Chapter 01

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Ch. 1-1

Chapter 1

The Nature of Strategic

Management

Strategic Management:

Concepts and Cases. 9thedition

Fred R. David

PowerPoint Slides by

Anthony F. Chelte

Western New England College

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Ch. 1-2

The Nature of Strategic

Management

A global perspectiveis a matter of

survival for businesses. E-commerceis a vital strategic

management tool.

The natural environmentis an importantstrategic issue.

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Ch. 1-3

Strategic Management Achieves

Organizational Success

Process of Integrating:

management marketing

finance/accounting

production/operations research and development

computer information systems

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Ch. 1-4

Three-Stage Process

Strategy Formulation

Strategy Implementation

Strategy Evaluation

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Ch. 1-5

Strategy Formulat ion

Vision & Mission

Alternative Strategies

Long-Term Objectives

Strengths & Weaknesses

Opportunities & Threats

Strategy Selection

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Ch. 1-6

Strategy Formulation

Issues include:

What new businesses to enter

What businesses to abandon How to allocate resources

Expand operations or diversify

Enter international markets Merge or form joint venture

Avoidance of hostile takeover

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Ch. 1-7

Strategy Implementat ion

Employee Motivation

Policies

Annual Objectives

Resource Allocation

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Ch. 1-8

Strategy Implementation

Action Stage of strategic management:

Most difficult stage

Mobilizing employees and managers

Interpersonal skills are critical

Consensus on pursuing goals

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Ch. 1-9

Strategy Evaluat ion

Performance Measurement

External Review

Internal Review

Corrective Action

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Ch. 1-10

Strategy Evaluation

Final stage of strategic management:

All strategies subject to future modification Success today is no guarantee of success

tomorrow

Success creates new and different problems

Complacency leads to demise

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Ch. 1-11

Prime Task of Strategic

Management

According to Peter Drucker

The prime task is to think through theoverall mission of a business

Ask the question:

What is our Business?

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Ch. 1-12

Integrating Intuition and Analysis

The strategic management process

attempts to organize quantitative andqualitative information under

conditions of uncertainty.

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Ch. 1-13


Intuition based on:

Past experiences

Judgment

Feelings

Useful for decision making

Conditions of great uncertainty

Conditions with little precedent

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Ch. 1-14


Intuition and judgment

Management at all levels

Analyses are influenced

Analytical thinking and intuitive thinking

Complement each other

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Ch. 1-15

Adaptation to Change

Organizations must monitor events

On-going process

Internal and external events

Timely changes

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Ch. 1-16


Rate and magnitude of changes

Increasing dramatically

E-commerce Demographics

Technology

Merger-mania Effective Adaptation

Long-run focus

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Ch. 1-17


Key strategic-management questions:

What kind of business should we become?

Are we in the right fields? Should we reshape our business?

What new competitors are entering our

industry? What strategies should we pursue?

How are our customers changing?

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Ch. 1-18

Key Terms

Strategists

Most responsible for success or failure of anorganization

Various job titles: Chief executive officer

President

Owner Chair of the Board

Executive Director

Entrepreneur

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Ch. 1-19

Key Terms

Vision Statement

What do we want to become?

Mission Statement What is our business?

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Ch. 1-20

Key Terms

External Opportunities and Threats Significantly benefit or harm the organization in the

future.

Include the following trends: Economic

Social

Cultural

Demographic Environmental

Political, legal, governmental

Technological

Competitive trends

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Ch. 1-21

Key Terms

External Opportunities and Threats

Largely beyond the control of a single

organization.

Basic tenet of strategic management

Strategy formulation to:

Take advantage of external opportunities

Avoid or reduce impact of external threats

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Ch. 1-22

Key Terms

Environmental Scanning

Industry Analysis

Process of conducting research and

gathering and assimilating externalinformation

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Ch. 1-23

Key Terms

Internal Strengths and Weaknesses Controllable activities performed especially

well or poorly.

Arise in functional areas of the business: Management

Marketing

Finance/accounting Production/operations

Research & development

Computer Information Systems

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Ch. 1-24

Key Terms

Determining Internal Factors:

Financial ratios

Measuring performance

Industry averages

Survey data

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Ch. 1-25

Key Terms

Long-term objectives:

Mission-driven pursuit of specific results morethan one-year out.

Essential for organizational success State direction

Aid in evaluation Create synergy

Focus coordination

Basis for planning, motivating and controlling

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Ch. 1-26

Key Terms

Strategies: Means by which long-term objectives will be

achieved.

May include: Geographic expansion, diversification

Acquisition

Product development, market penetration Retrenchment, divestiture

Liquidation, joint venture

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Ch. 1-27

Key Terms

Annual Objectives:

Short-term milestones that organizations mustachieve to reach long-term objectives.

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Ch. 1-28

Key Terms

Policies:

Means by which annual objectives will beachieved.

C h i St t i M t M d l

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Ch. 1-29

Comprehensive Strategic Management Model

ExternalAudit

Chapter 3

InternalAudit

Chapter 4

Long-TermObjectives

Chapter 5

Generate,Evaluate,

SelectStrategies

Chapter 6

ImplementStrategies:

Mgmt Issues

Chapter 7

ImplementStrategies:

Marketing,Fin/Acct,R&D, CIS

Chapter 8

Measure &Evaluate

Performance

Chapter 9

Vision&

Mission

Chapter 2

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Ch. 1-30

Strategic-Management Model

Strategic-Management Process

Dynamic and Continuous

More formal in larger organizations

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Ch. 1-31


1.Identify Organizations existing:

Vision

Mission

Objectives

Strategies

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Ch. 1-32


2.Perform External Audit

3.Perform Internal Audit

4.Establish long-term objectives5.Generate, evaluate, select strategies

6.Implement strategies

7.Measure and evaluate performance

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Ch. 1-33

Benefits of Strategic

Management

Proactive in shaping organizations future

Initiate and influence activities Formulate better strategies Systematic, logical, rational approach

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Ch. 1-34


Management

Financial benefits

Improvement in sales Improvement in profitability

Improvement in productivity

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Ch. 1-35


Management

Non-Financial benefits Enhanced awareness of xternal threats

Improved understanding of competitorsstrategies

Increased employee productivity

Reduced resistance to change

Understanding of performance-rewardrelationships

Enhances problem-prevention capabilities

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Ch. 1-36


Management

1.Identification of opportunities

2.Objective view of management problems

3.Improved coordination and control4.Minimizes adverse conditions andchanges

5.Decisions to better support objectives

6.Effective allocation of time and resources7.Internal communication among personnel

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Ch. 1-37


Management

8.Integration of individual behaviors

9.Clarifies individual responsibilities

10.Encourages forward thinking11.Encourages favorable attitude toward

change

12.Discipline and formality to themanagement of the business

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Ch. 1-38

Poor reward structures

Fire-fighting Waste of time

Too expensive

Laziness Content with success

Why Some Firms Do No

Strategic Planning

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Ch. 1-39

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknown

Suspicion

Why Some Firms Do No

Strategic Planning (Contd)

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Ch. 1-40

Business ethics defined:

Principles of conduct within

organizations that guide decision

making and behavior.

Business Ethics and Strategic

Management

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Ch. 1-41

Good business ethics:

prerequisite for good strategic

management


Management

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Ch. 1-42

Code of business ethics:

Provides basis on which policies can

be devised to guide daily behavior

and decisions at the workplace


Management

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Ch. 1-43

Internet privacy

Emerging ethical issue of immense

proportion


Management

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Ch. 1-44

Internet and business ethics --

38% of companies store and reviewemployees email messages

Up from 15% in 1997

54% of companies monitor

employees Internet connections


Management

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Ch. 1-45

Business actions alwaysunethical include:

Misleading advertising

Misleading labeling

Environmental harm

Poor product or service safety

Padding expense accounts Insider trading

Dumping flawed products on foreign markets

Business Ethics & Strategic

Planning

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Ch. 1-46

Nature of Global Competition

Companies conduct business acrossborders

International or multinational corporations Parent company

Host country

Strategy implementation more difficultCultural differences

Norms, values, work ethics

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Ch. 1-47

Absorb excess capacity

Reduce unit costs

Spread economic risks over widermarkets

Low-cost production facilities

Competition may be less intense

Reduced tariffs, lower taxes

Economies of scale

Advantages of International

Operations

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Ch 1-48

Different social, cultural demographic,legal forces may create difficultcommunication

Weaknesses of foreign competition maybe underestimated

Barriers to communication and effective

management of personnel Complications from different monetary

systems

Disadvantages of International

Operations

Chapter 01

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