Overview • Why do some firms succeed while others fail? • A central objective of strategic management is to learn why this happens. • What is strategy? • An action a company takes to attain superior performance. • What is the strategic management process? • The process by which managers choose a set of strategies for the enterprise to pursue its vision.
Strategic Planning • Rational planning by top management? Basic Strategic Planning Model Defining the Mission and Setting Top-Level Goals External Analysis of Opportunities and Threats Internal Analysis of Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Chosen Strategies
Mission and Goals • Mission • Sets out why the organization exists and what it should be doing. • Major goals • Specify what the organization hopesto fulfill in the medium to long term. • Secondary goals • Are objectives to be attained that lead to superior performance.
External Analysis • Identify strategic opportunities and threats in the operating environment. Immediate (Industry) Macroenvironment National
Internal Analysis • Identify strengths • Quality and quantity of resources available • Distinctive competencies • Identify weaknesses • Inadequate resources • Managerial and organizational deficiencies
Strengths and Weaknesses Opportunities and Threats(SWOT Analysis) SWOT and Strategic Choice Strategic ChoiceBusinessFunctionalGlobalCorporate
Business-Level Strategies • Cost leadership • Attaining, then using the lowest total cost basis as a competitive advantage. • Differentiation • Using product features or services to distinguish the firm’s offerings from its competitors. • Market niche focus • Concentrating competitively on a specific market segment.
Functional-Level Strategies • Focus is on improving the effectiveness of operations within a company. • Manufacturing • Marketing • Materials management • Research and development • Human resources
Global-Level Strategies • Multidomestic • International • Global • Transnational
Corporate-Level Strategies • Vertical integration • Diversification • Strategic alliances • Acquisitions • New ventures • Business portfolio restructuring
Structure Controls Strategy Strategy Implementation • Designing organizational structure • Designing control systems • Market and output controls • Bureaucratic controls • Control through organizational culture • Rewards and incentives • Matching strategy, structure, and controls • Congruence (fit) among strategy, structure, and controls
Corporate Operational Business Functional Managing Strategic Change • The only constant is change. • Success requires adapting strategy and structure to a changing world. • The feedback loop in strategic planning.
Strategic Managers • General managers • Responsible for the overall (strategic) performance and health of the total organization. • Operations managers • Responsible for specific businessfunctions or operations.
Strategic Managers for All Levels FIGURE 1.2
Strategic Leadership • Vision, eloquence, and consistency • Commitment to the vision • Being well informed • Willingness to delegate and empower • Astute use of power • Emotional intelligence
Strategy as an Emergent Process • Strategy making in an unpredictable world • Creates the necessity for flexible strategic approaches. • Strategy making by lower-level managers • Strategy evolves through autonomous action. • Serendipity and strategy • Accidental discoveries and happenstances can have dramatic effects on strategic direction. • Intended and emergent strategies • Realized strategies are combinations of intended and emergent strategies.
Intended and Emergent Strategies FIGURE 1.3 Source: Reprinted from “Strategy Formation in an Adhocracy,” by Henry Mintzberg and Alexandra McGugh, published in Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by permission of Administrative Science Quarterly.
The Strategic Management Process for Intended and Emergent Strategies FIGURE 1.4
Strategic Planning in Practice • Planning under uncertainty • Scenario planning for dynamic environmental change • Ivory tower planning • Lack of contact with operational realities • The importance of involving operating managers • Procedural justice in the decision-making process • Engagement, explanation, and expectations • Planning for the present: Strategic Intent • Recognition of the static nature of the strategic fit model • Strategic intent in focusing the organization on winning by achieving stretch goals
Improving Strategic Decision Making • Cognitive biases systematically influence the rationality of decision makers. FIGURE 1.5
Groupthink and Strategic Decisions • Pitfalls of groupthink • Failing to question underlying assumptions. • Coalescing around a single person or policy. • Filtering out conflicting information. • Developing after-the-fact rationalizations. • Having an emotional (nonobjective) commitment to an action.
Techniques for Improving Decision Making • Two decision-making processesthat counteractcognitive biases and groupthink. FIGURE 1.6