1. Strategic Management: How Star Managers Realize a Grand Design
Chapter Six
Strategic Management:
How Star Managers Realize a Grand Design

2. Strategy, Strategic Management, Strategic Planning
Strategy: is a large scale action plan that sets the direction for the organization.
Strategic Management: is a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals.
Strategic Planning: determines not only the organization’s long-term goals for the next 1-5 year regarding growth and profits, but also the ways the organization should achieve them
Why Strategic Management and Strategic Planning
are Important
Providing direction & momentum
Encouraging new ideas
Developing a sustainable competitive advantage
Forecasting
Forecasting: is a vision or projection of the future—two types:
Trend Analysis: is a hypothetical extension of a past series of events into the future.
Contingency Planning: also known as scenario planning & scenario analysis is the creation of alternative hypothetical but equally likely future conditions.
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

3. The Five Steps of the Strategic Management Process
2. Establish the grand strategy (using SWOT and forecasting)
3. Formulate the strategic plans (using e.g. Porter)
4. Carry out the strategic plan
5. Maintain strategic control
Establish
the mission
and vision
Feedback: Revise actions, if necessary, based on feedback
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

4. SWOT Analysis
Inside Matters: analysis of internal strengths & weaknesses
3. Formulate the strategic plans (using e.g. Porter)
4. Carry out the strategic plan
S—Strengths: inside matters
W—Weaknesses: inside matters
O—Opportunities: outside matters
T—Threats: outside matters
Outside Matters: analysis of external Opportunities & Threats
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5. Porter’s Four Competitive Strategies
Strategy
Wide
Narrow √
1. Cost-leadership
3. Formulate the strategic plans (using e.g. Porter)
4. Carry out the strategic plan √
2. Differentiation √
3. Cost focus √
4. Focused-differentiation
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

6. The Product Life Cycle
Stage 1 Introduction Stage 2 Growth Stage 3 Maturity Stage 4 Decline
3. Formulate the strategic plans (using e.g. Porter)
4. Carry out the strategic plan
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

7. Single-Product Strategy versus Diversification Strategy
Single Product Strategy: a company makes and sells only one product within its market.
Diversification Strategy: operating several businesses in order to spread the risk. Competitive Intelligence
Competitive Intelligence: means gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately.
Gaining Competitive Intelligence:
Public and print advertising
Investor information
Informal sources
The Balanced Scorecard
Balanced Scorecard: gives top managers a fast but comprehensive view of the organization
via four indicators:
Customer satisfaction
Internal processes
The organization’s innovation and improvement activities
Financial measures
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8. The Balanced Scorecard
Financial Perspective
“How do we look to shareholders?”
Goals Measures
2. Customer Perspective
“Ho do customers see us?”
Goals Measures
3. Internal Business Perspective
“What must we excel at?”
Goals Measures
4. Innovation & Learning Perspective
“Can we continue to improve and create value?
Goals Measures
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

9. Successful Measure Management
Top executives agree on strategy
Communication is clear
There is better focus and alignments
The organizational culture emphasizes teamwork and allows risk taking Barriers to Effective Measurement
Objectives are fuzzy
Managers put too much trust in informal feedback systems
Employees resist new measurement systems
Companies focus too much on measuring activities instead of results
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.