Basics of stratagic management

17 August 2015 1

Basic Concepts of

Strategic Management

17 August 2015 2

Strategic Decision Making

Mintzberg’s Modes

– Entrepreneurial mode

– Adaptive mode

– Planning mode

– Logical incrementalism

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Defined:

Set of managerial decisions and

actions that determines the long-

run performance of a firm.

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Business Policy

Defined:

General management orientation

that looks inward for properly

integrating the firm’s functional

activities.

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Four Phases of


• Basic financial planning

• Forecast-based planning

• Externally-oriented planning

(strategic)

• Strategic management

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Highly Rated Benefits:

• Clearer sense of strategic vision for the firm

• Sharper focus on what is strategically

important

• Improved understanding of a rapidly

changing environment

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Not always a formal process:

• Where is the organization now? (Not where do we hope it is!)

• If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 years?

• What specific actions should management undertake? What are the risks and payoffs involved?

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Challenges to


Globalization– Internationalization of markets and

corporations• Global (worldwide) markets rather than national

markets

Electronic Commerce– Use of the Internet to conduct business

transactions• Basis for competition on a more strategic level rather

than traditional focus on product features and costs

17 August 2015 9

Global Issues

• European Union (EU)

– Economic integration of 15 member countries

• North American Free Trade Agreement (NAFTA)

– Improved trade among 3 member countries

• Mercosur

– Free-trade area among Argentina, Brazil,

Uruguay, and Paraguay

• Association of South East Asian Nations (ASEAN)

– Attempting to link members into a borderless

economic zone

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E-Commerce

7 Trends:

– Internet forcing companies to transform themselves

– Market access and branding are changing, causing disintermediation of traditional distribution channels

– Balance of power shifting to the consumer

– Competition is changing

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7 Trends (continued)

• Pace of business increasing drastically

• Internet purchasing corporations out of

their traditional boundaries

• Knowledge becoming a key asset and

source of competitive advantage

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Organizational Adaptation

How organizations obtain “fit” within their environment:

– Theory of population ecology

– Institution theory

– Strategic choice perspective

– Organizational learning theory

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Adaptation to Changing

Environmental Conditions

Strategic flexibility:

– Demands a long-term commitment to the development

and nurturing of critical resources

– Demands that the firm become a learning organization

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Learning Organizations

Defined:

An organization skilled at creating,

acquiring, and transferring

knowledge and at modifying its

behavior to reflect new knowledge

and insights.

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Learning Organizations

Four Main Activities:

• Solving problems systematically

• Experimenting with new approaches

• Learning from their won experiences and

that of others

• Transferring knowledge quickly and

efficiently throughout the organization

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Evaluation

and Controland Control

Strategic Management Model

StrategyFormulation

StrategyImplementation

Mission

Objectives

Strategies

Policies

Feedback/Learning

Environmental

Scanning

Societal

Environment

General Forces

Task

Environment

Industry Analysis

Structure

Chain of Command

Resources

Assets, Skills

Competencies,

Knowledge

Culture

Beliefs, Expectations,

Values

Reason for

existence

What results

to

accomplish

by when Plan to

achieve the

mission &

objectives Broad

guidelines for

decision

making

Programs

Activities

needed to

accomplish

a plan

Budgets

Cost of the

programs Procedures

Sequence

of steps

needed to

do the job

Process

to monitor

performance

and take

corrective

action

Performance

External

Internal

Evaluation

and Control

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Basic Model of


Four Basic Elements

Characteristics of Strategic Management

Four aspects

that set apart

Strategic

Management

Interdisciplinary

External focus

Internal focus

Future direction

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Environmental Scanning

Defined:

The monitoring, evaluating, and

disseminating of information from

the external and internal

environments to key people within

the firm.

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Identify strategic factors

– SWOT Analysis– Strengths, Weaknesses

– Opportunities, Threats

– Internal Environment

• Strengths & Weaknesses

– Within the organization but not subject to short-run

control of management

– External Environment

• Opportunities & Threats

– External to the organization but not subject to short-

run control of management

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Strategy Formulation

Defined:

Development of long-range plans for

the effective management of

environmental opportunities and

threats in light of corporate strengths

and weaknesses.

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Mission Statement

– Purpose or reason for the organization’s existence

– Promotes shared expectations among employees

– Communicates public image important to stakeholders

– Who we are, what we do, what we’d like to become

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Maytag Corporation

Mission Statement

To improve the quality of home life

by designing, building, marketing,

and servicing the best appliances in

the world.

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Objectives

– The end results of planned activity

• What is to be accomplished

• Time in which to accomplish it

• Quantified when possible

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Goals vs. Objectives

A goal is an open-ended statement of

what one wants to accomplish with no

quantification of what is to be achieved

and no time criteria for completion.

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Goals & Objectives

Corporate goals and objectives include:

– Profitability (net profits)

– Growth (increase in total assets, etc.)

– Utilization of resources (ROE or ROI)

– Market leadership (market share)

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Strategies

Defined:

A strategy of a corporation forms a

comprehensive master plan stating

how the corporation will achieve its

mission and objectives. It maximizes

competitive advantage and

minimizes competitive disadvantage.

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Strategies

3 Types of Strategy

–Corporate strategy

–Business strategy

–Functional strategy

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Strategies

Corporate Strategy

–Stability

–Growth

–Retrenchment

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Strategies

Business Strategy

–Competitive strategies

–Cooperative strategies

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Strategies

Functional Strategy

–Technological leadership

–Technological followership

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Hierarchy of Strategy

Corporate Strategy

Business

(Division Level)

Strategy

Functional

Strategy

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Policies

Defined:

Broad guidelines for decision

making that link the formulation of

strategy with its implementation.

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Strategy Implementation

Strategy

Implementation

Programs

Budgets

Procedures

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Initiation of Strategy

Triggering

event

•New CEO

•External intervention

•Threat of change in

ownership

•Performance gap

•Strategic inflection point

Stimulus

for change

in

strategy

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Strategic Decisions

– Rare

– Consequential

– Directive

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Basics of stratagic management

Education

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