Chapter 1: The Strategic Chapter 1: The Strategic Management ProcessManagement Process

• by:by:

Khursheed YusufKhursheed Yusuf

PreviewPreview OverviewOverview Strategic ManagementStrategic Management Strategic ManagersStrategic Managers Strategic LeadershipStrategic Leadership Strategy as an Emergent Strategy as an Emergent

ProcessProcess Strategic Management in Strategic Management in

PracticePractice Improving Strategic Decision Improving Strategic Decision

MakingMaking

OverviewOverview

• Why do some firms succeed while Why do some firms succeed while others fail?others fail?

• Strategy DefinedStrategy Defined• Strategic Management ProcessStrategic Management Process

Strategic ManagementStrategic Management

• Rational Planning by Top Rational Planning by Top Management?Management?

Basic Planning Process

Missions and GoalsMissions and Goals

External Analysis - Opportunities and ThreatsExternal Analysis - Opportunities and Threats

Internal Analysis - Strengths and WeaknessesInternal Analysis - Strengths and Weaknesses

Selection of Appropriate StrategiesSelection of Appropriate Strategies

Implementation of StrategiesImplementation of Strategies

Strategic Management Strategic Management

• Let’s Look More Closely at Each Step . . .Let’s Look More Closely at Each Step . . .

• A Basic Planning ModelA Basic Planning Model

Missions and GoalsMissions and Goals

Basic Management ProcessBasic Management Process

Mission and Major GoalsMission and Major Goals• MissionMission• Major GoalsMajor Goals• Secondary GoalsSecondary Goals

Strategic Management Strategic Management (Continued)(Continued)

Missions and GoalsMissions and Goals

External Analysis - Opportunities and ThreatsExternal Analysis - Opportunities and Threats

Basic Planning ProcessBasic Planning Process

Strategic Management Strategic Management (Continued)(Continued)

• Identify Strategic Opportunities and Threats in Three Identify Strategic Opportunities and Threats in Three EnvironmentsEnvironments

Immediate

(Industry)

National Macro-

environment

External AnalysisExternal Analysis

Strategic Management Strategic Management (Continued)(Continued)

Missions and GoalsMissions and Goals

External Analysis - Opportunities and ThreatsExternal Analysis - Opportunities and Threats

Internal Analysis - Strengths and WeaknessesInternal Analysis - Strengths and Weaknesses

Basic Planning ProcessBasic Planning Process

Strategic Planning Strategic Planning (Continued)(Continued)

Internal AnalysisInternal Analysis

• Identify Strengths Identify Strengths

Strategic Planning Strategic Planning (Continued)(Continued)

Internal AnalysisInternal Analysis

• Identify StrengthsIdentify Strengths

• and Weaknessesand Weaknesses

Strategic Planning Strategic Planning (Continued)(Continued)

Basic Planning ProcessBasic Planning Process

Missions and GoalsMissions and Goals

External Analysis - Opportunities and ThreatsExternal Analysis - Opportunities and Threats

Internal Analysis - Strengths and WeaknessesInternal Analysis - Strengths and Weaknesses

Selection of Appropriate StrategiesSelection of Appropriate Strategies

Strategic Planning Strategic Planning (Continued)(Continued)

SWOT and Strategic ChoiceSWOT and Strategic Choice

Weaknesses Opportunities

Strengths Threats

Strategic Planning Strategic Planning (Continued)(Continued)

SWOT and SWOT and Strategic ChoiceStrategic Choice

(Continued)(Continued)

Functional

Business

Corporate

Global

Strategic Planning Strategic Planning (Continued)(Continued)

• Functional-Level StrategyFunctional-Level Strategy– ManufacturingManufacturing– MarketingMarketing– Materials ManagementMaterials Management– Research and DevelopmentResearch and Development– Human ResourcesHuman Resources

Strategic Planning Strategic Planning (Continued)(Continued)

SWOT and Strategic ChoiceSWOT and Strategic Choice (Continued) (Continued)

• Business-Level Strategy Business-Level Strategy – Cost LeadershipCost Leadership– DifferentiationDifferentiation– Market Niche FocusMarket Niche Focus

Strategic Planning Strategic Planning (Continued)(Continued)

SWOT and Strategic ChoiceSWOT and Strategic Choice (Continued) (Continued)

• Global StrategiesGlobal Strategies– MultidomesticMultidomestic– InternationalInternational– GlobalGlobal– TransnationalTransnational

Strategic Planning Strategic Planning (Continued)(Continued)

SWOT and Strategic ChoiceSWOT and Strategic Choice (Continued) (Continued)

• Corporate-Level StrategyCorporate-Level Strategy– Vertical IntegrationVertical Integration– DiversificationDiversification– Strategic AlliancesStrategic Alliances– AcquisitionsAcquisitions– New VenturesNew Ventures– Business PortfolioBusiness Portfolio

RestructuringRestructuring

Strategic Planning Strategic Planning (Continued)(Continued)

SWOT and Strategic ChoiceSWOT and Strategic Choice (Continued) (Continued)

Figure 1.1: Basic Planning ProcessFigure 1.1: Basic Planning Process

Missions and GoalsMissions and Goals

External Analysis - Opportunities and ThreatsExternal Analysis - Opportunities and Threats

Internal Analysis - Strengths and WeaknessesInternal Analysis - Strengths and Weaknesses

Selection of Appropriate StrategiesSelection of Appropriate Strategies

Implementation of StrategiesImplementation of Strategies

Strategic Planning Strategic Planning (Continued)(Continued)

• Designing Organizational StructureDesigning Organizational Structure

Strategic Planning Strategic Planning (Continued)(Continued)

Strategy ImplementationStrategy Implementation

• Designing Control SystemsDesigning Control Systems– Market and Output Market and Output

ControlsControls– Bureaucratic ControlsBureaucratic Controls– Control Through Control Through

Organizational CultureOrganizational Culture– Rewards and IncentivesRewards and Incentives

Strategic Planning Strategic Planning (Continued)(Continued)

Strategy Implementation Strategy Implementation (Continued)(Continued)

• Matching Strategy, Structure and ControlsMatching Strategy, Structure and Controls

Strategy

Structure

Controls

Strategic Planning Strategic Planning (Continued)(Continued)

Strategy Implementation Strategy Implementation (Continued)(Continued)

Strategic Planning Strategic Planning (Continued)(Continued)

Strategy Implementation Strategy Implementation (Continued)(Continued)• Managing Strategic ChangeManaging Strategic Change

– The Only Constant Is ChangeThe Only Constant Is Change– Strategy and Structure Strategy and Structure

AdaptationAdaptation

Strategic Planning Strategic Planning (Continued)(Continued)

Strategy Implementation Strategy Implementation (Continued)(Continued)• Managing Strategic ChangeManaging Strategic Change

– The Only Constant Is ChangeThe Only Constant Is Change– Strategy and Structure Strategy and Structure

AdaptationAdaptation

• The Feedback LoopThe Feedback Loop

Strategic ManagersStrategic Managers• General ManagersGeneral Managers• Functional ManagersFunctional Managers

Copyright 1998 by Houghton Mifflin Company. All rights reserved.

Figure 1.2:Figure 1.2: Levels of Strategic ManagementLevels of Strategic Management

Division A

Business

Functions

Market A

Head Office

Division B

Business

Functions

Market B

Division C

Business

Functions

Market C

Corporate LevelCEO, Board of DirectorsCorporate Staff

Business LevelDivisional Managers and Staff

Functional LevelFunctional Managers

Strategic Managers Strategic Managers (Continued)(Continued)

Strategic LeadershipStrategic Leadership

• Vision, Eloquence, and ConsistencyVision, Eloquence, and Consistency• CommitmentCommitment• Being Well InformedBeing Well Informed• Willingness to Delegate Willingness to Delegate

and Empowerand Empower• Astute Use Astute Use

of Powerof Power

Strategy as an Emergent Strategy as an Emergent ProcessProcess

• Strategy Making in an Strategy Making in an Unpredictable WorldUnpredictable World

• Strategy Making by Strategy Making by Lower Level ManagersLower Level Managers

• Intended and Emergent Intended and Emergent StrategiesStrategies

Figure 1.3: Emergent and Figure 1.3: Emergent and Deliberate StrategiesDeliberate Strategies

IntendedStrategy

RealizedStrategy

DeliberateStrategy

UnrealizedStrategy

EmergentStrategy

Figure 1.4.A: Strategic Management Figure 1.4.A: Strategic Management Process for Process for IntendedIntended Strategies Strategies

Missionsand Goals

Missionsand Goals

Strategic Choice

Strategic Choice

Organizing forImplementation

Organizing forImplementation

InternalAnalysis

InternalAnalysis

ExternalAnalysis

ExternalAnalysis

INTENDED STRATEGY

Figure 1.4.B:Figure 1.4.B: Strategic Management Strategic Management Process for Process for EmergentEmergent Strategies Strategies

Missionsand Goals

Missionsand Goals

InternalAnalysis

InternalAnalysis

ExternalAnalysis

ExternalAnalysis

EMERGENT STRATEGY

Strategic ChoiceDoes It Fit?

Strategic ChoiceDoes It Fit?

OrganizationalGrassroots

OrganizationalGrassroots

Strategic Planning In Strategic Planning In PracticePractice

• Planning Under UncertaintyPlanning Under Uncertainty• Ivory Tower PlanningIvory Tower Planning• Planning for the PresentPlanning for the Present

– Strategic IntentStrategic Intent

Improving Strategic Improving Strategic Decision MakingDecision Making

• Cognitive Biases and Strategic Cognitive Biases and Strategic DecisionsDecisions

Figure 1.5: Five Well-Known Cognitive BiasesFigure 1.5: Five Well-Known Cognitive Biases

Improving Strategic Decision Improving Strategic Decision Making Making (Continued)(Continued)

Figure 1.5: Five Well-Known Cognitive BiasesFigure 1.5: Five Well-Known Cognitive Biases

Improving Strategic Decision Improving Strategic Decision Making Making (Continued)(Continued)

Prior Hypothesis

Bias

Figure 1.5: Five Well-Known Cognitive BiasesFigure 1.5: Five Well-Known Cognitive Biases

Improving Strategic Decision Improving Strategic Decision Making Making (Continued)(Continued)

Prior Hypothesis

Bias

EscalatingCommitment

Figure 1.5: Five Well-Known Cognitive BiasesFigure 1.5: Five Well-Known Cognitive Biases

Improving Strategic Decision Improving Strategic Decision Making Making (Continued)(Continued)

Prior Hypothesis

Bias

EscalatingCommitment

Reasoningby

Analogy

Figure 1.5: Five Well-Known Cognitive BiasesFigure 1.5: Five Well-Known Cognitive Biases

Improving Strategic Decision Improving Strategic Decision Making Making (Continued)(Continued)

Prior Hypothesis

Bias

EscalatingCommitment

Reasoningby

Analogy

Representa-tiveness

Figure 1.5: Five Well-Known Cognitive BiasesFigure 1.5: Five Well-Known Cognitive Biases

Improving Strategic Decision Improving Strategic Decision Making Making (Continued)(Continued)

Prior Hypothesis

Bias

EscalatingCommitment

Reasoningby

Analogy

Representa-tiveness

Illusion of

Control

Improving Strategic Improving Strategic Decision MakingDecision Making

• Groupthink and Strategy Groupthink and Strategy DecisionsDecisions

• Techniques for Improving Techniques for Improving Decision MakingDecision Making– Devil’s AdvocacyDevil’s Advocacy– Dialectic InquiryDialectic Inquiry

• Cognitive Biases and Strategic Cognitive Biases and Strategic DecisionsDecisions

Two Decision-Making ProcessesTwo Decision-Making Processes

Improving Strategic Improving Strategic Decision Making Decision Making (Continued)(Continued)

ExpertPlan #2

(Antithesis)

ExpertPlan #1(Thesis)

Debate(Synthesis)

Final Plan

ExpertPlan

Devil’s Advocate

Plan

Final Plan

Devil’s Advocacy Dialectic InquiryDevil’s Advocacy Dialectic Inquiry

Chapter SummaryChapter Summary

STRATEGIC PLANNING

STRATEGIC MANAGERS

STRATEGIC LEADERSHIP

STRATEGY AS AN EMERGENT

PROCESS

STRATEGIC PLANNING IN PRACTICE

IMPROVING STRATEGIC DECISION

MAKING