Chapter 1 Sep 2014

8/10/2019 Chapter 1 Sep 2014

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Copyright © 2009 Pearson Education, Inc.

Publishing as Prentice Hall Ch 1 -1

Chapter 1

The Nature of Strategic Management

Strategic Management:

Concepts & Cases

14th Edition

Fred David

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Themes in the Text

•Global Considerat ions –

impact virtually all strategic decisions

•E-commerce – vital strategic management tool

•Natural Environment – important strategic issue

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Art & science of formulat ing ,

implement ing , and evaluat ing ,cross-functional decisions that

enable an organization to achieve its

objectives

Strategic Management –

Defined

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Strategic Management

In essence, the strategic p lan is a

company’s game plan .

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Strategic management

achieves a firm’s success

through integration ––

Management

MIS

Production/OperationsFinance/Accounting

Marketing

Research & Development

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Publishing as Prentice HallCh 1 -7

Issues in Strategy

Formulation

New business

opportunities

Businesses to abandon

Allocation of resources

Expansion ordiversification

International markets

Mergers or joint ventures

Avoidance of hostile

takeover

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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

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Strategy

Implementation

Action Stage of Strategic

Management

Most difficult stage

Mobilization ofemployees & managers

Interpersonal skills

critical

Consensus on goal

pursuit

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Peter Drucker: Think through the

overall mission of a business. Askthe key question: “What is our

Business?”

Prime Task of


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The strategic management processattempts to organize quantitative and

qualitative information under conditions of

uncertainty.

Integrating Intui t ion &

Analys is

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Intuition is based on:

Past experiences

Judgment

Feelings


Analys is

Intuition is useful for decision making in:

Conditions of great uncertainty

Conditions with little precedent

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Analytical Thinking


Analys is

Intuitive Thinking

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Organizations must monitor

events Ongoing process

Internal and external events

Timely changes

Adapting to Change

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1. Adapting to change in external trends,internal capabilities, and resources

Achieving Sustained

Compet it ive Advantage

2. Effectively formulating, implementing, andevaluating strategies

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Effective Adaptation

Adapting to Change

Requires long-term focus

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What k ind of bus iness shou ldwe become?

Are we in the r igh t f ields? Are there new competi tors?

What strategies should wepursue?

How are ou r custom erschanging?

Adapting to Change – Key


Questions

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Key Terms

Various Job Titles:

•Chief Executive Officer (CEO)

•Chief Strategy Officer (CSO)

•President

•Owner•Board Chair

•Executive Director

Strategists – Firm’s success/failure

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Vision Statement –

What do we want to become?

Mission Statement –

What is our bus iness?

Key Terms

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Largely beyond the control of a singleorganization

Key Terms

Opportunities & Threats (External)

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Opportun it ies & Threats (External)

Key Terms

Analysis of Trends:

• Economic

• Social• Cultural

• Demographic/Environmental

• Political, Legal, Governmental

• Technological

• Competitors

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Publishing as Prentice Hall

Ch 1 -28

Basic Tenet of Strategic Management

Key Terms

Opportunities & Threats

Strategy Formulation

Take advantage ofExternal Opportunities

Avoid/minimize impact of

External Threats

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Ch 1 -29

Controllable activities performed especiallywell or poorly

Key Terms

Strengths & Weaknesses (Internal)

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Ch 1 -30

Strength s & Weaknesses (In ternal)

Key Terms

Typically located in functional areas of the firm

• Management

• Marketing

• Finance/Accounting

• Production/Operations

• Research & Development

• Computer Information Systems

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Ch 1 -31

Assessing the Internal Environment

Key Terms

Strengths & Weaknesses

Internal Factors

Performance Metrics

Financial Ratios

Industry Averages

Survey Data

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Ch 1 -32

Mission-driven pursuit of specified resultsmore than one year out

Key Terms

Long-term Objectives

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Ch 1 -33

Long -term Object ives

Key Terms

Essential for ensuring the firm’s success

• Provide direction

• Aid in evaluation

• Create synergy

• Focus coordination

• Basis for planning, motivating, andcontrolling

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Ch 1 -34

Means by which long-term objectives areachieved

Key Terms

Strategies

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Ch 1 -36

Short-term milestones that firms mustachieve to attain long-term objectives

Key Terms

Annual Objectives

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Ch 1 -37

Means by which annual objectives will beachieved

Key Terms

Policies

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Ch 1 -38

External Audit

Chapter 3

Internal Audit

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

Figure 1.1 Comprehensive Strategic-Management Model

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Ch 1 -39

Dynamic & continuous

More formal in larger organizations

Strategic Management Model

Strategic Management Process

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Ch 1 -40

1. Identify Existing


• Vision

• Mission

• Objectives

• Strategies

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Ch 1 -41

2. Audit external environment

3. Audit internal environment

4. Establish long-term objectives

5. Generate, evaluate, and select strategies

6. Implement selected strategies

7. Measure & evaluate performance


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Ch 1 -42

Benefits of Strategic

Management

• Proactive in shaping firm’s future

• Initiate and influence firm’s activities • Formulate better strategies

•Systematic, logical, rational

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Ch 1 -43


Management

Financial Benefits

• Improvement in sales

• Improvement in profitability

• Productivity improvement

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Ch 1 -44


Management

Nonfinancial Benefits

• Improved understanding of competitors’ strategies

• Enhanced awareness of threats

• Reduced resistance to change

• Enhanced problem-prevention capabilities

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Ch 1 -45


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

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Ch 1 -46


Management (Greenley – cont’d)

6. Effective allocation of time & resources

7. Internal communication among personnel

8. Integration of individual behaviors

9. Clarify individual responsibilities

10. Encourage forward thinking

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Ch 1 -47


Management (Greenley – cont’d)

11. Encourages favorable attitude toward

change

12. Provides discipline and formality to the

management of the business

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Ch 1 -48

Why Some Firms Do No

Strategic Planning

Poor reward structures

Fire-fighting

Waste of time

Too expensive

LazinessContent with success

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Ch 1 -49

Why Some Firms Do No

Strategic Planning

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknownSuspicion

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Ch 1 -50

Principles of conduct within organizationsthat guide decision making and behavior

Business Ethics & Strategic

Management

Business ethics defined –

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Ch 1 -51

Prerequisite for good strategic management


Management

Good business ethics –

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Ch 1 -52

Provides basis on which policies can bedevised to guide daily behavior anddecisions in the workplace


Management

Code of business ethics –

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Ch 1 -53

Misleading advertising

Misleading labeling

Harm to the environment

Insider trading

Dumping flawed products on foreign markets Poor product or service safety

Padding expense accounts


Management

Business practices always considered unethical –

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Ch 1 -54

Natural Environment PerspectiveUsing ISO 14000 Certification to Gain Strategic Advantage

What are ISO 14000 & 14001?

Requirements for ISO 14001

Environmental Management

Systems (EMS)

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Ch 1 -55

Parent company

Host country

The Nature of Global

Competition

International/multinational corporations

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Ch 1 -56

Cultural differences Norms

Values

Work ethic

The Nature of Global

Competition

Strategy implementation may be difficult

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Ch 1 -57

Advantages of International

Operations

Absorb excess capacity

Reduce unit costsSpread risk over wider markets

Low-cost production facilities

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Ch 1 -58

Advantages of International

Operations (cont’d)

Less intense competition

Lower taxes

Economies of scale

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Copyright © 2009 Pearson Education Inc Ch 1 -59

Disadvantages of International

Operations

Difficult communications

Underestimate foreign competition

Cultural barriers to effective management

Complications arising from currencydifferences

Chapter 1 Sep 2014

Documents

Transcript of Chapter 1 Sep 2014