5. Introduction
• Planning includes:
1. Setting goals
2. Design a plan
Organizing is about determining WHO DOES WHAT and
allocation of resources.
Environmental scanning provides us with information about:
1. THE EXTERNAL OPPORTUNITIES AND THREATS
2. THE INTERNAL STRENGTHS AND WEAKNESSES
1-5
7. 1-7
Basic Concepts of Strategic Management
4 Phases of Strategic Management
(The Evolution / Historical
Development of Strategic
Management)
1. Basic financial planning
2. Forecast-based planning
3. Externally-oriented (Strategic)
planning
4. Strategic management
8. 1-8
Basic Concepts of Strategic Management
Highly Rated Benefits
• Clearer sense (UNDERSTANDING) of strategic vision
(FUTURE GOALS)
• Sharper focus on those factors, which have a strategic
(long-term effect) upon the organization.
External & Internal Strategic Factors (External & Internal
Environments): SWOT
• Improved understanding of changing environment
9. 1-9
Basic Concepts of Strategic Management
Not Always a Formal Process
Key Questions for Strategic Management
• Where is the organization now? (not where do we
hope it is)
• If no changes are made, where will the organization
be in 1,2,5 or 10 years?
• What specific actions should management
undertake? Strategies
• What are the risks and payoffs (Cost and Benefit
Analysis)?
Choose the most feasible strategic options.
10. 1-10
Globalization, Innovation and Sustainability
Globalization (Interdependence among world
economies and corporations)
The Integrated Internationalization of markets
and corporations
Global (worldwide) markets rather than national
markets
Free movement of resources (knowledge, capital,
human resources)
Business Sustainability (sustainable advantage)
Triple Bottom line
1. Traditional Profit/Loss
2. People Account: Social Responsibility (Stakeholders)
3. Planet Account: Natural Environmental Responsibility
11. • Sustainability:
The use of business practices to manage the triple bottom line.
Innovation:
The development of new products, services, technologies,
processes that allow the business to achieve extraordinary
results. R&D
Corporations are business organizations
Economic Blocks / regional trade associations: reducing or
eliminating trade restrictions, in terms of procedures, taxation, or
customs. (EU; NAFTA; ASEAN; BRICS; MERCUSOR; CAFTA)
1-11
Basic Concepts of Strategic Management
12. 1-12
Basic Concepts of Strategic Management
EU : EUROPEAN UNION
NAFTA: North American Free Trade Agreement
ASEAN: ASSOCIATION OF SOUTHEAST ASIAN
NATIONS
BRICS: BRAZIL, RUSSIA, INDIA, CHINA, SOUTH
AFRICA
MERCUSOR:
CAFTA: Central American Free Trade Agreement
Electronic Commerce -- Trends
13. 1-13
Organizational Adaptation
Organization “fit” with environment (Strategic Fit)
• Theory of population ecology: proposes that once an
organization is successfully established in a particular
environmental niche, it is unable to adapt to changing
conditions. Complacency: being satisfied from your successes,
which leads to unwillingness to change
• Institution theory: proposes that organizations can and
do adapt to changing conditions by imitating other
successful organizations. (benchmarking)
• Strategic choice perspective: proposes that not only do
organizations adapt to a changing environment, but they
also have the opportunity and power to reshape their
environments.
• Organizational learning theory: An organization adjusts
defensively to a changing environment and uses
knowledge offensively/competitively to improve the fit
between itself and its environment. (R&D)
14. 1-14
Organizational Adaptation
Strategic flexibility:
The ability to shift from one dominant strategy
to another.
• Demands long-term commitment to
development of critical resources
(without resources no organization will be able to
implement any strategy)
• Demands firm become a learning
organization
15. 1-15
Learning Organizations
An organization skilled (proficient) at
creating, acquiring, and transferring
knowledge and at modifying its
behavior to reflect new knowledge
and insights
16. 1-16
Learning Organizations
4 Chief Activities
• Systematic problem solving
• New approach experimentation: Trial and
Error
• Learning from experiences: an experience
is related to exposure to various past situations
(lessons)
• Intra-organization knowledge transfer
17. Systematic Problem Solving
1. Defining or diagnosing the nature of the problem
(Awareness)
2. Generate (suggest or develop) alternative solutions to
the problem (suggested courses of action).
3. Evaluate each alternative solution according to certain
criteria
4. Choose or select the most feasible alternative, which
can either: exploit an opportunity OR avoid a threat /
turn it into an opportunity.
1-17
18. 1-18
Basic Concepts of Strategic Management
Basic Elements of the Strategic
Management Process
21. Industry
• The domain or field of operation
• It is defined or determined by the mission
(types of products or services)
• It includes all stakeholders, who directly
affect and are affected by the organization’s
operations.
• Each stakeholder has certain expectations
or requirements from the organization.
• In return, they will contribute something.
1-21
24. 1-24
Strategy Formulation
Mission Statement
• Google: Our company’s mission is to organize the
world's information and make it universally
accessible and useful. That's why Search makes it
easy to discover a broad range of information from
a wide variety of sources.
Search Engine
• Purpose/reason for organization’s existence
• Promotes shared expectations
• Communicates public image
• Who we are; what we do; what we aspire to (Vision)
25. 1-25
Goals & Objectives
Objectives are the desired end results of planned activity.
SMART
1. Specific: should describe exactly what do we want to
achieve.
2. Measurable:
3. Attainable:
4. Results-Oriented:
5. Time-Related
They should be stated as action verbs and tell what is to be
accomplished by when and quantified if possible.
Corporate Goals/Objectives
Profitability (net profit)
Growth
Resource utilization (ROE, ROI)
Market leadership
26. 1-26
Basic Concepts of Strategic Management
3 Types of Strategy
A Plan is a list of all the required actions/activities
that are needed in order to achieve our goals.
A Business: A Product (Added Value) and Market (a group
of people who share similar needs or problems)
Combination
Value: A benefit that can be used to satisfy a need or solve
a problem
–Corporate strategy
–Business strategy: How to compete within the
industries or markets, which we have chosen.
–Functional strategy
31. 1-31
A policy is a broad guideline for decision making that links
the formulation of a strategy with its implementation.
Companies use policies to make sure that their employees make
and take decisions that support the organization’s mission,
objectives, and strategies.
Strategy Implementation is a process by which
strategies and policies are put into action through the
development of programs, budgets, and procedures
(standard operating procedures reflected in job
descriptions and manual).
Basic Concepts of Strategic Management
34. 1-34
Initiation of Strategy
Henry Mintzberg:
Strategy formulation is most often an irregular,
discontinuous process. There are periods of stability in
strategy development, but there are also periods of
change.
Punctuated Equilibrium:
Corporations evolve through relatively long periods of stability
(equilibrium periods) punctuated by relatively short bursts of
fundamental change (revolutionary periods).
A Triggering Event is something that acts as a stimulus for
a change in strategy.
35. 1-35
• A new CEO (Chief Executive Officer)
• External intervention from an external stakeholder
(banks, customers, etc.).
• Threat of a change in ownership.
• Performance gap.
• Strategic inflection point: what happens to a
business when a major change takes place (new
technology, different regulations, changes in
customers’ preferences)
Triggering Events
36. 1-36
Strategic Decision Making
Strategic Decisions
–Rare: Strategic decisions are unusual and typically have no
precedent (previous similar decisions) to follow.
–Consequential: Strategic decisions commit (require the
organization to allocate) substantial resources and demand a
great deal of commitment from people at all levels.
(Consequences) comprehensive effects
–Directive: Strategic decisions set precedents for lesser
decisions and future actions throughout an organization.
(Direction) .. On what to focus our efforts
37. 1-37
Mintzberg’s Modes or Approaches to Strategy
Formulation
–Entrepreneurial mode: Strategy is made by one powerful
individual (an entrepreneur or a powerful CEO). OPPORTUNITIES
–Adaptive mode: “Muddling Through” is characterized by
reactive solutions to existing problems rather than a proactive
search for new opportunities. THREATS
–Planning mode: 1) Systematic gathering of appropriate
information for situation analysis, 2) the generation of feasible
alternative strategies, and 3) the rational selection of the most
appropriate strategy.
–Logical incrementalism: Top management has a reasonably
good idea of the corporation’s mission and objectives, but it
chooses “an interactive process” in which the organization
probes the future, experiments and learns from a series of
incremental commitments.
38. 1-38
Hambrick and Fredrickson – Good Strategy
5 Elements of Good (Feasible/successful)
Strategy
1. Arenas (Field or Domain of Operations): where
will we be active?
2. Vehicles: How will we get there?
3. Differentiators: How will we win in the
marketplace?
4. Staging: What will be our speed and sequence
of moves? (Time Plan)
5. Economic logic: How will we obtain our
returns? (What is the main value provided to
customers?)
