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Ch 1 -1
Chapter 1
The Nature of Strategic Management


Strategic Management:
Concepts & Cases
13
th
Edition
Fred David



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Ch 1 -2

Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives

Strategic Management Defined
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Ch 1 -3
Purpose of Strategic Management

To exploit and create new and different
opportunities for tomorrow
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Ch 1 -4
Strategic Management

In essence, the strategic plan is a
companys game plan
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Ch 1 -5
3 Stages of the Strategic
Management Process

Strategy formulation

Strategy implementation

Strategy evaluation
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Ch 1 -6


Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Ch 1 -7


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
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Ch 1 -8


Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Ch 1 -9
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
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Ch 1 -10


Issues in Strategy
Implementation
Action Stage of Strategic
Management

Mobilization of
employees & managers

Most difficult stage

Interpersonal skills
critical
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Ch 1 -11


Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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Ch 1 -12

Peter Drucker: Think through the
overall mission of a business. Ask
the key question:
What is our Business?

Prime Task of
Strategic Management
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Ch 1 -13

The strategic management process
attempts to organize quantitative and
qualitative information under conditions of
uncertainty


Integrating Intuition & Analysis
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Ch 1 -14

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

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Ch 1 -15


Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
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Ch 1 -16

Organizations should continually
monitor internal and external
events and trends so that timely
changes can be made as needed
Adapting to Change
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Ch 1 -17
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
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Ch 1 -18

Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage
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Ch 1 -19

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
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Ch 1 -20


Strategists
Gather Information
Analyze Information
Organize Information
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Ch 1 -21

Vision Statement
What do we want to become?


Mission Statement
What is our business?
Vision and Mission Statements
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Ch 1 -22
External Opportunities and Threats
Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
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Ch 1 -23
Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation

Take advantage of
External Opportunities

Avoid/minimize impact of
External Threats

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Ch 1 -24

Controllable activities performed
especially well or poorly

Determined relative to competitors
Internal Strengths and Weaknesses

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Ch 1 -25
Typically located in functional areas of the firm

Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Management Information Systems
Internal Strengths and Weaknesses
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Ch 1 -26
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
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Ch 1 -27

Specific results that an organization
seeks to achieve in pursuing its basic
mission

Long-term means more than one year
Long-Term Objectives

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Ch 1 -28
Long-Term Objectives
Essential for ensuring the firms success
Provide direction
Aid in evaluation
Create synergy
Reveal priorities
Focus coordination
Provide basis for planning, organizing,
motivating, and controlling

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Ch 1 -29

Means by which long-term objectives
are achieved
Strategies
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Ch 1 -30
Strategies
Examples
Geographic expansion
Diversification
Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture

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Ch 1 -31
Sample Strategies
Table 1-1

Best Buy

Levi Strauss

New York Times Company


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Ch 1 -32

Short-term milestones that firms must
achieve to reach long-term objectives
Annual Objectives
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Ch 1 -33

Means by which annual objectives will
be achieved
Policies
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Ch 1 -34
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Ch 1 -35

Strategic Management Process
Dynamic & continuous
More formal in larger
organizations
Strategic Management Model
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Ch 1 -36
Strategic Management

Communication is a key to
successful strategic management
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Ch 1 -37
Benefits of Strategic Management
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Ch 1 -38
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
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Ch 1 -39
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
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Ch 1 -40
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
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Ch 1 -41
Pitfalls in Strategic Planning

Strategic planning is an involved, intricate,
and complex process that takes an
organization into uncharted territory
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Ch 1 -42
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
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Ch 1 -43
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


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Ch 1 -44
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
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Ch 1 -45
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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Ch 1 -46
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