The document outlines the nature of strategic management, emphasizing its definition as the art and science of formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives. It details the three stages of the strategic management process: strategy formulation, implementation, and evaluation, along with key terms and concepts such as competitive advantage, vision and mission statements, and internal and external analysis. Additionally, it discusses the benefits and challenges of strategic management, highlighting the importance of communication and the reasons some firms forgo strategic planning.

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Ch 1 -1
Chapter 1
The Nature of Strategic Management
Strategic Management:
Concepts & Cases
13th
Edition
Fred David

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Ch 1 -2
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives
Strategic Management –Defined

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Strategic Management
In essence, the strategic plan is a
company’s game plan

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3 Stages of the Strategic
Management Process
 Strategy formulation
 Strategy implementation
 Strategy evaluation

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Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation

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Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action

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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

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Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage

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Strategists
Gather Information
Analyze Information
Organize Information

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Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements

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External Opportunities and Threats
Analysis of Trends
 Economic
 Social
 Cultural
 Demographic/Environmental
 Political, Legal, Governmental
 Technological
 Competitors

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Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats

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 Controllable activities performed
especially well or poorly
 Determined relative to competitors
Internal Strengths and Weaknesses

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 Typically located in functional areas of the firm
 Management
 Marketing
 Finance/Accounting
 Production/Operations
 Research & Development
 Management Information Systems
Internal Strengths and Weaknesses

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Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Financial Ratios
Industry Averages
Survey Data

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 Specific results that an organization
seeks to achieve in pursuing its basic
mission
 Long-term means more than one year
Long-Term Objectives

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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

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Means by which long-term objectives
are achieved
Strategies

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Strategies
 Examples
 Geographic expansion
 Diversification
 Acquisition
 Product development
 Market penetration
 Retrenchment
 Divestiture
 Liquidation
 Joint venture

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Short-term milestones that firms must
achieve to reach long-term objectives
Annual Objectives

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Means by which annual objectives will
be achieved
Policies

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 Strategic Management Process
Dynamic & continuous
More formal in larger
organizations
Strategic Management Model

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Strategic Management
 Communication is a key to
successful strategic management

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Benefits of Strategic Management

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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

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Why Some Firms Do No Strategic
Planning
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success

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Why Some Firms Do No Strategic
Planning (continued)
 Fear of failure
 Overconfidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion