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Why Strategic Management Is a Process. Who Performs the Tasks of ... The Hows That. Define a Firm's Strategy. How to grow the business. How to please customers ... – PowerPoint PPT presentation

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STRATEGIC MANAGEMENT Concepts and Cases Arthur
A. Thompson, Jr. A. J. Strickland, III Tenth
Edition The University of Alabama
Screen graphics created by Jana F. Kuzmicki,
Indiana University Southeast

Screen graphics created by Jana F. Kuzmicki,
PhD, Indiana University Southeast
Chapter Outline
  • Five Tasks of Strategic Management
  • Developing a Strategic Vision and Mission
  • Setting Objectives
  • Crafting a Strategy
  • Implementing the Strategy
  • Evaluating Performance and Initiating Corrective
  • Why Strategic Management Is a Process
  • Who Performs the Tasks of Strategy?
  • Benefits of Managing Strategically
  • Terms to Remember

Thinking StrategicallyThe Three Big
Strategic Questions
  • 1. Where are we now -- what is our situation?
  • 2. Where do we want to go?
  • Business(es) we want to be in and market
    positions we want to stake out
  • Buyer needs and groups we want to
  • Outcomes we want to achieve
  • 3. How will we get there?

What Is Strategy?
  • Competitive moves and business approaches
    management employs in running a company
  • Managements game plan to
  • Please customers
  • Position a company in its chosen market
  • Compete successfully
  • Achieve good business performance

Why Are Strategies Needed ?
  • To proactively shape how a companys business
    will be conducted
  • To mold the independent actions and decisions of
    managers and employees into a coordinated,
    companywide game plan

The Five Tasksof Strategic Management
Task 1
Task 2
Task 3
Task 4
Task 5
Craft a Strategy to Achieve Objectives
Set Objectives
Develop a Strategic Vision Mission
Implement Execute Strategy
Evaluate Make Corrections
Improve/ Change
Revise as Needed
Revise as Needed
Improve/ Change
Recycle as Needed
Developing a Vision and Mission
The First Task of Strategic Management
  • Begins with thinking strategically about
  • The firms future business makeup
  • Where to take the firm
  • The task is to
  • Create a roadmap of a companys future
  • Decide what future business position to stake out
  • Provide long-term direction
  • Give the firm a strong identity

Missions vs. Strategic Visions
  • A mission statement focuses on current business
  • Business(es) company is in now
  • Customer needs currently being served
  • A strategic vision concerns a firms future
    business path
  • The kind of company it is trying to become
  • Customer needs to be satisfied in the future

Developing a Strategic Vision
  • A strategic vision is a roadmap of a companys
    future --
  • Direction it is headed
  • Business position it intends to stake out
  • Capabilities it plans to develop
  • Customer needs it intends to serve

Examples Mission andVision Statements
  • Intel
  • Intel supplies the computing industry with chips,
    boards, systems, and software. Intels products
    are used as building blocks to create advanced
    computing systems for PC users. Intels mission
    is to be the preeminent building block supplier
    to the new computing industry worldwide.

Compaq Computer To be the leading supplier of
PCs and PC servers in all customer segments.
Setting Objectives
The Second Task of Strategic Management
  • Establishing OBJECTIVES
  • Converts vision into specific performance
  • Creates yardsticks to track performance
  • Pushes firm to be inventive and focused
  • Helps prevent coasting and complacency if targets
    require stretch

Types of Objectives Required
Financial Objectives
Strategic Objectives
  • Outcomes focused on improving a firms
    competitiveness and its long-term business
  • Outcomes focused on improving a firms financial

Examples Financial Objectives
  • Grow earnings per share 15 annually
  • Boost annual return on investment (or EVA) from
    15 to 20
  • Increase annual dividends per share to
    stockholders by 5 each year
  • Strive for stock price appreciation equal to or
    above the SP 500 average
  • Maintain a positive cash flow
  • Achieve and maintain a AA bond rating

Examples Strategic Objectives
  • Increase firms market share
  • Overtake key rivals on quality or customer
    service or product performance
  • Attain lower overall costs than rivals
  • Boost firms reputation with customers
  • Attain stronger foothold in international markets
  • Achieve technological superiority
  • Become leader in new product introductions
  • Capture attractive growth opportunities

Example Nikes Corporate Objectives
  • Protect and improve Nikes position as the
    number one athletic brand in America.
  • Build a strong momentum in growing fitness
  • Intensify the companys effort to develop
    products that women need and want.
  • Explore the market for products specifically
    designed for the requirements of maturing
  • Direct and manage the companys international
    business as it continues to develop.
  • Continue the drive for increased margins through
    proper inventory management and fewer,
    better products.

Example Strategic andFinancial Objectives
  • Ford Motor Company
  • To satisfy our customers by providing
  • Quality cars and trucks,
  • Developing new products,
  • Reducing the time it takes to bring new vehicles
    to market,
  • Improving the efficiency of all our plants
    processes, and
  • Building on our teamwork with employees, unions,
    dealers, and suppliers.

Example Strategic andFinancial Objectives
  • General Electric
  • To become the most competitive enterprise in the
    world by being number one or number two in market
    share in every business the company is in. To
    achieve an average of 10 inventory turns and a
    corporate operating profit margin of 16 by 1998.

Crafting a Strategy
The Third Task of Strategic Management
  • Strategy involves determining whether to
  • Concentrate on a single business or several
    businesses (diversification)
  • Cater to a broad range of customers or focus on a
    particular niche
  • Develop a wide or narrow product line
  • Pursue a competitive advantage based on
  • Low cost or
  • Product superiority or
  • Unique organizational capabilities

Crafting a Strategy
  • Involves deciding how to
  • Respond to changing buyer preferences
  • Outcompete rivals
  • Respond to new market conditions
  • Grow the business over the long-term
  • Achieve performance targets

Our strategy will be . . .
Strategy Is Both Planned and Reactive to
Changing Circumstances
Planned (or Intended) Strategy
Actual Strategy
Adaptive Reactions
The Hows ThatDefine a Firm's Strategy
  • How to grow the business
  • How to please customers
  • How to outcompete rivals
  • How to respond to changing market conditions
  • How to manage each functional piece of the
    business and develop needed organizational
  • How to achieve strategic and financial objectives

Strategy is HOW to . . .
Understanding Company Strategy -- What to
Look For
Responses to Changing Conditions
Actions to Strengthen Resources Capabilities
How Functional Activities Are Managed
Offensive Moves to Gain Edge
Pattern of Actions That Define Strategy
Changes in Product Line, Quality, or Service
Defensive Moves
Pursuing New Opportunities
Geographic Coverage
Forward or Backward Integration, Collaboration
Crafting Strategy Is anExercise in
  • Strategy-making is a market-driven and
    customer-driven activity that involves
  • Risk-taking and venturesomeness
  • Innovation and business creativity
  • Keen eye for spotting market opportunities
  • Keen observation of customer needs
  • Choosing among alternatives

Characteristics ofEntrepreneurial Managers
  • Boldly pursue new strategic opportunities
  • Emphasize out-innovating the competition
  • Lead the way to improve firm performance
  • Willing to be a first-mover and take risks
  • Respond quickly and opportunistically to new
  • Devise trail blazing strategies

Why Do Strategies Evolve?
  • There is always an ongoing need to react to
  • Shifting market conditions
  • Fresh moves of competitors
  • New technologies
  • Evolving customer preferences
  • Political and regulatory changes
  • New windows of opportunity
  • The crisis of the moment

What Is a Strategic Plan?
Where firm is headed -- Strategic vision and
business mission
Short and long term performance targets
--Strategic and financial objectives
Action approaches to achieve targeted results --
A comprehensive strategy
Implementing Strategy
The Fourth Task of Strategic Management
  • Creating fits between way things are done and
    what it takes for effective strategy execution
  • Getting the organization to execute strategy
    proficiently and efficiently
  • Producing excellent results in a timely manner

Strategy Implementation
Strategy implementation is an internal,
operations-driven activity involving organizing,
budgeting, motivating, culture-building, supervisi
ng, and leading to make the strategy work as
What Does StrategyImplementation Include?
  • Building a capable organization
  • Allocating resources to strategy-critical
  • Establishing strategy-supportive policies
  • Motivating people to pursue objectives
  • Tying rewards to achievement of results
  • Creating a strategy-supportive corporate culture
  • Installing needed information, communication, and
    operating systems
  • Instituting best practices for continuous
  • Exerting strategic leadership

Evaluating Performance
The Fifth Task of Strategic Management
  • The tasks of strategy are not a one-time only
  • Times and conditions change
  • Events unfold
  • Better ways to do things emerge
  • New managers with different ideas take over

Evaluating Performance
  • Corrective adjustments
  • Alter long-term direction
  • Redefine the business
  • Raise or lower performance objectives
  • Modify the strategy
  • Improve strategy execution

Characteristics of the Strategic Management
  • Need to perform tasks never goes away
  • Boundaries among tasks are blurry
  • Strategizing is not isolated from other
    managerial activities
  • Time required comes in lumps and spurts
  • The big challenge is to get the best
    strategy-supportive performance from employees,
    perfect current strategy, and improve strategy

Who Performs the FiveStrategic Management
  • Senior Corporate Level Executives
  • Subsidiary Business Unit Managers
  • Functional Area Managers
  • Operating Managers

Strategizing An Individual or Group
  • Teams are increasingly used because
  • Strategic issues cut across departmental lines
  • Ideas of people with different backgrounds can be
    tapped into
  • More people will have an ownership stake in the

Role of Strategic Planners
  • Gather necessary information
  • Provide support in revising strategic plans
  • Coordinate review and approval process
  • Crystallize strategic issues to be addressed
  • Conduct studies of industry and competitive
  • Establish an annual review cycle
  • Develop strategy performance assessments

Why Planners Should NotBe Strategy Makers
  • Managers may toss tough decisions to planners
  • Planners know less about companys situation
  • Difficult to fix accountability for poor
  • Managers have no buy in to strategy
  • Strategic planning may be viewed as an
    unproductive bureaucratic activity

Strategic Role of aBoard of Directors
  • Continuously audit validity of a companys
    long-term direction and strategy
  • Evaluate strategic leadership skills of the CEO
    and candidates to succeed the CEO

Strategic Management Principle
  • A board of directors role in the strategic
    management process is to critically appraise and
    ultimately approve strategic action plans, but
    rarely, if ever, to develop the details!

Benefits of StrategicApproach to Managing
  • Guides entire firm regarding what it is we are
    trying to do and to achieve
  • Lowers managements threshold to change
  • Provides basis for evaluating competing budget
  • Unifies numerous strategy-related
  • Creates a proactive atmosphere
  • Enhances long-range performance

Recap of Important Terms
Strategic Vision
  • A view of an organizations future direction and
    business course a guiding concept for what the
    organization is trying to do and to become.
  • Represents managements customized answer to the
    question what is our business and what will it
    be. A mission statement broadly outlines the
    organizations future direction and serves as a
    guiding concept for what the organization is to
    do and to become.

Organization Mission
Recap of Important Terms
Performance Objectives
  • Organizations targets for achievement both
    short and long range objectives are needed.
  • Financial performance targets a company wants to
  • Targets relating to strengthening a companys
    overall market position and competitive viability.

Financial Objectives
Strategic Objectives
Recap of Important Terms
  • Achievement levels to be reached within the next
    three to five years.
  • Near-term performance targets they establish the
    pace for achieving the long-range objectives.

Long-Range Objectives
Short-Range Objectives
Recap of Important Terms
  • Managerial action plan for achieving
    organizational objectives strategy is mirrored
    in the pattern of moves and approaches devised by
    management to produce the desired performance.
    Strategy is the how of pursuing an organizations
    mission and reaching target objectives.
  • Statement outlining an organizations mission and
    future direction, near-term and long-term
    performance targets, and strategy, in light of
    organizations external and internal situation.

Strategic Plan
Recap of Important Terms
  • Includes the full range of managerial activities
    associated with putting the chosen strategy into
    place, supervising its pursuit, and achieving the
    targeted results.

Strategy Implementation