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Chapter 1 The Nature of Strategic Management

Chapter 1 The Nature of Strategic Management. Strategic Management: Concepts & Cases 11 th Edition Fred David. Themes in the Text. Global Considerations – impact virtually all strategic decisions E-commerce – vital strategic management tool Natural environment –

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Chapter 1 The Nature of Strategic Management

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  1. Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 11th Edition Fred David Copyright 2007 Prentice Hall

  2. Themes in the Text • Global Considerations– • impact virtually all strategic decisions • E-commerce – vital strategic management tool • Natural environment– • important strategic issue Copyright 2007 Prentice Hall

  3. Strategic Management – Defined Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Copyright 2007 Prentice Hall

  4. Strategic Management In essence, the strategic plan is a company’s game plan Copyright 2007 Prentice Hall

  5. Strategic Management achieves a firm’s success through integration –– Management Marketing Finance/Accounting Production/Operations Research & Development MIS Copyright 2007 Prentice Hall

  6. Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection Copyright 2007 Prentice Hall

  7. 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 Copyright 2007 Prentice Hall

  8. Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation Copyright 2007 Prentice Hall

  9. Strategy Implementation Action Stage of Strategic Management – • Most difficult stage • Mobilization of employees & managers • Interpersonal skills critical • Consensus on goal pursuit Copyright 2007 Prentice Hall

  10. Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions Copyright 2007 Prentice Hall

  11. Strategy Evaluation Final Stage of Strategic Management • Subject to future modification • Today’s success no guarantee of future success • New & different problems • Complacency leads to demise Copyright 2007 Prentice Hall

  12. Prime Task of Strategic Management Peter Drucker: -- Think through the overall mission of a business. Ask the key question: “What is our Business?” Copyright 2007 Prentice Hall

  13. Integrating Intuition and Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Copyright 2007 Prentice Hall

  14. Integrating Intuition and Analysis Intuition is based on: • Past experiences • Judgment • Feelings Intuition isuseful for decision making in: • Conditions of great uncertainty • Conditions with little precedent Copyright 2007 Prentice Hall

  15. Integrating Intuition & Analysis Intuition & Judgment Involve Management at all levels Influence all Analyses Copyright 2007 Prentice Hall

  16. Integrating Intuition & Analysis Analytical Thinking Intuitive Thinking Copyright 2007 Prentice Hall

  17. Adapting to Change Organizations must monitor events • On-going process • Internal and external events • Timely changes Copyright 2007 Prentice Hall

  18. Strategic Management is Gaining and Maintaining Competitive Advantage “Anything that a firm does especially well compared to rival firms” Copyright 2007 Prentice Hall

  19. Achieving Sustained Competitive Advantage 1. Adapting to change in external trends, internal capabilities and resources 2. Effectively formulating, implementing & evaluating strategies Copyright 2007 Prentice Hall

  20. Copyright 2007 Prentice Hall

  21. Adapting to Change Rate & magnitude of change increasing dramatically E-commerce Demographics Technology Copyright 2007 Prentice Hall

  22. Adapting to Change Effective Adaptation Requires long-term focus Copyright 2007 Prentice Hall

  23. 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? Copyright 2007 Prentice Hall

  24. Key Terms Strategists – Firm’s success/failure • Various Job Titles: • Chief Executive Officer (CEO) • Chief Strategy Officer (CSO) • President • Owner • Board Chair • Executive Director Copyright 2007 Prentice Hall

  25. Key Terms Vision Statement – What do we want to become? Mission Statement – What is our business? Copyright 2007 Prentice Hall

  26. Key Terms • Largely beyond the control of a single organization Opportunities and Threats (External) Copyright 2007 Prentice Hall

  27. Key Terms Opportunities & Threats (External) • Analysis of Trends: • Economic • Social • Cultural • Demographic/Environmental • Political, Legal, Governmental • Technological • Competitors Copyright 2007 Prentice Hall

  28. Key Terms Opportunities & Threats • Process of conducting research and gathering and assimilating external information Environmental Scanning (Industry Analysis) Copyright 2007 Prentice Hall

  29. Key Terms Opportunities & Threats Basic Tenet of Strategic Management Take advantage of External Opportunities Strategy Formulation Avoid/minimize impact of External Threats Copyright 2007 Prentice Hall

  30. Key Terms Strengths & Weaknesses (Internal) • Controllable activities performed especially well or poorly Copyright 2007 Prentice Hall

  31. Key Terms Strengths & Weaknesses (Internal) • Typically located in functional areas of the firm • Management • Marketing • Finance/Accounting • Production/Operations • Research & Development • Computer Information Systems Copyright 2007 Prentice Hall

  32. Key Terms Strengths & Weaknesses Assessing the Internal Environment Financial Ratios Internal Factors Performance Metrics Industry Averages Survey Data Copyright 2007 Prentice Hall

  33. Key Terms • Mission-driven pursuit of specified results more than one year out Long-term Objectives Copyright 2007 Prentice Hall

  34. Key Terms Long-term Objectives • Essential for ensuring the firm’s success • Provide direction • Aid in evaluation • Create synergy • Focus coordination • Basis for planning, motivating, and controlling Copyright 2007 Prentice Hall

  35. Key Terms • Means by which long-term objectives are achieved Strategies Copyright 2007 Prentice Hall

  36. Key Terms Strategies • Some Examples • Geographic expansion • Diversification • Acquisition • Market penetration • Retrenchment • Liquidation • Joint venture Copyright 2007 Prentice Hall

  37. Key Terms • Short-term milestones that firms must achieve to attain long-term objectives Annual Objectives Copyright 2007 Prentice Hall

  38. Key Terms • Means by which annual objectives will be achieved Policies Copyright 2007 Prentice Hall

  39. Example Strategies in Action in 2005 Copyright 2007 Prentice Hall

  40. Example Strategies in Action in 2005 Copyright 2007 Prentice Hall

  41. Comprehensive strategic management model External Audit Chapter 3 Vision & Mission Chapter 2 Long-Term Objectives Chapter 5 Generate, Evaluate, Select Strategies Chapter 6 Implement Strategies: Mgmt Issues Chapter 7 Implement Strategies: Marketing, Fin/Acct, R&D, CIS Chapter 8 Measure & Evaluate Performance Chapter 9 Internal Audit Chapter 4 Copyright 2007 Prentice Hall

  42. Strategic Management Model • Dynamic & Continuous • More formal in larger organizations Strategic Management Process Copyright 2007 Prentice Hall

  43. Strategic Management Model 1. Identify Existing -- • Vision • Mission • Objectives • Strategies Copyright 2007 Prentice Hall

  44. Strategic Management Model • Audit external environment • Audit internal environment • Establish long-term objectives • Generate, evaluate & select strategies • Implement selected strategies • Measure & evaluate performance Copyright 2007 Prentice Hall

  45. Benefits of Strategic Management • Proactive in shaping firm’s future • Initiate and influence firm’s activities • Formulate better strategies • Systematic, logical, rational Copyright 2007 Prentice Hall

  46. Benefits of Strategic Management Financial Benefits • Improvement in sales • Improvement in profitability • Productivity improvement Copyright 2007 Prentice Hall

  47. Benefits of Strategic Management Non-Financial Benefits • Improved understanding of competitors strategies • Enhanced awareness of threats • Reduced resistance to change • Enhanced problem-prevention capabilities Copyright 2007 Prentice Hall

  48. Benefits of Strategic Management (Greenley) • Identification of Opportunities • Objective view of management problems • Improved coordination & control • Minimizes adverse conditions & changes • Decisions that better support objectives Copyright 2007 Prentice Hall

  49. Benefits of Strategic Management (Greenley – cont’d) • Effective allocation of time & resources • Internal communication among personnel • Integration of individual behaviors • Clarify individual responsibilities • Encourage forward thinking Copyright 2007 Prentice Hall

  50. Benefits of Strategic Management (Greenley –cont’d) • Encourages favorable attitude toward change • Provides discipline and formality to the management of the business Copyright 2007 Prentice Hall

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