Chapter 1

The Nature of Strategic Management

Dr. Firend Rasheed

Strategy Defined

Strategy is an action take to

generate a desire reaction
(achieving goal/objective) that
benefit the business, stakeholders,
employees, a group of people or
one person, or the environment.

Von Clausewitz view of strategy

Strategy was not a formula. Detailed planning

always failed due to chance events, imperfections
in execution, and the leadership of the opposition.
Strategy was the art of the broken-field runner;
strategy was not a lengthy plan, but an idea that
evolved through changing circumstances.
Strategy involved the instinctive savvy of the best
generals.

Strategic Management
Defined

Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve
its objectives.

Strategic Management

In essence, the strategic plan is a

companys game plan

Strategic Management
achieves a firms success
through integration

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

MIS

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Hall

Ch 1 -6

Issues in Strategy
Formulation
New business
opportunities
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint ventures
Avoidance of hostile
takeover

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Hall

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Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

Strategy Implementation

Annual Objectives
Policies
Employee Motivation
Resource Allocation

Strategy Evaluation

Internal Review
External Review
Performance Metrics
Corrective Actions

Strategy
Implementation
Action Stage of Strategic
Management
Most difficult stage
Mobilization of
employees & managers
Interpersonal skills
critical
Consensus on goal
pursuit

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Hall

Ch 1 -11

Strategy
Evaluation
Final Stage of Strategic
Management
Subject to future
modification
Todays success no
guarantee of future success
New & different problems
Complacency leads to
demise

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Hall

Ch 1 -12

Prime Task of
Strategic Management

Peter Drucker: -- Think through the

overall mission of a business. Ask
the key question: What is our
Business?

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Hall

Ch 1 -13

Integrating Intuition and

Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under conditions
of uncertainty

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Hall

Ch 1 -14

Integrating Intuition and

Analysis
Intuition is based on:
Past experiences
Judgment
Feelings

Intuition is useful for decision making in:

Conditions of great uncertainty
Conditions with little precedent

Copyright 2007 Prentice

Hall

Ch 1 -15

Integrating Intuition &

Analysis
Intuition & Judgment

Involve Management at all levels

Influence all Analyses

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Hall

Ch 1 -16

Key Terms

Vision Statement
What do we want to become?
Mission Statement
What is our business?
Why we exist???

Opportunities & Threats (External)

Largely beyond the control of a

single organization
Analysis of Trends:

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

Strengths & Weaknesses (Internal)

Environmental Scanning (Industry Analysis)

Process of conducting research and gathering and

assimilating external information
Typically located in functional areas of the firm

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

Computer Information Systems

Strategy
is about the search for competitive
advantage
Strategies
Means (Actions/Tactics) by which longterm objectives are achieved

Key Terms
Strengths & Weaknesses (Internal)
Controllable activities performed especially
well or poorly

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Ch 1 -21

Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios

Performance Metrics

Internal Factors
Industry Averages

Survey Data

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Ch 1 -22

Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation

Avoid/minimize impact of
External Threats

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Hall

Ch 1 -23

Key Terms

Long-term Objectives

Mission-driven pursuit of specified results

more than one year out

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Key Terms
Long-term Objectives
Essential for ensuring the firms success

Provide direction

Aid in evaluation

Create synergy

Focus coordination

Basis for planning, motivating, and

controlling

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Hall

Ch 1 -25

Comprehensive strategic management

model
External
Audit

Chapter 3

Vision
&
Mission

Chapter 2

Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Measure &
Evaluate
Performance

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Internal
Audit

Chapter 4

Benefits of Strategic
Management
Financial Benefits
Improvement in sales
Improvement in profitability
Productivity improvement

Benefits of Strategic
Management
Non-Financial Benefits
Improved understanding of competitors strategies
Enhanced awareness of threats
Reduced resistance to change
Enhanced problem-prevention capabilities

Business Ethics & Strategic

Management

Code of business ethics

Provides basis on which policies can be
devised to guide daily behavior and
decisions in the workplace

Advantages of International
Operations
Absorb excess capacity
Reduce unit costs
Spread risk over wider markets
Low-cost production facilities

Disadvantages of International
Operations

Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currency
differences

Strategic Management is
Gaining and Maintaining
Competitive Advantage

Anything that a firm does especially

well compared to rival firms

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Hall

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Key Terms

Annual Objectives
Short-term milestones that firms must
achieve to attain long-term objectives

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Key Terms

Policies
Means by which annual objectives will be
achieved

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Hall

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