Ch 1 - Basic Concepts in Strategic Management
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Transcript of Ch 1 - Basic Concepts in Strategic Management
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STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION
Basic Concepts in Strategic Management
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What is Strategy?• A company’s strategy consists of the set of
competitive moves and business approaches that management is employing to run the company
• Strategy is management’s “game plan” to– Attract and please customers – Stake out a market position– Conduct operations– Compete successfully– Achieve organizational objectives
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“Without a strategy the organization is like a ship without a rudder, going
around in circles.”
Joel Ross and Michael Kami
“Quote”
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Strategic Management DefinedSet of managerial decisions and actions that determines the long-run performance of a firm.
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Strategic Management• Strategic management is the art and science
of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives.
• It is the process of specifying the organization's objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives.
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Highly Rated Benefits
• Clearer sense of strategic vision• Sharper focus on strategic importance• Improved understanding of changing
environment
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4 Phases of Strategic Management
1. Basic financial planning2. Forecast-based planning3. Externally-oriented planning4. Strategic management
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Basic Elements of the Strategic Management Process
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Strategic Management - Process
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Environmental Scanning Defined
Monitoring, evaluation, and disseminating information from external and internal environments to key people in the firm
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Environmental Variables
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Environmental Scanning
SWOT Analysis
• Strengths – Weaknesses
• Opportunities - Threats
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Strategy Formulation
Development of long-range plans for effective management of opportunitiesand threats in light of corporate Strengths and weaknesses
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Strategy FormulationMission Statement
• Purpose / reason for organization• Promotes shared expectations• Communicates public image• Who we are; what we do; what we
aspire to
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• Strategic Vision–A view of an organization’s future direction and business course; a guiding concept for what the organization is trying to do and to become.
• Organization Mission–Represents management’s customized answer to the question “what is our business and what will it be.” A mission statement broadly outlines the organization’s future direction and serves as a guiding concept for what the organization is to do and to become.
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STRATEGY - Types
IntendedStrategy
RealizedStrategyUnrealized
Strategy
Deliberate Strategy
Emergent strategy
Adapted from: Mintzberg, H. “The Strategy Concept I: Five Ps for Strategy” California Management Review. Volume 30 Number1, Fall 1987.
SustainedSuperior
Performance
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Hierarchy of Strategy
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3 Levels of Strategy
– Corporate strategy– Formulated for the company as a whole
– Business strategy– Formulated for each separate business unit
– Functional strategy– Formulated by functional-area managers within each business unit
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What is Corporate Strategy?• Overall GAME PLAN for DIVERSIFIED company
• Consists of – MOVES to establish business positions in different
industries
– APPROACHES to managing group of businesses company has diversified into
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Tasks of Corporate Strategy• Making moves to achieve
DIVERSIFICATION • Initiating actions to BOOST PERFORMANCE
of businesses company has diversified into • Finding ways to capture SYNERGY among
related business units
2 + 2 = 5 effects!
• Establishing INVESTMENT PRIORITIES and steering corporate resources into most attractive business units
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Corporate Strategy
–Stability–Growth–Retrenchment
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What Is Business Strategy?• GAME PLAN for ONE LINE OF BUSINESS
• Central thrust is HOW to build and strengthen firm’s long-term competitive position
• Task separating POWERFUL from WEAK business strategies is forging a series of moves capable of producing – SUSTAINABLE COMPETITIVE ADVANTAGE
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What Is Business Strategy?• Forming responses to changes in
– Industry – Economy – Regulatory and political arena
• Crafting competitive moves that lead to sustainable competitive advantage
• Uniting strategic initiatives of functional areas
• Addressing strategic issues related to firm’s competitive position and internal situation
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Business Strategy
–Competitive strategies
–Cooperative strategies
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Functional Strategies• GAME PLAN for running a particular
function within a business• Adds DETAIL to business strategy and governs HOW key
activities will be managed
• A business needs as many functional strategies as it has major functional activities
• Roles of functional strategies – Provide SUPPORT for overall business
strategy – Specify HOW functional managers plan
to achieve functional area performance objectives
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Functional Strategy
–Technological leadership
–Technological followership
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Operating Strategies• Concerns even narrower strategic approaches
for managing KEY OPERATING UNITS
• Designed to achieve strategy-critical performance targets of operating-level units
• Add detail to overall business plan and functional strategies but are of lesser scope
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Strategic Decision Making
Strategic Decisions
–Rare
–Consequential
–Directive
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Strategic Decision – Making Process
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Mintzberg’s Modes
–Entrepreneurial mode–Adaptive mode–Planning mode–Logical incrementalism
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Hambrick and Fredrickson – Good Strategy
5 Elements of Good Strategy
1. Arenas2. Vehicles3. Differentiators4. Staging5. Economic logic
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Please prepareMission,Vision,
ObjectiveFor a
Company Of yourchoice