concept_01.ppt

Prentice Hall, 2002 Chapter 1Wheelen/Hunger

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Chapter 1

Basic Concepts of

Strategic Management

PowerPoint Slides

Anthony F. Chelte

Western New England College


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Defined:

Set of managerial decisions and actions that determines the long-run performance of a firm.


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Business Policy

Defined:

General management orientation that looks inward for properly integrating the firm’s functional activities.


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Four Phases ofStrategic Management

• Basic financial planning

• Forecast-based planning

• Externally-oriented planning (strategic)

• Strategic management


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Highly Rated Benefits:

• Clearer sense of strategic vision for the firm

• Sharper focus on what is strategically important

• Improved understanding of a rapidly changing environment


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Not always a formal process:

• Where is the organization now? (Not where do we hope it is!)

• If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 years?

• What specific actions should management undertake? What are the risks and payoffs involved?


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Challenges to Strategic Management

Globalization– Internationalization of markets and

corporations• Global (worldwide) markets rather than national

markets

Electronic Commerce– Use of the Internet to conduct business

transactions• Basis for competition on a more strategic level

rather than traditional focus on product features and costs


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Global Issues• European Union (EU)

– Economic integration of 15 member countries

• North American Free Trade Agreement (NAFTA)– Improved trade among 3 member countries

• Mercosur– Free-trade area among Argentina, Brazil,

Uruguay, and Paraguay

• Association of South East Asian Nations (ASEAN)– Attempting to link members into a borderless

economic zone


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E-Commerce

7 Trends:

– Internet forcing companies to transform themselves

– Market access and branding are changing, causing disintermediation of traditional distribution channels

– Balance of power shifting to the consumer

– Competition is changing


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7 Trends (continued)

• Pace of business increasing drastically

• Internet purchasing corporations out of their traditional boundaries

• Knowledge becoming a key asset and source of competitive advantage


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Organizational Adaptation

How organizations obtain “fit” within their environment:

– Theory of population ecology

– Institution theory

– Strategic choice perspective

– Organizational learning theory


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Adaptation to Changing Environmental Conditions

Strategic flexibility:

– Demands a long-term commitment to the development and nurturing of critical resources

– Demands that the firm become a learning organization


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Learning Organizations

Defined:

An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights.


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Learning Organizations

Four Main Activities:• Solving problems systematically• Experimenting with new approaches• Learning from their won experiences and

that of others• Transferring knowledge quickly and

efficiently throughout the organization


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Evaluation and Control

and Control

Strategic Management Model

Strategy Formulation

Strategy Implementation

Mission

Objectives

Strategies

Policies

Feedback/Learning

Environmental

Scanning

Societal Environment

General Forces

Task Environment

Industry Analysis

Structure Chain of Command

Resources Assets, Skills

Competencies, Knowledge

Culture Beliefs, Expectations,

Values

Reason for existence

What results to accomplish by when Plan to

achieve the mission & objectives Broad

guidelines for decision making

Programs

Activities needed to accomplish a plan

Budgets

Cost of the programs Procedures

Sequence of steps needed to do the job

Process to monitor performanceand take corrective action

Performance

External

Internal

Evaluationand Control


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Basic Model of Strategic Management

Four Basic Elements


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Environmental Scanning

Defined:

The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the firm.


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Identify strategic factors– SWOT Analysis

– Strengths, Weaknesses

– Opportunities, Threats

– Internal Environment• Strengths & Weaknesses

– Within the organization but not subject to short-run control of management

– External Environment• Opportunities & Threats

– External to the organization but not subject to short-run control of management


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Defined:

Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses.


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Mission Statement– Purpose or reason for the

organization’s existence– Promotes shared expectations among

employees– Communicates public image important

to stakeholders– Who we are, what we do, what we’d like

to become


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Maytag Corporation

Mission Statement

To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world.


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Objectives

– The end results of planned activity• What is to be accomplished• Time in which to accomplish it• Quantified when possible


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Goals vs. Objectives

A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion.


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Goals & Objectives

Corporate goals and objectives include:– Profitability (net profits)– Growth (increase in total assets, etc.)– Utilization of resources (ROE or ROI)– Market leadership (market share)


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Strategies

Defined:

A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.


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Strategies

3 Types of Strategy

– Corporate strategy

– Business strategy

– Functional strategy


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Strategies

Corporate StrategyCorporate Strategy

–Stability

–Growth

–Retrenchment


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Strategies

Business StrategyBusiness Strategy– Competitive strategies

– Cooperative strategies


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Strategies

Functional StrategyFunctional Strategy

–Technological leadership

–Technological followership


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Hierarchy of Strategy

Corporate Strategy

Business(Division Level)

Strategy

FunctionalStrategy


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Policies

Defined:

Broad guidelines for decision making that link the formulation of strategy with its implementation.


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Programs

Budgets

Procedures


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Initiation of Strategy

Triggeringevent

•New CEO

•External intervention

•Threat of change inownership

•Performance gap

•Strategic inflection point

Stimulusfor change

instrategy


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Strategic Decision Making

Strategic Decisions

– Rare

– Consequential

– Directive


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Mintzberg’s Modes

– Entrepreneurial mode

– Adaptive mode

– Planning mode

– Logical incrementalism


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