Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -1 Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13 th Edition Fred David

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -2 Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management –Defined

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -3 Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -4 Strategic Management In essence, the strategic plan is a company’s game plan

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Stages of the Strategic Management Process Strategy formulation Strategy implementation Strategy evaluation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -6 Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -7 Issues in Strategy Formulation Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -8 Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -9 Strategy Implementation Steps Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to organizational performance

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Issues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Peter Drucker: Think through the overall mission of a business. Ask the key question: “What is our Business?” Prime Task of Strategic Management

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Integrating Intuition & Analysis

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Intuition is based on:  Past experiences  Judgment  Feelings Integrating Intuition & Analysis Intuition is useful for decision making in conditions of:  Great uncertainty  Little precedent  Highly interrelated variables  Several plausible alternatives

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Involve management at all levels Intuition & Judgment Influence all analyses Integrating Intuition & Analysis

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Adapting to Change

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Key Terms in Strategic Management Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Anything that a firm does especially well compared to rival firms Strategic Management is Gaining and Maintaining Competitive Advantage

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources Achieving Sustained Competitive Advantage 2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategists Gather Information Analyze Information Organize Information

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Vision Statement – What do we want to become? Mission Statement – What is our business? Vision and Mission Statements

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch External Opportunities and Threats Analysis of Trends  Economic  Social  Cultural  Demographic/Environmental  Political, Legal, Governmental  Technological  Competitors

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Basic Tenet of Strategic Management External Opportunities and Threats Strategy Formulation Take advantage of External Opportunities Take advantage of External Opportunities Avoid/minimize impact of External Threats Avoid/minimize impact of External Threats

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch  Controllable activities performed especially well or poorly  Determined relative to competitors Internal Strengths and Weaknesses

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Typically located in functional areas of the firm  Management  Marketing  Finance/Accounting  Production/Operations  Research & Development  Management Information Systems Internal Strengths and Weaknesses

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Assessing the Internal Environment Internal Strengths and Weaknesses Internal Factors Performance Measures Ratios Industry Averages Survey Data

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch  Specific results that an organization seeks to achieve in pursuing its basic mission  Long-term means more than one year Long-Term Objectives

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Long-Term Objectives Essential for ensuring the firm’s success  Provide direction  Aid in evaluation  Create synergy  Reveal priorities  Focus coordination  Provide basis for planning, organizing, motivating, and controlling

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Means by which long-term objectives are achieved Strategies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategies Examples  Geographic expansion  Diversification  Acquisition  Product development  Market penetration  Retrenchment  Divestiture  Liquidation  Joint venture

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Sample Strategies Table 1-1  Best Buy  Levi Strauss  New York Times Company

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Short-term milestones that firms must achieve to reach long-term objectives Annual Objectives

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Means by which annual objectives will be achieved Policies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -34

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch  Strategic Management Process  Dynamic & continuous  More formal in larger organizations Strategic Management Model

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategic Management Communication is a key to successful strategic management

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Benefits of Strategic Management

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Benefits of Strategic Management Nonfinancial Benefits  Enhanced awareness of threats  Improved understanding of competitors’ strategies  Increased employee productivity  Reduced resistance to change  Clearer understanding of performance-reward relationship  Enhanced problem-prevention capabilities

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Why Some Firms Do No Strategic Planning Lack of knowledge of strategic planning Poor reward structures Fire fighting Waste of time Too expensive Laziness Content with success

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Why Some Firms Do No Strategic Planning (continued) Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Effective Strategic Planning is: A people process more than a paper process A learning process Words supported by numbers Simple and nonroutine Varying assignments, team membership, meeting formats, and planning calendars Challenging assumptions underlying corporate strategy

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Effective Strategic Planning continued Welcomes bad news Requires open-mindedness and a spirit of inquiry Is not a bureaucratic mechanism Is not ritualistic or stilted Is not too formal, predictable, or rigid Does not contain jargon or arcane language

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Effective Strategic Planning continued Is not a formal system for control Does not disregard qualitative information Is not controlled by “technicians” Does not pursue too many strategies at once Continually strengthens the “good ethics is good business” policy

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Comparing Business and Military Strategy Strategic planning started in the military Similarity  Both business and military organizations must adapt to change and constantly improve Difference  Business strategy assumes competition  Military strategy assumes conflict

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.