This document summarizes key concepts from Chapter 1 of the textbook "Strategic Management: Concepts & Cases". It discusses the three stages of the strategic management process - strategy formulation, implementation, and evaluation. Strategy formulation involves assessing external opportunities/threats and internal strengths/weaknesses to develop long-term objectives and alternative strategies. Implementation requires setting annual objectives, policies, and allocating resources. Evaluation involves measuring and reviewing performance for corrective actions. The overall goal of strategic management is gaining and sustaining competitive advantage.
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Chapter 1
The Nature of Strategic Management
Strategic Management:
Concepts & Cases
13th
Edition
Fred David
Ch 1 -1
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Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives
Strategic Management –Defined
Ch 1 -2
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Purpose of Strategic Management
To exploit and create new and different
opportunities for tomorrow
Ch 1 -3
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Strategic Management
In essence, the strategic plan is a
company’s game plan
Ch 1 -4
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3 Stages of the Strategic
Management Process
Strategy formulation
Strategy implementation
Strategy evaluation
Ch 1 -5
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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
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
Ch 1 -7
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Peter Drucker: Think through the
overall mission of a business. Ask
the key question:
“What is our Business?”
Prime Task of
Strategic Management
Ch 1 -12
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The strategic management process
attempts to organize quantitative and
qualitative information under conditions of
uncertainty
Integrating Intuition & Analysis
Ch 1 -13
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Intuition is based on:
Past experiences
Judgment
Feelings
Integrating Intuition & Analysis
Intuition is useful for decision making in
conditions of:
Great uncertainty
Little precedent
Highly interrelated variables
Several plausible alternatives
Ch 1 -14
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Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
Ch 1 -15
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Organizations should continually
monitor internal and external
events and trends so that timely
changes can be made as needed
Adapting to Change
Ch 1 -16
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Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage
Ch 1 -18
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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 -19
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Strategists
Gather Information
Analyze Information
Organize Information
Ch 1 -20
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Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements
Ch 1 -21
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External Opportunities and Threats
Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
Ch 1 -22
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Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats
Avoid/minimize impact of
External Threats
Ch 1 -23
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Controllable activities performed
especially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
Ch 1 -24
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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
Ch 1 -25
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Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
Ch 1 -26
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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
Ch 1 -27
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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
Ch 1 -28
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Means by which long-term objectives
are achieved
Strategies
Ch 1 -29
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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
Ch 1 -38
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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
Ch 1 -39
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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
Ch 1 -40
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Pitfalls in Strategic Planning
Strategic planning is an involved,
complicated, and complex process that
takes an organization into unexplored
territory
Ch 1 -41
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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
Ch 1 -42
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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 -43
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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 -44
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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
Ch 1 -45
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Ch 1 -46