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CHAPTER-01

BASIC CONCEPTS OF
STRATEGIC MANAGEMENT
(SM)
ALMA.SHAMEEM

July 2, 2015

Learning Objectives
After studying this chapter, you should be able to do the
following:
Define the term strategic management (SM)
Describe the SM process.
Explain the need for integrating analysis and intuition in
strategic management.
Explain the benefits of strategic management.
Explain the impacts of Globalization and E-commerce on SM.
Describe the theory of learning organization.
Explain the basic model of SM.
Discuss the basic model of SM: The nature of strategy
formulation, implementation, and evaluation activities.
Describe the strategic decision making model.
Discuss how a firm may achieve sustained competitive
advantage.
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Strategic Management
SM is that set of managerial
decisions
and
actions
that
determines the long run performance
of a company.
How does a company become
successful and stay successful?
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4 Phases in the Evolution of Strategic


Management /4 Types of Strategic
Management
1.
2.
3.
4.

Basic financial planning internal focus on


budgeting (1 yr horizon)
Forecast-based planning extrapolate the
current situation into the future (3-5 yr horizon)
Externally-oriented planning planning
department and/or consultants develop a topdown strategy with no lower level involvement.
Strategic management involves various
departments and levels across the organization.
An ongoing process that includes
implementation, evaluation and control issues.

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Benefits of SM
Key Questions

Where is the organization now?

If no changes are made, where will the


organization be in 1, 2, 5 or 10 years?

What specific actions should


management undertake?

What are the risks and payoffs

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Benefits of SM
Why need Strategic Management?
Clearer sense of strategic vision
Sharper focus on strategic importance
Improved understanding of changing
environment
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Benefits of SM
Following are the major benefits of Strategic
management:
Proactive in shaping firms future
Initiate and influence actions
Formulate better strategies (Systematic, logical, rational
approach)
Financial benefits:
Improved productivity
Improved sales
Improved profitability
Non-Financial benefits:
Increased employee productivity
Improved understanding of competitors strategies
Greater awareness of external threats
Understanding of performance reward relationships
Better problem-avoidance
Lesser resistance to change
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Globalization & E-Commerce


Challenges to SM
Impact of Globalization
Internationalization of markets & corporations
Markets: global than national markets

Impact of Electronic Commerce


Internet to conduct business transactions
Basis for competition on a more strategic level rather
than traditional focus on product features and costs

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Theories of Organizational
Adaptation
Population Ecology
(Cant Change)
organizations)

vs.

Institutional Theory
(Mimic successful

Strategic Choice Perspective


(Management decisions have at
least as much impact as industry factors)

Organizational Learning Theory


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Creating Learning
Organization (LO)
LO is skilled at creating, acquiring
and transferring knowledge and
modifying its behavior to reflect new
knowledge and insight.
Key Activities:

Solve problems systematically


Experiment with new approaches
Learn from experience
Transfer knowledge throughout the organization

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Basic Model of SM
Four Basic Elements

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The term used in previous slide are explained here.

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1.Environmental
Scanning
Monitoring, evaluation, and
disseminating information from
external and internal environments
to key people in the firm

SWOT Analysis
Strengths Weaknesses
Opportunities Threats
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1. Environmental Scanning

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2. Strategy Formulation
Development of
long-range plans for
effective
management of
opportunities and
threats in light of
corporate strengths
and weaknesses

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2.Strategy Formulation
Vision statement
Vision is the art of seeing things
invisible
Jonathan Swif

Mission Statement

Purpose/reason for organization


Promotes shared expectations
Communicates public image
Who we are; what we do; what we aspire to

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2.Strategy Formulation
Corporate Goals/Objectives flow from the Mission/Vision
statement

Profitability (net profit)


Growth
Resource utilization (ROE, ROI)
Market leadership

Corporate Goals/Objectives need to be:

Specific
Measurable
Action oriented
Realistic
Timing is identified

SMART Goals
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2. Strategy Formulation
Selecting Strategy / Hierarchy of
Strategy
Corporate strategy (Stability, Growth,
Retrenchment)
Business strategy (Competitive, Cooperative)
Functional strategy (Technological
Leadership, Technological Followership)
Defining Policies
Guidelines for decision making that links formulation
to implementation
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3. Strategy
Implementation
Programs

Process by which strategies and


Strategy
Budgets
Implementation
policies
are put into action through
development of programs and
Procedures
procedures

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3. Strategy
Implementation
Programs single use plans (projects)
Budgets costs associated with a
program
Procedures system of sequential
steps that describe how a particular
task or job is to be done
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4.Evaluation and Control


Process by which corporate activities
and performance results are monitored
so that actual performance can be
compared with desired performance.
Feedback/Learning Process
Must go back to revise or correct
decisions made earlier.
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Triggering Events

New CEO
External Intervention
Threat of change in ownership
Performance Gap
Strategic inflection point (industry)

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Strategic Decisions
Rare unusual, no precedent
Consequential commit substantial resources
Directive set precedents for decision making

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Mintzbergs Modes of
Strategic Decision Making
Entrepreneurial mode founders vision
Adaptive mode muddling through (reactive)
Planning mode systematic gathering and
analysis of information
Logical incrementalism interactive strategy
development (Planning + Adaptive)

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Strategic Decision Making


Model

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Strategic Decision Making

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Elements of Good Strategy

1. Arenas Where?
1. Vehicles How to get there?
1. Differentiators How to win?
1. Staging Speed and sequence tactics
1. Economic logic How will we gain a return?
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Key Reference
Chapter 01-J David Hunger and
Thomas L Wheelan, Strategic
Management and Business Policy
(10th Edition), Addison Wesley
Lingman Inc.

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Thank You

Chapter Roundup and


Discussions

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