CHAPTER 1 Basic Concepts of Strategic Management (continued) CONCEPTS IN STRATEGIC MANAGEMENT & BUSINESS POLICY 12TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER Prentice Hall 2006

Environmental Scanning Defined Monitoring, evaluation, and disseminating information from external and internal environments to key people in the firm Prentice Hall, Inc. © 2008 Prentice Hall 2006

Environmental Variables Basic Concepts of Strategic Management Environmental Variables Prentice Hall, Inc. © 2008 Prentice Hall 2006

Strengths – Weaknesses Opportunities – Threats Environmental Scanning SWOT Analysis Strengths – Weaknesses Opportunities – Threats Prentice Hall, Inc. © 2008 Prentice Hall 2006

Strategy Formulation Developing long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses Prentice Hall, Inc. © 2008 Prentice Hall 2006

Purpose/reason for organization Promotes shared expectations Strategy Formulation – How to Codify a Strategy Mission Statement Purpose/reason for organization Promotes shared expectations Communicates public image Who we are; what we do; what we aspire to Prentice Hall, Inc. © 2008 Prentice Hall 2006

Organization “fit” with environment Theory of population ecology Organizational Adaptation Organization “fit” with environment Theory of population ecology Institution theory Strategic choice perspective Organizational learning theory Prentice Hall, Inc. © 2008 Prentice Hall 2006

Strategic flexibility Organizational Adaptation Strategic flexibility Demands long-term commitment to development of critical resources Demands firm become a learning organization Prentice Hall, Inc. © 2008 Prentice Hall 2006

Learning Organizations An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights Prentice Hall, Inc. © 2008 Prentice Hall 2006

Systematic problem solving New approach experimentation Learning Organizations 4 Chief Activities Systematic problem solving New approach experimentation Learning from experiences Intra-organization knowledge transfer Prentice Hall, Inc. © 2008 Prentice Hall 2006

Hierarchy of Strategy Basic Concepts of Strategic Management Prentice Hall, Inc. © 2008 Prentice Hall 2006

Corporate Goals/Objectives Profitability (net profit) Growth Resource utilization (ROE, ROI) Market leadership Prentice Hall, Inc. © 2008 Prentice Hall 2006

3 Types of Strategy Corporate strategy Business strategy Basic Concepts of Strategic Management 3 Types of Strategy Corporate strategy Business strategy Functional strategy Prentice Hall, Inc. © 2008 Prentice Hall 2006

Corporate Strategy seeks one of these: Basic Concepts of Strategic Management Corporate Strategy seeks one of these: Stability Growth Retrenchment Prentice Hall, Inc. © 2008 Prentice Hall 2006

Business Strategy Competitive strategies Cooperative strategies Basic Concepts of Strategic Management Business Strategy Competitive strategies Cooperative strategies Prentice Hall 2006

Functional Strategy Technological leadership Basic Concepts of Strategic Management Functional Strategy Technological leadership Technological followership Prentice Hall, Inc. © 2008 Prentice Hall 2006

Strategic Decision-Making Process Basic Concepts of Strategic Management Strategic Decision-Making Process

Strategic Decisions Rare Consequential Directive Strategic Decision Making Strategic Decisions Rare Consequential Directive Prentice Hall 2006

Mintzberg’s Modes Entrepreneurial mode – CEO-driven Strategic Decision Making Mintzberg’s Modes Entrepreneurial mode – CEO-driven Adaptive mode – ‘muddling through’ Planning mode – process-driven Logical incrementalism - mixture Prentice Hall 2006

5 Elements of Good Strategy Hambrick and Fredrickson – Good Strategy 5 Elements of Good Strategy Arenas Vehicles Differentiators Staging Economic logic Prentice Hall 2006