1. 1
Ch 1 -1
Chapter 1The Nature of Strategic Management
Ch 1 -2
Art & science offormulating, implementing, andevaluating, cross-functional decisions that enable an organization to achieve its objectives
Strategic Management –Defined
Ch 1 -3
Purpose of Strategic Management
To exploit and create new and different opportunities for tomorrow
Ch 1 -4
Strategic Management
In essence, the strategic planis a company’s game plan
Ch 1 -5
3 Stages of the Strategic Management Process
Strategy formulation
Strategy implementation
Strategy evaluation
Ch 1 -6
Vision&Mission
StrategyFormulation
ExternalOpportunities&Threats
InternalStrengths&Weaknesses
Long-TermObjectives
AlternativeStrategies
StrategySelection

2. 2
Ch 1 -7
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
Ch 1 -8
StrategyImplementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -9
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 performance
Ch 1 -10
Issues in Strategy Implementation
Action Stage of Strategic Management
Mobilization of employees & managers
Most difficult stage
Interpersonal skills critical
Ch 1 -11
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
Ch 1 -12
Peter Drucker:Think through the overall mission of a business. Ask the key question:
“What is our Business?”
Prime Task of Strategic Management

3. 3
Ch 1 -13
The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Integrating Intuition & Analysis
Ch 1 -14
Intuition is based on:
Past experiences
Judgment
Feelings
Integrating Intuition & Analysis
Intuition isuseful for decision making in conditions of:
Great uncertainty
Little precedent
Highly interrelated variables
Several plausible alternatives
Ch 1 -15
Involve management at all levels
Intuition & Judgment
Influenceallanalyses
Integrating Intuition & Analysis
Ch 1 -16
Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed
Adapting to Change
Ch 1 -17
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
Ch 1 -18
Anything that a firm does especially well compared to rival firms
Strategic Management is Gaining and Maintaining Competitive Advantage

4. 4
Ch 1 -19
1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors
Ch 1 -20
Strategists
Gather Information
Analyze Information
Organize Information
Ch 1 -21
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements
Ch 1 -22
External Opportunities and Threats
Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
Ch 1 -23
Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats
Ch 1 -24
Controllable activities performed especially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses

5. 5
Ch 1 -25
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Management Information Systems
Internal Strengths and Weaknesses Ch 1 -26
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
Ch 1 -27
Specific results that an organization seeks to achieve in pursuing its basic mission
Long-term means more than one year
Long-Term Objectives Ch 1 -28
Long-Term Objectives
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
Ch 1 -29
Means by which long-term objectives are achieved
Strategies
Ch 1 -30
Strategies
Examples
Geographic expansion
Diversification
Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture

6. 6
Ch 1 -31
Sample Strategies
 Table 1-1
 Best Buy
 Levi Strauss
 New York Times Company
Ch 1 -32
Short-term milestones that firms must
achieve to reach long-term objectives
Annual Objectives
Ch 1 -33
Means by which annual objectives will
be achieved
Policies
Ch 1 -34
Ch 1 -35
 Strategic Management Process
Dynamic & continuous
More formal in larger
organizations
Strategic Management Model
Ch 1 -36
Strategic Management
 Communication is a key to
successful strategic management

7. 7
Ch 1 -37
Benefits of Strategic Management
Ch 1 -38
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
Ch 1 -39
Why Some Firms Do NoStrategic Planning
Lack of knowledge of strategic planning
Poor reward structures
Fire fighting
Waste of time
Too expensive
Laziness
Content with success
Ch 1 -40
Why Some Firms Do NoStrategic Planning (continued)
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Honest difference of opinion
Suspicion
Ch 1 -41
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory
Ch 1 -42
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

8. 8
Ch 1 -43
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
Ch 1 -44
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
Ch 1 -45
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