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




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!!!




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




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



Copyright © 2011 Pearson Education

Strategic Management – Model




Art & science of formulating,

implementing, and evaluating,cross-functional decisions that

enable an organization to achieve its

objectives

Strategic Management –Defined




Purpose of Strategic Management

To exploit and create new and differentopportunities for tomorrow




Strategic Management

In essence, the strategic plan is a

company’s game plan




Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection




Issues in StrategyFormulation

Businesses to enterBusinesses to abandonAllocation of resourcesExpansion or

diversificationInternational marketsMergers or jointventuresAvoidance of hostiletakeover




Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation




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




Issues in StrategyImplementation

Action Stage of StrategicManagement

Mobilization of

employees & managers

Most difficult stage

Interpersonal skills

critical




Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action




Peter Drucker: Think through the

overall mission of a business. Askthe key question:

“What is our Business?”

Prime Task ofStrategic Management




The strategic management processattempts to organize quantitative and

qualitative information under conditions of

uncertainty

Integrating Intuition & Analysis




Intuition is based on:

Past experiences

Judgment

Feelings


Intuition is useful for decision making inconditions of: Great uncertainty

Little precedent Highly interrelated variables

Several plausible alternatives




Involve management at all levels

Intuition & Judgment

Influence all analyses





Organizations should continually

monitor internal and externalevents and trends so that timelychanges can be made as needed

Adapting to Change




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




Anything that a firm does especially

well compared to rival firms

Strategic Management isGaining and Maintaining

Competitive Advantage




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




Strategists

Gather Information

Analyze Information

Organize Information




Vision Statement –What do we want to become?

Mission Statement –

What is our business?

Vision and Mission Statements




External Opportunities and Threats

Analysis of Trends Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological Competitors




Basic Tenet of Strategic Management

External Opportunities and Threats

Strategy Formulation

Take advantage ofExternal Opportunities

Avoid/minimize impact ofExternal Threats




Controllable activities performedespecially well or poorly

Determined relative to competitors

Internal Strengths and Weaknesses




Ch 1 -29

Typically located in functional areas of the firm

Management

Marketing Finance/Accounting

Production/Operations

Research & Development Management Information Systems





Ch 1 -30

Assessing the Internal Environment


Internal Factors

Performance Measures

Ratios

Industry Averages

Survey Data




Ch 1 -31

Specific results that an organization

seeks to achieve in pursuing its basicmission

Long-term means more than one year





Ch 1 -32


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




Ch 1 -33

Means by which long-term objectivesare achieved

Strategies




Ch 1 -34

Strategies

Examples Geographic expansion

Diversification

Acquisition

Product development

Market penetration

Retrenchment

Divestiture

Liquidation

Joint venture




Ch 1 -35

Sample Strategies

Table 1-1

Best Buy

Levi Strauss

New York Times Company




Ch 1 -36

Short-term milestones that firms mustachieve to reach long-term objectives

Annual Objectives




Ch 1 -37

Means by which annual objectives willbe achieved

Policies




Ch 1 -38




Ch 1 -39

Strategic Management Process

Dynamic & continuousMore formal in larger

organizations

Strategic Management Model




Ch 1 -40

Strategic Management

Communication is a key tosuccessful strategic management




Ch 1 -41

Benefits of Strategic Management




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




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




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




Ch 1 -45

Pitfalls in Strategic Planning

Strategic planning is an involved, intricate,

and complex process that takes anorganization into uncharted territory




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




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




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




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.

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