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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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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
Strategic Management
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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
Integrating Intui t ion &
Analys is
Intuition is useful for decision making in:
Conditions of great uncertainty
Conditions with little precedent
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Analytical Thinking
Integrating Intui t ion &
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
Strategic Management
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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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
Strategic Management Model
• 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
Strategic Management Model
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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
Benefits of Strategic
Management
Financial Benefits
• Improvement in sales
• Improvement in profitability
• Productivity improvement
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Ch 1 -44
Benefits of Strategic
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
Benefits of Strategic
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
Benefits of Strategic
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
Benefits of Strategic
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
Business Ethics & Strategic
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
Business Ethics & Strategic
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
Business Ethics & Strategic
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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Disadvantages of International
Operations
Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currencydifferences