Strategic Management and Policy Chapter 1: Overview of Strategic Management

Learning Outcomes Describe the nature and process of strategic management Explain the need for integrating analysis and intuition in strategic management Define and give examples of key terms in strategic management Discuss the nature of strategy formulation, implementation, and evaluation activities Describe the benefits of good strategic management

Nature and Purpose Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives To exploit and create new and different opportunities for tomorrow

Stages of Strategic Management Formulation Evaluation Implementation

Stages of Strategic Management Formulation developing a vision and mission identifying an organization’s external opportunities and threats determining internal strengths and weaknesses establishing long-term objectives generating alternative strategies choosing particular strategies to pursue

Stages of Strategic Management Implementation 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

Stages of Strategic Management mobilizing employees and managers to put formulated strategies into action requires personal discipline, commitment, and sacrifice hinges upon managers’ ability to motivate employees involves the critical aspects of interpersonal skills Implementation

Stages of Strategic Management Evaluation Three fundamental strategy-evaluation activities are (1)reviewing external and internal factors that are the bases for current strategies, (2)measuring performance, and (3)taking corrective actions.

Stages of Strategic Management Formulation Evaluation Implementation Corporate Level Divisional Level Functional Level

Intuition and Analysis Strategic-management process is an attempt both to duplicate what goes on in the mind of a brilliant, intuitive person who knows the business and to couple it with analysis.

Adapting to Change The strategic-management process is based on the belief that organizations should continually monitor internal and external events and trends so that timely changes can be made as needed.

Reflective Question How significant is strategic management in an organization? What is the most critical stage in strategic management? and Why? Why is interpersonal skill significant in the implementation of strategies?

Key Terms in Strategic Management Competitive advantage Strategist Vision and Mission External opportunities and threats Internal strength and weaknesses Long-term objectives Strategies Annual Objectives Policies

Figure 1-1. Comprehensive Strategic Model (Fred R. David)

Benefits of Strategic Management

Non-financial 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

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

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 1 -18

Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory.

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

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

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

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

Reflective Questions What is the benefit of having a comprehensive strategic management model? How do you think a firm may benefit from strategic management?

Required Reading Art of War by Sun Tzu This reading will give us a glimpse into the past on how strategic thinking is being practiced.