Strategic Management Summer 2013 Chapter 1

Strategic Management- The set of decisions and actions that result in the formulation and implementation
of plans designed to achieve a companys objectives. Critical Task in Strategic Management 1. 2. 3. 4. 5. 6. 7. 8. 9. Formulate the companys mission Develop a company profile Assess the companys options Analyze the companys options Identify the most desirable option Select a set of long-term objectives/grand strategies Develop annual objectives/short-term strategies Implement strategic choices Evaluate the success of the strategic process

A strategy is a companys game plan. It provides a framework for managerial decisions and reflects a companys awareness of how, when and where it should compete; against whom it should compete; and for what purposes it should compete. Dimensions of Strategic Decisions What decisions facing a business are strategic and therefore deserve strategic management attention? 1. 2. 3. 4. 5. Top-Management Decisions Large amount of the Firms Resources Affect the Firms Long-Term Prosperity Future Oriented Multifunctional/Multibusiness Consequences

6. Considering the Firms External Environment

THREE LEVELS OF STRATEGY CORPORATE LEVEL- BOD, CEO, AO BUSINESS LEVEL- business and corporate managers FUNCTIONAL LEVEL- managers of products, geographic and functional areas

CHARACTERISTICS OF STRATEGIC MANAGEMENT DECISIONS CORPORATE LEVEL- risk, potential, flexibility, time horizons FUNCTIONAL LEVEL- operational issues, low risk, modest cost, minimal cooperation, concrete and quantifiable, critical attention and analysis BUSINESS LEVEL- bridge decisions at the corporate and functional levels

Formality refers to the degree to which participants, responsibilities, authority, and discretion in decision making are specified. The Strategy Makers-

a. Top management shoulders broad responsibility for all the major elements of strategic planning and management. b. General managers at the business level typically have principal responsibilities for developing environmental analysis and forecasting, establishing business objectives, and developing business plans prepared by staff groups.
The Benefits-

a. Strategy formulation activities enhance the firms ability to prevent problems. b. Group-based strategic decisions are likely to be drawn from the best available alternatives c. The involvement of employees in strategy formulation improves their understanding of the productivity-reward relationship in every strategic plan and, thus, heightens their motivation. d. Gaps and overlaps in activities among individuals and groups are reduced as participation in strategy formulation clarifies differences in roles. e. Resistance to change is reduced.

Strategic Management Summer 2013 Chapter 1

The Risks

a. The time spent by managers on the strategic management process may have a negative impact, thus, on operational responsibilities b. If the formulators of strategies are not intimately involved in its implementation, they may shirk their individual responsibility for the decisions reached. c. Strategic managers must be trained to anticipate and respond to the disappointment of participating subordinates over unattained expectations
Executives View How do managers and corporate executives view the contribution of strategic management to the success of their firms?

COMPONENTS of the STRATEGIC MANAGEMENT MODEL

1. 2. 3. 4. 5. 6. 8. 9. 10. 11. 12. 13. Company Mission Company Profile External Environment Strategic Analysis and Choice Long-term objectives Grand Strategy Functional Strategies Annual Objectives Functional Strategies Policies Institutionalizing the Strategy Control and Evaluation

7. Annual Objectives