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Strategic Management in Action Mary Coulter

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1 Strategic Management in Action Mary Coulter
4/15/2017 Strategic Management in Action Mary Coulter 1 Introducing the Concepts This chapter introduces the basic concepts of strategy and strategic management. As indicated in the next slide, the chapters covers 4 important areas that helps students understand this discipline. © Prentice-Hall 2005

2 Learning Outline Why is strategic management important?
4/15/2017 Learning Outline Why is strategic management important? Give four reasons why strategic management is important. Discuss what studies have shown about the impact of strategic management on an organization’s performance. What is strategic management? Define strategy and strategic management. Describe the strategic management process. Describe the three levels of organizational strategies. Explain the historical evolution of strategic management. The learning objectives for this chapter are divided into the four sections indicated in the slide. In each section, various issues including definition of terms and current trends are described. © Prentice-Hall 2005

3 Learning Outline (contd.)
4/15/2017 Learning Outline (contd.) Who’s involved with strategic management? Explain the role of the board of directors in strategic management. Discuss how top managers can be effective leaders. Describe the role of other managers and organizational employees in strategy. Strategic management in today’s world Discuss how globalization issues affect strategic management. Explain the concept of corporate governance and how it’s impacting strategic management. Describe the three different strategic approaches to e-business. This slide identifies the last two of the four topics covered in the chapter. © Prentice-Hall 2005

4 Why is Strategic Management Important?
4/15/2017 Why is Strategic Management Important? It gives a role to everyone in an organization to manage strategically. It helps the organization perform well. It helps the organization to effectively cope with the uncertainties in the external and internal environment. It helps to coordinate various functions and activities It is important for students to know why the field of strategic management is vital to organizations and, more importantly, to them. Regardless of what their major is or where they hope to work (accounting firm, online retailer, etc.), the key assumption in this book is that everyone in an organization plays a role in managing strategically. © Prentice-Hall 2005

5 Definition of Strategy
4/15/2017 Definition of Strategy Goal-directed decisions and actions in which its capabilities and resources are matched with the opportunities and threats in its environment It is important to focus on the key parts of this definition. First, strategy involves an organization’s goals. Second, it involves goal-directed actions – implementing the strategy. Finally, the organization’s strategies should be designed so they take into account its key internal strengths (capabilities and resources) and external opportunities and threats. This “matching” idea is important to the concept of strategy and strategic management. These concepts are emphasized in the next slide. © Prentice-Hall 2005

6 Strategy involves Organization’s goals Goal-directed actions
4/15/2017 Strategy involves Organization’s goals Goal-directed actions Matching key internal strengths with external opportunities and threats The “matching” idea is frequently referred to throughout the book. © Prentice-Hall 2005

7 Definition of Strategic Management
4/15/2017 Definition of Strategic Management The process of analyzing the current situation, developing appropriate strategies, putting those strategies into action and evaluating, modifying, or changing those strategies as needed This definition indicates that strategic management involves several activities. The next slide identifies them. © Prentice-Hall 2005

8 Figure 1.1 Basic Activities of Strategic Management
4/15/2017 Figure 1.1 Basic Activities of Strategic Management Situation Analysis Strategy Formulation Strategy Evaluation Strategy Implementation The arrows connecting the 4 basic activities indicate that the activities are inter-connected and iterative. © Prentice-Hall 2005

9 Characteristics of Strategic Management
4/15/2017 Characteristics of Strategic Management Interdisciplinary Four aspects that set apart Strategic Management External focus First, strategic management encompasses all the areas of an organization – i.e., it is interdisciplinary. Second, it is characterized by its emphasis on the interactions of the organization with its external environment. Third, its internal focus refers to the organization’s specific resources and capabilities. Finally, what distinguishes strategic management is that it concerns the future direction of the organization. Internal focus Future direction © Prentice-Hall 2005

10 Figure 1.2 Strategic Management in Action
4/15/2017 Figure 1.2 Strategic Management in Action Analyzing Current Situation Deciding on Strategies Putting Strategies in Action Evaluating and Changing Strategies Situation Analysis Strategy Formulation Strategy Implementation Strategy Evaluation Organizational Context External Analysis Chapter 2 This slide illustrates the strategic management process and indicates how each chapter fits into the process. This slide provides an overview of the textbook’s organization. Functional Competitive Chapter 3 Chapter 5 Chapter 6 Internal Analysis Corporate Chapter 4 Chapter 7 © Prentice-Hall 2005

11 The Strategic Management Process
4/15/2017 The Strategic Management Process Situation Analysis entails scanning and evaluating Organizational context External environment Organizational environment Before deciding on an appropriate strategic direction or response, organizational employees need to analyze the current situation. Chapters 2,3, and 4 cover this topic. © Prentice-Hall 2005

12 Figure 1.3 Levels of Strategies
4/15/2017 Figure 1.3 Levels of Strategies Corporate What direction are we going and what business(es) are we in or do we want to be in? Competitive: How are we going to compete in our chosen business(es)? The typical approach to describing the strategies that are formulated is to look at them from three different organization levels – functional (or operational), competitive (or business unit), and corporate. Functional What resources and capabilities do we have to support the corporate and competitive strategies? © Prentice-Hall 2005

13 The Strategic Management Process
4/15/2017 The Strategic Management Process Strategy Implementation Putting the organization’s various strategies into action Strategy Evaluation Evaluating how the strategy has been implemented as well as the outcomes of the strategy It is not enough for an organization’s employees to develop or formulate great strategies – these strategies have to be implemented. The approaches to implementing the various strategies should be considered as the strategies are formulated. An organization’s employees should monitor both the actual implementation of the strategy and the performance outcomes of strategies that have been implemented. © Prentice-Hall 2005

14 The Strategic Management Process
4/15/2017 The Strategic Management Process A continuous cycle of Situation analysis Strategy formulation Strategy implementation Strategy evaluation It’s important to recognize that , even though we discuss the strategic management process by isolating each step individually in order to study it, in reality it’s a continuous cycle of situation analysis and strategy formulation, implementation, and evaluation. © Prentice-Hall 2005

15 Looking at Strategic Management’s Past
4/15/2017 Looking at Strategic Management’s Past Strategy’s Military Roots Battlefield strategies to gain an edge on the enemy Exploit enemy’s weak spots Attack enemy where most vulnerable Academic Origins of Strategic Management Mainstream economic theory Scientific management (Taylor) Bureaucratic organizations (Weber) Administrative functions/open systems (Barnard) Looking at the history of strategic management helps us better understand how and why today’s managers are practicing strategic management in action and even perhaps get clues as to why organizational performance levels vary. The concept of strategy can be seen in history in the decisions and actions used by military organizations.Many popular children’s games (Battleship, tic-tac-toe, and checkers) are based on military concepts and designed around the idea of a “strategy.” Strategic management is a relatively young academic discipline. The fields of economics and organization theory provided the earliest academic bases. © Prentice-Hall 2005

16 Looking at Strategic Management’s Past
4/15/2017 Looking at Strategic Management’s Past The 1960s Strategic management established as separate field, basic concepts established The 1970s and 1980s Process researchers (“how” strategy is formed) Content researchers (“what” of a strategic decision) During the 1960s, three classic books on strategy – Alfred Chandler’s Strategy and Structure, Igor Ansoff’s Corporate Strategy, and a Harvard textbook Business Policy: Text and Cases by Learned, Christensen, Andrews, and Guth – helped distinguish strategic management as a separate academic field and established many basis concepts. © Prentice-Hall 2005

17 Who’s Involved with Strategic Management?
4/15/2017 Who’s Involved with Strategic Management? Board of Directors Elected representatives of stockholders Play significant role in corporate governance Top Management Team Ultimately responsible for every decision and action of every organizational employee Act as strategic leaders Other Strategic Managers and Organizational Employees Responsible for strategy implementation and evaluation One of the major assumptions of this text is that all of an organization’s employees play an important role in strategic management. The only aspect that differs is the scope and range of the individual’s strategic decision making and action. This slide identifies the scope and responsibility of three major groups in an organization. © Prentice-Hall 2005

18 Table 1.1 Typical Board Responsibilities
4/15/2017 Table 1.1 Typical Board Responsibilities Review and approve strategic goals and plans Review and approve organization’s financial standards and policies Ensure integrity of organization’s financial controls and reporting system Approve an organizational philosophy Monitor organizational performance and regularly review performance results Select, evaluate, and compensate top-level managers Develop management succession plans Review and approve capital allocations and expenditures Monitor relations with shareholders and other key stakeholders Other responsibilities may be assigned depending on the unique culture and needs of the organization Corporate governance has become an extremely important issue for today’s strategic managers. This slide lists the typical responsibilities of an organization’s board of directors. © Prentice-Hall 2005

19 Figure 1.4 Board Involvement in the Strategic Management Process
4/15/2017 Figure 1.4 Board Involvement in the Strategic Management Process APPROVING ROLE INITIATING ROLE (Highest level of board involvement) (Lowest level of board involvement) The role of the board in the firm’s strategy process was often viewed from two opposing perspectives as shown in the slide. In today’s organizations, we are seeing a shift in the board’s role from mere approval of strategic plans to initiating strategies as well as overseeing the implementation and evaluation of the strategies. © Prentice-Hall 2005

20 Figure 1.5 Effective Strategic Leadership Involves
4/15/2017 Figure 1.5 Effective Strategic Leadership Involves Determining Organizational Purpose or Vision Establishing Appropriately Balanced Controls Exploiting and Maintaining Core Competencies Effective Strategic Leadership Emphasizing Ethical Decisions and Practices Developing Human Capital Strategic leadership is the ability to anticipate, envision, maintain flexibility, think strategically, and work with others in the organization to initiate changes that will create a viable and valuable future for the organization. This slide identifies the 6 key dimensions of strategic leadership. Creating and Sustaining Strong Organizational Culture © Prentice-Hall 2005

21 Strategic Management in Today’s World
4/15/2017 Strategic Management in Today’s World Three important issues affecting strategic management in today’s world Globalization Corporate governance E-business Managing strategically in today’s world isn’t easy. This slide identifies three important issues that impact strategic management in today’s world. Globalization challenges come from openness and significant cultural differences. In a world of Enron, Tyco, and Worldcom, corporate governance is a major issue. The next slides deals more specifically with this issue. Today’s strategic decision makers function in an e-business world. Despite the implosion of many dot com businesses, e-business is here to stay and offers many strategic advantages. © Prentice-Hall 2005

22 4/15/2017 Corporate Governance Corporate governance is the determination of the broad uses to which organizational resources will be deployed and the resolution of conflicts among the myriad participants in organizations Sarbanes-Oxley Act of 2002 – a U.S. federal law designed to protect investors by improving the accuracy and reliability of corporate disclosures A significant part of the reform in corporate governance was the Sarbanes-Oxley Act of Two areas in which corporate governance reform was mandated by the Act are the role of boards of directors and financial reporting. Tables 1.2 and 1.3 are guidelines in these areas. © Prentice-Hall 2005

23 Chapter One ? Questions © Prentice-Hall 2005


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