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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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -2
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
Strategic Management –Defined
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -3
Purpose of Strategic Management
To exploit and create new and different opportunities for tomorrow
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -4
Strategic Management
In essence, the strategic plan is a company’s game plan
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -5
3 Stages of the Strategic Management Process
Strategy formulation
Strategy implementation
Strategy evaluation
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -6
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -7
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -8
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -9
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -10
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -11
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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Ch 1 -12
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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Ch 1 -13
The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Integrating Intuition & Analysis
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Ch 1 -14
Intuition is based on: Past experiences Judgment Feelings
Integrating Intuition & Analysis
Intuition is useful for decision making in conditions of: Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -15
Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -16
Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed
Adapting to Change
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -17
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -18
Anything that a firm does especially well compared to rival firms
Strategic Management is Gaining and Maintaining Competitive Advantage
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Ch 1 -19
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -20
Strategists
Gather Information
Analyze Information
Organize Information
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Ch 1 -21
Vision Statement –What do we want to become?
Mission Statement –What is our business?
Vision and Mission Statements
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -22
External Opportunities and Threats
Analysis of Trends Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -23
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -24
Controllable activities performed especially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
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Ch 1 -25
Typically located in functional areas of the firm
Management Marketing Finance/Accounting Production/Operations Research & Development Management Information Systems
Internal Strengths and Weaknesses
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Ch 1 -26
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
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Ch 1 -27
Specific results that an organization seeks to achieve in pursuing its basic mission
Long-term means more than one year
Long-Term Objectives
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Ch 1 -28
Long-Term Objectives
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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Ch 1 -29
Means by which long-term objectives are achieved
Strategies
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Ch 1 -30
Strategies
Examples Geographic expansion Diversification Acquisition Product development Market penetration Retrenchment Divestiture Liquidation Joint venture
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Ch 1 -31
Sample Strategies
Table 1-1
Best Buy
Levi Strauss
New York Times Company
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Ch 1 -32
Short-term milestones that firms must achieve to reach long-term objectives
Annual Objectives
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Ch 1 -33
Means by which annual objectives will be achieved
Policies
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Ch 1 -34
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -35
Strategic Management ProcessDynamic & continuousMore formal in larger
organizations
Strategic Management Model
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Ch 1 -36
Strategic Management
Communication is a key to successful strategic management
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Ch 1 -37
Benefits of Strategic Management
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Ch 1 -38
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -39
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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Ch 1 -40
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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Ch 1 -41
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory
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Ch 1 -42
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -43
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -44
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -45
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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Ch 1 -46
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.