strategic thinking Organizational learning

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Impact of Globalization: Globalization: the integration and internationalization of


markets and corporations

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M CDONALD S PLAN TO WIN


After 50 years of operation, McDonald s is revitalizing its products, and pushing innovation through a variety of initiatives. This foodservice giant with more than 30,000 restaurants in 100 countries provides food to nearly 50 million customers each day, but decades of expansion, sales growth, and profits ts made the burger giant complacent. By focusing on getting bigger, not better, the company stumbled in 2002, recording its first losing quarter. By 2003, U.S. sales had flattened, as many consumers were turning to healthier options and restaurants with more upscale menu items, a segment sometimes referred to as fast - casual . Morgan Spurlock s fi lm Super Size Me , released in 2004, also seriously diminished the public image of the quick - service chain, as moviegoers watched Spurlock become ill and gain 25 pounds after eating only McDonald s food for one month. With pressure to get back on track, it was time for McDonald s to rethink the business. The chain devised a recovery strategy that included new menu items, redesigned restaurants, and a focus on the consumer experience. Through a program titled Plan to Win, McDonald s focused on making a deeper connection with customers through the five business drivers of people, products, place, price, and promotion. Using its own five P s, the company is developing and refi ning new strategies to deliver value, offering product variety, developing updated and contemporary stores, balancing the delivery of value pricing with more expensive items, and marketing through bold and innovative promotions.

Execution of this strategy has included mystery shoppers and customer surveys, along with grading restaurants to help the company deliver on its people goals. New menu items like the Fruit & Walnut Salad in the United States and deli sandwiches in Australia are part of the commitment to serve high - quality products to satisfy customer demand for choice and variety. Restaurants are staying open longer, accepting credit and debit cards, enabling wireless Internet access, and even providing delivery service in parts of Asia. As part of the program, franchisees and suppliers are asked to provide their opinions and ideas on facility design, while the company benchmarks retail leaders, such as Crate & Barrel, to help produce cleaner and smarter restaurants. The company is testing small handheld devices to use on what it calls travel paths, a process for checking operational failures such as the temperature inside the refrigerators. Experiments with a new grilling concept from Sweden, which grills burgers vertically instead of horizontally, offers space - saving possibilities for the chain. Product offerings like the McCaf , a concept developed in the Australian market that provides gourmet coffee inside 500 existing restaurants, are proving to be successful. The trouble experienced in the early part of the millennium has

The trouble experienced in the early part of the millennium has abated, and executives at McDonald s have declared success after several years of progress under the Plan to WinCompany revenues are up, and the fi rm plans to remain focused on its core business. One indication of its commitment to fast food was the divestiture of its seven - year ownership stake in Chipotle Mexican Grill, a highly successful fast - casual burrito chain. With the sale of around 5 millioAttracting more customers to McDonald s remains its goal for growth. In the U.S. market, the strategy is to leverage menu innovation; in Europe, upgrading the customer experience and enhancing local relevance have driven management efforts; and the Asia/Pacifi c, Middle East, and Africa markets have focused on building sales through extended hours. The question remains whether focusing on the core business will yield maximum return. At McDonald s, the executives are betting on the core brand and hoping that this strategy will pay off. 1

Impact of Environmental Sustainability: Environmental Sustainability: the use of business

practices to reduce a companys impact on the natural, physical environment

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Impact of Environmental Sustainability


Risks of Climate Change include: Litigation risk Reputational risk Physical risk

Regulatory risk Supply chain risk Product and technology risk

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Impact of E-commerce
The internet is forcing companies to transform themselves. New Channels are changing market access and branding causing the disintermediation of traditional distribution channels. The balance of power is shifting to the consumer. Companies are becoming more innovative and efficient. The pace of business is increasingly drastically. Corporations are being pushed out of the traditional boundaries. Knowledge is becoming a key asset and a source of competitive advantage.

Population ecology: established organizations are


unable to adapt to change

Institution theory: organizations adapt by imitating


successful organizations

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Strategic choice perspective: organizations adapt to


change and have the ability to reshape their environment

Organizational learning theory: organizations adapt


defensively and use knowledge to improve their relationship with the environment

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Strategic flexibility: the ability to shift from one


dominant strategy to another and requires:

Long-term commitment to the development and nurturing of critical resources Learning organization

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Learning organization: an organization skilled at

creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights

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Main activities of a learning organization include:


Solving problems systematically Experimenting with new approaches Learning from past experience, history and experiences of others Transferring knowledge quickly and easily throughout the organization

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Basic Elements of Strategic Management


1. 2. 3. 4. Environmental scanning Strategy formulation Strategy implementation Evaluation and control

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Basic Elements of Strategic Management Environmental Scanning is the monitoring, evaluating


and disseminating of information from the external and internal environments to key people within the organization SWOT Analysis

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Basic Elements of Strategic Management

Strategy Formulation: the development of long-range


plans for the effective management of environmental opportunities and threats in light of organizational strengths and weaknesses (SWOT)

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Basic Elements of Strategic Management Mission- the purpose or reason for the organizations
existence

Vision- describes what the organization would like to


become

Objectives- the end results of planned activity

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Basic Elements of Strategic Management Strategies- form a comprehensive master plan that
states how the corporation will achieve its mission and objectives Corporate (Stability, growth and retrenchment) Business ( competitive or cooperative) Functional (distinctive competence) that links the formulation of a strategy with its implementation

Policies- the broad guidelines for decision making

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Basic Elements of Strategic Management

Strategy implementation: the process by which

strategies and policies are put into action through the development of: Programs: It is a statement of the activities or steps needed to accomplish a single use plan. Budgets: It is a statement of a corporation's programs in terms of money. Procedures/Standing operating procedures: These are a system of sequential steps or techniques that describe in detail how a particular task is to be done.
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Basic Elements of Strategic Management

Evaluation and control: the process in which

corporate activities and performance results are monitored so that actual performance can be compared to desired performance

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Basic Elements of Strategic Management

Performance: the end result of organizational activities

Feedback/Learning Process: revise or correct


decisions based on performance

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Triggering event: something that acts as a stimulus for


a change in strategy and can include:

New CEO External intervention Threat of change of ownership Performance gap Strategic inflection point

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What Makes a Strategic Decision? Strategic decision making focuses on the long-run
future of the organization Characteristics of strategic decision making include: Rare Consequential Directive

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Mintzbergs Modes of Strategic Decision Making


Entrepreneurial Adaptive (Muddling through) Planning Logical incrementalism (Quinn)

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Strategic Decision Making Process:


1. Evaluate current performance results 2. Review corporate governance 3. Scan and assess the external environment 4. Scan and assess the internal corporate environment
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5. Analyze strategic (SWOT) factors 6. Generate, evaluate and select the best alternative strategy 7. Implement selected strategies 8. Evaluate implemented strategies

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Strategic audit provides a checklist of questions, by

area or issue, that enables a systematic analysis to be made of various corporate functions and activities

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