Chapter 1 The Nature of Strategic Management

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Chapter 1 The Nature of Strategic Management

• Strategic Management Concepts Cases
• 13th Edition
• Fred David

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Chapter Outline

• What Is Strategy Strategic Management?
• Key Terms in Strategic Management
• The Strategic-Management Model
• Benefits of Strategic Management
• Why Some Firms Do No Strategic Planning?
• Business Ethics and Strategic Management
• Comparing Business and Military Strategies
• The Nature of Global Competition

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What is Strategy?

• Consists of competitive moves business
  approaches to produce successful performance.
• Managements game plan for
• Running the business
• Strengthening firms competitive position
• Satisfying customers
• Achieving performance targets

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• A corporations strategy forms a comprehensive
  master plan stating how the corporation will
  achieve its mission objectives.

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Strategic Management Defined

• Art science of formulating, implementing, and
  evaluating, cross-functional decisions that
  enable an organization to achieve its
  objectives. -It focuses on integrating
  management, marketing, finance/accounting,
  production, RD and computer information systems
  to achieve organizational success.

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Strategic-Management Process Three Stages
Strategy Formulation
Strategy Implementation
Strategy Evaluation
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Strategy Formulation

• Issues include
• What new businesses to enter
• What businesses to abandon
• How to allocate resources
• Expand operations or diversify
• Enter international markets
• Merge or form joint venture
• Avoidance of hostile takeover

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Strategy Implementation

• Is the action stage of strategic management
• Most difficult stage
• Need to mobilize employees and managers to put
  formulated strategies into action
• Interpersonal skills are critical
• Consensus on pursuing goals

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Strategy Evaluation

• Final stage of strategic management
• It is the stage where managers find out how well
  their strategies are working.
• All strategies subject to future modification
  because of changes in the firms internal and
  external environment
• Success today is no guarantee of success tomorrow

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Integrating Intuition and Analysis

• The strategic management process is a logical,
  systematic and objective approach to
  decision-making in organizations.
• The strategic management process attempts to
  organize quantitative and qualitative information
  under conditions of uncertainty.
• But intuition is still important to making good
  strategic decisions.

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Integrating Intuition and Analysis

• Intuition based on
• Past experiences
• Judgment
• Feelings
• Useful for decision making
• Conditions of great uncertainty
• Conditions with little precedent

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Adaptation to Change

• Organizations must continually monitor internal
  and external events and trends so that timely
  changes can be made when needed.

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Adaptation to Change

• Rate and magnitude of changes
• Increasing dramatically
• E-commerce
• Demographics
• Technology
• Strategic alliances
• The strategic management process allows
  organizations to adapt effectively to change over
  the long run.

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Adapting to Change Key Strategic Management
Questions

• What kind of business should we become?
• Are we in the right fields
• Are there new competitors
• What strategies should we pursue?
• How are our customers changing?

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Key Terms

• Competitive Advantage
• Is defined as anything the firm does especially
  well compared to its competitors.
• It exists when a firm can do something that rival
  firms cannot do, or owns a resource that rival
  firms desire.
• Exists when a firm is able to deliver the same
  benefits as a competitor but at a lower cost
  (cost advantage) or deliver benefits that exceed
  those of competing products (differentiation
  advantage).

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Key Terms

• Competitive Advantage
• The goal of a business strategy is to achieve
  sustainable competitive advantage.
• Can be achieved through continually adapting to
  internal and external changes.
• Effectively formulating, implementing and
  evaluating strategies that capitalize upon the
  competitive advantage.

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Key Terms

• Vision Statement
• What do we want to become?
• Mission Statement
• What is our business?
• - Identifies the scope of the business

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Key Terms

• Opportunities Threats (External)

• Include the following factors
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
• These factors can significantly harm or benefit
  the organization in the future

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Opportunities Threats (External)

• These factors are beyond the control of a a
  single organization.
• Basic tenet of strategic management
• Take advantage of external opportunities
• Avoid or reduce impact of external threats

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Key Terms

• - Environmental Scanning/Industry Analysis is
  the process of conducting research and gathering
  and assimilating external information.

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Key Terms

• Strengths Weaknesses (Internal)

• Refers to an organizations controllable
  activities that are performed especially well or
  poorly.
• Typically located in functional areas of the
  firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research Development
• Computer Information Systems
• Strengths and weaknesses are typically determined
  relative to competitors.

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Key Terms

• Long-term objectives
• Objectives refer to results that an organization
  seeks to achieve in its mission statement.
• Long term means more than one year.
• Objectives are essential for organizational
  success because they
• State direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Provide the basis for planning, motivating and
  controlling

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Key Terms
Strategies

• - The means by which long-term objectives are
  achieved.
• May include
• Geographic expansion, diversification
• Acquisition
• Product development, market penetration
• Retrenchment, divestiture
• Liquidation, joint venture

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Key Terms

• Annual Objectives
• - Short-term milestones that organizations must
  take to achieve long-term objectives.
• Represent the basis for allocating resources
• Established at corporate, divisional, and
  functional levels

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Key Terms

• Policies
• Important in strategy implementation as the means
  by which annual objectives will be achieved
• Guide to decision making and address repetitive
  situations
• Established at corporate, divisional, or
  functional levels
• Allow consistency coordination within and
  between organizational departments

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Comprehensive strategic management model
External Audit Chapter 3
Vision Mission Chapter 2
Long-Term Objectives Chapter 5
Generate, Evaluate, Select Strategies Chapter 6
Implement Strategies Mgmt Issues Chapter 7
Implement Strategies Marketing, Fin/Acct, RD,
CIS Chapter 8
Measure Evaluate Performance Chapter 9
Internal Audit Chapter 4
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Benefits of Strategic Management
Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement

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Why Some Firms Dont Do Strategic Planning

• Poor reward structures
• Fire-fighting
• Waste of time
• Too expensive
• Laziness
• Content with success

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Why Some Firms Dont Do Strategic Planning
(Contd)

• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Suspicion