Chapter 1 The Strategic Management Process

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Chapter 1The Strategic Management Process
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Overview

• Why do some firms succeed while others fail?
• A central objective of strategic management is to
  learn why this happens.
• What is strategy?
• An action a company takes to attain superior
  performance.
• What is the strategic management process?
• The process by which managers choose a set of
  strategies for the enterprise to pursue its
  vision.

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Strategic Planning

• Rational planning by top management?

Basic Strategic Planning Model
Defining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and Threats
Internal Analysis of Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Chosen Strategies
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The Main Components of the Strategic Planning
Process
FIGURE 1.1
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Mission and Goals

• Mission
• Sets out why the organization exists and what it
  should be doing.
• Major goals
• Specify what the organization hopesto fulfill in
  the medium to long term.
• Secondary goals
• Are objectives to be attained that lead to
  superior performance.

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External Analysis

• Identify strategic opportunities and threats in
  the operating environment.

Immediate (Industry)
Macroenvironment
National
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Internal Analysis

• Identify strengths
• Quality and quantity of resources available
• Distinctive competencies
• Identify weaknesses
• Inadequate resources
• Managerial and organizational deficiencies

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SWOT and Strategic Choice

• Strengths and Weaknesses
• Opportunities and Threats(SWOT Analysis)

Strategic ChoiceBusinessFunctionalGlobalCorpor
ate
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Business-Level Strategies

• Cost leadership
• Attaining, then using the lowest total cost basis
  as a competitive advantage.
• Differentiation
• Using product features or services to distinguish
  the firms offerings from its competitors.
• Market niche focus
• Concentrating competitively on a specific market
  segment.

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Functional-Level Strategies

• Focus is on improving the effectiveness of
  operations within a company.
• Manufacturing
• Marketing
• Materials management
• Research and development
• Human resources

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Global-Level Strategies

• Multidomestic
• International
• Global
• Transnational

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Corporate-Level Strategies

• Vertical integration
• Diversification
• Strategic alliances
• Acquisitions
• New ventures
• Business portfolio restructuring

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Strategy Implementation

• Designing organizational structure
• Designing control systems
• Market and output controls
• Bureaucratic controls
• Control through organizational culture
• Rewards and incentives
• Matching strategy, structure, and controls
• Congruence (fit) among strategy, structure, and
  controls

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Managing Strategic Change

• The only constant is change.
• Success requires adapting strategy and structure
  to a changing world.
• The feedback loop in strategic planning.

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Strategic Managers

• General managers
• Responsible for the overall (strategic)
  performance and health of the total organization.
• Operations managers
• Responsible for specific businessfunctions or
  operations.

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Strategic Managers for All Levels
FIGURE 1.2
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Strategic Leadership

• Vision, eloquence, and consistency
• Commitment to the vision
• Being well informed
• Willingness to delegate and empower
• Astute use of power
• Emotional intelligence

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Strategy as an Emergent Process

• Strategy making in an unpredictable world
• Creates the necessity for flexible strategic
  approaches.
• Strategy making by lower-level managers
• Strategy evolves through autonomous action.
• Serendipity and strategy
• Accidental discoveries and happenstances can have
  dramatic effects on strategic direction.
• Intended and emergent strategies
• Realized strategies are combinations of intended
  and emergent strategies.

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Intended and Emergent Strategies
FIGURE 1.3
Source Reprinted from Strategy Formation in an
Adhocracy, by Henry Mintzberg and Alexandra
McGugh, published in Administrative Science
Quarterly, Vol. 30, No. 2, June 1985, by
permission of Administrative Science Quarterly.
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The Strategic Management Process for Intended and
Emergent Strategies
FIGURE 1.4
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Strategic Planning in Practice

• Planning under uncertainty
• Scenario planning for dynamic environmental
  change
• Ivory tower planning
• Lack of contact with operational realities
• The importance of involving operating managers
• Procedural justice in the decision-making process
• Engagement, explanation, and expectations
• Planning for the present Strategic Intent
• Recognition of the static nature of the strategic
  fit model
• Strategic intent in focusing the organization on
  winning by achieving stretch goals

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Improving Strategic Decision Making

• Cognitive biases systematically influence the
  rationality of decision makers.

FIGURE 1.5
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Groupthink and Strategic Decisions

• Pitfalls of groupthink
• Failing to question underlying assumptions.
• Coalescing around a single person or policy.
• Filtering out conflicting information.
• Developing after-the-fact rationalizations.
• Having an emotional (nonobjective) commitment to
  an action.

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Techniques for Improving Decision Making

• Two decision-making processesthat
  counteractcognitive biases and groupthink.

FIGURE 1.6