Wheelen/Hunger

1
Chapter 1

• Basic Concepts of
• Strategic Management
• PowerPoint Slides
• Dr.Vijaya Kumar
• Skyline College

2
Strategic Management

• Defined
• Set of managerial decisions and actions that
  determines the long-run performance of a firm.

3
Business Policy

• Defined
• General management orientation that looks inward
  for properly integrating the firms functional
  activities.

4
Four Phases ofStrategic Management

• Basic financial planning
• Forecast-based planning
• Externally-oriented planning (strategic)
• Strategic management

5
Strategic Management

• Highly Rated Benefits
• Clearer sense of strategic vision for the firm
• Sharper focus on what is strategically important
• Improved understanding of a rapidly changing
  environment

6
Strategic Management

• Not always a formal process
• Where is the organization now? (Not where do we
  hope it is!)
• If no changes are made, where will the
  organization be in 1 year, 2 years, 5 years, 10
  years?
• What specific actions should management
  undertake? What are the risks and payoffs
  involved?

7
Challenges to Strategic Management

• Globalization
• Internationalization of markets and corporations
• Global (worldwide) markets rather than national
  markets
• Electronic Commerce
• Use of the Internet to conduct business
  transactions
• Basis for competition on a more strategic level
  rather than traditional focus on product features
  and costs

8
Global Issues

• European Union (EU)
• Economic integration of 15 member countries
• North American Free Trade Agreement (NAFTA)
• Improved trade among 3 member countries
• Mercosur
• Free-trade area among Argentina, Brazil, Uruguay,
  and Paraguay
• Association of South East Asian Nations (ASEAN)
• Attempting to link members into a borderless
  economic zone

9
E-Commerce

• 7 Trends
• Internet forcing companies to transform
  themselves
• Market access and branding are changing, causing
  disintermediation of traditional distribution
  channels
• Balance of power shifting to the consumer
• Competition is changing

10
7 Trends (continued)

• Pace of business increasing drastically
• Internet purchasing corporations out of their
  traditional boundaries
• Knowledge becoming a key asset and source of
  competitive advantage

11
Organizational Adaptation

• How organizations obtain fit within their
  environment
• Theory of population ecology
• Institution theory
• Strategic choice perspective
• Organizational learning theory

12
Adaptation to Changing Environmental Conditions

• Strategic flexibility
• Demands a long-term commitment to the development
  and nurturing of critical resources
• Demands that the firm become a learning
  organization

13
Learning Organizations

• Defined
• An organization skilled at creating, acquiring,
  and transferring knowledge and at modifying its
  behavior to reflect new knowledge and insights.

14
Learning Organizations

• Four Main Activities
• Solving problems systematically
• Experimenting with new approaches
• Learning from their won experiences and that of
  others
• Transferring knowledge quickly and efficiently
  throughout the organization

15
Strategic Management Model
Environmental
Evaluation and Control




Evaluation and Control
Strategy
Strategy
and Control
Formulation
Implementation
Scanning
Mission
External
Reason for

Societal

existence
Objectives
Environment

General Forces
What results

to

Strategies
Task

accomplish

Environment

by when
Plan to

Industry Analysis
achieve the

Policies
mission

Internal
objectives
Broad

guidelines for

Programs

Structure

Process
decision


Chain of Command
to monitor
making
Activities

performance
needed to

Budgets

Culture

and take
accomplish


Beliefs, Expectations,

corrective
a plan
Cost of the

action
Values
programs
Procedures
Resources

Sequence

Assets, Skills

of steps

Competencies,

needed to

Knowledge
do the job
Performance
Feedback/Learning
16
Basic Model of Strategic Management

• Four Basic Elements

17
Environmental Scanning

• Defined
• The monitoring, evaluating, and disseminating of
  information from the external and internal
  environments to key people within the firm.

18
Environmental Scanning
19
Environmental Scanning

• Identify strategic factors
• SWOT Analysis
• Strengths, Weaknesses
• Opportunities, Threats
• Internal Environment
• Strengths Weaknesses
• Within the organization but not subject to
  short-run control of management
• External Environment
• Opportunities Threats
• External to the organization but not subject to
  short-run control of management

20
Strategy Formulation

• Defined
• Development of long-range plans for the
  effective management of environmental
  opportunities and threats in light of corporate
  strengths and weaknesses.

21
Strategy Formulation

• Mission Statement
• Purpose or reason for the organizations
  existence
• Promotes shared expectations among employees
• Communicates public image important to
  stakeholders
• Who we are, what we do, what wed like to become

22
Strategy Formulation

• Maytag Corporation
• Mission Statement
• To improve the quality of home life by
  designing, building, marketing, and servicing the
  best appliances in the world.

23
Strategy Formulation

• Objectives
• The end results of planned activity
• What is to be accomplished
• Time in which to accomplish it
• Quantified when possible

24
Strategy Formulation

• Goals vs. Objectives
• A goal is an open-ended statement of what one
  wants to accomplish with no quantification of
  what is to be achieved and no time criteria for
  completion.

25
Goals Objectives

• Corporate goals and objectives include
• Profitability (net profits)
• Growth (increase in total assets, etc.)
• Utilization of resources (ROE or ROI)
• Market leadership (market share)

26
Strategies

• Defined
• A strategy of a corporation forms a
  comprehensive master plan stating how the
  corporation will achieve its mission and
  objectives. It maximizes competitive advantage
  and minimizes competitive disadvantage.

27
Strategies

• 3 Types of Strategy
• Corporate strategy
• Business strategy
• Functional strategy

28
Strategies

• Corporate Strategy
• Stability
• Growth
• Retrenchment

29
Strategies

• Business Strategy
• Competitive strategies
• Cooperative strategies

30
Strategies

• Functional Strategy
• Technological leadership
• Technological followership

31
Hierarchy of Strategy
Corporate Strategy
Business (Division Level) Strategy
Functional Strategy
32
Policies

• Defined
• Broad guidelines for decision making that link
  the formulation of strategy with its
  implementation.

33
Strategy Implementation
Programs
Strategy Implementation
Budgets
Procedures
34
Initiation of Strategy

• New CEO
• External intervention
• Threat of change in
• ownership
• Performance gap
• Strategic inflection point

Stimulus for change in strategy
Triggering event
35
Strategic Decision Making

• Strategic Decisions
• Rare
• Consequential
• Directive

36
Strategic Decision Making

• Mintzbergs Modes
• Entrepreneurial mode
• Adaptive mode
• Planning mode
• Logical incrementalism

37
Strategic Decision Making
38
Strategic Decision Making