1. CHAPTER-01 BASIC CONCEPTS OF STRATEGIC MANAGEMENT (SM)
ALMA.SHAMEEM
13 April 2017

2. Learning Objectives
After studying this chapter, you should be able to do the following:
Define the term strategic management (SM)
Describe the SM process.
Explain the need for integrating analysis and intuition in strategic management.
Explain the benefits of strategic management.
Explain the impacts of Globalization and E-commerce on SM.
Describe the theory of learning organization.
Explain the basic model of SM.
Discuss the basic model of SM: The nature of strategy formulation, implementation, and evaluation activities.
Describe the strategic decision making model.
Discuss how a firm may achieve sustained competitive advantage.
13 April 2017

3. Strategic Management
SM is that set of managerial decisions and actions that determines the long run performance of a company.
How does a company become successful and stay successful?
13 April 2017

4. 4 Phases in the Evolution of Strategic Management /4 Types of Strategic Management
Basic financial planning – internal focus on budgeting (1 yr horizon)
Forecast-based planning – extrapolate the current situation into the future (3-5 yr horizon)
Externally-oriented planning – planning department and/or consultants develop a top-down strategy with no lower level involvement.
Strategic management – involves various departments and levels across the organization. An ongoing process that includes implementation, evaluation and control issues.
13 April 2017

5. Benefits of SM Key Questions Where is the organization now?
If no changes are made, where will the organization be in 1, 2, 5 or 10 years?
What specific actions should management undertake?
What are the risks and payoffs
13 April 2017

6. Benefits of SM Why need Strategic Management?
Clearer sense of strategic vision
Sharper focus on strategic importance
Improved understanding of changing environment
13 April 2017

7. Benefits of SM
Following are the major benefits of Strategic management:
Proactive in shaping firm’s future
Initiate and influence actions
Formulate better strategies (Systematic, logical, rational approach)
Financial benefits:
Improved productivity
Improved sales
Improved profitability
Non-Financial benefits:
Increased employee productivity
Improved understanding of competitors’ strategies
Greater awareness of external threats
Understanding of performance reward relationships
Better problem-avoidance
Lesser resistance to change

8. Globalization & E-Commerce Challenges to SM
Impact of Globalization
Internationalization of markets & corporations
Markets: global than national markets
Impact of Electronic Commerce
Internet to conduct business transactions
Basis for competition on a more strategic level rather than traditional focus on product features and costs
13 April 2017

9. Theories of Organizational Adaptation
Population Ecology vs. Institutional Theory
(Can’t Change) (Mimic successful organizations)
Strategic Choice Perspective
(Management decisions have at
least as much impact as industry factors)
Organizational Learning Theory
13 April 2017

10. Creating Learning Organization (LO)
LO is skilled at creating, acquiring and transferring knowledge and modifying its behavior to reflect new knowledge and insight.
Key Activities:
Solve problems systematically
Experiment with new approaches
Learn from experience
Transfer knowledge throughout the organization
13 April 2017

11. Basic Model of SM
Four Basic Elements
13 April 2017

12. The term used in previous slide are explained here.
13 April 2017

13. 1.Environmental Scanning
Monitoring, evaluation, and disseminating information from external and internal environments –to key people in the firm
SWOT Analysis
Strengths – Weaknesses
Opportunities – Threats
13 April 2017

14. 1. Environmental Scanning
13 April 2017

15. 2. Strategy Formulation
Development of long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses
13 April 2017

16. 2.Strategy Formulation Vision statement
“Vision is the art of seeing things invisible”
Jonathan Swif
Mission Statement
Purpose/reason for organization
Promotes shared expectations
Communicates public image
Who we are; what we do; what we aspire to
13 April 2017

17. 2.Strategy Formulation SMART Goals
Corporate Goals/Objectives flow from the Mission/Vision statement
Profitability (net profit)
Growth
Resource utilization (ROE, ROI)
Market leadership
Corporate Goals/Objectives need to be:
Specific
Measurable
Action oriented
Realistic
Timing is identified
SMART Goals
13 April 2017

18. 2. Strategy Formulation Selecting Strategy / Hierarchy of Strategy
Corporate strategy (Stability, Growth, Retrenchment)
Business strategy (Competitive, Cooperative)
Functional strategy (Technological Leadership, Technological Followership)
Defining Policies
Guidelines for decision making that links formulation to implementation
13 April 2017

19. 3. Strategy Implementation Process by which strategies and policies are put into action through development of programs and procedures
Programs
Strategy
Implementation
Budgets
Procedures
13 April 2017

20. 3. Strategy Implementation
Programs – single use plans (projects)
Budgets – costs associated with a program
Procedures – system of sequential steps that describe how a particular task or job is to be done
13 April 2017

21. 4.Evaluation and Control
Process by which corporate activities and performance results are monitored so that actual performance can be compared with desired performance.
Feedback/Learning Process
Must go back to revise or correct decisions made earlier.
13 April 2017

22. Triggering Events New CEO External Intervention
Threat of change in ownership
Performance Gap
Strategic inflection point (industry)
13 April 2017

23. Strategic Decisions Rare – unusual, no precedent
Consequential – commit substantial resources
Directive – set precedents for decision making
13 April 2017

24. Mintzberg’s Modes of Strategic Decision Making
Entrepreneurial mode – founders vision
Adaptive mode – “muddling through” (reactive)
Planning mode – systematic gathering and analysis of information
Logical incrementalism – interactive strategy development (Planning + Adaptive)
13 April 2017

25. Strategic Decision Making Model
13 April 2017

26. Strategic Decision Making
13 April 2017

27. Elements of Good Strategy
Arenas – Where?
Vehicles – How to get there?
Differentiators – How to win?
Staging – Speed and sequence – tactics
Economic logic – How will we gain a return?
13 April 2017

28. Key Reference
Chapter 01-J David Hunger and Thomas L Wheelan, Strategic Management and Business Policy (10th Edition), Addison Wesley Lingman Inc.
13 April 2017

29. Thank You
Chapter Roundup and Discussions
13 April 2017