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Copyright © 2001 Houghton Mifflin Company. All rights reserved.
Chapter 1
The Strategic Management Process
Strategic Charles W. L. Hill
Management Gareth R. Jones
Fifth Edition
PowerPoint Presentation by Charlie Cook
An Integrated Approach
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Overview
Why do some firms succeed while others fail? A central objective of strategic management is to
learn why this happens.
What is strategy? An action a company takes to attain superior
performance.
What is the strategic management process? The process by which managers choose a set of
strategies for the enterprise to pursue its vision.
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Defining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and Threats
Internal Analysis of Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Chosen Strategies
Strategic Planning
Rational planning by top management?
Basic Strategic Planning Model
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FIGURE 1.1
The Main Components of the Strategic Planning Process
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Mission and Goals
Mission Sets out why the organization
exists and what it should be doing.
Major goals Specify what the organization hopes
to fulfill in the medium to long term.
Secondary goals Are objectives to be attained that lead to superior
performance.
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External Analysis
Identify strategic opportunities and threats in the operating environment.
Macroenvironment National
Immediate (Industry)
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Internal Analysis
Identify strengths Quality and quantity of resources available Distinctive competencies
Identify weaknesses Inadequate resources Managerial and
organizational deficiencies
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Strengths and Weaknesses
Opportunities and Threats(SWOT Analysis)
Strategic ChoiceBusiness
FunctionalGlobal
Corporate
SWOT and Strategic Choice
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Business-Level Strategies
Cost leadership Attaining, then using the lowest total cost basis as a
competitive advantage.
Differentiation Using product features or services to distinguish the
firm’s offerings from its competitors.
Market niche focus Concentrating competitively on
a specific market segment.
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Functional-Level Strategies
Focus is on improving the effectiveness of operations within a company.
Manufacturing Marketing Materials management Research and development Human resources
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Global-Level Strategies
Multidomestic
International
Global
Transnational
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Corporate-Level Strategies
Vertical integration
Diversification
Strategic alliances
Acquisitions
New ventures
Business portfolio restructuring
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Strategy Implementation
Designing organizational structure
Designing control systems Market and output controls Bureaucratic controls Control through organizational culture Rewards and incentives
Matching strategy, structure, and controls
Congruence (fit) among strategy, structure, and controls
Structure
Strategy
Controls
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Managing Strategic Change
The only constant is change.
Success requires adapting strategy and structure to a changing world.
The feedback loop in strategic planning. Corporate
Functional
BusinessOperational
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Strategic Managers
General managers Responsible for the overall (strategic) performance
and health of the total organization.
Operations managers Responsible for specific business
functions or operations.
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Strategic Managers for All Levels
FIGURE 1.2
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Strategic Leadership
Vision, eloquence, and consistency
Commitment to the vision
Being well informed
Willingness to delegate and empower
Astute use of power
Emotional intelligence
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Strategy as an Emergent ProcessStrategy making in an unpredictable world
Creates the necessity for flexible strategic approaches.
Strategy making by lower-level managers Strategy evolves through autonomous action.
Serendipity and strategy Accidental discoveries and happenstances can have dramatic
effects on strategic direction.
Intended and emergent strategies Realized strategies are combinations of intended and
emergent strategies.
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FIGURE 1.3
Intended and Emergent Strategies
Source: Reprinted from “Strategy Formation in an Adhocracy,” by Henry Mintzberg and Alexandra McGugh, published in Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by permission of Administrative Science Quarterly.
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FIGURE 1.4
The Strategic Management Process for Intended and Emergent Strategies
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Strategic Planning in Practice
Planning under uncertainty Scenario planning for dynamic environmental change
Ivory tower planning Lack of contact with operational realities The importance of involving operating managers Procedural justice in the decision-making process
Engagement, explanation, and expectations
Planning for the present: Strategic Intent Recognition of the static nature of the strategic fit model Strategic intent in focusing the organization on winning by
achieving stretch goals
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Improving Strategic Decision MakingCognitive biases systematically influence the rationality of decision makers.
FIGURE 1.5
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Groupthink and Strategic DecisionsPitfalls of groupthink
Failing to question underlying assumptions. Coalescing around a single person or policy. Filtering out conflicting information. Developing after-the-fact rationalizations. Having an emotional (nonobjective)
commitment to an action.
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Techniques for Improving Decision MakingTwo decision-making processesthat counteractcognitive biases and groupthink.
FIGURE 1.6