Prentice Hall, 2000Chapter 11 Definition of Strategic Management Strategic Management That set of managerial decisions and actions that determines the long-run performance of a corporation 1.1Definition of Strategic Management

Prentice Hall, 2000Chapter 12 Sequential Phases of Strategic Planning 1.Basic Financial Planning 2.Forecast-Based Planning 3.Externally-Oriented Planning (Strategic Planning) 4.Strategic Management 1.2Sequential Phases of Strategic Planning

Prentice Hall, 2000Chapter 13 Benefits of Strategic Management Clearer sense of strategic visionClearer sense of strategic vision Sharper focus on what is strategically importantSharper focus on what is strategically important Improved understanding of rapidly changing environmentImproved understanding of rapidly changing environment 1.3Benefits of Strategic Management

Prentice Hall, 2000Chapter 14 Three Key Strategic Questions Where is the organization now?Where is the organization now? If no changes are made, where will the organization be in one, two, five or ten years? Are the answers acceptable?If no changes are made, where will the organization be in one, two, five or ten years? Are the answers acceptable? If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved?If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved? 1.4Three Key Strategic Questions

Prentice Hall, 2000Chapter 15 Regional Trade Associations/Agreements European Union (EU)European Union (EU) North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) MercosurMercosur Association of South East Asian Nations (ASEAN)Association of South East Asian Nations (ASEAN) 1.5Regional Trade Associations / Agreements

Prentice Hall, 2000Chapter 16 Learning Organization An organization skilled at creating, acquiring, transferring knowledge, and at modifying its behavior to reflect new knowledge and insights 1.6Learning Organization

Prentice Hall, 2000Chapter 17 Composition of Strategic Management Strategic Management is Composed of 1.Environmental scanning 2.Strategy formulation 3.Strategy implementation 4.Evaluation and control 1.7Composition of Strategic Management

Prentice Hall, 2000Chapter 18 Basic Elements of the Strategic Management Process 1.8Basic Elements of the Strategic Management Process (Fig. 1.1) Evaluation and Control Strategy Implementation Environmental Scanning Strategy Formulation

Prentice Hall, 2000Chapter 19 Evaluation and Control Strategic Management Model 1.9Strategic Management Model (Fig. 1.2) Strategy Formulation Strategy Implementation Mission Objectives Strategies Policies Feedback/Learning Environmental Scanning Societal Environment General Forces Task Environment Industry Analysis Structure Chain of Command Resources Assets, Skills Competencies, Knowledge Culture Beliefs, Expectations, Values Reason for existence What results to accomplish by when Plan to achieve the mission & objectives Broad guidelines for decision making Programs Activities needed to accomplish a plan Budgets Cost of the programs Procedures Sequence of steps needed to do the job Process to monitor performance and take corrective action Performance External Internal Evaluation and Control

Prentice Hall, 2000Chapter 110 Environmental Variables 1.10 Environmental Variables (Fig. 1.3) Societal Environment Economic Forces Technological Forces Political-Legal Forces Sociocultural Forces Internal Environment Structure Culture Resources Shareholders Governments Customers Creditors Communities Competitors Employees/ Labor Unions Suppliers Special Interest Groups Trade Associations Task Environment (Industry)

Prentice Hall, 2000Chapter 111 Societal Environment Composed of general forces in environment 1.11Societal Environment

Prentice Hall, 2000Chapter 112 Task Environment Composed of Groups in environment that directly affect or are affected by the organization’s operationsGroups in environment that directly affect or are affected by the organization’s operations (Often called industry)(Often called industry) 1.12Task Environment

Prentice Hall, 2000Chapter 113 Structure The way a corporation is organized in terms of communication, authority, and workflow 1.13Structure

Prentice Hall, 2000Chapter 114 Corporate Culture Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of employees to another 1.14Corporate Culture

Prentice Hall, 2000Chapter 115 Resource An asset, competency, process, skill, or knowledge controlled by the corporation 1.15Definition of Resource

Prentice Hall, 2000Chapter 116 Definition of Strategy Formulation 1.16Definition of Strategy Formulation Strategy Formulation The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of corporate strengths and weaknesses Composed of Mission Mission Objectives Objectives Strategies Strategies Policies Policies

Prentice Hall, 2000Chapter 117 Definition of Mission Mission The purpose or reason for the corporation’s existence. It may be narrow or broad in scope. NarrowBroad RailroadTransportation InsuranceFinancial Services 1.17Definition of Mission

Prentice Hall, 2000Chapter 118 Definition of Objectives Objectives The end results of planned activity. They state WHAT is to be accomplished by WHEN. They should be quantified, if possible. 1.18Definition of Objectives

Prentice Hall, 2000Chapter 119 Areas in Which to Set Objectives ProfitabilityProfitability EfficiencyEfficiency GrowthGrowth Shareholder wealthShareholder wealth Utilization of resourcesUtilization of resources ReputationReputation Contributions to employeesContributions to employees Contributions to societyContributions to society Market leadershipMarket leadership Technological leadershipTechnological leadership SurvivalSurvival Personal needs of managementPersonal needs of management 1.19Areas for Objectives

Prentice Hall, 2000Chapter 120 Definition of Strategy Strategy A comprehensive master plan stating HOW the corporation will achieve its mission and objectives 1.20Definition of Strategy

Prentice Hall, 2000Chapter 121 Definition of Corporate Strategy Corporation’s overall direction and the management of its businesses 1.21Definition of Corporate Strategy

Prentice Hall, 2000Chapter 122 Definition of Business Strategy Emphasizes improving the competitive position of a corporation’s products or units 1.22Definition of Business Strategy

Prentice Hall, 2000Chapter 123 Definition of Functional Strategy Maximizes resource productivity 1.23Definition of Functional Strategy

Prentice Hall, 2000Chapter 124 Hierarchy of Strategy 1.24 Hierarchy of Strategy (Fig. 1.4) Corporate Strategy Corporate Strategy Business (Division Level) Strategy Functional Strategy

Prentice Hall, 2000Chapter 125 Definition of Policies Policies Broad guidelines for making decisions 1.25Definition of Policies

Prentice Hall, 2000Chapter 126 Definition of Strategy Implementation Strategy Implementation The process of putting strategies and policies into action through the development of Programs Programs Budgets Budgets Procedures Procedures 1.26Definition of Strategy Implementation

Prentice Hall, 2000Chapter 127 Definition of Program Program A statement of activities or steps needed to accomplish a single-use plan 1.27Definition of Program

Prentice Hall, 2000Chapter 128 Definition of Budget Budget A statement of a corporation’s program in dollar terms 1.28Definition of Budget

Prentice Hall, 2000Chapter 129 Definition of Procedures Procedures A system of sequential steps or techniques that describe in detail how to perform a particular task or job 1.29Definition of Procedures

Prentice Hall, 2000Chapter 130 Definition of Evaluation and Control Evaluation and Control The process of monitoring corporate activities and performance results so that actual performance can be compared with desired performance 1.30Definition of Evaluation and Control

Prentice Hall, 2000Chapter 131 Triggering Events for Strategic Change New CEONew CEO External interventionExternal intervention Threat of a change in ownershipThreat of a change in ownership Performance gapPerformance gap 1.31Triggering Events for Strategic Change

Prentice Hall, 2000Chapter 132 Characteristics of Strategic Decisions Rare : strategic decisions are unusual and typically have no precedent to follow.Rare : strategic decisions are unusual and typically have no precedent to follow. Consequential : Strategic decisions commit substantial resources and demand a great deal of commitment from people at all levels.Consequential : Strategic decisions commit substantial resources and demand a great deal of commitment from people at all levels. Directive: Strategic decisions set precedents for lesser decisions and future actions throughout the organization.Directive: Strategic decisions set precedents for lesser decisions and future actions throughout the organization. 1.32Characteristics of Strategic Decisions

Prentice Hall, 2000Chapter 133 Modes of Strategy Formulation Entrepreneurial: By one powerful individual.Entrepreneurial: By one powerful individual. Adaptive: “ muddling through”, reactive solution to existing problems.Adaptive: “ muddling through”, reactive solution to existing problems. Planning: Systematic gathering of information, etc.Planning: Systematic gathering of information, etc. Logical incrementalism: A synthesis of the planning, adaptive, and to a lesser extent, the entrepreneurial modes of strategic decision making.Logical incrementalism: A synthesis of the planning, adaptive, and to a lesser extent, the entrepreneurial modes of strategic decision making. 1.33Modes of Strategy Formulation

Prentice Hall, 2000Chapter 134 Strategic Decision-Making Process 1.34Strategic Decision-Making Process (Fig. 1.5)

Prentice Hall, 2000Chapter 135 Strategic Management Process at Maytag Corporation (1993): Mission & Objectives Strategy Formulation Mission Broad: To serve the best interests of shareowners, customers, and employeesBroad: To serve the best interests of shareowners, customers, and employees Narrow: To become a full-line globally-oriented major home appliance manufacturer and marketerNarrow: To become a full-line globally-oriented major home appliance manufacturer and marketerObjectives Increased profitabilityIncreased profitability Number one in customer satisfactionNumber one in customer satisfaction Number three in North American unit salesNumber three in North American unit sales 1.35aStrategic Management Process at Maytag Corporation (1993): Mission & Objectives

Prentice Hall, 2000Chapter 136 Strategic Management Process at Maytag Corporation (1993): Strategies & Policies Strategies To grow horizontally where the corporation is not yet well represented through external acquisition or joint venturesTo grow horizontally where the corporation is not yet well represented through external acquisition or joint ventures To grow horizontally internally by improving efficiency and quality of acquired companies and by using one business unit’s expertise in one acquired are to introduce quality products from a business unit in another areaTo grow horizontally internally by improving efficiency and quality of acquired companies and by using one business unit’s expertise in one acquired are to introduce quality products from a business unit in another area Policies Policies No cost reduction proposal will be approved if it reduces product quality in any wayNo cost reduction proposal will be approved if it reduces product quality in any way Every product, from the least expensive to the highest priced, should be superior to the competition in overall quality and performanceEvery product, from the least expensive to the highest priced, should be superior to the competition in overall quality and performance The corporation must not emphasize market share at the expense of profitabilityThe corporation must not emphasize market share at the expense of profitability Business units must be managed for synergies, while simultaneously the specialized expertise among those units must be allowed to flourishBusiness units must be managed for synergies, while simultaneously the specialized expertise among those units must be allowed to flourish 1.35bStrategic Management Process at Maytag Corporation (1993): Strategies & Policies

Prentice Hall, 2000Chapter 137 Strategic Management Process at Maytag Corporation (1993): Programs & Budgets Programs Work with Bosch-Siemens to develop joint marketing and supplier agreements for Hoover appliancesWork with Bosch-Siemens to develop joint marketing and supplier agreements for Hoover appliances Analyze and develop Asian markets through current distributors and licensees and through joint venturesAnalyze and develop Asian markets through current distributors and licensees and through joint ventures Develop new appliances for continental EuropeDevelop new appliances for continental Europe Develop TV advertising for Jenn-Air and Magic ChefDevelop TV advertising for Jenn-Air and Magic Chef Consolidate production of washers and dryers in dedicated plantsConsolidate production of washers and dryers in dedicated plantsBudgets Prepare budgets for each planned programPrepare budgets for each planned program 1.35cStrategic Management Process at Maytag Corporation (1193): Programs & Budgets

Prentice Hall, 2000Chapter 138 Strategic Management Process at Maytag Corporation (1993): Procedures Procedures Develop procedures for joint purchasing and joint marketing of Bosch-Siemens with HooverDevelop procedures for joint purchasing and joint marketing of Bosch-Siemens with Hoover Coordinate marketing, manufacturing, and purchasing activities of business units through committeesCoordinate marketing, manufacturing, and purchasing activities of business units through committees Research and development takes place in unit housing each product lineResearch and development takes place in unit housing each product line Consolidate all advertising under one agency, but establish internal advertising for each brand categoryConsolidate all advertising under one agency, but establish internal advertising for each brand category 1.35dStrategic Management Process at Maytag Corporation (1993): Procedures

Prentice Hall, 2000Chapter 139 Strategic Management Process at Maytag Corporation (1993): Evaluation & Control Evaluation & Control Require all business units to provide monthly status reports on sales and costs by product line plus any trends in expensesRequire all business units to provide monthly status reports on sales and costs by product line plus any trends in expenses Require all business units to provide annual reports giving operating revenues, costs, and expenses as well as identifiable assets in dollars, plus property additions and deletionsRequire all business units to provide annual reports giving operating revenues, costs, and expenses as well as identifiable assets in dollars, plus property additions and deletions Require all business units to provide quarterly assessments of competitive activity and overall trends affecting each of their product linesRequire all business units to provide quarterly assessments of competitive activity and overall trends affecting each of their product lines Require all business units to inform corporate headquarters before proceeding on any financially risky planRequire all business units to inform corporate headquarters before proceeding on any financially risky plan 1.35eStrategic Management Process at Maytag Corporation (1993): Evaluation & Control