1. CHAPTER 1 Basic Concepts of Strategic Management
STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
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2. The “strategos” in Athens was an elected general.
What is Strategy ? …
The concept of strategy is ancient and originated in the study of success in war.
The word strategy comes from the Greek ‘stratos’ (army) and ‘agein’ (to lead).
The “strategos” in Athens was an elected general.
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3. “Strategy is knowing the business you propose to carry out”.
What is Strategy ? …
“Strategy is knowing the business you propose to carry out”.
Xenophon (ancient Greece)
This definition stresses that strategy requires;
A knowledge of the business,
An intention of the future,
An orientation towards action.
This definition also emphasizes the link between leadership and strategy formulation. Xenophon saw strategy as a direct responsibility of those in charge, not as a spectator sport.
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4. MINTZBERG’S TEN SCHOOLS (Strategy Safari)
1. THE DESIGN SCHOOL
“Strategy Formation as a Process of Conception”
2. THE PLANNING SCHOOL
“Strategy Formation as a Formal Process”
3. THE POSITIONING SCHOOL
“Strategy Formation as an Analytical Process”
4. THE ENTREPRENEURIAL SCHOOL
“Strategy Formation as a Visionary Process”
5. THE COGNITIVE SCHOOL
“Strategy Formation as a Mental Process”
6. THE LEARNING SCHOOL
“Strategy Formation as an Emergent Process”
7. THE POWER SCHOOL
“Strategy Formation as a Process of Negotiation”
8. THE CULTURAL SCHOOL
“Strategy Formation as a Collective Process”
9. THE ENVIRONMENTAL SCHOOL
“Strategy Formation as a Reactive Process”
10. THE CONFIGURATION SCHOOL
“Strategy Formation as a Process of Transformation”
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5. Mintzberg's 5 Ps for Strategy
Strategic Management Defined
Mintzberg's 5 Ps for Strategy
Plan
Pattern
Position
Perspective.
Ploy
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6. Set of managerial decisions and actions that determines
Strategic Management Defined
Set of managerial decisions and
actions that determines
the long-run performance of a firm.
It includes :
Environmental scanning
(both external and internal : SWOT)
Strategy formulation
Strategy implementation
Evaluation and control
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7. 5 Elements of Good Strategy
Hambrick and Fredrickson – Good Strategy
5 Elements of Good Strategy
Arenas ( Where will we be active ?)
Vehicles (How we will get there ?)
Differentiators (How will we win in the marketplace ?)
Staging (What will be our speed and sequence of moves ?)
Economic logic (How will we make money ?) (How will we obtain our resources ?)
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8. Clearer sense of strategic vision
Basic Concepts of Strategic Management
Highly Rated Benefits
Clearer sense of strategic vision
Sharper focus on strategic importance
Improved understanding of changing environment
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9. Highly Rated Benefits (Mintzberg) Strategy sets direction
Basic Concepts of Strategic Management
Highly Rated Benefits (Mintzberg)
Strategy sets direction
Strategy focuses effort
Strategy defines the organization
Strategy provides consistency
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10. Strategy includes : Environmental scanning
Strategic Management Defined
Strategy includes :
Environmental scanning
(both external and internal : SWOT)
Strategy formulation
Strategy implementation
Evaluation and control
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11. Basic Elements of the Strategic Management Process
Basic Concepts of Strategic Management
Basic Elements of the Strategic Management Process
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12. Strengths – Weaknesses Opportunities - Threats
Environmental Scanning
SWOT Analysis
Strengths – Weaknesses
Opportunities - Threats
Monitoring, evaluation, and disseminating information from external and internal environments –to key people in the firm
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13. Globalization Electronic Commerce
Basic Concepts of 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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14. Electronic Commerce -- Trends Forcing company transformation
Basic Concepts of Strategic Management
Electronic Commerce -- Trends
Forcing company transformation
Market access & branding changing – disintermediation of traditional distribution channels
Balance of power shift to consumer
Competition changing
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15. Environmental Variables
Basic Concepts of Strategic Management
Environmental Variables
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16. Organization “fit” with environment Theory of population ecology
Organizational Adaptation
Organization “fit” with environment
Theory of population ecology
(Inertia prevents from changing)
Institution theory
(Change by imitating)
Strategic choice perspective
(They have the power to reshape)
Organizational learning theory
(Organization adjust defensively)
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17. HERE COMES THE LEARNING ORGANIZATION
Strategy Formulation
Environment is not static, it is dynamic.
If you do not fail to adjust, no strategic
plan will save you from failure.
HERE COMES THE LEARNING ORGANIZATION
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18. Learning Organizations
An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights
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19. Systematic problem solving New approach experimentation
Learning Organizations
4 Chief Activities
Systematic problem solving
New approach experimentation
Learning from experiences
Intra-organization knowledge transfer
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20. IT IS THE PLANNING (that counts)
Organizational Adaptation
Strategic flexibility
Demands long-term commitment to development of critical resources
Demands firm become a learning organization
IT IS NOT THE PLAN
IT IS THE PLANNING (that counts)
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21. Strategy Formulation
Development of long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses
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22. Purpose/reason for organization Promotes shared expectations
Strategy Formulation
Mission Statement
Purpose/reason for organization
Promotes shared expectations
Communicates public image
Who we are; what we do; what we aspire to
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23. “ We shall build good ships here – at a profit if we can
Strategy Formulation
Mission Statement
“ We shall build good ships here
– at a profit if we can
– at a loss if we must
but always good ships …”
Newport Ships Building
1886
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24. Not Always a Formal Process
Basic Concepts of 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 1,2,5 or 10 years?
What specific actions should management undertake?
What are the risks and payoffs?
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25. Strategic Decision Making
How can we differentiate Strategic Decisions :
Rare
(Typically new and unusual)
Consequential
(Commit substantial resources
and demand commitment)
Directive
(Direct lesser decisions and
future actions)
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26. Mintzberg’s Modes Entrepreneurial mode Adaptive mode Planning mode
Strategic Decision Making
Mintzberg’s Modes
Entrepreneurial mode
(Focus is on opportunities, problems are secondary. Typically large, bold decisions. Dominant goal is growth)
Adaptive mode
(“muddling through” Reactive solutions to existing problems rather than proactive search for new opportunities)
Planning mode
(Systematic gathering of information, situation analysis, generation of feasible alternatives, rational selection)
Logical incrementalism
(An interactive process, synthesis of the other three)
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27. 3 Types of Strategy Corporate strategy Business strategy
Basic Concepts of Strategic Management
3 Types of Strategy
Corporate strategy
Business strategy
Functional strategy
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28. Hierarchy of Strategy Basic Concepts of Strategic Management
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29. Corporate Strategy Business Strategy Functional Strategy Stability
Basic Concepts of Strategic Management
Corporate Strategy
Stability
Growth
Retrenchment
Business Strategy
Competitive strategies
Cooperative strategies
Functional Strategy
Technological leadership
Technological followership
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30. STRATEGY IMPLEMENTATION
Basic Concepts of Strategic Management
STRATEGY IMPLEMENTATION
STRATEGY
PROGRAMS
BUDGETS
PROCEDURES
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31. Strategic Decision-Making Process
Basic Concepts of Strategic Management
Strategic Decision-Making Process
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32. 4 Phases of Strategic Management
Basic Concepts of Strategic Management
4 Phases of Strategic Management
1. Basic financial planning
(Time horizon: 1 year)
2. Forecast-based planning
(Time horizon: 3 – 5 years)
3. Externally-oriented planning
(by expert planners)
4. Strategic management
(constructed with the inputs and
commitments of lover lever managers too)
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33. “Strategies for better and worse”
Basic Concepts of Strategic Management
Reading assignment;
“Strategies for better and worse”
Strategy sets direction
Strategy focuses effort
Strategy defines the organization
Strategy provides consistency
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