Overview of Strategic Management

Strategic Management: Concepts & Cases 12th Edition Fred David

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What is Strategic Management

Once two competing company presidents went on a camping trip to discuss a possible merger. Suddenly there came a dangerous grizzly bear. The first president took off his backpack and quickly wore his jogging shoes. The second president said, Hey! You cant outrun that bear. The first president said, May be I cant outrun the bear, but I surely can outrun you!
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What is Strategic Management

The story captures the notion of strategic management, Which is to achieve and maintain Competitive Advantage.

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Strategic Management Defined

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

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Strategic Management achieves a firms success through integration

Management Finance/Accounting Research & Development

Marketing Production/Operations MIS

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Purpose of Strategic Management

To exploit and create new and different opportunities for tomorrow

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Three Stage Process

Strategy Formulation Strategy Implementation Strategy Evaluation
Fred R. David Prentice Hall

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

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Strategy Implementation

Annual Objectives Policies Employee Motivation Resource Allocation

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Strategy Implementation Steps

Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to organizational performance
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Strategy Implementation
Action ActionStage Stageof ofStrategic Strategic Management Management Most Mostdifficult difficultstage stage Mobilization Mobilizationof ofemployees employees & &managers managers Interpersonal Interpersonalskills skillscritical critical Consensus Consensuson ongoal goalpursuit pursuit

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Strategy Evaluation

Internal Review External Review Performance Measurement Corrective Actions

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Strategy Evaluation
Final FinalStage Stageof ofStrategic Strategic Management Management Subject Subjectto tofuture futuremodification modification Todays Todayssuccess successno no guarantee guaranteeof offuture futuresuccess success New New& &different differentproblems problems Complacency Complacencyleads leadsto todemise demise

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Integrating Intuition and Analysis

Strategic Management is:
An

objective, logical, systematic and analytical approach for making major decisions.
The

strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Yet

it is not a pure science that lends itself to a one two three approach.
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Integrating Intuition and Analysis

Intuition:
An insight or understanding of a phenomenon without conscious reasoning.

The act or faculty of knowing or sensing without the use of evident rational processes.

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Integrating Intuition and Analysis

Where does intuition come from? Conscious Subconscious Unconscious

We think of intuition as a magical phenomenonbut intuition is formed out of our past experiences and knowledge. Intuition is useful for decision making in: Conditions of great uncertainty Conditions with little precedent
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Integrating Intuition & Analysis

I believe in intuition and inspiration. At times I feel certain that I am right while not knowing the reason. Sometimes, imagination is more important than knowledge, because knowledge is limited, whereas imagination embraces the entire world. Albert Einstein

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Integrating Intuition & Analysis

Excessive reliance on facts limits us. Too much reliance on intuition kills the business.
Analytical Thinking

Intuitive Thinking

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Ch 1 -18

Adapting to Change

Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed

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Ch 1 -19

Key Terms in Strategic Management

Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies
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Strategic Management is Gaining and Maintaining Competitive Advantage

Anything that a firm does especially well compared to rival firms

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Achieving Sustained Competitive Advantage

1. Adapting to change in external trends, internal capabilities and resources

2. Effectively formulating, implementing & evaluating strategies

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Adapting to Change Rate & magnitude of change increasing dramatically

E-commerce Demographics Technology
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Adapting to Change Key Strategic Management Questions

What kind of business should we become? Are we in the right fields? Are there new competitors? What strategies should we pursue? How are our customers changing?
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Strategists Strategists
Gather Information Analyze Information Organize Information

Various Job Titles: Chief Executive Officer(CEO) Chief Strategy Officer (CSO) President Board Chair Executive Director
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Key Terms Vision Statement What do we want to become?

Mission Statement What is our business?

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Key Terms

Opportunities and Threats (External)

Largely beyond the control of a single organization

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Key Terms Opportunities & Threats (External)

Analysis of Trends: Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors
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Key Terms Opportunities & Threats

Environmental Scanning (Industry Analysis)

Process of conducting research and gathering and assimilating external information

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Ch 1 -29

Key Terms Opportunities & Threats Basic Tenet of Strategic Management

Take Takeadvantage advantageof of External ExternalOpportunities Opportunities Strategy Formulation

Avoid/minimize Avoid/minimizeimpact impactof of External ExternalThreats Threats

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Key Terms Strengths & Weaknesses (Internal)

Controllable activities performed especially well or poorly

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Key Terms Strengths & Weaknesses (Internal)

Typically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development Computer Information Systems

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Key Terms Strengths & Weaknesses Assessing the Internal Environment

Financial Ratios

Performance Metrics

Internal Factors
Industry Averages

Survey Data

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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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Key Terms

Strategies

Means by which long-term objectives are achieved

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Key Terms Strategies

Some Examples Geographic expansion Diversification Acquisition Market penetration Retrenchment Liquidation Joint venture
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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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Ch 1 -39

Comprehensive strategic management model

External Audit

Chapter 3

Vision & Mission

Long-Term Objectives

Generate, Evaluate, Select Strategies

Implement Strategies: Mgmt Issues

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

Measure & Evaluate Performance

Chapter 2

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Internal Audit

Chapter 4

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Ch 1 -40

Strategic Management Model

Strategic Management Process

Dynamic & Continuous More formal in larger organizations

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Strategic Management Model 1. Identify Existing - Vision Mission Objectives Strategies

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Strategic Management Model

2. 3. 4. 5. 6. 7.

Audit external environment Audit internal environment Establish long-term objectives Generate, evaluate & select strategies Implement selected strategies Measure & evaluate performance

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Benefits of Strategic Management

Proactive in shaping firms future

Initiate and influence firms activities Formulate better strategies

Systematic, logical, rational

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Benefits of Strategic Management Financial Benefits

Improvement in sales Improvement in profitability Productivity improvement

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Benefits of Strategic Management

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

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Benefits of Strategic Management (Greenley)

1. Identification of Opportunities 2. Objective view of management problems 3. Improved coordination & control 4. Minimizes adverse conditions & changes 5. Decisions that better support objectives

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Benefits of Strategic Management (Greenley contd)

6. Effective allocation of time & resources 7. Internal communication among personnel 8. Integration of individual behaviors 9. Clarify individual responsibilities 10. Encourage forward thinking

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Benefits of Strategic Management (Greenley contd)

11. Encourages

favorable attitude toward

change
12. Provides

discipline and formality to the management of the business

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Ch 1 -49

Why Some Firms Do No Strategic Planning

Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success
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Ch 1 -50

Why Some Firms Do No Strategic Planning

Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion
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Ch 1 -51

Pitfalls in Strategic Planning

Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory

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Effective Strategic Planning is:

A people process more than a paper process A learning process Simple and nonroutine Varying assignments, team membership, meeting formats, and planning calendars

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Ch 1 -53

Effective Strategic Planning continued

Welcomes bad news Requires open-mindedness and a spirit of inquiry Is not a bureaucratic mechanism Is not too formal, predictable, or rigid Does not contain jargon or arcane language

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Ch 1 -54

Effective Strategic Planning continued

Is not a formal system for control Does not disregard qualitative information Is not controlled by technicians Does not pursue too many strategies at once Continually strengthens the good ethics is good business policy

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Ch 1 -55

Comparing Business and Military Strategy

Strategic planning started in the military Similarity

Both business and military organizations must adapt to change and constantly improve Business strategy assumes competition Military strategy assumes conflict

Difference

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