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Strategic Management Chapter 1 © 2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale.

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Presentation on theme: "Strategic Management Chapter 1 © 2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale."— Presentation transcript:

1 Strategic Management Chapter 1 © 2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

2 Learning Objectives 1.Explain the concept of strategic management 2.Describe how strategic decisions differ from other decisions that managers make 3.Name the benefits and risks of a participative approach to strategic decision making 4.Understand the types of strategic decisions for which different managers are responsible 5.Describe a comprehensive model of strategic decision making 6.Appreciate the importance of strategic management as a process 7.Give examples of strategic decisions that companies have recently made 2

3 The Nature and Value of Strategic Management Strategic management: The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives 3

4 Nine Critical Tasks of Strategic Management -- Tasks 1-5: Formulate the company’s mission Conduct an internal analysis Assess the external environment – competitive and general contexts Analyze the company’s options by matching its resources with the external environment Identify the most desirable options in light of the mission 4

5 Nine Critical Tasks of Strategic Management -- Tasks 6-9: Select a set of long-term objectives and grand strategies that will achieve the most desirable options Develop annual objectives and short-term strategies that are compatible with long-term objectives and grand strategies Implement the strategic choices Evaluate the success of the strategic process for future decision making 5

6 What is Strategy?  Large-scale, future-oriented plan  Used to interact within competitive environment to achieve company goals  Provides a framework for managerial decisions  Reflects a company’s awareness of the main elements of competition 6

7 Dimensions of Strategic Decisions Strategic issues require top-management team decisions Strategic issues require large amounts of the firm’s resources Strategic issues often affect the firm’s long-term prosperity Strategic issues are future oriented Strategic issues usually have multifunctional or multibusiness consequences Strategic issues require considering the firm’s external environment 7

8 Dimensions of Strategic Decisions (in detail)  Strategic issues require top-management team decisions  Strategic decisions overarch several areas of a firm’s operations  Usually only top management has the perspective needed to understand their broad implications  Usually only top managers have the power to authorize necessary resource allocations 8

9 Dimensions of Strategic Decisions (contd.) Strategic issues require large amounts of the firm’s resources They involve substantial allocations of people, physical assets, and money Strategic decisions commit the firm to actions over an extended period In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm 9

10 Dimensions of Strategic Decisions (contd.) Strategic issues often affect the firm’s long- term prosperity Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains. 10

11 Dimensions of Strategic Decisions (contd.) Strategic issues are future-oriented They are based on what managers forecast, rather than what they know Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options A firm will succeed only if it takes a proactive (anticipatory) stance toward change 11

12 Dimensions of Strategic Decisions (contd.) Strategic issues usually have multifunctional or multibusiness consequences. Strategic decisions have complex implications for most areas of the firm Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firm’s SBUs, divisions, or program units 12

13 Dimensions of Strategic Decisions (contd.) Strategic issues require considering the firm’s external environment All businesses exist in an open system. They affect and are affected by external conditions that are largely beyond their control Successful positioning requires that strategic managers look beyond operations and consider what relevant others are likely to do 13

14 Levels of Strategy Corporate level: board of directors, CEO & administration [Highest] Business level: business and corporate managers [Middle] Functional level: Product, geographic, and functional area managers [Lowest] 14

15 Ex. 1.2 Alternative Strategic Management Structures 15

16 Ex. 1.4 Hierarchy of Objectives and Strategy 16

17 Characteristics of Strategic Management Decisions: Corporate Often carry greater risk, cost, and profit potential Greater need for flexibility Longer time horizons Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth 17

18 Characteristics of Strategic Management Decisions: Functional Implement the overall strategy formulated at the corporate and business levels Involve action-oriented operational issues Relatively short range and low risk Modest costs: depend upon available resources Relatively concrete and quantifiable 18

19 Characteristics of Strategic Management Decisions: Business/SBU Help bridge decisions at the corporate and functional levels Less costly, risky, and potentially profitable than corporate-level decisions More costly, risky, and potentially profitable than functional-level decisions Include decisions on plant location, marketing segmentation, and distribution 19

20 Formality in Strategic Management Formality is the degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management 20

21 Forces Determining Formality Organizational Size Predominant Management Styles Complexity of Environment Production Process Problems in the Firm Purpose of the Planning System Stage of Firm’s Development 21

22 Three Modes of Formality Entrepreneurial Mode – most small firms Planning Mode – most large firms Adaptive Mode – most medium size firms 22

23 Entrepreneurial Mode The informal, intuitive, and limited approach to strategic management associated with owner-managers of smaller firms. 23

24 Planning Mode The strategic formality associated with large firms that operate under a comprehensive, formal planning system. 24

25 Adaptive Mode The strategic formality associated with medium-sized firms that emphasize the incremental modification of existing competitive approaches. 25

26 Strategy Makers Ideal strategic management planning process includes decision makers from all three levels Top managers must give final approval Strategic decisions coincide with managers’ responsibilities 26

27 Strategy Makers: The CEO A firm’s CEO plays a prominent role in strategic planning The CEO’s principal duty is giving long-term direction to the firm The CEO bears ultimate responsibility for the firm’s success and strategic success CEOs are typically strong-willed, company-oriented individuals 27

28 Benefits of a Participative Approach to Strategic Management Managers at all levels interact in planning and implementing strategy Similar to participative decision making Assessing strategy formulation requires looking at nonfinancial evaluations as well as financial ones Promoting positive behavioral consequences enables achievement of financial goals 28

29 The Strategic Management Process Businesses vary in formulation and other processes The basic components of the models used to analyze strategic management are similar Strategic management is a process—a flow of information through interrelated stages of analysis toward the achievement of some goal 29

30 Ex. 1.5 Strategic Management Model 30

31 Components of the Strategic Management Model Company Mission External Analysis Long-Term Objectives Short-Term Objectives Policies Empowering Action Strategic Control & Continuous Improvement Internal Analysis Strategic Analysis & Choice Generic & Grand Strategies Action Plans & Functional Tactics Restructuring, Reengineering & Refocusing 31

32 Strategic Management Terms Defined Company Mission: The unique purpose that sets a company apart from others of its type and identifies the scope of its operations. Long-term Objectives: The results than an organization seeks to achieve over a multiyear period. 32

33 Strategic Management Terms Defined Generic Strategies: Fundamental philosophical options for the design of strategies. Grand Strategies: The means by which objectives are achieved. 33

34 Strategic Management Terms Defined Short-term Objectives: Desired results that provide specific guidance for action during a period of one year or less. Functional Tactics: Short-term, narrow scoped plans that detail the “means” or activities that a company will use to achieve short-term objectives. Policies: Predetermined decisions that substitute for managerial discretion in repetitive decision making. 34

35 Strategic Management Terms Defined Strategic Control: Tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making necessary adjustments. Continuous Improvement: A form of strategic control in which managers are encouraged to be proactive in improving all operations of the firm. 35

36 Stakeholders Influential people who are vitally interested in the actions of the business 36

37 Key Terms Adaptive mode Company mission Continuous improvement Dynamic Entrepreneurial mode Feedback Formality Functional tactics Generic strategies Grand strategies Long-term objectives Planning mode Policies Processes Short-term objectives Stakeholders Strategic control Strategic management Strategy 37


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