2Learning ObjectivesExplain the concept of strategic managementDescribe how strategic decisions differ from other decisions that managers makeDescribe the comprehensive model of strategic decision makingAppreciate the importance of strategic management process
3Strategic Management – Defined Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its goal and objectives.
4Strategic Management Critical Task Formulate the company’s mission, including broad statements about its philosophy, and goalsConduct an analysis that reflects the company’s internal conditions and capabilitiesAssess the company’s external environment, including both the competitive and the general contextual factorsAnalyze the company’s options by matching its resources with the external environment
5Identify the most desirable options by evaluating each option in light of the company's mission Select a set of long-term objectives and grand strategies that will achieve the most desirable options7. Develop annual objective and short-term strategies that are compatible with the selected set of long-term objectives and grand strategies
68. Implement the strategic choices by means of budgeted resource allocations in which the matching of tasks, people, structures, technologies, and reward system is emphasized 9. Evaluate the success of the strategic process as an input for future decision making.
7Expectations for the Course: You Will… Struggle with figuring out what to doBe prepared to participate in planning for your own firmsStudy real business situation
8Why is strategic management important? Gives everyone a roleMakes a difference in performance levelsProvides systematic approach to uncertaintiesCoordinates and focuses employees
10Strategic Leadership and the Strategic Management Process Effective Strategic LeadershipShapes theFormulation ofStrategic IntentStrategic MissionandInfluenceSuccessful Strategic ActionsFormulation of StrategiesImplementation of StrategiesYieldsStrategic CompetitivenessAbove-average Returns
11Strategic Leadership Requires the managerial ability to: Anticipate and envisionMaintain flexibilityEmpower others to create strategic change as necessaryStrategic leadership is:Multi-functional work that involves working through othersConsideration of the entire enterprise rather than just a sub-unitA managerial frame of reference
12Strategic Leadership (cont’d) Effective strategic leaders:Manage the firm’s operations effectivelySustain a high performance over timeMake better decisions than their competitorsMake candid, courageous, pragmatic decisionsUnderstand how their decisions affect the internal systems in use by the firmSolicit feedback from peers, superiors and employees about their decisions and visions
13Managers as an Organizational Resource Managers often use their discretion when making strategic decisions and implementing strategiesFactors affecting the amount of decision-making discretion include:External environmental sourcesCharacteristics of the organizationCharacteristics of the manager
14Factors Affecting Managerial Discretion External EnvironmentExternal EnvironmentIndustry structureRate of market growthNumber and type of competitorsNature and degree of political/legal constraintsDegree to which products can be differentiatedManagerial Discretion
15Factors Affecting Managerial Discretion External EnvironmentCharacteristics of the OrganizationCharacteristics of the OrganizationSizeAgeCultureAvailability of resourcesPatterns of interaction among employeesManagerial Discretion
16Factors Affecting Managerial Discretion External EnvironmentCharacteristics of the OrganizationCharacteristics of the ManagerTolerance for ambiguityCommitment to the firm and its desired strategic outcomesInterpersonal skillsAspiration levelDegree of self-confidenceManagerial DiscretionCharacteristics of the Manager
17Top Management TeamsComposed of the key managers who are responsible for selecting and implementing the firm’s strategiesA heterogeneous top management team:Has varied expertise and knowledgeCan draw on multiple perspectivesWill evaluate alternative strategiesBuilds consensus
18Important Definitions Strategic Management ProcessThe full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
19Steps in Strategic Management Process Step 1: Identifying the organization's current mission, objectives, and strategiesMission: the firm’s reason for beingWho we are,What we do, andWhere we are nowGoals: the foundation for further planningMeasurable performance targetsStep 2: Conducting an external analysisThe environmental scanning of specific and general environmentsFocuses on identifying opportunities and threats
20Strategic Management Process (cont’d) Step 3: Conducting an internal analysisAssessing organizational resources, capabilities, activities and culture:Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm.Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.Steps 2 and 3 combined are called a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)
21Strategic Management Process (cont’d) Step 4: Formulating strategiesDevelop and evaluate strategic alternativesSelect appropriate strategies for all levels in the organization that provide relative advantage over competitorsMatch organizational strengths to environmental opportunitiesCorrect weaknesses and guard against threats
22Strategic Management Process (cont’d) Step 5: Implementing strategiesImplementation: effectively fitting organizational structure and activities to the environmentEffective strategy implementation requires an organizational structure matched to its requirements.Step 6: Evaluating resultsHow effective have strategies been?What adjustments, if any, are necessary?
24Adapting to Change – Key Strategic Management Questions What kind of business should we become?Are we in the right fieldsAre there new competitorsWhat strategies should we pursue?How are our customers changing?
25What do we want to become? Key TermsVision Statement –What do we want to become?Mission Statement –What is our business?
27Strengths & Weaknesses (Internal) Key TermsStrengths & Weaknesses (Internal)Typically located in functional areas of the firmManagementMarketingFinance/AccountingProduction/OperationsResearch & DevelopmentComputer Information Systems
28Key TermsStrategiesMeans by which long-term objectives are achieved