1. 1 Chapter 1 The Nature of Strategic Management

2. 2 Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. Strategic Management Defined

3. 3 The Stages and Activities in the Strategic Management Process StagesActivities Strategy formulation Strategy evaluation Strategy implementation Conduct research Establish annual objectives Review internal and external factors Integrate intuition with analysis Devise policies Measure performance Make decisions Allocate resources Take corrective action ©1999 Prentice Hall

4. 4 The Basis for Good Strategic Decisions Intuition + Analysis Effective Strategic Decisions ©1999 Prentice Hall

5. 5 Hierarchy of Strategy Functional Strategy Business (Division Level) Strategy Corporate Strategy Manufacturing Finance Marketing Research and Development Human Resources Strategic Business Unit Strategic Business Unit Strategic Business Unit Corporate Headquarters

6. 6 Business Mission Strategy Formulation External Opportunities and Threats Internal Strengths and Weaknesses Keys to Formulating Strategies ©1999 Prentice Hall

7. 7 Business Mission Mission statements are statements of purpose that distinguish one business from similar firms. It addresses the basic question: “What is our business?”

8. 8 Ten Key External Forces Economic Social Cultural Demographic Environmental Political Legal Governmental Technological Competitive ©1999 Prentice Hall

9. 9 Fourteen Key Internal Forces Management Marketing Distribution Production/ Operations Production/ Operations Research & Development Purchasing Manufacturing ©1999 Prentice Hall

10. 10 Key Internal Forces (continued) Finance/Accounting Packaging Computer Information Systems Vendor Relations Promotion Human Resource Management Employee/ Manager Relations ©1999 Prentice Hall

11. 11 A Comprehensive Strategic Management Model Develop Mission And Vision Statements Develop Mission And Vision Statements Establish Long- term Objectives Establish Long- term Objectives Generate, Evaluate, and Select Strategies Generate, Evaluate, and Select Strategies Establish Policies and Annual Objectives Establish Policies and Annual Objectives Implement Strategies Implement Strategies Measure and Evaluate Performance Measure and Evaluate Performance Perform External Audit Perform External Audit Perform Internal Audit Perform Internal Audit Feedback Strategy FormulationStrategy ImplementationStrategy Evaluation ©1999 Prentice Hall

12. 12 Benefits of Strategic Management - Improved Communication - Increased Understanding - Enhanced Commitment - Greater Productivity - More Effective Strategies - Higher Sales and Profits - Firm can Influence, Initiate, and Anticipate - Be Proactive Rather Than Reactive ©1999 Prentice Hall

13. 13 Business Ethics Business ethics can be defined as principles of conduct within organizations that guide decision making and behavior. Ethical decision making deals with the moral evaluation of decisions based on commonly accepted principles of behavior; the evaluation results in an action being judged right or wrong.

14. 14 Factors Affecting Ethical Decision Making Moral Values –deontology –teleology Opportunity –codes of ethics –policies –rewards/punishment Significant Others –management –peers

15. 15 Suggestions for Improving Ethical Behavior Offer training programs which independently and explicitly address specific treatment of ethical issues. Limit the opportunity to engage in unethical behavior by providing a well- developed structure and system of checks and balances, including explicit penalties for unethical behavior. Let employees know what penalties the company imposes on those who engage in unethical behavior. Recognize how the behavior of co-workers and superiors can influence the behavior of other employees in the organization. Develop a code of ethics or ethical policies that are widely communicated and enforced. In larger organizations, develop an ethics committee to address new issues and help establish and evaluate existing codes and policies. Eliminate the “bad apples”. –Source: Ferrell, O.C. and Gareth Gardiner (1991), In Pursuit of Ethics, USA: Smith Collins.

16. 16 Tough-Minded Management and Social/Ethical Responsibility Continuum of Managerial Authority The Tough-Minded Manager: –Accepts that risks must often be taken and that conflict is inevitable in making tough choices; –Understands that short-run losses may be inevitable and unavoidable to achieve long-run success; –Believes that the best long-run approach to business is integrity; –Is aware that ethical problems may arise in the workplace, and of how ethical decisions are usually made in the workplace; –Has reached a level of moral development where economic self-interest is not paramount, and where persona ethical values are important; –Has learned that trust is the glue that holds business relationships together; –Believes strongly that maintaining self-esteem and self-respect outweighs material gain. –Source: Ferrell, O.C. and Gareth Gardiner (1991), In Pursuit of Ethics, USA: Smith Collins.