1. Strategic Management Defined:
Set of managerial decisions and actions that determines the long-run performance of a firm.

2. Strategic Decision Making
Strategic Decisions
Rare
Consequential
Directive

3. Initiation of Strategy
New CEO
External intervention
Threat of change in
ownership
Performance gap
Strategic inflection point
Stimulus
for change in
strategy
Triggering
event

4. Key Strategic Questions
Not always a formal process:
Where is the organization now? (Not where do we hope it is!)
If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 years?
If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved?

5. Four Phases of Strategic Management
Basic financial planning
Forecast-based planning
Externally-oriented planning (strategic)
Strategic management

6. Strategic Management Benefits:
Clearer sense of long term vision (strategic direction) for the firm
Sharper focus on what is strategically important
Improved understanding of a rapidly changing environment

7. Challenges to Strategic Management
Electronic Commerce
Use of the Internet to conduct business transactions
Globalization
Internationalization of markets and corporations
Global (worldwide) markets rather than national markets

8. Global Issues European Union (EU)
Economic integration of 15 member countries
North American Free Trade Agreement (NAFTA)
Improved trade among 3 member countries
Mercado Del Cono Sur = Market of the southern cone (Mercosur)
Free-trade area among Argentina, Brazil, Uruguay, and Paraguay
Association of South East Asian Nations (ASEAN)
Attempting to link members into a borderless economic zone

9. Strategic Management Process
Strategic Management process is composed of:
Environmental Scanning
Strategic Formulation
Strategic Implementation
Evaluation and Control

10. Environmental Scanning
Defined:
The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the firm.

11. Environmental Scanning
Identify strategic factors
SWOT Analysis
Strengths, Weaknesses
Opportunities, Threats
Internal Environment
Strengths & Weaknesses
Within the organization but not subject to short-run control of management
External Environment
Opportunities & Threats
External to the organization but not subject to short-run control of management

12. Environment Composed of: Internal Environment External Environment
Task Environment
Societal Environment

13. Environmental Scanning

14. Internal Environment
Composed of:
Structure
Culture
Resources

15. Structure
Refers to the way a firm is organized in terms of communication, authority, and workflow
Basic Forms of structures:
Simple structure
Functional structure
Divisional structure

16. Basic Organizational Structures: Simple and Functional
I. Simple Structure
II. Functional Structure
Owner-Manager
Workers
Top Management
Manufacturing
Sales
Finance
Personnel

17. Basic Structures of Corporations: Divisional
III. Divisional Structure*
Manufacturing
Finance
Top Management
Product Division A
Product Division B
*Conglomerate structure is a variant of the division structure.
Sales
Personnel

18. Internal Environment
Composed of:
Culture
Structure
Resources

19. Culture
Refers to the pattern of beliefs, expectations, and values shared by a firm’s employees
Distinct attributes of organizational culture:
Cultural intensity
Cultural integration

20. Cultural intensity
Refers to the degree in which the members of each unit (department or division) in the company subscribe to the same values or norms. As a result, employees in a unit with intensive culture tend to behave the same.
In general, older organizations tend to display more intense culture.

21. Cultural integration
Refers to the degree in which units (departments and divisions) across a company tend to subscribe to the same set of values and norms.
Units within a companies with integrated culture tend to be more uniformed with other units. As a results, the units in a company with an integrated culture tend to lack subcultures of their own.

22. Internal Environment
Composed of:
Resources
Culture
Structure

23. Resources
Refers to the assets of the firm including physical assets, skills and knowledge within the functional areas

24. Environmental Scanning

25. Task Environment Composed of:
Groups in environment that directly affect or are affected by the organization’s operations (often refer to as industry)
Competition
Suppliers
Customers (Buyers)
Other interest Groups

26. Industry Analysis

27. Environmental Scanning

28. Societal Environment Composed of: General forces in environment
Economic Forces
Sociocultural Forces
Technological Forces
Political-Legal Forces

29. Societal Environment Important Variables
Economic
GDP trends
Interest rates
Money supply
Inflation rates
Unemployment
levels
Wage/price controls
Devaluation/
revaluation
Energy availability and cost
Disposable and discretionary income
Technological
Total government spending for R&D
Total industry spending for R&D
Focus of technological efforts
Patent protection
New products
New developments in technology transfer from lab to marketplace
Productivity improvements through automation
Political-Legal
Antitrust regulations
Environmental protection laws
Tax laws
Special incentives
Foreign trade regulations
Attitudes toward foreign companies
Laws on hiring and promotion
Stability of government
Sociocultural
Lifestyle changes
Career expectations
Consumer activism
Rate of family formation
Growth rate of population
Age distribution of population
Regional shifts in population
Life expectancies
Birth rates
Societal Environment Important Variables

30. Societal Environment Important Variables
Economic
GDP trends
Interest rates
Money supply
Inflation rates
Unemployment
levels
Wage/price controls
Devaluation/
revaluation
Energy availability and cost
Disposable and discretionary income
Technological
Total government spending for R&D
Total industry spending for R&D
Focus of technological efforts
Patent protection
New products
New developments in technology transfer from lab to marketplace
Productivity improvements through automation
Political-Legal
Antitrust regulations
Environmental protection laws
Tax laws
Special incentives
Foreign trade regulations
Attitudes toward foreign companies
Laws on hiring and promotion
Stability of government
Sociocultural
Lifestyle changes
Career expectations
Consumer activism
Rate of family formation
Growth rate of population
Age distribution of population
Regional shifts in population
Life expectancies
Birth rates
Societal Environment Important Variables

31. Environmental Scanning

32. SWOT Analysis Internal Environment: External Environment: Strengths
Weaknesses
External Environment:
Opportunities
Threats

33. Basic Model of Strategic Management
Four Basic Elements

34. Strategic Management Model
Environmental
Strategy
Strategy
Evaluation
and Control
Evaluation
and Control
and Control
Scanning
Formulation
Implementation
External
Mission
Reason for
Societal
existence
Environment
Objectives
General Forces
What results to
Task
Strategies
accomplish
Environment
by when
Plan to
Industry Analysis
achieve the
Policies
mission &
Internal
objectives
Broad
guidelines for
Programs
Structure
decision
Process
Chain of Command
making
Activities
to monitor
needed to
performance
Culture
Budgets
accomplish
and take
Beliefs, Expectations,
a plan
corrective
Cost of the
Values
action
programs
Procedures
Resources
Sequence
Assets, Skills
of steps
Competencies,
needed to
Knowledge
do the job
Performance
Feedback/Learning

35. SWOT Analysis Internal Environment: External Environment: Strengths
Weaknesses
External Environment:
Opportunities
Threats

36. Basic Model of Strategic Management
Four Basic Elements

37. Strategy Formulation Defined:
Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses.
Composed of:
Mission
Objectives
Strategies
Policies

38. Strategy Formulation Mission Statement
Purpose or reason for the organization’s existence
Should include the firm’s products / services and it’s target market(s)
Who we are, what we do, what we’d like to become
Promotes shared expectations among employees
Communicates a public image to stakeholders

39. Strategy Formulation Maytag Corporation Mission Statement
To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world.

40. Strategy Formulation Objectives The end results of planned activity
WHAT is to be accomplished
Time in which to accomplish it (WHEN)
Objectives should be quantified when possible

41. Strategy Formulation Goals vs. Objectives
A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and/or no time criteria for completion.

42. Goals & Objectives Corporate goals and objectives include:
Profitability (net profits)
Growth (increase in total assets, etc.)
Utilization of resources (ROE or ROI)
Market leadership (market share)

43. Strategies
Defined:
A strategy of a corporation forms a comprehensive master plan stating HOW the corporation will achieve its mission and objectives.

44. Strategies 3 Types of Strategy Corporate strategy Business strategy
Functional strategy

45. Hierarchy of Strategy Corporate Strategy Functional Strategy Business
(Division Level)
Strategy
Functional
Strategy

46. Corporate Strategies
Corporate strategies deal with corporation’s overall direction and its management of its businesses

47. Corporate Strategies
Corporate Strategy
Growth
Stability
Retrenchment

48. Growth Strategies Concentration Diversification
Horizontal integration
Vertical integration
Diversification
Concentric diversification
Conglomerate diversification
Any of these four growth strategies may be though internal development or external acquisitions, mergers, or joint ventures.

49. Corporate Strategies
Corporate Strategy
Stability
Growth
Retrenchment

50. Stability Strategies
Pause
Proceed-with-caution
No change
Profit

51. Corporate Strategies
Corporate Strategy
Retrenchment
Stability
Growth

52. Retrenchment Strategies
Turnaround
Captive
Divestment
Bankruptcy
Liquidation

53. Hierarchy of Strategy Corporate Strategy Functional Strategy Business
(Division Level)
Strategy
Functional
Strategy

54. Business Strategy
Emphasizes on improving the competitive position of a firm’s strategic business
Also referred to as competitive strategies

55. Porter’s Competitive Strategies
Competitive Advantage:
Lower cost strategy
Design, produce, market more efficiently than competitors
Differentiation strategy
Unique and superior value in terms of product quality, features, service

56. Porter’s Competitive Strategies
Competitive Scope:
Refers to the Breadth of the company’s target market
Compete head to head in large market?
Focus on niche?

57. Porter’s Generic Competitive Strategies

58. Porter’s Competitive Strategies
Cost Leadership:
Low-cost competitive strategy
Aimed at broad mass market
Aggressive construction of efficient-scale facilities
Cost reductions/Cost minimization

59. Porter’s Competitive Strategies
Differentiation:
Broad mass market
Unique product or service
Charge premiums
Lower customer sensitivity to price

60. Porter’s Competitive Strategies
Cost focus:
Low cost competitive strategy
Focus on particular buyer group or market
Niche focused
Seek cost advantage in target market

61. Porter’s Competitive Strategies
Differentiation focus:
Focus on particular group or geographic market
Seek differentiation in targeted market segment
Serve special needs of narrow target market

62. Hierarchy of Strategy Corporate Strategy Functional Strategy Business
(Division Level)
Strategy
Functional
Strategy

63. Functional Strategy
To optimize resource productivity

64. Policies
Defined:
Broad guidelines for decision making that link the formulation of strategy with its implementation.

65. Strategy Implementation
Programs
Strategy
Implementation
Budgets
Procedures

66. Programs
A program is a statement of activities or tasks needed to accomplish a single-use plan

67. Budgets
A budget is a statement of a corporation’s program in dollar terms

68. Procedures
Procedures refer to a system of sequential steps or techniques that describe in detail how to perform a particular activity or task