1. Chapter 1 Basic Concepts of Strategic Management PowerPoint Slides
Dr.Vijaya Kumar
Skyline College
Prentice Hall, 2002
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Wheelen/Hunger

2. Strategic Management Defined:
Set of managerial decisions and actions that determines the long-run performance of a firm.
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3. Business Policy Defined:
General management orientation that looks inward for properly integrating the firm’s functional activities.
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4. Four Phases of Strategic Management
Basic financial planning
Forecast-based planning
Externally-oriented planning (strategic)
Strategic management
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5. Strategic Management Highly Rated Benefits:
Clearer sense of strategic vision for the firm
Sharper focus on what is strategically important
Improved understanding of a rapidly changing environment
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6. Strategic Management Not always a formal process:
Where is the organization now? (Not where do we hope it is!)
If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 years?
What specific actions should management undertake? What are the risks and payoffs involved?
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7. Challenges to Strategic Management
Globalization
Internationalization of markets and corporations
Global (worldwide) markets rather than national markets
Electronic Commerce
Use of the 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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8. Global Issues European Union (EU)
Economic integration of 15 member countries
North American Free Trade Agreement (NAFTA)
Improved trade among 3 member countries
Mercosur
Free-trade area among Argentina, Brazil, Uruguay, and Paraguay
Association of South East Asian Nations (ASEAN)
Attempting to link members into a borderless economic zone
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9. E-Commerce
7 Trends:
Internet forcing companies to transform themselves
Market access and branding are changing, causing disintermediation of traditional distribution channels
Balance of power shifting to the consumer
Competition is changing
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10. 7 Trends (continued) Pace of business increasing drastically
Internet purchasing corporations out of their traditional boundaries
Knowledge becoming a key asset and source of competitive advantage
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11. Organizational Adaptation
How organizations obtain “fit” within their environment:
Theory of population ecology
Institution theory
Strategic choice perspective
Organizational learning theory
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12. Adaptation to Changing Environmental Conditions
Strategic flexibility:
Demands a long-term commitment to the development and nurturing of critical resources
Demands that the firm become a learning organization
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13. Learning Organizations
Defined:
An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights.
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14. Learning Organizations
Four Main Activities:
Solving problems systematically
Experimenting with new approaches
Learning from their won experiences and that of others
Transferring knowledge quickly and efficiently throughout the organization
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15. Strategic Management Model
Environmental
Strategy
Strategy
and Control
Evaluation
and Control
Evaluation
and Control
Scanning
Formulation
Implementation
External
Mission
Reason for
Societal
existence
Environment
Objectives
General Forces
What results to
Task
Strategies
accomplish
Environment
by when
Plan to
Industry Analysis
achieve the
Policies
mission &
Internal
objectives
Broad
guidelines for
Programs
Structure
decision
Process
Chain of Command
making
Activities
to monitor
needed to
performance
Culture
Budgets
accomplish
and take
Beliefs, Expectations,
a plan
corrective
Cost of the
Values
action
programs
Procedures
Resources
Sequence
Assets, Skills
of steps
Competencies,
needed to
Knowledge
do the job
Performance
Feedback/Learning
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16. Basic Model of Strategic Management
Four Basic Elements
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17. Environmental Scanning
Defined:
The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the firm.
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18. Environmental Scanning
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19. Environmental Scanning
Identify strategic factors
SWOT Analysis
Strengths, Weaknesses
Opportunities, Threats
Internal Environment
Strengths & Weaknesses
Within the organization but not subject to short-run control of management
External Environment
Opportunities & Threats
External to the organization but not subject to short-run control of management
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20. Strategy Formulation Defined:
Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses.
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21. Strategy Formulation Mission Statement
Purpose or reason for the organization’s existence
Promotes shared expectations among employees
Communicates public image important to stakeholders
Who we are, what we do, what we’d like to become
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22. Strategy Formulation Maytag Corporation Mission Statement
To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world.
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23. Strategy Formulation Objectives The end results of planned activity
What is to be accomplished
Time in which to accomplish it
Quantified when possible
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24. Strategy Formulation Goals vs. Objectives
A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion.
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25. Goals & Objectives Corporate goals and objectives include:
Profitability (net profits)
Growth (increase in total assets, etc.)
Utilization of resources (ROE or ROI)
Market leadership (market share)
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26. Strategies
Defined:
A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.
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27. Strategies 3 Types of Strategy Corporate strategy Business strategy
Functional strategy
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28. Strategies Corporate Strategy Stability Growth Retrenchment
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29. Strategies Business Strategy Competitive strategies
Cooperative strategies
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30. Strategies Functional Strategy Technological leadership
Technological followership
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31. Hierarchy of Strategy Corporate Strategy Functional Strategy Business
(Division Level)
Strategy
Functional
Strategy
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32. Policies
Defined:
Broad guidelines for decision making that link the formulation of strategy with its implementation.
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33. Strategy Implementation
Programs
Strategy
Implementation
Budgets
Procedures
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34. Initiation of Strategy
New CEO
External intervention
Threat of change in
ownership
Performance gap
Strategic inflection point
Stimulus
for change in
strategy
Triggering
event
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35. Strategic Decision Making
Strategic Decisions
Rare
Consequential
Directive
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36. Strategic Decision Making
Mintzberg’s Modes
Entrepreneurial mode
Adaptive mode
Planning mode
Logical incrementalism
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37. Strategic Decision Making
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38. Strategic Decision Making
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