David sm13 ppt_01

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 1 -1

Chapter 1 The Nature of Strategic Management

Strategic Management: Concepts & Cases

13th Edition

Fred David


Ch 1 -2

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

Strategic Management –Defined


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Purpose of Strategic Management

To exploit and create new and different opportunities for tomorrow


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Strategic Management

In essence, the strategic plan is a company’s game plan


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3 Stages of the Strategic Management Process

Strategy formulation

Strategy implementation

Strategy evaluation


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Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection


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Issues in Strategy Formulation

Businesses to enter Businesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover

Businesses to enter Businesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover


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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation


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Strategy Implementation Steps

Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to

organizational performance


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Issues in Strategy Implementation

Action Stage of Strategic Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical

Action Stage of Strategic Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical


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Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action


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Peter Drucker: Think through the overall mission of a business. Ask the key question:

“What is our Business?”

Prime Task of Strategic Management


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The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty

Integrating Intuition & Analysis


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Intuition is based on: Past experiences Judgment Feelings


Intuition is useful for decision making in conditions of: Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives


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Involve management at all levels

Intuition & Judgment

Influence all analyses



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Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed

Adapting to Change


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Key Terms in Strategic Management

Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies


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Anything that a firm does especially well compared to rival firms

Strategic Management is Gaining and Maintaining Competitive Advantage


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1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources

Achieving Sustained Competitive Advantage

2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors


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Strategists

Gather Information

Analyze Information

Organize Information


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Vision Statement –What do we want to become?

Mission Statement –What is our business?

Vision and Mission Statements


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External Opportunities and Threats

Analysis of Trends Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors


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Basic Tenet of Strategic Management

External Opportunities and Threats

Strategy Formulation

Take advantage of External Opportunities

Take advantage of External Opportunities

Avoid/minimize impact ofExternal Threats

Avoid/minimize impact ofExternal Threats


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Controllable activities performed especially well or poorly

Determined relative to competitors

Internal Strengths and Weaknesses


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Typically located in functional areas of the firm

Management Marketing Finance/Accounting Production/Operations Research & Development Management Information Systems



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Assessing the Internal Environment


Internal Factors

Performance Measures

Ratios

Industry Averages

Survey Data


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Specific results that an organization seeks to achieve in pursuing its basic mission

Long-term means more than one year



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Essential for ensuring the firm’s success Provide direction Aid in evaluation Create synergy Reveal priorities Focus coordination Provide basis for planning, organizing,

motivating, and controlling


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Means by which long-term objectives are achieved

Strategies


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Strategies

Examples Geographic expansion Diversification Acquisition Product development Market penetration Retrenchment Divestiture Liquidation Joint venture


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Sample Strategies

Table 1-1

Best Buy

Levi Strauss

New York Times Company


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Short-term milestones that firms must achieve to reach long-term objectives

Annual Objectives


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Means by which annual objectives will be achieved

Policies


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Ch 1 -35

Strategic Management ProcessDynamic & continuousMore formal in larger

organizations

Strategic Management Model


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Strategic Management

Communication is a key to successful strategic management


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Benefits of Strategic Management


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Benefits of Strategic Management

Nonfinancial Benefits Enhanced awareness of threats Improved understanding of competitors’ strategies Increased employee productivity Reduced resistance to change Clearer understanding of performance-reward

relationship Enhanced problem-prevention capabilities


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Why Some Firms Do No Strategic Planning Lack of knowledge of strategic planning Poor reward structures Fire fighting Waste of time Too expensive Laziness Content with success


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Why Some Firms Do No Strategic Planning (continued) Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion


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Pitfalls in Strategic Planning

Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory


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Effective Strategic Planning is:

A people process more than a paper process A learning process Words supported by numbers Simple and nonroutine Varying assignments, team membership,

meeting formats, and planning calendars Challenging assumptions underlying

corporate strategy


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Effective Strategic Planning continued Welcomes bad news Requires open-mindedness and a spirit of

inquiry Is not a bureaucratic mechanism Is not ritualistic or stilted Is not too formal, predictable, or rigid Does not contain jargon or arcane language


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Effective Strategic Planning continued Is not a formal system for control Does not disregard qualitative information Is not controlled by “technicians” Does not pursue too many strategies at once Continually strengthens the “good ethics is

good business” policy


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Comparing Business and Military Strategy Strategic planning started in the military Similarity

Both business and military organizations must adapt to change and constantly improve

Difference Business strategy assumes competition Military strategy assumes conflict


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David sm13 ppt_01

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