© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 1 Session 1 – Part 1 History and Overview of Strategic Management

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 2 Session Objectives To Develop an Understanding of the (brief) History of Strategic Management. To Develop a Conceptual Understanding of the Paradigm Shift from Business Policy to Strategic Management

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 3 Word for the Day Paradigm

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 4 Ford Foundation Study During Late 40s Need to develop a multi-disciplinary understanding of Business Ergo a capstone course that introduces accountants to marketing, marketers to operations, production managers to human resources… Efficiency oriented given pent up demand form WWII

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Multi-Disciplinary Integrative with input from an understanding of the interworkings of finance, accounting, marketing, research and development, human resources, operations, information management,… These are the functional specialties that contribute to the general management of the firm. You have studied these fundamentals separately. 5

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 6 What’s Missing in this Paradigm? The effectiveness issue Focuses on doing things right but not whether the business is doing the right thing The entrepreneurial aspect of the business Must start with the health of the key idea

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 7 What is the First “Strategy” for any Business? It’s that Key Idea in the Entrepreneurs mind for Satisfying a societal/marketplace need by Providing/producing a product/service that will Yield an excess of price over cost of its provision that Incents the provider to continue/expand its delivery (Capitalism 101)

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 8 WHAT IS THE LIFE EXPECTANCY OF THESE KEY IDEAS? LONGER OR SHORTER TODAY THAN DURING THE MID 20 TH CENTURY?

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 9 A MORE RATIONAL PARADIGM WOULD BEGIN BY CONSIDERING THE HEALTH OF THE BUSINESS’S KEY IDEA OR KEY IDEAS THAT’S STRATEGIC MANAGEMENT

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 10 What is Strategic Management? The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives.

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 11 Critical Tasks of Strategic Management 1 1 Formulate the company’s mission 2 2 Develop company profile, reflecting its internal conditions 3 3 Assess company’s external environment 4 4 Analyze company’s options 5 5 Identify most desirable options 6 6 Select long-term objectives and grand strategies 7 7 Develop annual objectives and short-term strategies 8 8 Implement the strategic choices 9 9 Evaluate success of the strategic process

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 12 What is Strategy? Large-scale, future-oriented plan for interacting with competitive environment to achieve objectives Company’s “game plan” Framework for managerial decisions

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill 13 SO WE WILL NOT TOTALLY ABANDON THE NOTION OF BUSINESS POLICIES – THEY ARE IMPORTANT BUT WE WILL NOT CONSIDER POLICIES (WHICH WE WILL COME TO REFER TO AS FUNCTIONAL STRATEGIES/POLICIES) UNTIL WE’VE ESTABLISHED THAT WE ARE DOING THE RIGHT THINGS EFFECTIVENESS BEFORE EFFICIENCY

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Session 1 – Part 1 The Strategic Management Model

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Learning Objectives 1. Understand the types of strategic decisions for which different managers are responsible 2. Describe a comprehensive model of strategic decision making 3. Appreciate the importance of strategic management as a process 4. Give examples of strategic decisions that companies have recently made

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Three Levels of Strategy Corporate level: board of directors, CEO & administration [Highest] Business level: business and corporate managers [Middle] Functional level: Product, geographic, and functional area managers [Lowest]

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Alternative Strategic Management Structures

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Strategic Management Decisions: Corporate Domain Definition: Where to Compete? Defines Scope of Firm In Which Industries Will We Compete? Must Be Reflected in Mission Choice of businesses, entry (diversification) and exit (divestiture) decisions, resource allocation/ priorities for growth Corporate Financial: Dividend Policies, Sources of Long-term Financing

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Strategic Management Decisions: Business Domain Navigation: How to Compete? Competitive Strategy Help bridge decisions at the corporate and functional levels Less costly, risky, and potentially profitable than corporate-level decisions More costly, risky, and potentially profitable than functional-level decisions Include decisions on plant location, marketing segmentation, and distribution

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Strategic Management Decisions: Functional Implement the overall strategy formulated at the corporate and business levels AKA Tactics Involve specific action-oriented and operational issues Relatively short range (typically within the coming year) and low risk Modest costs: depend upon available resources Relatively concrete and quantifiable

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Strategic Management Process The basic components of the models used to analyze strategic management are similar Strategic management is a process—a flow of information through interrelated stages of analysis toward the achievement of some goal

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Phases of Strategic Management Process Formulation Implementation Control

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Strategic Management Model

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Word (Acronym) of the Day SWOT ANALYSIS S trengths W eaknesses O pportunities T hreats

© 2000 The McGraw-Hill Companies, Inc. Irwin/McGraw-Hill Strategic Management Components Company Mission External Analysis Long-Term Objectives Short-Term Objectives Policies Empowering Action Strategic Control & Continuous Improvement Internal Analysis Strategic Analysis & Choice Generic & Grand Strategies Functional Tactics Restructuring, Reengineering & Refocusing