key concepts of strategic management

1. Concepts of Strategic Management
Fred R. David
Prentice-Hall, Inc.
Sixth Edition
Concepts of Strategic Management
Fred R. David
Prentice-Hall, Inc.
Sixth Edition

2. Chapter 1Chapter 1
The Nature of Strategic
Management
The Nature of Strategic
Management

3. Three Themes in the TextThree Themes in the Text
• Global Considerations Impact Virtually
All Strategic Decisions
• Information Technology Has Become a
Vital Strategic Management Tool
• Preserving the Natural Environment is
an Important Strategic Issue

4. Chapter ObjectivesChapter Objectives
• Describe the strategic management process
• Explain the need for integrating analysis and
intuition in strategic management
• Define and give examples of key terms in strategic
management
• Discuss the nature of strategy formulation,
implementation, and evaluation activities
• Describe the benefits of good strategic management
• Explain why good ethics is good business in
strategic management

5. Should we
import?
Should we
import?
Will NAFTA
affect our firm?
Will NAFTA
affect our firm?
Should we
export?
Should we
export?
Should I
learn a foreign
language?
Should I
learn a foreign
language?
Global Considerations
Impact Virtually All
Strategic Decisions

6. Should we
outsource MIS?
Should we
outsource MIS?
Should we buy
our sales staff
laptops?
Should we buy
our sales staff
laptops?
Should we
upgrade our
PCs?
Should we
upgrade our
PCs?
Should we set
up a Web site?
Should we set
up a Web site?
Information Technology Has Become
A Vital Strategic Management Tool

7. Should we
recycle?
Should we
recycle?
Will Congress
pass tougher
laws?
Will Congress
pass tougher
laws?
Should we
burn low-sulfur
coal?
Should we
burn low-sulfur
coal?
Is our firm
environmentally
friendly?
Is our firm
environmentally
friendly?
Preserving the Natural
Environment is an Important
Strategic Issue

8. The Definition of
Strategic Management
The Definition of
Strategic Management
The Art and Science of
Formulating, Implementing, and
Evaluating Cross-Functional
Decisions That Enable an
Organization to Achieve It’s
Objectives

9. The Stages and Activities in the
Strategic Management Process
The Stages and Activities in the
Strategic Management Process
Stages Activities
Strategy
formulation
Strategy
evaluation
Strategy
implementation
Conduct
research
Establish
annual
objectives
Review internal
and external
factors
Integrate
intuition
with analysis
Devise
policies
Measure
performance
Make
decisions
Allocate
resources
Take
corrective
action

10. The Basis for Good
Strategic Decisions
The Basis for Good
Strategic Decisions
Intuition + Analysis
Effective Strategic Decisions

11. Global Perspective
The World’s Largest Companies
Global Perspective
The World’s Largest Companies
The World’s Ten Largest Companies in
Rank Order Based on 1994 Revenues
1. Mitsubishi 6. Marubeni
2. Mitsui 7. Ford Motor
3. Itochu 8. Exxon
4. Sumitomo 9. Nissho Iwai
5. General Motors 10. Royal Dutch/Shell Group

12. Conveys strong sense of vision 75% 98%
Links compensation to performance 66% 91%
Communicates frequently with employees 59% 89%
Emphasizes ethics 74% 85%
Plans for management succession 56% 85%
Communicates frequently with customers 41% 78%
Reassigns or terminates 34% 71%
Rewards loyalty 39% 44%
Makes all major decisions 39% 21%
Behaves conservatively 32% 13%
What Traits CEOs Have Now - And Will
Need in the Year 2000
What Traits CEOs Have Now - And Will
Need in the Year 2000
Personal Behaviors Now Year 2000

13. Strategy formulation 68% 78%
Human resource management 41% 53%
International economics and politics 10% 19%
Science and technology 11% 15%
Computer literacy 3% 7%
Marketing and sales 50% 48%
Negotiation 34% 24%
Accounting and finance 33% 24%
Handling media and public speaking 16% 13%
Production 21% 9%
What Traits CEOs Have Now - And Will
Need in the Year 2000 (cont.)
What Traits CEOs Have Now - And Will
Need in the Year 2000 (cont.)
Knowledge and Skills Now Year 2000

14. Ten Key External ForcesTen Key External Forces
EconomicEconomic
SocialSocial
CulturalCultural
DemographicDemographic EnvironmentalEnvironmental
PoliticalPolitical
LegalLegal
GovernmentalGovernmental
TechnologicalTechnological
CompetitiveCompetitive

15. Fourteen Key Internal ForcesFourteen Key Internal Forces
ManagementManagement
MarketingMarketing
DistributionDistribution
Production/
Operations
Production/
Operations
Research &
Development
Research &
Development
PurchasingPurchasing
ManufacturingManufacturing

16. Key Internal Forces (cont.)Key Internal Forces (cont.)
Finance/AccountingFinance/Accounting
PackagingPackaging
Computer
Information
Systems
Computer
Information
Systems
Employee/
Manager
Relations
Employee/
Manager
Relations
Human
Resource
Management
Human
Resource
Management
Vendor
Relations
Vendor
Relations
PromotionPromotion

17. Business MissionBusiness Mission
Strategy FormulationStrategy Formulation
External
Opportunities
and Threats
External
Opportunities
and Threats
Internal
Strengths and
Weaknesses
Internal
Strengths and
Weaknesses
Keys to Formulating Strategies

18. A Comprehensive Strategic Management ModelA Comprehensive Strategic Management Model
Develop
Mission
Statement
Develop
Mission
Statement
Establish
Long-
term
Objectives
Establish
Long-
term
Objectives
Generate,
Evaluate,
and
Select
Strategies
Generate,
Evaluate,
and
Select
Strategies
Establish
Policies and
Annual
Objectives
Establish
Policies and
Annual
Objectives
Allocate
Resources
Allocate
Resources
Measure
and
Evaluate
Performance
Measure
and
Evaluate
Performance
Perform
External
Audit
Perform
External
Audit
Perform
Internal
Audit
Perform
Internal
Audit
Feedback
Strategy Formulation Strategy Implementation Strategy Evaluation

19. Forces Influencing Design of Strategic
Management Systems
Forces Influencing Design of Strategic
Management Systems
Toward more
formality and
more details
Toward less
formality and
fewer details
Management Styles
Policy maker
Democratic-permissive
Authoritarian
Day-to-day operational thinker
Intuitive thinker
Experienced in planning
Inexperienced in planning
Organization
Small one-plant companies
Large companies

20. Forces Influencing Design of Strategic
Management Systems
Forces Influencing Design of Strategic
Management Systems
Toward more
formality and
more details
Toward less
formality and
fewer details
Complexity of
Environment
Stable environment
Turbulent environment
Little competition
Many markets and customers
Single market and customer
Competition severe

21. Forces Influencing Design of Strategic
Management Systems
Forces Influencing Design of Strategic
Management Systems
Toward more
formality and
more details
Toward less
formality and
fewer details
Complexity of
Production Process
Long production lead times
Short production lead times
Capital intensive
Labor intensive
Integrated manufacturing processes
Simple manufacturing processes
High technology
Low technology
Market reaction time for new
product is short
Market reaction time is long

22. Forces Influencing Design of Strategic
Management Systems
Forces Influencing Design of Strategic
Management Systems
Toward more
formality and
more details
Toward less
formality and
fewer details
Nature of Problems
Facing new, complex, tough
problems having long-range
aspects
Facing tough short-range problems
Purpose of Planning
System
Coordinate division activities
Train managers

23. Benefits of Strategic ManagementBenefits of Strategic Management
- Improved Communication
- Increased Understanding
- Enhanced Commitment
- Greater Productivity
- More Effective Strategies
- Higher Productivity
- Allow Firm to Influence, Initiate, and Anticipate
- Be Proactive Rather Than Reactive

24. How to Create an Ethical CultureHow to Create an Ethical Culture
• Develop a Code of Business Ethics
• Ask All Managers and Employers to Sign
the Code
• Offer Business Ethics Workshops
• Include Ethics Factors in Performance
Appraisal Instruments
• Link Compensation to Ethical Behavior

25. How to Create an Ethical Culture
(cont.)
How to Create an Ethical Culture
(cont.)
• Encourage Whistle Blowing
• Encourage Good Business Ethics
Behavior
• Publicize Good Business Ethics Behavior
• Reward Good Business Ethics Behavior
• Set a Good Example

26. The Communications Benefits of
Engaging In Strategic Management
The Communications Benefits of
Engaging In Strategic Management
Managers from all functional
areas listen and discuss their
views in strategic
management meetings. This
interaction yields learning,
appreciation, and
understanding among
managers who otherwise do
not communicate with each
other