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Prentice Hall, Inc. © 2006 1-1
STRATEGIC MANAGEMENT & BUSINESS POLICY10TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 1 Basic Concepts of Strategic Management
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Basic Concepts of Strategic Management
GlobalizationInternationalization of markets and corporations
Global (worldwide) markets rather than national markets
Electronic CommerceUse 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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Basic Concepts of Strategic Management
Electronic Commerce -- Trends
• Forcing company transformation• Market access & branding changing –
disintermediation of traditional distribution channels
• Balance of power shift to consumer• Competition changing
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Basic Concepts of Strategic Management
Electronic Commerce -- Trends
• Pace of business increasing • Internet purchasing beyond traditional
boundaries• Knowledge key asset – source of
competitive advantage
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Strategic Management Defined
Set of managerial decisions and actions that determines the long-run performance of a firm.
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Basic Concepts of Strategic Management
4 Phases of Strategic Management
1. Basic financial planning2. Forecast-based planning3. Externally-oriented planning4. Strategic management
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Basic Concepts of Strategic Management
Highly Rated Benefits
• Clearer sense of strategic vision• Sharper focus on strategic importance• Improved understanding of changing
environment
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Basic Concepts of Strategic Management
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 1,2,5 or 10 years?
• What specific actions should management undertake?
• What are the risks and payoffs?
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Basic Concepts of Strategic Management
Basic Elements of the Strategic Management Process
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Environmental Scanning Defined
Monitoring, evaluation, and disseminating information from external and internal environments –to key people in the firm
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Basic Concepts of Strategic Management
Environmental Variables
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Environmental Scanning
SWOT Analysis
• Strengths – Weaknesses
• Opportunities - Threats
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Strategy Formulation
Development of long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses
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Strategy Formulation
Mission Statement
• Purpose/reason for organization• Promotes shared expectations• Communicates public image• Who we are; what we do; what we
aspire to
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Organizational Adaptation
Organization “fit” with environment
• Theory of population ecology• Institution theory• Strategic choice perspective• Organizational learning theory
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Organizational Adaptation
Strategic flexibility
• Demands long-term commitment to development of critical resources
• Demands firm become a learning organization
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Learning Organizations
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
4 Chief Activities
• Systematic problem solving• New approach experimentation• Learning from experiences• Intra-organization knowledge transfer
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Basic Concepts of Strategic Management
Hierarchy of Strategy
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Goals & Objectives
Corporate Goals/Objectives
–Profitability (net profit)–Growth–Resource utilization (ROE, ROI)–Market leadership
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Basic Concepts of Strategic Management
3 Types of Strategy
–Corporate strategy
–Business strategy
–Functional strategy
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Basic Concepts of Strategic Management
Corporate Strategy
–Stability–Growth–Retrenchment
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Basic Concepts of Strategic Management
Business Strategy
–Competitive strategies
–Cooperative strategies
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Basic Concepts of Strategic Management
Functional Strategy
–Technological leadership
–Technological followership
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Basic Concepts of Strategic Management
Strategic Decision-Making
Process
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Strategic Decision Making
Strategic Decisions
–Rare
–Consequential
–Directive
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Strategic Decision Making
Mintzberg’s Modes
–Entrepreneurial mode–Adaptive mode–Planning mode–Logical incrementalism
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Hambrick and Fredrickson – Good Strategy
5 Elements of Good Strategy
1. Arenas2. Vehicles3. Differentiators4. Staging5. Economic logic
