Chap01

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Chap01

  1. 1. Strategic Management Concepts & Cases 8th edition Fred R. David Chapter 1: The Nature of Strategic Management PowerPoint Slides By: Anthony F. Chelte Western New England College Ch. 1-1
  2. 2. Organizing Themes • Global considerations impact virtually all strategic decisions. • E-commerce has become a vital strategic management tool. • The natural environment has become an important strategic issue. Ch. 1-2
  3. 3. Strategic Management Defined Art and science of formulating, implementing, and evaluating crossfunctional decisions that enable an organization to achieve its objectives. Ch. 1-3
  4. 4. Strategic Management Club Visit and join the club on-line: www.strategyclub.com Ch. 1-4
  5. 5. Terminology “Strategic Management ” Synonymous with “Strategic Planning ” • Strategic management  Used more often in academia • Strategic planning  Used more often in the business world Ch. 1-5
  6. 6. Terminology • Strategic management Refers to:  Strategy formulation  Strategy implementation  Strategy evaluation • Strategic planning Refers to:  Strategy formulation Ch. 1-6
  7. 7. Brief History • 1950s  Term strategic planning originates 1960s – 1970s  Strategic planning very popular  Widely viewed as panacea for problems Ch. 1-7
  8. 8. Brief History • 1980s  Strategic planning cast aside  Planning models did not yield higher returns • 1990s–2000  Revival of strategic planning  Widely practiced in business world Ch. 1-8
  9. 9. Strategic-Management Process Three Stages Strategy Formulation Strategy Implementation Strategy Evaluation Ch. 1-9
  10. 10. Strategy Formulation Vision & Mission Opportunities & Threats Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection Ch. 1-10
  11. 11. Strategy Implementation Annual Objectives Policies Motivate Employees Resource Allocation Ch. 1-11
  12. 12. Strategy Evaluation Review External & Internal Measure Performance Corrective Action Ch. 1-12
  13. 13. Key Strategic Management Terms (Cont’d) 1. 2. 3. 4. 5. Strategists Vision statements Mission statements External opportunities and threats Internal strengths and weaknesses Ch. 1-13
  14. 14. Key Strategic Management Terms (Cont’d) 6. 7. 8. 9. Long-term objectives Strategies Annual objectives Policies Ch. 1-14
  15. 15. Strategic Management Terms (Cont’d) Strategists • Usually found in high levels of management (CEO) Help organization gather, analyze, and organize information Track industry and competitive trends Develop forecasting model Evaluate corporate and divisional performance Ch. 1-15
  16. 16. Chanakya quotes (Indian politician, strategist and writer, 350 BC-275 BC) • "Before you start some work, always ask yourself three questions - Why am I doing it, What the results might be and Will I be successful. Only when you think deeply and find satisfactory answers to these questions, go ahead." Ch. 1-16
  17. 17. Strategic Management Terms (Cont’d) Vision Statements • Answers the question: “What do we want to become?” First step in strategic planning Oftentimes a single sentence “Our vision is to take care of your vision.” (Stokes Eye Clinic, Florence, South Carolina) Ch. 1-17
  18. 18. Strategic Management Terms (Cont’d) External Opportunities & Threats • Largely beyond the control of a single organization Economic Social Cultural Demographic Environmental Ch. 1-18
  19. 19. Strategic Management Terms (Cont’d) External Opportunities & Threats (cont’d) Political Governmental Technological Competitive trends & events Ch. 1-19
  20. 20. Strategic Management Terms (Cont’d) Internal Strengths & Weaknesses • Controllable activities that are performed well or poorly relative to competitors Based on functional analysis of activities in the firm’s:  Management  Marketing  Finance/accounting Ch. 1-20
  21. 21. Strategic Management Terms (Cont’d) Internal Strengths & Weaknesses (Cont’d) • Based on functional analysis of activities in the firm’s: Production/operations Research and development Computer information systems • Organizations strive to pursue strategies that capitalize on strengths and improve weaknesses Ch. 1-21
  22. 22. Strategic Management Terms (Cont’d) Long-Term Objectives • Results to be achieved in pursuing the organization’s mission. Time frame is beyond one year. State direction Aid in evaluation Create synergy Reveal priorities Focus coordination Provide basis for effective management Ch. 1-22
  23. 23. Strategic Management Terms (Cont’d) Strategies • Potential actions that require top management decisions and large amounts of firm’s resources Mechanisms by which long-term objectives are realized Geographic expansion Diversification Acquisition Product development Ch. 1-23
  24. 24. Strategic Management Terms (Cont’d) Strategies (cont’d) • Mechanisms by which long-term objectives are realized Market penetration Retrenchment Divestiture Liquidation Joint venture Ch. 1-24
  25. 25. Strategic Management Terms (Cont’d) Annual Objectives • Short-term milestones necessary to achieve long-term objectives. Represent the basis for allocating resources Established at corporate, divisional, and functional levels Ch. 1-25
  26. 26. Strategic Management Terms (Cont’d) Annual Objectives (cont’d) • Stated in terms of accomplishments for: management  marketing  finance/accounting  production/operations  research and development  information systems accomplishments Ch. 1-26
  27. 27. Strategic Management Terms (Cont’d) 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 Ch. 1-27
  28. 28. Comprehensive Strategic Management Model External Audit Chapter 3 Long-Term Objectives Vision & Mission Statements Generate, Evaluate, Select Strategies Implement Strategies: Mgmt Issues Implement Strategies: Marketing, Fin/Acct, R&D, CIS Measure & Evaluate Performance Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 2 Internal Audit Chapter 4 Ch. 1-28
  29. 29. Benefits of Strategic Management • Proactive vs. Reactive Initiate and influence activities  Helps shape firm’s own future • Principal Benefit Formulate better strategies  Systematic, logical, and rational approach • Communication Key to successful strategic management Ch. 1-29
  30. 30. Benefits of Strategic Management (Cont’d) • Financial Benefits More profitable and successful Improvements in sales, profitability, and productivity High-Performing Firms  Systematic planning Fluctuations in external and internal environments Ch. 1-30
  31. 31. Benefits of Strategic Management (Cont’d) • Nonfinancial Benefits Enhanced awareness of external threats Understanding of competitors’ strategies Increased employee productivity Reduced resistance to change Clear performance-reward relationships Order and discipline to the firm View change as opportunity Ch. 1-31
  32. 32. Why Some Firms Do No Strategic Planning • • • • • • Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success Ch. 1-32
  33. 33. Why Some Firms Do No Strategic Planning (Cont’d) • • • • • • Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion Ch. 1-33
  34. 34. Pitfalls to Avoid in Strategic Planning • Using to gain control over decisions & resources • Doing only to satisfy regulatory requirements • Moving hastily from mission to strategy formulation • Failing to communicate to employees • Intuitive decisions that conflict with formal plan • Top management not supportive of process Ch. 1-34
  35. 35. Pitfalls to Avoid in Strategic Planning (Cont’d) • Failing to use as standard for performance measurement • Delegating to a “planner” vs. involvement of managers • Failing to involve key personnel • Failing to create collaborative environment • Formality that stifles creativity and flexibility Ch. 1-35
  36. 36. Business Ethics & Strategic Planning Defined: Principles of conduct within organizations that guide decision making and behavior • Good business ethics is a prerequisite for good strategic management • Good ethics is just good business! Ch. 1-36
  37. 37. Business Ethics & Strategic Planning (Cont’d) • Strategists responsible for high ethical principles • All strategic processes have ethical ramifications • Formal codes of ethics are in place for many businesses • Internet privacy emerging as ethical issue of immense proportions Ch. 1-37
  38. 38. Business Ethics & Strategic Planning (Cont’d) 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 Ch. 1-38
  39. 39. Nature 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 Ch. 1-39
  40. 40. Advantages of International Operations • • • • • Absorb excess capacity Reduce unit costs Low-cost production facilities Lower labor costs Competition less intense Ch. 1-40
  41. 41. Advantages of International Operations (Cont’d) • Reduced tariffs, lower taxes • Favorable political climate • Economies of scale Ch. 1-41
  42. 42. Disadvantages of International Operations Communication difficulties between parent and subsidiaries • Based on cultural, political, social, language, demographic, and competitive forces Foreign-based competitors • Strengths underestimated • Weaknesses overestimated Ch. 1-42
  43. 43. Key Terms & Concepts • • • • • • • • Annual objectives Business ethics Code of ethics E-commerce Empowerment Environmental scanning External opportunities External threats • • • • • • • • Internal strengths Internal weaknesses Intuition Long-term objectives Mission statements Policies Strategic management Strategic-management model Ch. 1-43
  44. 44. Key Terms & Concepts (Cont’d) • Strategic-management process • Strategies • Strategists • Strategy evaluation • Strategy formulation • Strategy implementation • Lobbying • • • • • • Vision statement Vision Host country International firms Long-range planning Multinational corporation Ch. 1-44

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