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The Strategic Management Process
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Overview
Why do some firms succeed while others fail? A central objective of strategic management is tolearn why this happens.
What is strategy? An action a company takes to attain superior performance.
What is the strategic management process?The process by which managers choose a set of strategies for the enterprise to pursue its vision.
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Defining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and Threats
Internal Analysis of Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Chosen Strategies
Strategic Planning
Rational planning by top management?Basic Strategic Planning Model
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FIGURE 1.1
The MainComponents of the StrategicPlanning Process
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Mission and Goals
MissionSets out why the organizationexists and what it should be doing.
Major goalsSpecify what the organization hopesto fulfill in the medium to long term.
Secondary goals Are objectives to be attained that lead to superior performance.
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External Analysis
Identify strategic opportunities and threats inthe operating environment.
Macroenvironment National
Immediate (Industry)
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Internal Analysis
Identify strengthsQuality and quantity of resources availableDistinctive competencies
Identify weaknessesInadequate resourcesManagerial and
organizational deficiencies
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Strengths and WeaknessesOpportunities and Threats
(SWOT Analysis)
Strategic Choice BusinessFunctional
GlobalCorporate
SWOT and Strategic Choice
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Business-Level Strategies
Cost leadership Attaining, then using the lowest total cost basis as acompetitive advantage.
DifferentiationUsing product features or services to distinguish thefirms offerings from its competitors.
Market niche focusConcentrating competitively ona specific market segment.
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Functional-Level Strategies
Focus is on improving the effectiveness of operations within a company.
Manufacturing
MarketingMaterials managementResearch and development
Human resources
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Global-Level Strategies
MultidomesticInternationalGlobalTransnational
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Corporate-Level Strategies
Vertical integrationDiversificationStrategic alliancesAcquisitions
New venturesBusiness portfoliorestructuring
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Strategy Implementation
Designing organizational structureDesigning control systems
Market and output controlsBureaucratic controlsControl through organizational cultureRewards and incentives
Matching strategy, structure,
and controlsCongruence (fit) among strategy,structure, and controls
Structure
Strategy
Controls
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Managing Strategic Change
The only constant is change.Success requires adapting strategy andstructure to a changing world.
The feedback loop instrategic planning. Corporate
Functional
BusinessOperational
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Strategic Managers
General managersResponsible for the overall (strategic) performanceand health of the total organization.
Operations managersResponsible for specific businessfunctions or operations.
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Strategic Managers for All Levels
FIGURE 1.2
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Strategic Leadership
Vision, eloquence, and consistencyCommitment to the vision
Being well informedWillingness to
delegate and empower Astute use of power
Emotional intelligence
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Strategy as an Emergent Process
Strategy making in an unpredictable worldCreates the necessity for flexible strategic approaches.
Strategy making by lower-level managersStrategy evolves through autonomous action.
Serendipity and strategy Accidental discoveries and happenstances can have dramaticeffects on strategic direction.
Intended and emergent strategiesRealized strategies are combinations of intended andemergent strategies.
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FIGURE 1.3
Intended and Emergent Strategies
Source: Reprinted from Strategy Formation in an Adhocracy,by Henry Mintzberg and Alexandra McGugh, published in
Administrative Science Quarterly , Vol. 30, No. 2, June 1985, bypermission of Administrative Science Quarterly .
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FIGURE 1.4
The Strategic Management Processfor Intended and Emergent Strategies
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Strategic Planning in Practice
Planning under uncertaintyScenario planning for dynamic environmental change
Ivory tower planningLack of contact with operational realities
The importance of involving operating managersProcedural justice in the decision-making process
Engagement, explanation, and expectations
Planning for the present: Strategic IntentRecognition of the static nature of the strategic fit modelStrategic intent in focusing the organization on winning byachieving stretch goals
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Improving Strategic Decision Making
Cognitive biases systematically influence therationality of decision makers.
FIGURE 1.5
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Copyright 2001 Houghton Mifflin Company. All rights reserved. 1-23
Groupthink and Strategic Decisions
Pitfalls of groupthink Failing to question underlying assumptions.Coalescing around a single person or policy.
Filtering out conflicting information.Developing after-the-fact rationalizations.Having an emotional (nonobjective)
commitment to an action.
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C ight 2001 H ght Miffli C All ight d 1 24
Techniques for Improving Decision Making
Two decision-making processesthat counteractcognitive biasesand groupthink.
FIGURE 1.6