Five stages of strategic management process identifying and analyzing internal and external strengths and weaknesses; formulating action plans; executing action plans; and. evaluating to what degree action plans have been successful and making changes when desired results are not being produced.

1. Strategic Management
Basic Concepts

2. Learning
Objectives
After studying this topic, you should be able to do the following:
1-1. Describe the strategic-management process.
1-2. Discuss the three stages of strategy formulation, implementation, and
evaluation activities.
1-3. Explain the need for integrating analysis and intuition in strategic management.
1-4. Define and give examples of key terms in strategic management.
1-5. Illustrate the comprehensive strategic-management model.
2

3. What is Strategic
Management?
► Strategic management is the art and
science of formulating, implementing,
and evaluating cross-functional
decisions that enable an organization to
achieve its objectives.
3

4. What is Strategic
Management?
Strategic management is a set of managerial
decisions and actions that help determine the
long-term performance of an organization. It
includes environmental scanning (both external
and internal), strategy formulation (strategic or
long-range planning), strategy implementation,
and evaluation and control.
4

5. The Basic Model of Strategic Management
ENVIRONMENTAL
SCANNING
STRATEGY
FORMULATION
STRATEGY
IMPLEMENTATION
STRATEGY
EVALUATION

6. 6
Basic Elements of the Strategic
Management Process

7. Environmental Scanning
- the monitoring, evaluating, and disseminating of information from the external
and internal environments to key people within the corporation. Its purpose is
to identify strategic factors—those external and internal elements that will
assist in the analysis of the strategic decisions of the corporation.
1

8. Strategic
Management
Model
8

9. Strategy Formulation
- the process of investigation, analysis, and decision making that
provides the company with the criteria for attaining a competitive
advantage.
2

10. Strategic
Management
Model
10

11. Strategy Implementation
- requires a firm to establish annual objectives, devise policies,
motivate employees, and allocate resources so that formulated
strategies can be executed.
3

12. Strategic
Management
Model
12

13. Strategy Evaluation
- is the final stage in strategic management. Managers desperately
need to know when particular strategies are not working well;
strategy evaluation is the primary means for obtaining this
information.
4

14. 14
Strategy
Evaluation
All strategies are subject to future
modification because external and
internal factors constantly change.

15. Strategy
Evaluation
Activities
(1) reviewing
external and internal
factors that are the
bases for current
strategies,
(2) measuring
performance, and
(3) taking corrective
actions.
15

16. Strategic
Management
Model
16

17. 17
- Peter Drucker
The prime task of
Strategic
Management is
thinking through the
overall mission of a
business, that is, of
asking the question,
“What is our
business?”
This leads to the
setting of objectives,
the development of
strategies, and the
making of today’s
decisions for
tomorrow’s results.
This clearly must be
done by a part of
the organization that
can see the entire
business; that can
balance objectives
and the needs of
today against the
needs of tomorrow;
and that can
allocate resources
of men and money
to key results.

18. Integrating Intuition
and Analysis
►The strategic-management process can be
described as an objective, logical, systematic
approach for making major decisions in an
organization.
►It attempts to organize qualitative and quantitative
information in a way that allows effective decisions to
be made under conditions of uncertainty.
►Yet strategic management is not a pure science that
lends itself to a nice, neat, one-two-three approach.
18

19. 19
Bruce Henderson says:
►The accelerating rate of change today is producing a business
world in which customary managerial habits in organizations are
increasingly inadequate.
►Experience alone was an adequate guide when changes could
be made in small increments.
►But intuitive and experience-based management philosophies
are grossly inadequate when decisions are strategic and have
major, irreversible consequences

20. 20
Adapting
to
Change
► The strategic-management process is based
on the belief that organizations should
continually monitor internal and external
events and trends so that timely changes can
be made as needed.
► The need to adapt to change leads
organizations to key strategic-management
questions, such as “What kind of business
should we become?” “Are we in the right
field(s)?” “Should we reshape our business?”
“What new competitors are entering our
industry?” “What strategies should we pursue?”
“How are our customers changing?” “Are new
technologies being developed that could put
us out of business?”

21. 21
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

22. Competitive
Advantage
22
► Strategic management is all about gaining
and maintaining competitive advantage.
This term can be defined as any activity a
firm does especially well compared to
activities done by rival firms, or any resource
a firm possesses that rival firms desire.

23. Long-Term Objectives
► Objectives can be defined as specific results
that an organization seeks to achieve in
pursuing its basic mission. Long-term means
more than one year.
► Objectives are essential for organizational
success because they provide direction; aid in
evaluation; create synergy; reveal priorities;
focus coordination; and provide a basis for
effective planning, organizing, motivating,
and controlling activities.
23

24. Strategists
► Strategists are the individuals most
responsible for the success or failure of an
organization.
► Strategists help an organization gather,
analyze, and organize information. They
track industry and competitive trends,
develop forecasting models and scenario
analyses, evaluate corporate and divisional
performance, spot emerging market
opportunities, identify business threats, and
develop creative action plans.
24

25. Strategy
╸ the set of actions that managers take to
outperform the company’s competitors
and achieve superior profitability.
╸ a plan of action that will develop a business’
competitive advantage and compound it.
╸ the ability to create unique and valuable
position that is not easily imitated by others
and therefore Strategy is what allows a firm
to create and protect its competitive
advantage.
25

26. Vision Statement
► Many organizations today develop a vision
statement that answers the question “What
do we want to become?” Developing a
vision statement is often considered the
first step in strategic planning, preceding
even development of a mission statement.
Many vision statements are a single
sentence. For example, the vision
statement of Stokes Eye Clinic in Florence,
South Carolina, is “Our vision is to take care
of your vision.”
26

27. 27
Mission
Statement
► Mission statements are “enduring
statements of purpose that distinguish one
business from other similar firms. A mission
statement identifies the scope of a firm’s
operations in product and market terms.” It
addresses the basic question that faces all
strategists: “What is our business?”

28. Annual Objectives
28
Annual objectives are short-term
milestones that organizations must
achieve to reach long- term objectives.
Like long-term objectives, annual objectives should
be measurable, quantitative, challenging, realistic,
consistent, and prioritized. They must also be
established at the corporate, divisional, and
functional levels in a large organization.

29. External
Opportunities
and Threats
29
► External opportunities and external threats
refer to economic, social, cultural,
demographic, environmental, political,
legal, governmental, technological, and
competitive trends and events that could
significantly benefit or harm an organization
in the future.
► This process of conducting research and
gathering and assimilating external
information is sometimes called
environmental scanning or industry analysis.

30. 30
Policies ► Policies are the means by which annual
objectives will be achieved. Policies include
guidelines, rules, and procedures
established to support efforts to achieve
stated objectives. Policies are guides to
decision making and address repetitive or
recurring situations.

31. Internal
Strengths and
Weaknesses
31
► Internal strengths and internal weaknesses
are an organization’s controllable activities
that are performed especially well or
poorly. They arise in the management,
marketing, finance/ accounting,
production/operations, research and
development, and management
information systems (MIS) activities of a
business.

32. 32
The Impact of Globalization
Today, everything has changed. Globalization, the integrated
internationalization of markets and corporations, has changed the
way modern corporations do business.
Globalization is the increasing economic interdependence among
countries and their organizations as reflected in the flow of goods and
services, financial capital, and knowledge across country borders.

33. The Impact of
Innovation
33
► Innovation, as the term is used in business, is
meant to describe new products, services,
methods, and organizational approaches that
allow the business to achieve extraordinary
returns.
► Innovation is the machine that generates business
opportunities in the market; however, it is the
implementation of potential innovations that truly
drives businesses to be remarkable. Although
there is a value in being a first mover, there is also
a tremendous value in being a second or third
mover with the right implementation.

34. 34
Creating a Learning
Organization
Strategic management has now evolved to the point that its primary
value is in helping an organization operate successfully in a dynamic,
complex environment. To be competitive in dynamic environments,
corporations are becoming less bureaucratic and more flexible.
This means that corporations must develop strategic flexibility—the ability
to shift from one dominant strategy to another.

35. Learning
Organization
35
► Strategic flexibility demands a long-term
commitment to the development and
nurturing of critical resources and
capabilities. It also demands that the
company become a Learning
Organization—an organization skilled at
creating, acquiring, and transferring
knowledge and at modifying its behavior
to reflect new knowledge and insights.

36. Learning
organizations
are skilled at
four main
activities:
36
SOLVING
PROBLEMS
SYSTEMATICALLY
EXPERIMENTING
WITH NEW
APPROACHES
LEARNING FROM
THEIR OWN
EXPERIENCES AND
PAST HISTORY AS
WELL AS FROM
THE EXPERIENCES
OF OTHERS
TRANSFERRING
KNOWLEDGE
QUICKLY AND
EFFICIENTLY
THROUGHOUT THE
ORGANIZATION.

37. Example
►The Toyota production system is famous for
empowering employees to improve. If an
employee spots a problem on the line, he/she
pulls the cord, which immediately starts a
speedy diagnosis. The line continues if the
problem can be solved within one minute. If
not, the production line is shut down until the
problem is solved. At Toyota, they learn from
their mistakes as much as they learn from their
successes. Improvements are sent to all
factories worldwide.
37

38. Starbucks’ Strategy in
the Specialty Coffee
Market
Since its founding in 1985 as
a modest nine-store
operation in Seattle,
Washington, Starbucks had
become the premier roaster
and retailer of specialty
coffees in the world, with
nearly 25,000 store locations
in 70 countries as of April
2016 and annual sales that
exceed $21 billion in fiscal
2016. The key elements of
Starbucks’ strategy in
specialty coffees included:
Train “baristas” to serve a
wide variety of specialty
coffee drinks that allow
customers to satisfy their
individual preferences in a
customized way.
Emphasis on store
ambience and elevating
the customer experience at
Starbucks stores.
38
Purchase and roast only top-
quality coffee beans.
Commitment to corporate
responsibility.
Fully exploit the growing power
of the Starbucks name and
brand image with out-of-store
sales.
Expansion of the number of
Starbucks stores domestically
and internationally.
Broaden and periodically refresh
in-store product offerings.

39. Case Study
╸ Based on your experiences as a coffee
consumer, does Starbucks’ strategy
seem to set it apart from rivals?
╸ Does the strategy seem to be keyed to
a cost-based advantage, differentiating
features, serving the unique needs of a
niche, or some combination of these?
╸ What is there about Starbucks’ strategy
that can lead to sustainable
competitive advantage?
39
Place your screenshot here

40. What have you
learned today?
40

41. Technology and
Technological
Changes
41
►Technology-related trends and conditions can
be placed into three categories:
► Technology diffusion and disruptive
technologies,
► The information age, and,
► Increasing knowledge intensity.
►These categories are significantly altering the
nature of competition and as a result contributing
to highly dynamic competitive environments.

42. Technology Diffusion
and Disruptive
Technologies
╸ The rate of technology diffusion, which is the speed at
which new technologies become available and are
used, has increased substantially over the past 15 to 20
years. Consider the following rates of technology
diffusion:
It took the telephone 35 years to get into 25 percent of all
homes in the United States. It took TV 26 years. It took radio
22 years. It took PCs 16 years. It took the Internet 7 years.
42
Place your screenshot here

43. 43
Impact of Technological Changes
► The impact of technological changes on individual firms and industries
has been broad and significant. For example, in the not-too-distant
past, people rented movies on videotapes at retail stores. Now, movie
rentals are almost entirely electronic. The publishing industry (books,
journals, magazines, newspapers) is moving rapidly from hard copy to
electronic format.
► Many firms in these industries, operating with a more traditional
business model, are suffering. These changes are also affecting other
industries, from trucking to mail services (public and private).

44. Speed as a source of
competitive advantage
44
► When products become
somewhat indistinguishable
because of the widespread and
rapid diffusion of technologies,
speed to market with innovative
products may be the primary
source of competitive
advantage

45. Benefits of
patents
► Another indicator of rapid
technology diffusion is that it now
may take only 12 to 18 months for
firms to gather information about
their competitors’ research and
development (R&D) and product
decisions.
► In the global economy,
competitors can sometimes imitate
a firm’s successful competitive
actions within a few days. In this
sense, the rate of technological
diffusion has reduced the
competitive benefits of patents.
45

46. Disruptive
Technologies
46
► Technologies that destroy the
value of an existing
technology and create new
markets — surface frequently
in today’s competitive
markets.
► Think of the new markets
created by the technologies
underlying the development
of products such as iPods,
iPads, Wi-Fi, and the web
browser. These types of
products are thought by
some to represent radical or
breakthrough innovations

47. The Information Age
╸ Dramatic changes in information technology have
occurred in recent years. Personal computers, cellular
phones, artificial intelligence, virtual reality, massive
databases (“big data”), and multiple social
networking sites are only a few examples of how
information is used differently as a result of
technological developments.
47
Place your screenshot here

48. IT as a source of
competitive advantage
► IT has become an important source of
competitive advantage in virtually all
industries. The Internet and IT advances
have given small firms more flexibility in
competing with large firms, if the
technology is used efficiently.
48

49. Increasing Knowledge
Intensity
╸ Knowledge (information, intelligence, and
expertise) is the basis of technology and its
application. In the competitive landscape of
the twenty-first century, knowledge is a critical
organizational resource and an increasingly
valuable source of competitive advantage.
49
Place your screenshot here

50. Knowledge as
a competitive
advantage
► The probability of achieving strategic
competitiveness is enhanced for the firm that
develops the ability to capture intelligence,
transform it into usable knowledge, and diffuse it
rapidly throughout the company.
► Therefore, firms must develop (e.g., through
training programs) and acquire (e.g., by hiring
educated and experienced employees)
knowledge, integrate it into the organization to
create capabilities, and then apply it to gain a
competitive advantage.
50

51. Strategic
Leaders
╸ are people located in different
areas and levels of the firm using
the strategic management
process to select strategic actions
that help the firm achieve its vision
and fulfill its mission.
╸ hard work, thorough analyses, a
willingness to be brutally honest, a
penchant for wanting the firm
and its people to accomplish
more, and tenacity are
prerequisites to an individual’s
success as a strategic leader.
51

52. Categories of people
52
THERE ARE THREE
CATEGORIES OF PEOPLE:
THE PERSON WHO GOES
INTO THE OFFICE, PUTS HIS
FEET UP ON HIS DESK, AND
DREAMS FOR 12 HOURS;
THE PERSON WHO ARRIVES
AT 5 A.M. AND WORKS
FOR 16 HOURS, NEVER
ONCE STOPPING TO
DREAM; AND
THE PERSON WHO PUTS HIS
FEET UP, DREAMS FOR ONE
HOUR, THEN DOES
SOMETHING ABOUT THOSE
DREAMS.

53. Dream to Vision
╸ The operational term used for a
dream that challenges and
energizes a company is vision. The
most effective strategic leaders
provide a vision as the foundation
for the firm’s mission and
subsequent choice and use of
one or more strategies.
53

54. What have you
learned today?
54