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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />StrategicCharles W. L. HillManagementGareth R. Jones<br />PowerPoint Presentation by Charlie Cook<br />An Integrated Approach<br />Fifth Edition<br />Chapter 1The Strategic Management Process<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-2<br />Overview<br />Why do some firms succeed while others fail?<br />A central objective of strategic management is to learn why this happens.<br />What is strategy?<br />An action a company takes to attain superior performance.<br />What is the strategic management process?<br />The process by which managers choose a set of strategies for the enterprise to pursue its vision.<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-3<br />Rational planning by top management?<br />Basic Strategic Planning Model<br />Defining the Mission and Setting Top-Level Goals<br />External Analysis of Opportunities and Threats<br />Internal Analysis of Strengths and Weaknesses<br />Selection of Appropriate Strategies<br />Implementation of Chosen Strategies<br />Strategic Planning<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-4<br />The Main Components of the Strategic Planning Process<br />FIGURE 1.1<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-5<br />Mission and Goals<br />Mission<br />Sets out why the organization exists and what it should be doing.<br />Major goals<br />Specify what the organization hopesto fulfill in the medium to long term.<br />Secondary goals<br />Are objectives to be attained that lead to superior performance.<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-6<br />External Analysis<br />Identify strategic opportunities and threats in the operating environment.<br />Immediate (Industry)<br />Macroenvironment<br />National<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-7<br />Internal Analysis<br />Identify strengths<br />Quality and quantity of resources available<br />Distinctive competencies<br />Identify weaknesses<br />Inadequate resources<br />Managerial and organizational deficiencies<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-8<br />Strengths and Weaknesses<br />Opportunities and Threats(SWOT Analysis)<br />Strategic ChoiceBusinessFunctionalGlobalCorporate<br />SWOT and Strategic Choice<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-9<br />Business-Level Strategies<br />Cost leadership<br />Attaining, then using the lowest total cost basis as a competitive advantage.<br />Differentiation<br />Using product features or services to distinguish the firm’s offerings from its competitors.<br />Market niche focus<br />Concentrating competitively on a specific market segment.<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-10<br />Functional-Level Strategies<br />Focus is on improving the effectiveness of operations within a company.<br />Manufacturing<br />Marketing<br />Materials management<br />Research and development<br />Human resources<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-11<br />Global-Level Strategies<br />Multidomestic<br />International<br />Global<br />Transnational<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-12<br />Corporate-Level Strategies<br />Vertical integration<br />Diversification<br />Strategic alliances<br />Acquisitions<br />New ventures<br />Business portfolio restructuring<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-13<br />Strategy Implementation<br />Designing organizational structure<br />Designing control systems<br />Market and output controls<br />Bureaucratic controls<br />Control through organizational culture<br />Rewards and incentives<br />Matching strategy, structure, and controls<br />Congruence (fit) among strategy, structure, and controls<br />Structure<br />Controls<br />Strategy<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-14<br />Managing Strategic Change<br />The only constant is change.<br />Success requires adapting strategy and structure to a changing world.<br />The feedback loop in strategic planning.<br />Corporate<br />Operational<br />Business<br />Functional<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-15<br />Strategic Managers<br />General managers<br />Responsible for the overall (strategic) performance and health of the total organization.<br />Operations managers<br />Responsible for specific businessfunctions or operations.<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-16<br />Strategic Managers for All Levels<br />FIGURE 1.2<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-17<br />Strategic Leadership<br />Vision, eloquence, and consistency<br />Commitment to the vision<br />Being well informed<br />Willingness to delegate and empower<br />Astute use of power<br />Emotional intelligence<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-18<br />Strategy as an Emergent Process<br />Strategy making in an unpredictable world<br />Creates the necessity for flexible strategic approaches.<br />Strategy making by lower-level managers<br />Strategy evolves through autonomous action.<br />Serendipity and strategy<br />Accidental discoveries and happenstances can have dramatic effects on strategic direction.<br />Intended and emergent strategies<br />Realized strategies are combinations of intended and emergent strategies. <br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-19<br />FIGURE 1.3<br />Intended and Emergent Strategies<br />Source: Reprinted from “Strategy Formation in an Adhocracy,” by Henry Mintzberg and Alexandra McGugh, published in Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by permission of Administrative Science Quarterly.<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-20<br />The Strategic Management Process for Intended and Emergent Strategies<br />FIGURE 1.4<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-21<br />Strategic Planning in Practice<br />Planning under uncertainty<br />Scenario planning for dynamic environmental change<br />Ivory tower planning<br />Lack of contact with operational realities<br />The importance of involving operating managers<br />Procedural justice in the decision-making process<br />Engagement, explanation, and expectations<br />Planning for the present: Strategic Intent<br />Recognition of the static nature of the strategic fit model<br />Strategic intent in focusing the organization on winning by achieving stretch goals<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-22<br />Improving Strategic Decision Making<br />Cognitive biases systematically influence the rationality of decision makers.<br />FIGURE 1.5<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-23<br />Groupthink and Strategic Decisions<br />Pitfalls of groupthink<br />Failing to question underlying assumptions.<br />Coalescing around a single person or policy.<br />Filtering out conflicting information.<br />Developing after-the-fact rationalizations.<br />Having an emotional (nonobjective) commitment to an action.<br />

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Copyright © 2001 Houghton Mifflin Company. All rights reserved.<br />1-24<br />Techniques for Improving Decision Making<br />Two decision-making processesthat counteractcognitive biases and groupthink.<br />FIGURE 1.6<br />