The Nature of Strategic Management Strategic Management: Concepts & Cases All rights reserved by

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management –Defined All rights reserved by

Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow All rights reserved by

Strategic Management In essence, the strategic plan is a company’s game plan

All rights reserved by 3 Stages of the Strategic Management Process Strategy formulation Strategy implementation Strategy evaluation

All rights reserved by Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

All rights reserved by 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

All rights reserved by Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation

All rights reserved by 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

All rights reserved by 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

All rights reserved by Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action

All rights reserved by Peter Drucker: Think through the overall mission of a business. Ask the key question: “What is our Business?” Prime Task of Strategic Management

All rights reserved by The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Integrating Intuition & Analysis

All rights reserved by 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

All rights reserved by Involve management at all levels Intuition & Judgment Influence all analyses Integrating Intuition & Analysis

All rights reserved by Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Adapting to Change

All rights reserved by 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

All rights reserved by Anything that a firm does especially well compared to rival firms Strategic Management is Gaining and Maintaining Competitive Advantage

All rights reserved by 1. 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

All rights reserved by Strategists Gather Information Analyze Information Organize Information

All rights reserved by Vision Statement – What do we want to become? Mission Statement – What is our business? Vision and Mission Statements

All rights reserved by External Opportunities and Threats Analysis of Trends  Economic  Social  Cultural  Demographic/Environmental  Political, Legal, Governmental  Technological  Competitors

All rights reserved by 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

All rights reserved by  Controllable activities performed especially well or poorly  Determined relative to competitors Internal Strengths and Weaknesses

All rights reserved by Typically located in functional areas of the firm  Management  Marketing  Finance/Accounting  Production/Operations  Research & Development  Management Information Systems Internal Strengths and Weaknesses

All rights reserved by Assessing the Internal Environment Internal Strengths and Weaknesses Internal Factors Performance Measures Ratios Industry Averages Survey Data

All rights reserved by  Specific results that an organization seeks to achieve in pursuing its basic mission  Long-term means more than one year Long-Term Objectives

All rights reserved by 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

All rights reserved by Means by which long-term objectives are achieved Strategies

All rights reserved by Strategies Examples  Geographic expansion  Diversification  Acquisition  Product development  Market penetration  Retrenchment  Divestiture  Liquidation  Joint venture

All rights reserved by Sample Strategies Table 1-1  Best Buy  Levi Strauss  New York Times Company

All rights reserved by Short-term milestones that firms must achieve to reach long-term objectives Annual Objectives

All rights reserved by Means by which annual objectives will be achieved Policies

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 Strategic Management Process  Dynamic & continuous  More formal in larger organizations Strategic Management Model

All rights reserved by Strategic Management Communication is a key to successful strategic management

All rights reserved by Benefits of Strategic Management

All rights reserved by 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

All rights reserved by 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

All rights reserved by 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

All rights reserved by Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory

All rights reserved by 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

All rights reserved by 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

All rights reserved by 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

All rights reserved by 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

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