Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13 th Edition...
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Transcript of Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13 th Edition...
Chapter 1 The Nature of Strategic Management
Strategic Management:
Concepts & Cases
13th Edition
Fred David
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
What is Strategy?
• Consists of competitive moves & business approaches to produce successful performance.
• Management’s “game plan” for – Running the business– Strengthening firm’s competitive position– Satisfying customers– Achieving performance targets
• A corporation’s strategy forms a comprehensive master plan stating how the corporation will achieve its mission & objectives.
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, R&D and computer information systems to achieve organizational success.
Strategic Management – Defined
6
Strategic-Management Process Three Stages
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Prentice Hall, 2001 7
Strategy FormulationStrategy 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
Prentice Hall, 2001 8
Strategy ImplementationStrategy 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
Prentice Hall, 2001 9
Strategy EvaluationStrategy 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 firm’s internal and external environment– Success today is no guarantee of success tomorrow
Prentice Hall, 2001 10
Integrating Intuition and AnalysisIntegrating 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.
Prentice Hall, 2001 11
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
Intuition based on:– Past experiences
– Judgment
– Feelings
Useful for decision making– Conditions of great uncertainty
– Conditions with little precedent
Prentice Hall, 2001 12
Adaptation to ChangeAdaptation to Change
• Organizations must continually monitor internal and external events and trends so that timely changes can be made when needed.
Prentice Hall, 2001 13
Adaptation to ChangeAdaptation 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.
• 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?
Adapting to Change – Key Strategic Management Questions
15
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).
Key TermsKey Terms
16
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.
Key TermsKey Terms
Vision Statement –What do we want to become?
Mission Statement –What is our business?- Identifies the scope of the business
Key TermsKey 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
Key TermsKey Terms
Prentice Hall, 2001 19
• 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
Opportunities & Threats (External)
Prentice Hall, 2001 20
Key TermsKey Terms
- Environmental Scanning/Industry Analysis is the process of conducting research and gathering and assimilating external information.
Strengths & Weaknesses (Internal) Key Terms
• Refers to an organization’s 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.
Prentice Hall, 2001 22
Key TermsKey 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
- The means by which long-term objectives are achieved.
– May include:• Geographic expansion, diversification• Acquisition• Product development, market penetration• Retrenchment, divestiture• Liquidation, joint venture
Strategies
Key TermsKey Terms
24
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
Key TermsKey Terms
25
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
Key TermsKey Terms
ExternalAudit
Chapter 3
InternalAudit
Chapter 4
Long-TermObjectives
Chapter 5
Generate,Evaluate,
SelectStrategies
Chapter 6
ImplementStrategies:
Mgmt Issues
Chapter 7
ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8
Measure &Evaluate
Performance
Chapter 9
Vision &
Mission
Chapter 2
Comprehensive strategic management model
Benefits of Strategic Management
Financial Benefits
• Improvement in sales
• Improvement in profitability
• Productivity improvement
28
• Poor reward structures• Fire-fighting• Waste of time• Too expensive• Laziness• Content with success
Why Some Firms Don’t Do Strategic Planning
29
• Fear of failure• Overconfidence• Prior bad experience• Self-interest• Fear of the unknown• Suspicion
Why Some Firms Don’t Do Strategic Planning (Cont’d)