2. Chapter 1 Strategic Management McGraw-Hill/Irwin
Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

3. Learning Objectives Explain the concept of strategic management
Describe how strategic decisions differ from other decisions that managers make
Name the benefits and risks of a participative approach to strategic decision making
Understand the types of strategic decisions for which different managers are responsible
Describe a comprehensive model of strategic decision making
Appreciate the importance of strategic management as a process
Give examples of strategic decisions that companies have recently made
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4. The Nature and Value of Strategic Management
The set of decisions and actions that result in formulation and implementation of plans designed to achieve a company’s objectives
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5. Nine Critical Tasks of Strategic Management -- Tasks 1-5:
Formulate the company’s mission
Conduct an internal analysis
Assess the external environment – competitive and general contexts
Analyze the company’s options by matching its resources with the external environment
Identify the most desirable options in light of the mission
1-5

6. Nine Critical Tasks of Strategic Management -- Tasks 6-9:
Select a set of long-term objectives and grand strategies that will achieve the most desirable options
Develop annual objectives and short-term strategies that are compatible with long-term objectives and grand strategies
Implement the strategic choices
Evaluate the success of the strategic process for future decision making
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7. What is Strategy? Large-scale, future-oriented plan
Used to interact within competitive environment to achieve company goals
Provides a framework for managerial decisions
Reflects a company’s awareness of the main elements of competition
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8. Dimensions of Strategic Decisions
Strategic issues require top-management decisions
Strategic decisions overarch several areas of a firm’s operations
Usually only top management has the perspective needed to understand their broad implications
Usually only top managers have the power to authorize necessary resource allocations
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9. Dimensions of Strategic Decisions (contd.)
Strategic issues require large amounts of the firm’s resources
They involve substantial allocations of people, physical assets, and money
Strategic decisions commit the firm to actions over an extended period
In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm
1-9

10. Dimensions of Strategic Decisions (contd.)
Strategic issues often affect the firm’s long-term prosperity
Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer
Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy
Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains.
1-10

11. Dimensions of Strategic Decisions (contd.)
Strategic issues are future-oriented
They are based on what managers forecast, rather than what they know
Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options
A firm will succeed only if it takes a proactive (anticipatory) stance toward change
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12. Dimensions of Strategic Decisions (contd.)
Strategic issues usually have multifunctional or multibusiness consequences.
Strategic decisions have complex implications for most areas of the firm
Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firm’s SBUs, divisions, or program units
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13. Dimensions of Strategic Decisions (contd.)
Strategic issues require considering the firm’s external environment
All businesses exist in an open system. They affect and are affected by external conditions that are largely beyond their control
Successful positioning requires that strategic managers look beyond operations and consider what relevant others are likely to do
1-13

14. Three Levels of Strategy
Corporate level: board of directors, CEO & administration [Highest]
Business level: business and corporate managers [Middle]
Functional level: Product, geographic, and functional area managers [Lowest]
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15. Alternative Strategic Management Structures
1-15

16. Characteristics of Strategic Management Decisions: Corporate
Often carry greater risk, cost, and profit potential
Greater need for flexibility
Longer time horizons
Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth
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17. Characteristics of Strategic Management Decisions: Functional
Implement the overall strategy formulated at the corporate and business levels
Involve action-oriented and operational issues
Relatively short range and low risk
Modest costs: depend upon available resources
Relatively concrete and quantifiable
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18. Characteristics of Strategic Management Decisions: Business
Help bridge decisions at the corporate and functional levels
Less costly, risky, and potentially profitable than corporate-level decisions
More costly, risky, and potentially profitable than functional-level decisions
Include decisions on plant location, marketing segmentation, and distribution
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19. Formality in Strategic Management
Formality is the degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management
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20. Forces Determining Formality
Organizational Size
Predominant Management Styles
Complexity of Environment
Production Process
Problems in the Firm
Purpose of the Planning System
Stage of Firm’s Development
1-20

21. Three Modes of Formality
Entrepreneurial Mode – most small firms
Planning Mode – most large firms
Adaptive Mode – most medium size firms
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22. Ideal strategic team includes decision makers from all three levels
Strategy Makers
Ideal strategic team includes decision makers from all three levels
Top managers must give final approval
Strategic decisions coincide with managers’ responsibilities
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23. Strategy Makers: The CEO
A firm’s CEO plays a dominant role in strategic planning
The CEO’s principal duty is giving long-term direction to the firm
The CEO bears ultimate responsibility for the firm’s success and strategic success
CEOs are typically strong-willed,
company-oriented individuals
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24. Benefits of Strategic Management
Managers at all levels interact in planning and implementing strategy
Similar to participative decision making
Assessing strategy formulation requires looking at nonfinancial evaluations as well as financial ones
Promoting positive behavioral consequences enables achievement of financial goals
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25. Risks of Strategic Management
Managers’ time away from other responsibilities
Unrealistic expectations promised by strategy formulators
Possible disappointment of participating subordinates if goal is not reached
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26. Strategic Management Process
Businesses vary in formulation and other processes
The basic components of the models used to analyze strategic management are similar
Strategic management is a process—a flow of information through interrelated stages of analysis toward the achievement of some goal
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27. Strategic Management Model
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28. Components of Strategic Management Model
Company Mission
External Analysis
Long-Term Objectives
Short-Term Objectives
Policies Empowering Action
Strategic Control & Continuous Improvement
Internal Analysis
Strategic Analysis & Choice
Generic & Grand Strategies
Functional Tactics
Restructuring, Reengineering & Refocusing
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