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  • 1. Copyright © 2011 Pearson Education, Inc. Ch 1 -1 Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13th Edition Fred David
  • 2. Copyright © 2011 Pearson Education, Inc. Ch 1 -2 Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management –Defined
  • 3. Copyright © 2011 Pearson Education, Inc. Ch 1 -3 Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow
  • 4. Copyright © 2011 Pearson Education, Inc. Ch 1 -4 Strategic Management In essence, the strategic plan is a company’s game plan
  • 5. Copyright © 2011 Pearson Education, Inc. Ch 1 -5 3 Stages of the Strategic Management Process  Strategy formulation  Strategy implementation  Strategy evaluation
  • 6. Copyright © 2011 Pearson Education, Inc. Ch 1 -6 Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection
  • 7. Copyright © 2011 Pearson Education, Inc. Ch 1 -7 Issues in Strategy Formulation Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover
  • 8. Copyright © 2011 Pearson Education, Inc. Ch 1 -8 Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation
  • 9. Copyright © 2011 Pearson Education, Inc. Ch 1 -9 Strategy Implementation Steps  Developing a strategy-supportive culture  Creating an effective organizational structure  Redirecting marketing efforts  Preparing budgets  Developing and utilizing information systems  Linking employee compensation to organizational performance
  • 10. Copyright © 2011 Pearson Education, Inc. Ch 1 -10 Issues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical
  • 11. Copyright © 2011 Pearson Education, Inc. Ch 1 -11 Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action
  • 12. Copyright © 2011 Pearson Education, Inc. Ch 1 -12 Peter Drucker: Think through the overall mission of a business. Ask the key question: “What is our Business?” Prime Task of Strategic Management
  • 13. Copyright © 2011 Pearson Education, Inc. Ch 1 -13 The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Integrating Intuition & Analysis
  • 14. Copyright © 2011 Pearson Education, Inc. Ch 1 -14 Intuition is based on:  Past experiences  Judgment  Feelings Integrating Intuition & Analysis Intuition is useful for decision making in conditions of:  Great uncertainty  Little precedent  Highly interrelated variables  Several plausible alternatives
  • 15. Copyright © 2011 Pearson Education, Inc. Ch 1 -15 Involve management at all levels Intuition & Judgment Influence all analyses Integrating Intuition & Analysis
  • 16. Copyright © 2011 Pearson Education, Inc. Ch 1 -16 Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Adapting to Change
  • 17. Copyright © 2011 Pearson Education, Inc. Ch 1 -17 Key Terms in Strategic Management  Competitive advantage  Strategists  Vision and mission statements  External opportunities and threats  Internal strengths and weaknesses  Long-term objectives  Strategies  Annual objectives  Policies
  • 18. Copyright © 2011 Pearson Education, Inc. Ch 1 -18 Anything that a firm does especially well compared to rival firms Strategic Management is Gaining and Maintaining Competitive Advantage
  • 19. Copyright © 2011 Pearson Education, Inc. Ch 1 -19 1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources Achieving Sustained Competitive Advantage 2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors
  • 20. Copyright © 2011 Pearson Education, Inc. Ch 1 -20 Strategists Gather Information Analyze Information Organize Information
  • 21. Copyright © 2011 Pearson Education, Inc. Ch 1 -21 Vision Statement – What do we want to become? Mission Statement – What is our business? Vision and Mission Statements
  • 22. Copyright © 2011 Pearson Education, Inc. Ch 1 -22 External Opportunities and Threats Analysis of Trends  Economic  Social  Cultural  Demographic/Environmental  Political, Legal, Governmental  Technological  Competitors
  • 23. Copyright © 2011 Pearson Education, Inc. Ch 1 -23 Basic Tenet of Strategic Management External Opportunities and Threats Strategy Formulation Take advantage of External Opportunities Take advantage of External Opportunities Avoid/minimize impact of External Threats Avoid/minimize impact of External Threats
  • 24. Copyright © 2011 Pearson Education, Inc. Ch 1 -24  Controllable activities performed especially well or poorly  Determined relative to competitors Internal Strengths and Weaknesses
  • 25. Copyright © 2011 Pearson Education, Inc. Ch 1 -25  Typically located in functional areas of the firm  Management  Marketing  Finance/Accounting  Production/Operations  Research & Development  Management Information Systems Internal Strengths and Weaknesses
  • 26. Copyright © 2011 Pearson Education, Inc. Ch 1 -26 Assessing the Internal Environment Internal Strengths and Weaknesses Internal Factors Performance Measures Ratios Industry Averages Survey Data
  • 27. Copyright © 2011 Pearson Education, Inc. Ch 1 -27  Specific results that an organization seeks to achieve in pursuing its basic mission  Long-term means more than one year Long-Term Objectives
  • 28. Copyright © 2011 Pearson Education, Inc. Ch 1 -28 Long-Term Objectives  Essential for ensuring the firm’s success  Provide direction  Aid in evaluation  Create synergy  Reveal priorities  Focus coordination  Provide basis for planning, organizing, motivating, and controlling
  • 29. Copyright © 2011 Pearson Education, Inc. Ch 1 -29 Means by which long-term objectives are achieved Strategies
  • 30. Copyright © 2011 Pearson Education, Inc. Ch 1 -30 Strategies  Examples  Geographic expansion  Diversification  Acquisition  Product development  Market penetration  Retrenchment  Divestiture  Liquidation  Joint venture
  • 31. Copyright © 2011 Pearson Education, Inc. Ch 1 -31 Sample Strategies  Table 1-1  Best Buy  Levi Strauss  New York Times Company
  • 32. Copyright © 2011 Pearson Education, Inc. Ch 1 -32 Short-term milestones that firms must achieve to reach long-term objectives Annual Objectives
  • 33. Copyright © 2011 Pearson Education, Inc. Ch 1 -33 Means by which annual objectives will be achieved Policies
  • 34. Copyright © 2011 Pearson Education, Inc. Ch 1 -34
  • 35. Copyright © 2011 Pearson Education, Inc. Ch 1 -35  Strategic Management Process Dynamic & continuous More formal in larger organizations Strategic Management Model
  • 36. Copyright © 2011 Pearson Education, Inc. Ch 1 -36 Strategic Management  Communication is a key to successful strategic management
  • 37. Copyright © 2011 Pearson Education, Inc. Ch 1 -37 Benefits of Strategic Management
  • 38. Copyright © 2011 Pearson Education, Inc. Ch 1 -38 Benefits of Strategic Management  Nonfinancial Benefits  Enhanced awareness of threats  Improved understanding of competitors’ strategies  Increased employee productivity  Reduced resistance to change  Clearer understanding of performance-reward relationship  Enhanced problem-prevention capabilities
  • 39. Copyright © 2011 Pearson Education, Inc. Ch 1 -39 Why Some Firms Do No Strategic Planning  Lack of knowledge of strategic planning  Poor reward structures  Fire fighting  Waste of time  Too expensive  Laziness  Content with success
  • 40. Copyright © 2011 Pearson Education, Inc. Ch 1 -40 Why Some Firms Do No Strategic Planning (continued)  Fear of failure  Overconfidence  Prior bad experience  Self-interest  Fear of the unknown  Honest difference of opinion  Suspicion
  • 41. Copyright © 2011 Pearson Education, Inc. Ch 1 -41 Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory
  • 42. Copyright © 2011 Pearson Education, Inc. Ch 1 -42 Effective Strategic Planning is:  A people process more than a paper process  A learning process  Words supported by numbers  Simple and nonroutine  Varying assignments, team membership, meeting formats, and planning calendars  Challenging assumptions underlying corporate strategy
  • 43. Copyright © 2011 Pearson Education, Inc. Ch 1 -43 Effective Strategic Planning continued  Welcomes bad news  Requires open-mindedness and a spirit of inquiry  Is not a bureaucratic mechanism  Is not ritualistic or stilted  Is not too formal, predictable, or rigid  Does not contain jargon or arcane language
  • 44. Copyright © 2011 Pearson Education, Inc. Ch 1 -44 Effective Strategic Planning continued  Is not a formal system for control  Does not disregard qualitative information  Is not controlled by “technicians”  Does not pursue too many strategies at once  Continually strengthens the “good ethics is good business” policy
  • 45. Copyright © 2011 Pearson Education, Inc. Ch 1 -45 Comparing Business and Military Strategy  Strategic planning started in the military  Similarity  Both business and military organizations must adapt to change and constantly improve  Difference  Business strategy assumes competition  Military strategy assumes conflict
  • 46. Copyright © 2011 Pearson Education, Inc. Ch 1 -46 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.