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Fred R. David
Prentice Hall
Ch. 1-1
Chapter 1Chapter 1
The Nature of StrategicThe Nature of Strategic
ManagementManagement...
Fred R. David
Prentice Hall
Ch. 1-2
The Nature of StrategicThe Nature of Strategic
ManagementManagement
• A global perspec...
Fred R. David
Prentice Hall
Ch. 1-3
Strategic Management AchievesStrategic Management Achieves
Organizational SuccessOrgan...
Fred R. David
Prentice Hall
Ch. 1-4
Three-Stage ProcessThree-Stage Process
Strategy Formulation
Strategy Implementation
St...
Fred R. David
Prentice Hall
Ch. 1-5
Strategy Formulation
Vision & Mission
Alternative Strategies
Long-Term Objectives
Stre...
Fred R. David
Prentice Hall
Ch. 1-6
Strategy FormulationStrategy Formulation
Issues include:
–What new businesses to enter...
Fred R. David
Prentice Hall
Ch. 1-7
Strategy Implementation
Employee Motivation
Policies
Annual Objectives
Resource Alloca...
Fred R. David
Prentice Hall
Ch. 1-8
Strategy ImplementationStrategy Implementation
Action Stage of strategic management:
–...
Fred R. David
Prentice Hall
Ch. 1-9
Strategy Evaluation
Performance Measurement
External Review
Internal Review
Corrective...
Fred R. David
Prentice Hall
Ch. 1-10
Strategy EvaluationStrategy Evaluation
Final stage of strategic management:
– All str...
Fred R. David
Prentice Hall
Ch. 1-11
Prime Task of StrategicPrime Task of Strategic
ManagementManagement
According to Pete...
Fred R. David
Prentice Hall
Ch. 1-12
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
The strategic ma...
Fred R. David
Prentice Hall
Ch. 1-13
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
Intuition based ...
Fred R. David
Prentice Hall
Ch. 1-14
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
Intuition and ju...
Fred R. David
Prentice Hall
Ch. 1-15
Adaptation to ChangeAdaptation to Change
Organizations must monitor events
–On-going ...
Fred R. David
Prentice Hall
Ch. 1-16
Adaptation to ChangeAdaptation to Change
Rate and magnitude of changes
–Increasing dr...
Fred R. David
Prentice Hall
Ch. 1-17
Adaptation to ChangeAdaptation to Change
Key strategic-management questions:
– What k...
Fred R. David
Prentice Hall
Ch. 1-18
Key TermsKey Terms
Strategists
– Most responsible for success or failure of an
organi...
Fred R. David
Prentice Hall
Ch. 1-19
Key TermsKey Terms
Vision Statement
–What do we want to become?
Mission Statement
–Wh...
Fred R. David
Prentice Hall
Ch. 1-20
Key TermsKey Terms
External Opportunities and Threats
– Significantly benefit or harm...
Fred R. David
Prentice Hall
Ch. 1-21
Key TermsKey Terms
External Opportunities and Threats
–Largely beyond the control of ...
Fred R. David
Prentice Hall
Ch. 1-22
Key TermsKey Terms
Environmental Scanning
–Industry Analysis
• Process of conducting ...
Fred R. David
Prentice Hall
Ch. 1-23
Key TermsKey Terms
Internal Strengths and Weaknesses
– Controllable activities perfor...
Fred R. David
Prentice Hall
Ch. 1-24
Key TermsKey Terms
Determining Internal Factors:
–Financial ratios
–Measuring perform...
Fred R. David
Prentice Hall
Ch. 1-25
Key TermsKey Terms
Long-term objectives:
– Mission-driven pursuit of specific results...
Fred R. David
Prentice Hall
Ch. 1-26
Key TermsKey Terms
Strategies:
– Means by which long-term objectives will be
achieved...
Fred R. David
Prentice Hall
Ch. 1-27
Key TermsKey Terms
Annual Objectives:
– Short-term milestones that organizations must...
Fred R. David
Prentice Hall
Ch. 1-28
Key TermsKey Terms
Policies:
– Means by which annual objectives will be
achieved.
Fred R. David
Prentice Hall
Ch. 1-29
Comprehensive Strategic Management ModelComprehensive Strategic Management Model
Exte...
Fred R. David
Prentice Hall
Ch. 1-30
Strategic-Management ModelStrategic-Management Model
Strategic-Management Process –
•...
Fred R. David
Prentice Hall
Ch. 1-31
Strategic-Management ModelStrategic-Management Model
1.Identify Organization’s existi...
Fred R. David
Prentice Hall
Ch. 1-32
Strategic-Management ModelStrategic-Management Model
2.Perform External Audit
3.Perfo...
Fred R. David
Prentice Hall
Ch. 1-33
Benefits of StrategicBenefits of Strategic
ManagementManagement
• Proactive in shapin...
Fred R. David
Prentice Hall
Ch. 1-34
Benefits of StrategicBenefits of Strategic
ManagementManagement
• Financial benefits
...
Fred R. David
Prentice Hall
Ch. 1-35
Benefits of StrategicBenefits of Strategic
ManagementManagement
• Non-Financial benef...
Fred R. David
Prentice Hall
Ch. 1-36
Benefits of StrategicBenefits of Strategic
ManagementManagement
1.Identification of o...
Fred R. David
Prentice Hall
Ch. 1-37
Benefits of StrategicBenefits of Strategic
ManagementManagement
8.Integration of indi...
Fred R. David
Prentice Hall
Ch. 1-38
• Poor reward structures
• Fire-fighting
• Waste of time
• Too expensive
• Laziness
•...
Fred R. David
Prentice Hall
Ch. 1-39
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of t...
Fred R. David
Prentice Hall
Ch. 1-40
Business ethics defined:
–Principles of conduct within
organizations that guide decis...
Fred R. David
Prentice Hall
Ch. 1-41
Good business ethics:
–prerequisite for good strategic
management
Business Ethics and...
Fred R. David
Prentice Hall
Ch. 1-42
Code of business ethics:
–Provides basis on which policies can
be devised to guide da...
Fred R. David
Prentice Hall
Ch. 1-43
Internet privacy
–Emerging ethical issue of immense
proportion
Business Ethics and St...
Fred R. David
Prentice Hall
Ch. 1-44
Internet and business ethics --
–38% of companies store and review
employees email me...
Fred R. David
Prentice Hall
Ch. 1-45
Business actions always unethical include:
• Misleading advertising
• Misleading labe...
Fred R. David
Prentice Hall
Ch. 1-46
Nature of Global CompetitionNature of Global Competition
Companies conduct business a...
Fred R. David
Prentice Hall
Ch. 1-47
• Absorb excess capacity
• Reduce unit costs
• Spread economic risks over wider
marke...
Fred R. David
Prentice Hall
Ch. 1-48
• Different social, cultural demographic,
legal forces may create difficult
communica...
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Strategic management-concepts Fred R. David (2007) Slide 1 Strategic management-concepts Fred R. David (2007) Slide 2 Strategic management-concepts Fred R. David (2007) Slide 3 Strategic management-concepts Fred R. David (2007) Slide 4 Strategic management-concepts Fred R. David (2007) Slide 5 Strategic management-concepts Fred R. David (2007) Slide 6 Strategic management-concepts Fred R. David (2007) Slide 7 Strategic management-concepts Fred R. David (2007) Slide 8 Strategic management-concepts Fred R. David (2007) Slide 9 Strategic management-concepts Fred R. David (2007) Slide 10 Strategic management-concepts Fred R. David (2007) Slide 11 Strategic management-concepts Fred R. David (2007) Slide 12 Strategic management-concepts Fred R. David (2007) Slide 13 Strategic management-concepts Fred R. David (2007) Slide 14 Strategic management-concepts Fred R. David (2007) Slide 15 Strategic management-concepts Fred R. David (2007) Slide 16 Strategic management-concepts Fred R. David (2007) Slide 17 Strategic management-concepts Fred R. David (2007) Slide 18 Strategic management-concepts Fred R. David (2007) Slide 19 Strategic management-concepts Fred R. David (2007) Slide 20 Strategic management-concepts Fred R. David (2007) Slide 21 Strategic management-concepts Fred R. David (2007) Slide 22 Strategic management-concepts Fred R. David (2007) Slide 23 Strategic management-concepts Fred R. David (2007) Slide 24 Strategic management-concepts Fred R. David (2007) Slide 25 Strategic management-concepts Fred R. David (2007) Slide 26 Strategic management-concepts Fred R. David (2007) Slide 27 Strategic management-concepts Fred R. David (2007) Slide 28 Strategic management-concepts Fred R. David (2007) Slide 29 Strategic management-concepts Fred R. David (2007) Slide 30 Strategic management-concepts Fred R. David (2007) Slide 31 Strategic management-concepts Fred R. David (2007) Slide 32 Strategic management-concepts Fred R. David (2007) Slide 33 Strategic management-concepts Fred R. David (2007) Slide 34 Strategic management-concepts Fred R. David (2007) Slide 35 Strategic management-concepts Fred R. David (2007) Slide 36 Strategic management-concepts Fred R. David (2007) Slide 37 Strategic management-concepts Fred R. David (2007) Slide 38 Strategic management-concepts Fred R. David (2007) Slide 39 Strategic management-concepts Fred R. David (2007) Slide 40 Strategic management-concepts Fred R. David (2007) Slide 41 Strategic management-concepts Fred R. David (2007) Slide 42 Strategic management-concepts Fred R. David (2007) Slide 43 Strategic management-concepts Fred R. David (2007) Slide 44 Strategic management-concepts Fred R. David (2007) Slide 45 Strategic management-concepts Fred R. David (2007) Slide 46 Strategic management-concepts Fred R. David (2007) Slide 47 Strategic management-concepts Fred R. David (2007) Slide 48
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Strategic management-concepts Fred R. David (2007)

  1. 1. Fred R. David Prentice Hall Ch. 1-1 Chapter 1Chapter 1 The Nature of StrategicThe Nature of Strategic ManagementManagement Strategic Management: Concepts and Cases. 9th edition Fred R. David
  2. 2. Fred R. David Prentice Hall Ch. 1-2 The Nature of StrategicThe Nature of Strategic ManagementManagement • A global perspective is a matter of survival for businesses. • E-commerce is a vital strategic management tool. • The natural environment is an important strategic issue.
  3. 3. Fred R. David Prentice Hall Ch. 1-3 Strategic Management AchievesStrategic Management Achieves Organizational SuccessOrganizational Success Process of Integrating: – management – marketing – finance/accounting – production/operations – research and development – computer information systems
  4. 4. Fred R. David Prentice Hall Ch. 1-4 Three-Stage ProcessThree-Stage Process Strategy Formulation Strategy Implementation Strategy Evaluation
  5. 5. Fred R. David Prentice Hall Ch. 1-5 Strategy Formulation Vision & Mission Alternative Strategies Long-Term Objectives Strengths & Weaknesses Opportunities & Threats Strategy Selection
  6. 6. Fred R. David Prentice Hall Ch. 1-6 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
  7. 7. Fred R. David Prentice Hall Ch. 1-7 Strategy Implementation Employee Motivation Policies Annual Objectives Resource Allocation
  8. 8. Fred R. David Prentice Hall Ch. 1-8 Strategy ImplementationStrategy Implementation Action Stage of strategic management: –Most difficult stage –Mobilizing employees and managers –Interpersonal skills are critical –Consensus on pursuing goals
  9. 9. Fred R. David Prentice Hall Ch. 1-9 Strategy Evaluation Performance Measurement External Review Internal Review Corrective Action
  10. 10. Fred R. David Prentice Hall Ch. 1-10 Strategy EvaluationStrategy Evaluation Final stage of strategic management: – All strategies subject to future modification – Success today is no guarantee of success tomorrow – Success creates new and different problems – Complacency leads to demise
  11. 11. Fred R. David Prentice Hall Ch. 1-11 Prime Task of StrategicPrime Task of Strategic ManagementManagement According to Peter Drucker… The prime task is to think through the overall mission of a business Ask the question: What is our Business?
  12. 12. Fred R. David Prentice Hall Ch. 1-12 Integrating Intuition and AnalysisIntegrating Intuition and Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty.
  13. 13. Fred R. David Prentice Hall Ch. 1-13 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
  14. 14. Fred R. David Prentice Hall Ch. 1-14 Integrating Intuition and AnalysisIntegrating Intuition and Analysis Intuition and judgment –Management at all levels –Analyses are influenced Analytical thinking and intuitive thinking –Complement each other
  15. 15. Fred R. David Prentice Hall Ch. 1-15 Adaptation to ChangeAdaptation to Change Organizations must monitor events –On-going process –Internal and external events –Timely changes
  16. 16. Fred R. David Prentice Hall Ch. 1-16 Adaptation to ChangeAdaptation to Change Rate and magnitude of changes –Increasing dramatically • E-commerce • Demographics • Technology • Merger-mania –Effective Adaptation • Long-run focus
  17. 17. Fred R. David Prentice Hall Ch. 1-17 Adaptation to ChangeAdaptation to Change Key strategic-management questions: – What kind of business should we become? – Are we in the right fields? – Should we reshape our business? – What new competitors are entering our industry? – What strategies should we pursue? – How are our customers changing?
  18. 18. Fred R. David Prentice Hall Ch. 1-18 Key TermsKey Terms Strategists – Most responsible for success or failure of an organization – Various job titles: • Chief executive officer • President • Owner • Chair of the Board • Executive Director • Entrepreneur
  19. 19. Fred R. David Prentice Hall Ch. 1-19 Key TermsKey Terms Vision Statement –What do we want to become? Mission Statement –What is our business?
  20. 20. Fred R. David Prentice Hall Ch. 1-20 Key TermsKey Terms External Opportunities and Threats – Significantly benefit or harm the organization in the future. – Include the following trends: • Economic • Social • Cultural • Demographic Environmental • Political, legal, governmental • Technological • Competitive trends
  21. 21. Fred R. David Prentice Hall Ch. 1-21 Key TermsKey Terms External Opportunities and Threats –Largely beyond the control of a single organization. –Basic tenet of strategic management • Strategy formulation to: – Take advantage of external opportunities – Avoid or reduce impact of external threats
  22. 22. Fred R. David Prentice Hall Ch. 1-22 Key TermsKey Terms Environmental Scanning –Industry Analysis • Process of conducting research and gathering and assimilating external information
  23. 23. Fred R. David Prentice Hall Ch. 1-23 Key TermsKey Terms Internal Strengths and Weaknesses – Controllable activities performed especially well or poorly. – Arise in functional areas of the business: • Management • Marketing • Finance/accounting • Production/operations • Research & development • Computer Information Systems
  24. 24. Fred R. David Prentice Hall Ch. 1-24 Key TermsKey Terms Determining Internal Factors: –Financial ratios –Measuring performance –Industry averages –Survey data
  25. 25. Fred R. David Prentice Hall Ch. 1-25 Key TermsKey Terms Long-term objectives: – Mission-driven pursuit of specific results more than one-year out. – Essential for organizational success • State direction • Aid in evaluation • Create synergy • Focus coordination • Basis for planning, motivating and controlling
  26. 26. Fred R. David Prentice Hall Ch. 1-26 Key TermsKey Terms Strategies: – Means by which long-term objectives will be achieved. – May include: • Geographic expansion, diversification • Acquisition • Product development, market penetration • Retrenchment, divestiture • Liquidation, joint venture
  27. 27. Fred R. David Prentice Hall Ch. 1-27 Key TermsKey Terms Annual Objectives: – Short-term milestones that organizations must achieve to reach long-term objectives.
  28. 28. Fred R. David Prentice Hall Ch. 1-28 Key TermsKey Terms Policies: – Means by which annual objectives will be achieved.
  29. 29. Fred R. David Prentice Hall Ch. 1-29 Comprehensive Strategic Management ModelComprehensive Strategic Management Model External Audit Chapter 3 Internal Audit Chapter 4 Long-Term Objectives Chapter 5 Generate, Evaluate, Select Strategies Chapter 6 Implement Strategies: Mgmt Issues Chapter 7 Implement Strategies: Marketing, Fin/Acct, R&D, CIS Chapter 8 Measure & Evaluate Performance Chapter 9 Vision & Mission Chapter 2
  30. 30. Fred R. David Prentice Hall Ch. 1-30 Strategic-Management ModelStrategic-Management Model Strategic-Management Process – • Dynamic and Continuous • More formal in larger organizations
  31. 31. Fred R. David Prentice Hall Ch. 1-31 Strategic-Management ModelStrategic-Management Model 1.Identify Organization’s existing: • Vision • Mission • Objectives • Strategies
  32. 32. Fred R. David Prentice Hall Ch. 1-32 Strategic-Management ModelStrategic-Management Model 2.Perform External Audit 3.Perform Internal Audit 4.Establish long-term objectives 5.Generate, evaluate, select strategies 6.Implement strategies 7.Measure and evaluate performance
  33. 33. Fred R. David Prentice Hall Ch. 1-33 Benefits of StrategicBenefits of Strategic ManagementManagement • Proactive in shaping organization’s future • Initiate and influence activities • Formulate better strategies – Systematic, logical, rational approach
  34. 34. Fred R. David Prentice Hall Ch. 1-34 Benefits of StrategicBenefits of Strategic ManagementManagement • Financial benefits – Improvement in sales – Improvement in profitability – Improvement in productivity
  35. 35. Fred R. David Prentice Hall Ch. 1-35 Benefits of StrategicBenefits of Strategic ManagementManagement • Non-Financial benefits – Enhanced awareness of xternal threats – Improved understanding of competitors’ strategies – Increased employee productivity – Reduced resistance to change – Understanding of performance-reward relationships – Enhances problem-prevention capabilities
  36. 36. Fred R. David Prentice Hall Ch. 1-36 Benefits of StrategicBenefits of Strategic ManagementManagement 1.Identification of opportunities 2.Objective view of management problems 3.Improved coordination and control 4.Minimizes adverse conditions and changes 5.Decisions to better support objectives 6.Effective allocation of time and resources 7.Internal communication among personnel
  37. 37. Fred R. David Prentice Hall Ch. 1-37 Benefits of StrategicBenefits of Strategic ManagementManagement 8.Integration of individual behaviors 9.Clarifies individual responsibilities 10.Encourages forward thinking 11.Encourages favorable attitude toward change 12.Discipline and formality to the management of the business
  38. 38. Fred R. David Prentice Hall Ch. 1-38 • Poor reward structures • Fire-fighting • Waste of time • Too expensive • Laziness • Content with success Why Some Firms DoWhy Some Firms Do NoNo Strategic PlanningStrategic Planning
  39. 39. Fred R. David Prentice Hall Ch. 1-39 • Fear of failure • Overconfidence • Prior bad experience • Self-interest • Fear of the unknown • Suspicion Why Some Firms DoWhy Some Firms Do NoNo Strategic Planning (Cont’d)Strategic Planning (Cont’d)
  40. 40. Fred R. David Prentice Hall Ch. 1-40 Business ethics defined: –Principles of conduct within organizations that guide decision making and behavior. Business Ethics and StrategicBusiness Ethics and Strategic ManagementManagement
  41. 41. Fred R. David Prentice Hall Ch. 1-41 Good business ethics: –prerequisite for good strategic management Business Ethics and StrategicBusiness Ethics and Strategic ManagementManagement
  42. 42. Fred R. David Prentice Hall Ch. 1-42 Code of business ethics: –Provides basis on which policies can be devised to guide daily behavior and decisions at the workplace Business Ethics and StrategicBusiness Ethics and Strategic ManagementManagement
  43. 43. Fred R. David Prentice Hall Ch. 1-43 Internet privacy –Emerging ethical issue of immense proportion Business Ethics and StrategicBusiness Ethics and Strategic ManagementManagement
  44. 44. Fred R. David Prentice Hall Ch. 1-44 Internet and business ethics -- –38% of companies store and review employees email messages –Up from 15% in 1997 –54% of companies monitor employees’ Internet connections Business Ethics and StrategicBusiness Ethics and Strategic ManagementManagement
  45. 45. Fred R. David Prentice Hall Ch. 1-45 Business actions always unethical include: • Misleading advertising • Misleading labeling • Environmental harm • Poor product or service safety • Padding expense accounts • Insider trading • Dumping flawed products on foreign markets Business Ethics & StrategicBusiness Ethics & Strategic PlanningPlanning
  46. 46. Fred R. David Prentice Hall Ch. 1-46 Nature of Global CompetitionNature of Global Competition Companies conduct business across borders International or multinational corporations  Parent company  Host country • Strategy implementation more difficult Cultural differences  Norms, values, work ethics
  47. 47. Fred R. David Prentice Hall Ch. 1-47 • Absorb excess capacity • Reduce unit costs • Spread economic risks over wider markets • Low-cost production facilities • Competition may be less intense • Reduced tariffs, lower taxes • Economies of scale Advantages of InternationalAdvantages of International OperationsOperations
  48. 48. Fred R. David Prentice Hall Ch. 1-48 • Different social, cultural demographic, legal forces may create difficult communication • Weaknesses of foreign competition may be underestimated • Barriers to communication and effective management of personnel • Complications from different monetary systems Disadvantages of InternationalDisadvantages of International OperationsOperations
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Strategic management concepts by Fred R. David

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