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7/30/2019 1. Nature of St. Mgt.
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Copyright © 2011 Pearson Education Ch 1 -1
Chapter 1
The Nature of Strategic Management
Strategic Management:
Concepts & Cases13th Edition
Global Edition
Fred David
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Copyright © 2011 Pearson Education Ch 1 -2
When NASA first started sending up astronauts, they quickly discovered that ball- point pens would not work in zero gravity. To combat this problem, NASA scientists spent a decade and $12 million developing a pen that writes in zero gravity, upside down, on
almost any surface, and at a temperature ranging from below freezing to over 300 C
Strategic Thinking!!!
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Copyright © 2011 Pearson Education Ch 1 -3
Strategic thinking should take into consideration:
1. Competencies and Skills
2. Products and Offerings
3. Environment and Industry
4. Markets and Customers
5. Competitors and Substitutes6. Suppliers and Buyers
Strategic Thinking
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Copyright © 2011 Pearson Education Ch 1 -4
States how the functions of the
whole organization relate to each
other within their internal andexternal environments, both Now and in the Future
Strategic Thinking
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Strategic Management – Model
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Copyright © 2011 Pearson Education Ch 1 -6
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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Copyright © 2011 Pearson Education Ch 1 -7
Purpose of Strategic Management
To exploit and create new and differentopportunities for tomorrow
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Copyright © 2011 Pearson Education Ch 1 -8
Strategic Management
In essence, the strategic plan is a
company’s game plan
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Copyright © 2011 Pearson Education Ch 1 -10
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Issues in StrategyFormulation
Businesses to enterBusinesses to abandonAllocation of resourcesExpansion or
diversificationInternational marketsMergers or jointventuresAvoidance of hostiletakeover
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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Copyright © 2011 Pearson Education Ch 1 -13
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 toorganizational performance
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Copyright © 2011 Pearson Education Ch 1 -14
Issues in StrategyImplementation
Action Stage of StrategicManagement
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
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Copyright © 2011 Pearson Education Ch 1 -15
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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Copyright © 2011 Pearson Education Ch 1 -16
Peter Drucker: Think through the
overall mission of a business. Askthe key question:
“What is our Business?”
Prime Task ofStrategic Management
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Copyright © 2011 Pearson Education Ch 1 -17
The strategic management processattempts to organize quantitative and
qualitative information under conditions of
uncertainty
Integrating Intuition & Analysis
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Copyright © 2011 Pearson Education Ch 1 -18
Intuition is based on:
Past experiences
Judgment
Feelings
Integrating Intuition & Analysis
Intuition is useful for decision making inconditions of: Great uncertainty
Little precedent Highly interrelated variables
Several plausible alternatives
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Copyright © 2011 Pearson Education Ch 1 -19
Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
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Copyright © 2011 Pearson Education Ch 1 -20
Organizations should continually
monitor internal and externalevents and trends so that timelychanges can be made as needed
Adapting to Change
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Copyright © 2011 Pearson Education Ch 1 -21
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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Copyright © 2011 Pearson Education Ch 1 -22
Anything that a firm does especially
well compared to rival firms
Strategic Management isGaining and Maintaining
Competitive Advantage
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1. Continually adapting to changes inexternal trends and events and internalcapabilities, competencies, and resources
Achieving Sustained CompetitiveAdvantage
2. Effectively formulating, implementing, and
evaluating strategies that capitalize on thosefactors
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Copyright © 2011 Pearson Education Ch 1 -24
Strategists
Gather Information
Analyze Information
Organize Information
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Copyright © 2011 Pearson Education Ch 1 -25
Vision Statement –What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements
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Copyright © 2011 Pearson Education Ch 1 -26
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 ofExternal Opportunities
Avoid/minimize impact ofExternal Threats
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Copyright © 2011 Pearson Education Ch 1 -28
Controllable activities performedespecially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
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Ch 1 -29
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 -30
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
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Copyright © 2011 Pearson Education
Ch 1 -31
Specific results that an organization
seeks to achieve in pursuing its basicmission
Long-term means more than one year
Long-Term Objectives
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Copyright © 2011 Pearson Education
Ch 1 -32
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 -33
Means by which long-term objectivesare achieved
Strategies
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Ch 1 -34
Strategies
Examples Geographic expansion
Diversification
Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture
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Copyright © 2011 Pearson Education
Ch 1 -35
Sample Strategies
Table 1-1
Best Buy
Levi Strauss
New York Times Company
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Ch 1 -36
Short-term milestones that firms mustachieve to reach long-term objectives
Annual Objectives
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Ch 1 -37
Means by which annual objectives willbe achieved
Policies
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Ch 1 -38
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Ch 1 -39
Strategic Management Process
Dynamic & continuousMore formal in larger
organizations
Strategic Management Model
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Copyright © 2011 Pearson Education
Ch 1 -40
Strategic Management
Communication is a key tosuccessful strategic management
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Ch 1 -41
Benefits of Strategic Management
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Ch 1 -42
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-rewardrelationship
Enhanced problem-prevention capabilities
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Copyright © 2011 Pearson Education
Ch 1 -43
Why Some Firms Do No StrategicPlanning
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 -44
Why Some Firms Do No StrategicPlanning (continued)
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Honest difference of opinion
Suspicion
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Copyright © 2011 Pearson Education
Ch 1 -45
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate,
and complex process that takes anorganization into uncharted territory
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Ch 1 -46
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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Ch 1 -47
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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Ch 1 -48
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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Copyright © 2011 Pearson Education Ch 1 -50
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.