David PPT Exp Ch01

Chapter 1
The Nature of Strategic Management
Strategic Management:
Concepts & Cases
11th Edition
Fred David
Copyright 2007 Prentice Hall
Ch 1 -1
Themes in the Text

Global Considerations
impact virtually all strategic decisions
E-commerce
vital strategic management tool
Natural environment
important strategic issue
Ch 1 -2
Strategic Management
Defined
Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives
Ch 1 -3
In essence, the strategic plan is a

companys game plan
Ch 1 -4
achieves a firms success
through integration
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
MIS
Ch 1 -5
Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch 1 -6
Issues in Strategy
Formulation
New business
opportunities
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint ventures
Avoidance of hostile
takeover
Ch 1 -7
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -8
Strategy
Implementation
Action Stage of Strategic
Management
Most difficult stage
Mobilization of
employees & managers
Interpersonal skills
critical
Consensus on goal
pursuit
Ch 1 -9
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
Ch 1 -10
Strategy
Evaluation
Final Stage of Strategic
Management
Subject to future
modification
Todays success no
guarantee of future success
New & different problems
Complacency leads to
demise
Ch 1 -11
Prime Task of
Peter Drucker: -- Think through the

overall mission of a business. Ask
the key question: What is our
Business?
Ch 1 -12
Integrating Intuition and

Analysis
The strategic management process

attempts to organize quantitative and
qualitative information under conditions of
uncertainty
Ch 1 -13
Integrating Intuition and

Analysis
Intuition is based on:
Past experiences
Judgment
Feelings
Intuition is useful for decision making in:

Conditions of great uncertainty
Conditions with little precedent
Ch 1 -14
Integrating Intuition &

Analysis
Intuition & Judgment
Involve Management at all levels
Influence all Analyses
Ch 1 -15
Integrating Intuition &

Analysis
Analytical Thinking
Intuitive Thinking
Ch 1 -16
Adapting to Change
Organizations must monitor

events
On-going process
Internal and external events
Timely changes
Ch 1 -17
Strategic Management is
Gaining and Maintaining
Competitive Advantage
Anything that a firm does especially

well compared to rival firms
Ch 1 -18
Achieving Sustained
Competitive Advantage
1. Adapting to change in external trends,
internal capabilities and resources
2. Effectively formulating, implementing &

evaluating strategies
Ch 1 -19
Ch 1 -20
Adapting to Change
Rate & magnitude of change
increasing dramatically
E-commerce
Demographics
Technology
Ch 1 -21
Adapting to Change
Effective Adaptation
Requires long-term focus
Ch 1 -22
Adapting to Change Key

Questions
What kind of business should

we become?
Are we in the right fields
Are there new competitors?
What strategies should we
pursue?
How are our customers
changing?
Ch 1 -23
Key Terms
Strategists Firms success/failure
Various Job Titles:
Chief Executive Officer (CEO)

Chief Strategy Officer (CSO)
President
Owner
Board Chair
Executive Director
Ch 1 -24
Key Terms
Vision Statement
What do we want to become?
Mission Statement
What is our business?
Ch 1 -25
Key Terms
Opportunities and Threats (External)
Largely beyond the control of a single

organization
Ch 1 -26
Key Terms
Opportunities & Threats (External)
Analysis of Trends:
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
Ch 1 -27
Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)
Process of conducting research and

gathering and assimilating external
information
Ch 1 -28
Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation
Avoid/minimize impact of
External Threats
Ch 1 -29
Key Terms
Strengths & Weaknesses (Internal)
Controllable activities performed especially

well or poorly
Ch 1 -30
Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Computer Information Systems
Ch 1 -31
Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios
Performance Metrics
Internal Factors
Industry Averages
Survey Data
Ch 1 -32
Key Terms
Long-term Objectives
Mission-driven pursuit of specified results

more than one year out
Ch 1 -33
Key Terms
Long-term Objectives
Essential for ensuring the firms success
Provide direction
Aid in evaluation
Create synergy
Focus coordination
Basis for planning, motivating, and

controlling
Ch 1 -34
Key Terms
Strategies
Means by which long-term objectives are

achieved
Ch 1 -35
Key Terms
Strategies
Some Examples
Geographic expansion
Diversification
Acquisition
Market penetration
Retrenchment
Liquidation
Joint venture
Ch 1 -36
Key Terms
Annual Objectives
Short-term milestones that firms must

achieve to attain long-term objectives
Ch 1 -37
Key Terms
Policies
Means by which annual objectives will be

achieved
Ch 1 -38
Example Strategies in Action in 2005
Ch 1 -39
Example Strategies in Action in 2005
Ch 1 -40
Comprehensive strategic management model

External
Audit
Chapter 3
Vision
&
Mission
Chapter 2
Long-Term
Objectives
Generate,
Evaluate,
Select
Strategies
Implement
Strategies:
Mgmt Issues
Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS
Measure &
Evaluate
Performance
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Internal
Audit
Chapter 4
Ch 1 -41
Strategic Management Model
Strategic Management Process
Dynamic & Continuous

More formal in larger organizations
Ch 1 -42

1. Identify Existing -
Vision
Mission
Objectives
Strategies
Ch 1 -43

2.
3.
4.
5.
6.
7.
Audit external environment

Audit internal environment
Establish long-term objectives
Generate, evaluate & select
strategies
Implement selected strategies
Measure & evaluate performance
Ch 1 -44
Benefits of Strategic
Management
Proactive in shaping firms future
Initiate and influence firms activities
Formulate better strategies

Systematic, logical, rational
Ch 1 -45
Management
Financial Benefits
Improvement in sales
Improvement in profitability
Productivity improvement
Ch 1 -46
Management
Non-Financial Benefits
Improved understanding of competitors strategies
Enhanced awareness of threats

Reduced resistance to change
Enhanced problem-prevention capabilities
Ch 1 -47
Management (Greenley)
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
Ch 1 -48
Management (Greenley contd)
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
Ch 1 -49
Management (Greenley contd)
11. Encourages
favorable attitude toward
change
12. Provides
discipline and formality to the

management of the business
Ch 1 -50
Why Some Firms Do No

Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success

Ch 1 -51
Why Some Firms Do No

Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
Ch 1 -52
Business Ethics & Strategic

Management
Business Ethics defined
Principles of conduct within organizations

that guide decision making and behavior
Ch 1 -53

Management
Good business ethics
Prerequisite for good strategic management
Ch 1 -54

Management
Code of business ethics
Provides basis on which policies can be

devised to guide daily behavior and
decisions in the workplace
Ch 1 -55

Management
Business practices always considered unethical
Misleading advertising
Misleading labeling
Harm to the environment
Insider trading
Dumping flawed products on foreign markets
Poor product or service safety
Padding expense accounts
Ch 1 -56
Natural Environment
Perspective
ISO used to gain strategic advantage
ISO 9000 focuses on quality control

> 1.5 million companies incorporate ISO
Ch 1 -57
Natural Environment
Perspective
ISO 14000 standards
Voluntary standards
ISO 14001 standard for Environmental
Management System
Firms minimize harmful effects on
environment
Ch 1 -58
The Nature of Global

Competition
International/multinational corporations
Parent company
Host country
Ch 1 -59
The Nature of Global

Competition
Strategy implementation may be difficult
Cultural differences
Norms
Values
Work ethic
Ch 1 -60
Advantages of International
Operations
Absorb excess capacity
Reduce unit costs
Spread risk over wider markets

Low-cost production facilities
Ch 1 -61
Advantages of International
Operations (contd)
Less intense competition

Lower taxes
Economies of scale
Ch 1 -62
Disadvantages of International
Operations
Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currency
differences
Ch 1 -63

David PPT Exp Ch01

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Chapter 1

The Nature of Strategic Management

Copyright 2007 Prentice Hall

Themes in the Text

Art & science of formulating,

Copyright 2007 Prentice Hall

In essence, the strategic plan is a

Copyright 2007 Prentice Hall

Research & Development

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Peter Drucker: -- Think through the

Copyright 2007 Prentice Hall

Integrating Intuition and

The strategic management process

Copyright 2007 Prentice Hall

Integrating Intuition and

Intuition is useful for decision making in:

Copyright 2007 Prentice Hall

Integrating Intuition &

Involve Management at all levels

Influence all Analyses

Copyright 2007 Prentice Hall

Integrating Intuition &

Copyright 2007 Prentice Hall

Organizations must monitor

Copyright 2007 Prentice Hall

Anything that a firm does especially

Copyright 2007 Prentice Hall

2. Effectively formulating, implementing &

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Requires long-term focus

Copyright 2007 Prentice Hall

Adapting to Change Key

What kind of business should

Copyright 2007 Prentice Hall

Chief Executive Officer (CEO)

Copyright 2007 Prentice Hall

Opportunities and Threats (External)

Largely beyond the control of a single

Copyright 2007 Prentice Hall

Political, Legal, Governmental

Copyright 2007 Prentice Hall

Process of conducting research and

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Strengths & Weaknesses (Internal)

Controllable activities performed especially

Copyright 2007 Prentice Hall

Research & Development

Computer Information Systems

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Mission-driven pursuit of specified results

Copyright 2007 Prentice Hall

Basis for planning, motivating, and

Copyright 2007 Prentice Hall