MGMT4000 – Chapters 1 and 2 January 15 1

THE STUDY OF STRATEGIC MANAGEMENT

Strategic Management (SM)

 A set of managerial decisions and actions that determines the long-run performance of a
corporation
 It includes:
o Internal and eternal environmental scanning
o Strategy formulation
o Strategy implementation
o Evaluation and control

PHASES OF SM

 As managers attempt to better deal with their changing world, a firm generally evolves through
the following four phases of strategic management:
o Phase 1: Basic financial planning
o Phase 2: Forecast-based planning
o Phase 3: external oriented strategic planning
o Phase 4: strategic management

BENEFITS OF SM

 The attainment of an appropriate match, or “fit”, between an organization’s environment and

its strategy, structure, and processes have positive effects on the organizations performance.
 Strategic planning becomes increasingly important as the environment becomes more stable
 Improved understanding of a rapidly changing environment

IMPACT OF GLOBALIZATION

 Globalization
o The integrated internalization of markets and corporations
 Innovation
o Describes new products, services, methods, and organizational approaches that allow
the business to achieve extraordinary returns

IMPACT OF SUSTAINABILITY

 Sustainability
o Refers to the use of business practices to manage the triple bottom line
 The triple bottom line involves:
o 1. The management of traditional profit / loss
o 2. The management of the company’s social responsibility
o 3. The management of its environmental responsibility

CREATING A LEARNING ORGANIZATION

 Strategic flexibility
o The ability to shift from one dominant strategy to another
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o Demands long-term commitment to development and nurturing of critical resources

 Learning organization (LO)
o An organization skilled at creating, acquiring, and transferring knowledge and at
modifying its behaviour to reflect new knowledge and insights
o Organizational learning is a critical component of competitiveness in a dynamic
environment
 LOs are skilled at four main activities:
o 1. Solving problems systematically
o 2. Experimenting with new approaches
o 3. Learning from the organization’s own experiences and past history as well as from the
experiences of others
o 4. Transferring knowledge quickly and efficiently throughout the organization

BASIC MODEL OF STRATEGIC MANAGEMENT

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ENVIRONMENTAL VARIABLES

BASIC MODEL OF SM

 Strategy formulation
o Process of investigation, analysis, and decision-making that provides the company with
the criteria for attaining a competitive advantage
 Mission
o Purpose or reason for the organizations existence
 Vision
o Describes what the organization would like to become
 Objectives
o Results of planned activity
 Strategy
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o Forms a comprehensive master approach that states how the corporation will achieve
its mission and objectives
o Maximizes competitive advantage and minimizes competitive disadvantages
 Policy
o A broad guideline for decision-making that links formulation of a strategy with its
implementation
 Strategy implementation
o Process by which strategies and policies are put into action through the development of
programs, budgets, and procedures.
 Evaluation and control
o A process in which corporate activities and performance results are monitored so that
actual performance can be compared with desired performance
 Performance
o Result of activities
o Includes actual outcomes of the SM process
 Feedback/learning process
o Revise or correct decision based on performance

INITIATION OF STRATEGY: TRIGGERING EVENTS

 Triggering event
o Something that acts as a stimulus for a change in strategy and can include:
 New CEO
 External intervention
 Threat of change of ownership
 Performance gap

STRATEGIC DECISION-MAKING

 Strategic decisions
o Deal with the long-term future of an entire organization and have three characteristics:
 Rare
 Strategic decisions are unusual and typically have no precedent to
follow
 Consequential
 Strategic decisions commit substantial resources and demand a great
deal of commitment from people at all levels
 Directive
 Strategic decisions set precedent for lesser decisions and future actions
throughout an organization

MINTZBURG’S MODES OF STRATEGIC DECSION-MAKING

 Entrepreneurial mode
o Strategy is made by one powerful individual
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 Adaptive mode
o Characterized by reactive solutions to existing problems, rather than a proactive search
for new opportunities
 Planning mode
o Involves the systematic gathering of appropriate information for situation analysis, the
generation of feasible alternative strategies, and the rational selection of the most
appropriate strategy
 Logical Incrementalism
o A synthesis of the planning, adaptive, and, to a lesser extent, the entrepreneurial
modes.

STRATEGIC DECISION-MAKING PROCESS

 1. Revaluate current performance results

 2. Review corporate governance
 3. Scan and assess the external environment
 4. Scan and assess the internal corporate environment
 5. Analyze strategic factors
 6. Generate, evaluate, and select the best alternative strategies
 7. Implement selected strategies
 8. Evaluate implemented strategies