introduction of strategic management

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introduction of strategic management

  1. 1. Chapter 1 The Nature of Strategic Management Strategic Management Ch 1 -1
  2. 2. Derived from  The Greek word „strategtia‟  Means are and science of directing military forces. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -2
  3. 3. Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -3 Strategic Management –Defined
  4. 4. Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -4
  5. 5. In essence, the strategic plan is a company‟s game plan Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -5 Strategic Management
  6. 6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -6 Benefits of Strategic Management
  7. 7. 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -7
  8. 8. Ch 1 -8 Strategic Management Model Strategy Formulation Strategy Implementation Evaluation and Control 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
  9. 9. 4 Stages of the Strategic Management Process Strategy formulation . Strategy analysis and choice. Strategy implementation. Strategy evaluation. Ch 1 -9
  10. 10. Strategy Formulation The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of corporate strengths and weaknesses. Composed of:  Mission Vision  Objectives  Strategies  Policies
  11. 11. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -11 Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection
  12. 12. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -12 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
  13. 13. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -13 Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation
  14. 14. 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 performanceCopyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -14
  15. 15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -15 Issues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical
  16. 16. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -16 Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action
  17. 17. Context: Strategic Analysis Content: Strategic Choice Process: Strategy Implementation The environment Culture and stakeholder expectations Resources and strategic capabilities Planning and allocatin g resource s Firm structure and design Managin g strategic change Identifyin g strategic options Evaluatin g options Selecting strategy Components of Strategy
  18. 18. Levels of Strategy
  19. 19. Hierarchy of Strategy Functional Strategy Business (Division Level) Strategy Corporate Strategy Manufacturing Finance Marketing Research and Development Human Resources Strategic Business Unit Strategic Business Unit Strategic Business Unit Corporate Headquarters
  20. 20. Vision Statement – What do we want to become? Mission Statement – What is our business? Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -20 Vision and Mission Statements
  21. 21. Vision  It is description of something in future  An organisational charter of core values and principles.  A puller into the future. Ch 1 - 21
  22. 22. Mission  The purpose or reason for the corporation‟s existence. It tells who the company is? what they do? what they‟d like to become?
  23. 23. Objectives The end results of planned activity. They state WHAT is to be accomplished by WHEN. They should be quantified, if possible. Should be specific, measurable and obtainable.
  24. 24. Strategies A strategy is a comprehensive master plan stating HOW the corporation will achieve its mission and objectives. There are three types: Corporate - a corporation‟s overall direction and the management of its businesses. Business - emphasizes improving the competitive position of a corporation‟s products or services in a specific industry or market segment. Functional - concerned with developing a distinctive competence to provide a company or business unit with a competitive advantage.
  25. 25. Policies Broad guidelines for making decisions. E.g. - 3M‟s policy requiring researchers to spend 15% of their time working on something other than their primary project.
  26. 26. Strategy Implementation The process of putting strategies and policies into action through the development of: ◦ Programs - statements of activities or steps needed to accomplish a single-use plan. ◦ Budgets - statements of a corporation‟s programs in dollar terms. ◦ Procedures - systems of sequential steps or techniques that describe in detail how to perform particular tasks or jobs.
  27. 27. Evaluation and Control The process of monitoring corporate activities and performance results so that actual performance can be compared with desired performance.
  28. 28. Specific results that an organization seeks to achieve in pursuing its basic mission Long-term means more than one year Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 28 Long-Term Objectives
  29. 29.  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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 29 Long-Term Objectives
  30. 30. Means by which long-term objectives are achieved Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 30 Strategies
  31. 31.  Examples ◦ Geographic expansion ◦ Diversification ◦ Acquisition ◦ Product development ◦ Market penetration ◦ Retrenchment ◦ Divestiture ◦ Liquidation ◦ Joint venture Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 31 Strategies
  32. 32. Short-term milestones that firms must achieve to reach long-term objectives Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 32 Annual Objectives
  33. 33. Means by which annual objectives will be achieved Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 33 Policies
  34. 34. Ch 1 - 34
  35. 35. Strategic Management Communication is a key to successful strategic management Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 35
  36. 36. 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 36
  37. 37. 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 37
  38. 38. 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 38
  39. 39. 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 39
  40. 40. Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 - 40 Adapting to Change
  41. 41. 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -41
  42. 42. Ch 1 -42

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