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Ch 1 -1
Chapter 1
The Nature of Strategic Management
Strategic Management
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Ch 1 -2
Art & science offormulating,
implementing, andevaluating,cross-functional decisions that
enable an organization to achieve its
objectives
Strategic ManagementDefined
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Ch 1 -3
Purpose of Strategic Management
To exploit and create new and differentopportunities for tomorrow
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Ch 1 -4
Strategic Management
In essence, the strategic plan is a
companys game plan
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Ch 1 -5
3 Stages of the Strategic
Management Process
Strategy formulation
Strategy implementation
Strategy evaluation
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Ch 1 -6
Vision&Mission
StrategyFormulation
ExternalOpportunities&Threats
InternalStrengths&Weaknesses
Long-TermObjectives
AlternativeStrategies
StrategySelection
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Ch 1 -7
Issues in Strategy
Formulation
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversificationInternational markets
Mergers or joint
ventures
Avoidance of hostile
takeover
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Ch 1 -8
StrategyImplementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Ch 1 -9
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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Ch 1 -10
Issues in Strategy
Implementation
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
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Ch 1 -11
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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Ch 1 -12
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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Ch 1 -13
The strategic management processattempts to organize quantitative and
qualitative information under conditions of
uncertainty
Integrating Intuition & Analysis
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Ch 1 -14
Intuition is based on:
Past experiences
Judgment
Feelings
Integrating Intuition & Analysis
Intuition isuseful for decision making inconditions of:
Great uncertainty
Little precedent Highly interrelated variables
Several plausible alternatives
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Ch 1 -15
Involve management at all levels
Intuition & Judgment
Influenceallanalyses
Integrating Intuition & Analysis
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Ch 1 -16
Organizations should continually
monitor internal and externalevents and trends so that timely
changes can be made as needed
Adapting to Change
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Ch 1 -17
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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Ch 1 -18
Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage
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Ch 1 -19
1. Continually adapting to changes inexternal trends and events and internalcapabilities, competencies, and resources
Achieving Sustained Competitive
Advantage
2. Effectively formulating, implementing, and
evaluating strategies that capitalize on thosefactors
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Ch 1 -20
Strategists
Gather Information
Analyze Information
Organize Information
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Ch 1 -21
Vision Statement
What do we want to become?
Mission Statement
What is our business?
Vision and Mission Statements
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Ch 1 -22
External Opportunities and Threats
Analysis of Trends Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological Competitors
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Ch 1 -23
Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage ofExternal Opportunities
Avoid/minimize impact of
External Threats
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Ch 1 -24
Controllable activities performedespecially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
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Ch 1 -25
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 -26
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
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Ch 1 -27
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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Ch 1 -28
Long-Term Objectives Essential for ensuring the firms 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 -29
Means by which long-term objectivesare achieved
Strategies
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Ch 1 -30
Strategies Examples
Geographic expansion
Diversification
Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture
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Ch 1 -31
Sample Strategies Table 1-1
Best Buy
Levi Strauss
New York Times Company
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Ch 1 -32
Short-term milestones that firms mustachieve to reach long-term objectives
Annual Objectives
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Ch 1 -33
Means by which annual objectives willbe achieved
Policies
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Ch 1 -34
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Ch 1 -35
Strategic Management Process
Dynamic & continuousMore formal in larger
organizations
Strategic Management Model
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Ch 1 -36
Strategic Management
Communication is a key tosuccessful strategic management
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Ch 1 -37
Benefits of Strategic Management
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Ch 1 -38
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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Ch 1 -39
Why Some Firms Do No Strategic
Planning 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 -40
Why Some Firms Do No Strategic
Planning (continued)
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Honest difference of opinion
Suspicion
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Ch 1 -41
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 -42
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 -43
Effective Strategic Planning
continued
Welcomes bad news
Requires open-mindedness and a spirit ofinquiry
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 -44
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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Ch 1 -45
Comparing Business and Military
Strategy
Strategic planning started in the military
Similarity
Both business and military organizations must
adapt to change and constantly improve
Difference
Business strategy assumes competition
Military strategy assumes conflict