Overview of Strategic Management; defines basic activities and terms used in strategic management.

1. Ch 1: Introduction to
Strategic Management

2. 2
Strategies in Action
(McDonald‟s Corp)
 World‟s largest restaurant chain by number of outlets, both in the US &
Abroad
 In recent times, McDonald‟s began opening drive-through restaurants in
China, closed 25 sites in UK, and disposed of a supply-chain operation in
Russia
 In 2007, Big Mac opened 800 new restaurants in China, Japan, and Russia
 Shares of McDonald‟s stock increased 42% in 2006 as sales touched $41
Billion
 Big Mac is working to eliminate trans fats from its food (New York City is
requiring this of all restaurants)
 In 2008, McDonald‟s plans to turn ownership of about 2,300 restaurants in
Canada & UK over to licensees
Strategic Management | CH1: Introduction February 20, 2012

3. 3
Strategies in Action
(American General)
 A Fortune 500 company, American General split into 3 businesses
in 2007
 Air-Conditioning systems
 Bath-and-Kitchen business
 Vehicle Control systems
 The firm is also renaming itself TRANE, after its flagship air-
conditioning brand name
 Company plans to divest the bath-and-kitchen division and to
spin off its vehicle-control division into a publicly traded
company named Wabco
Strategic Management | CH1: Introduction February 20, 2012

4. 4
What is Strategic
Management?
 The art & science of ‘formulating’, ‘implementing’, and
‘evaluating’ cross-functional decisions that enable an
organization to achieve its objectives.
 An ongoing process that evaluates and controls the business
and the industries in which the company is involved; assesses its
competitors and sets goals & strategies to meet all existing and
potential competitors; and then reassesses each strategy
annually or quarterly to determine how it has been implemented
and whether it has succeeded or needs replacement by a new
strategy to meet changed circumstances, new technology, new
competitors, a new economic environment or a new
social, financial or political environment.
Strategic Management | CH1: Introduction February 20, 2012

5. 5
Strategic Management
Model
Perform
External
Audit
Develop Generate, Implement Implement
Establish Measure *
Mission & Evaluate & Strategies Strategies –
Long-Term Evaluate
Vision Select Mgmnt Functional
Objectives Performance
Statement Strategies Issues Issues
Perform
Internal
Audit
Strategic Management | CH1: Introduction February 20, 2012

6. 6
Stage 1: Strategy Formulation
 Developing a vision & mission, identifying an organization‟s
external opportunities and threats, determining internal strengths
& weaknesses, establishing long-term objectives, generating
alternative strategies, and choosing particular strategies to
pursue.
 Deciding what new businesses to enter, what businesses to
abandon, how to allocate resources, whether to expand
operations or diversify, whether to enter international
markets, whether to merge or form a joint venture.
 Limited resources (decide which alternatives will benefit firm
most) | Wrong decisions (enduring negative impact)
Strategic Management | CH1: Introduction February 20, 2012

7. 7
Stage 2: Strategy
Implementation
 Establish annual objectives, devise policies, motivate
employees, and allocate resources so that the formulated
strategies can be executed.
 Creating an effective organizational structure, redirecting
marketing efforts, preparing budgets, developing & utilizing
information systems, and linking employee compensation to
organizational performance.
 Mobilizing employees & managers to put the formulated
strategies into action. Requires personal
discipline, commitment, and sacrifice.
Strategic Management | CH1: Introduction February 20, 2012

8. 8
Stage 3: Strategy Evaluation
 Three fundamental activities
1. Reviewing external & internal factors that are the bases of current
strategies
2. Measuring performance
3. Taking corrective actions
 Success today is no guarantee of success tomorrow. Success
creates new & different problems; complacent organizations
experience demise.
Strategic Management | CH1: Introduction February 20, 2012

9. 9
Key Terms in Strategic
Management (1/6)
 Competitive Advantage
 “Anything that a firm does especially well compared to rival firms.”
 Sustainable competitive advantage
 Continually adapting to changes in external trends & events and
internal capabilities, competencies & resources
 Effectively formulating, implementing and evaluating strategies that
capitalize upon the above factors
 Example: Internet for direct selling and communication with suppliers
& customers dispersed globally
Strategic Management | CH1: Introduction February 20, 2012

10. 10
Key Terms in Strategic
Management (2/6)
 Strategists
 Individuals who are responsible for the success or failure of an
organization (CXO)
 Help organizations gather, analyze & organize information.
 Track industry & competitive trends, develop forecasting
models, evaluate corporate & divisional performance, spot emerging
market opportunities, identify business threats, and develop creative
action plans
Strategic Management | CH1: Introduction February 20, 2012

11. 11
Key Terms in Strategic
Management (3/6)
 Vision & Mission Statements
 Vision Statement answers the question “What do we want to
become?”
 First step in strategy planning; precedes development of mission
statement
 Example, vision statement of Institute of Management Accountants
is “Global leadership in education, certification, and practice of
management accounting & financial management.”
 Mission statement address the basic question “What is our business?”
 Enduring statements of purpose that distinguish one business from
other similar firms.
Strategic Management | CH1: Introduction February 20, 2012

12. 12
FedEx: Vision Statement
 "FedEx is committed to providing outstanding customer
experience, to being a great place to work, a thoughtful steward
of the environment and a caring citizen in the communities
where we live and work. At FedEx, we are passionate about
sustainably connecting people and places and improving the
quality of life around the world.”
Strategic Management | CH1: Introduction February 20, 2012

13. 13
FedEx:
Mission, Strategy, Values (1/3)
 Mission
 FedEx Corporation will produce superior financial returns for its
shareowners by providing high value-added logistics, transportation
and related business services through focused operating companies.
Customer requirements will be met in the highest quality manner
appropriate to each market segment served. FedEx will strive to
develop mutually rewarding relationships with its employees, partners
and suppliers. Safety will be the first consideration in all operations.
Corporate activities will be conducted to the highest ethical and
professional standards.
Strategic Management | CH1: Introduction February 20, 2012

14. 14
FedEx:
Mission, Strategy, Values (2/3)
 Strategy
 The unique FedEx operating strategy works seamlessly - and
simultaneously - on three levels.
 Compete collectively by standing as one brand worldwide and
speaking with one voice.
 Operate independently by focusing on our independent networks
to meet distinct customer needs.
 Manage collaboratively by working together to sustain loyal
relationships with our workforce, customers and investors.
Strategic Management | CH1: Introduction February 20, 2012

15. 15
FedEx:
Mission, Strategy, Values (3/3)
 Values
 People: We value our people and promote diversity in our workplace
and in our thinking.
 Service: Our absolutely, positively spirit puts our customers at the heart
of everything we do.
 Innovation: We invent and inspire the services and technologies that
improve the way we work and live.
 Integrity: We manage our operations, finances and services with
honesty, efficiency and reliability.
 Responsibility: We champion safe and healthy environments for the
communities in which we live and work.
 Loyalty: We earn the respect and confidence of our FedEx
people, customers and investors every day, in everything we do.
Strategic Management | CH1: Introduction February 20, 2012

16. 16
Key Terms in Strategic
Management (4/6)
 External Opportunities & Threats
 Refer to the economic, social, cultural, demographic, legal, etc. that
could significantly benefit or harm an organization in the future.
 Largely, beyond the control of a single organization
 Examples, wireless revolution, biotechnology, population shifts, high
gas prices, changing work values & attitudes, increased competition
from foreign companies, natural catastrophe, declining value of
dollar
 Organizations need to constantly identify, monitor and evaluate
external opportunities & threats for success (environmental scanning)
 Some organizations use lobbying to influence external opportunities &
threats
Strategic Management | CH1: Introduction February 20, 2012

17. 17
Key Terms in Strategic
Management (5/6)
 Internal Strengths & Weaknesses
 Organization‟s controllable activities that are performed especially
well or poorly
 Functions such as
Management, Marketing, Finance/Accounting, Production/Operatio
ns, Research & Development, Management Information System (MIS)
 Usually assessed „relative to competitors‟
 Example, Ownership of Natural Resources or a historic reputation for
quality
Strategic Management | CH1: Introduction February 20, 2012

18. 18
Key Terms in Strategic
Management (6/6)
 Long-Term Objectives & Annual Objectives
 Objectives are specific results that an organization seeks to achieve in
pursuing its basic mission
 Objectives are essential for organizational success because they state
direction, aid in evaluation, reveal priorities, basis for effective
planning, organizing, motivating & controlling activities
 Objectives should be
challenging, measurable, consistent, reasonable & clear
 Long-Term means more than one year
 Annual means short term milestones that organizations must achieve
to reach long-term objectives
Strategic Management | CH1: Introduction February 20, 2012

19. 19
Why Companies Do No
Strategic Planning?
 Poor Reward Structures (penalized for failures, individuals prefer to
play safe)
 Fire-Fighting, too busy with crisis management so no time to plan
 Waste of Time, time spent on planning is an investment
 Too Expensive, organizations culturally opposed to spending
resources
 Content with success (success today doesn‟t guarantee success
tomorrow)
 Overconfidence, as individuals gain experience they rely less on
formal planning
Strategic Management | CH1: Introduction February 20, 2012

20. 20
Thank You
Hardy Alexander
Founder & Director | Triune Global
“Partners in Employee Development”
halexander@triuneglobal.com
Strategic Management | CH1: Introduction February 20, 2012