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Session 1 – Part 1Session 1 – Part 1

History and Overview ofStrategic Management

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Session ObjectivesSession Objectives

To Develop an Understanding of the (brief) History of Strategic Management.

To Develop a Conceptual Understanding of the Paradigm Shift from Business Policy to Strategic Management

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Word for the DayWord for the Day

Paradigm

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Ford Foundation Study During Late 40sFord Foundation Study During Late 40s

Need to develop a multi-disciplinary understanding of Business

Ergo a capstone course that introduces accountants to marketing, marketers to operations, production managers to human resources…

Efficiency oriented given pent up demand form WWII

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Multi-DisciplinaryMulti-Disciplinary

Integrative with input from an understanding of the interworkings of finance, accounting, marketing, research and development, human resources, operations, information management,…

These are the functional specialties that contribute to the general management of the firm.

You have studied these fundamentals separately.

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What’s Missing in this Paradigm?What’s Missing in this Paradigm?

The effectiveness issue Focuses on doing things right but not whether the

business is doing the right thing The entrepreneurial aspect of the business Must start with the health of the key idea

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What is the First “Strategy” for any Business?What is the First “Strategy” for any Business?

It’s that Key Idea in the Entrepreneurs mind for Satisfying a societal/marketplace need by Providing/producing a product/service that will Yield an excess of price over cost of its provision that Incents the provider to continue/expand its delivery

(Capitalism 101)

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WHAT IS THE LIFE EXPECTANCY OF THESE KEY IDEAS?

LONGER OR SHORTER TODAY THAN DURING THE MID 20TH

CENTURY?

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A MORE RATIONAL

PARADIGM WOULD BEGIN BY CONSIDERING THE HEALTH OF THE BUSINESS’S KEY IDEA OR KEY IDEAS

THAT’S STRATEGIC MANAGEMENT

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What is Strategic Management?What is Strategic Management?

The set of decisions and actions that result in the formulation and implementation of plans

designed to achieve a company’s objectives.

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Critical Tasks of Strategic ManagementCritical Tasks of Strategic Management

11 Formulate the company’s missionFormulate the company’s mission

22 Develop company profile, reflecting its internal conditionsDevelop company profile, reflecting its internal conditions

33 Assess company’s external environmentAssess company’s external environment

44 Analyze company’s optionsAnalyze company’s options

55 Identify most desirable optionsIdentify most desirable options

66 Select long-term objectives and grand strategiesSelect long-term objectives and grand strategies

77 Develop annual objectives and short-term strategiesDevelop annual objectives and short-term strategies

88 Implement the strategic choicesImplement the strategic choices

99 Evaluate success of the strategic processEvaluate success of the strategic process

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What is Strategy?What is Strategy?

Large-scale, future-oriented plan for interacting with competitive environment to achieve objectives

Company’s “game plan”

Framework for managerial decisions

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SO WE WILL NOT TOTALLY ABANDON THE NOTION OF BUSINESS POLICIES – THEY ARE IMPORTANT

BUT WE WILL NOT CONSIDER POLICIES (WHICH WE WILL COME TO REFER TO AS FUNCTIONAL STRATEGIES/POLICIES) UNTIL WE’VE ESTABLISHED THAT WE ARE DOING THE RIGHT THINGS

EFFECTIVENESS BEFORE EFFICIENCY

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Session 1 – Part 1Session 1 – Part 1

The Strategic Management

Model

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Learning ObjectivesLearning Objectives

1. Understand the types of strategic decisions for which different managers are responsible

2. Describe a comprehensive model of strategic decision making

3. Appreciate the importance of strategic management as a process

4. Give examples of strategic decisions that companies have recently made

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Three Levels of StrategyThree Levels of Strategy

Corporate level: board of directors, CEO & administration [Highest]

Business level: business and corporate managers [Middle]

Functional level: Product, geographic, and functional area managers [Lowest]

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Alternative Strategic Management Alternative Strategic Management StructuresStructures

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Strategic Management Decisions: Strategic Management Decisions: CorporateCorporate

Domain Definition: Where to Compete?Defines Scope of FirmIn Which Industries Will We Compete?Must Be Reflected in MissionChoice of businesses, entry (diversification)

and exit (divestiture) decisions, resource allocation/ priorities for growth

Corporate Financial: Dividend Policies, Sources of Long-term Financing

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Strategic Management Decisions: Strategic Management Decisions: BusinessBusiness

Domain Navigation: How to Compete?Competitive Strategy Help bridge decisions at the corporate and

functional levelsLess costly, risky, and potentially profitable

than corporate-level decisionsMore costly, risky, and potentially

profitable than functional-level decisionsInclude decisions on plant location,

marketing segmentation, and distribution

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Strategic Management Decisions: Strategic Management Decisions: FunctionalFunctional

Implement the overall strategy formulated at the corporate and business levels

AKA TacticsInvolve specific action-oriented and

operational issues Relatively short range (typically within the

coming year) and low riskModest costs: depend upon available

resourcesRelatively concrete and quantifiable

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Strategic Management ProcessStrategic Management Process

The basic components of the models used to analyze strategic management are similar

Strategic management is a process—a flow of information through interrelated stages of analysis toward the achievement of some goal

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Phases of Strategic Phases of Strategic Management ProcessManagement Process

FormulationImplementation Control

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Strategic Management ModelStrategic Management Model

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Word (Acronym) of the DayWord (Acronym) of the Day

SWOT ANALYSIS

Strengths

Weaknesses

Opportunities

Threats

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Strategic Management Strategic Management ComponentsComponents

Company MissionExternal AnalysisLong-Term ObjectivesShort-Term ObjectivesPolicies Empowering

ActionStrategic Control &

Continuous Improvement

Internal AnalysisStrategic Analysis &

ChoiceGeneric & Grand

StrategiesFunctional TacticsRestructuring,

Reengineering & Refocusing