1. Strategic Management

2. Definition
Strategic management is a continuous iterative process keeping an organization fully matched with its environment.

3. Joel Ross and Michael Kami
“Without a strategy the organization is like a ship without a rudder, going around in circles.”
“Quote”
Joel Ross and Michael Kami

4. Thinking Strategically: The Three Big Strategic Questions
1. Where are we now?
2. Where do we want to go?
Business(es) to be in and market positions to stake out?
Buyer needs and groups to serve?
Outcomes to achieve?
3. How do we get there?

5. The Hows That Define a Firm's Strategy
How to grow the business
How to please customers
How to outcompete rivals
How to respond to changing market conditions
How to manage each functional piece of the business and develop needed organizational capabilities
How to achieve strategic and financial objectives
Strategy is HOW to . . .

6. “Strategic Management”
Terminology
“Strategic Management”
Synonymous with
“Strategic Planning”
Strategic management
Used more often in academia
Strategic planning
Used more often in the business world

7. Terminology Strategic management Strategic planning Refers to:
Strategy formulation
Strategy implementation
Strategy evaluation
Strategic planning

8. Brief History 1950s Term strategic planning originates 1960s – 1970s
Strategic planning very popular
Widely viewed as panacea for problems

9. Brief History 1980s 1990s–till today Strategic planning cast aside
Planning models did not yield higher returns
1990s–till today
Revival of strategic planning
Widely practiced in business world

10. Strategic-Management Process Three Stages
Strategy Formulation
Strategy Implementation
Strategy Evaluation

11. Opportunities & Threats Strengths & Weaknesses Alternative Strategies
Strategy Formulation
Vision & Mission
Opportunities & Threats
Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

12. Strategy Formulation Issues include/ consideration:
What new businesses to enter
What businesses to abandon
How to allocate resources
Enter international markets
Merge or form joint venture

13. Strategy Implementation
Annual Objectives
Policies
Motivate Employees
Resource Allocation

14. Strategy Implementation
Action Stage of strategic management:
Most difficult stage
Mobilizing employees and managers
Consensus on pursuing goals

15. Strategy Evaluation Review Standards Measure Performance
Corrective Action

16. Key Strategic Management Terms (Cont’d)
1. Strategists
2. Vision statements
3. Mission statements
4. External opportunities and threats
5. Internal strengths and weaknesses

17. Key Strategic Management Terms (Cont’d)
6. Long-term objectives
7. Strategies
8. Annual objectives
9. Policies

18. Strategic Management Terms (Cont’d)
Strategists
Usually found in high levels of management (CEO)
Most responsible for success or failure of an organization
Various job titles:
Chief executive officer
President
Owner
Chair of the Board
Executive Director
Entrepreneur

19. Strategic Management Terms (Cont’d)
Vision Statements
Answers the question: “What do we want to become?”
First step in strategic planning
Oftentimes a single sentence
“Our vision is to take care of your vision.”
(Stokes Eye Clinic, Florence, South Carolina)

20. Mission statement
Mission Statement
What is our business?

21. Examples: Mission and Vision Statements
Intel
Our vision: Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intel’s core mission is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being connected is now at the center of people’s computing experience. We are helping to expand the capabilities of the PC platform and the Internet.

22. Strategic Management Terms (Cont’d)
External Opportunities & Threats
Largely beyond the control of a single organization
Significantly benefit or harm the organization in the future
Political
Economic
Social and Cultural
Technological

23. Basic tenet of strategic management
Strategy formulation to:
Take advantage of external opportunities
Avoid or reduce impact of external threats

24. Strategic Management Terms (Cont’d)
Internal Strengths & Weaknesses (Cont’d)
Based on functional analysis of activities in the firm’s:
Controllable activities performed especially well or poorly.
Arise in functional areas of the business:
Management
Marketing
Finance/accounting
Production/operations
Research & development
Computer Information Systems
© 2001 Prentice Hall

25. Strategic Management Terms (Cont’d)
Long-Term Objectives
Results to be achieved in pursuing the organization’s mission. Time frame is beyond one year.
State direction
Aid in evaluation
Focus coordination
Provide basis for effective management

26. Types of Objectives Required
Financial Objectives
Strategic Objectives
Outcomes focused on improving financial performance
Outcomes focused on improving long-term, competitive business position $

27. Examples of Financial Objectives
Grow earnings per share 15% annually
Boost annual return on investment from 15% to 20% within three years
Increase annual dividends per share to stockholders by 5% each year
Maintain a positive cash flow every year

28. Examples of Strategic Objectives
Increase firm’s market share
Overtake key rivals on quality or customer service or product performance
Attain lower overall costs than rivals
Boost firm’s reputation with customers
Attain stronger foothold in international markets
Achieve technological superiority
Become leader in new product introductions

29. Strategic Management Terms (Cont’d)
Strategies
Potential actions that require top management decisions and large amounts of firm’s resources
Mechanisms by which long-term objectives are realized(achieved)
Geographic expansion
Diversification
Product development

30. Strategic Management Terms (Cont’d)
Strategies (cont’d)
Mechanisms by which long-term objectives are realized
Market penetration
Retrenchment
Liquidation

31. Strategic Management Terms (Cont’d)
Annual Objectives
Short-term milestones necessary to achieve long-term objectives.

32. Strategic Management Terms (Cont’d)
Annual Objectives (cont’d)
Stated in terms of accomplishments for:
management
marketing
finance/accounting
production/operations
research and development
information systems accomplishments

33. Strategic Management Terms (Cont’d)
Policies
Important in strategy implementation as the means by which annual objectives will be achieved
Guide to decision making and address repetitive situations

34. Strategic Management Process
External
Environ-
ment
Analysis
Vision
&
Mission
Statements
Long-Term
Goals &
Objectives
Strategy
Formulation
Strategy:
Implementation
Strategy
Evaluation
Corporate Strategies
Internal
Environ-
ment
Analysis
Competitive Strategies
Functional Strategies

35. Figure 1-1: The Five Tasks of Strategic Management
Craft a
Strategy
to Achieve
Objectives
Set
Develop a
Strategic
Vision
and
Mission
Implement
Execute
Improve/
Change
Revise as
Needed
Recycle
as Needed
Task 1
Task 2
Task 3
Task 4
Task 5
Monitor,
Evaluate,
and Take Corrective
Action

36. Benefits of Strategic Management
Allows an organization to be proactive than reactive
Increases commitment
Empowerment by participation
Gives direction to organizational activities
Increases sales, profitability and productivity

37. Benefits of Strategic Management (Cont’d)
Enhanced awareness of external threats
Understanding of competitors’ strategies
Reduced resistance to change
View change as opportunity

38. Why Some Firms Do No Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success

39. Why Some Firms Do No Strategic Planning (Cont’d)
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion

40. Pitfalls to Avoid in Strategic Planning
Failing to communicate to employees
Top management not supportive of process
Failing to use as standard for performance measurement
Failing to involve key personnel
Failing to create collaborative environment
Formality that stifles creativity and flexibility

41. Business Ethics & Strategic Planning
Defined:
Principles of conduct within organizations that guide decision making and behavior
Good business ethics is a prerequisite for good strategic management
Good ethics is just good business!
Strategists responsible for high ethical principles

42. Business Ethics & Strategic Planning (Cont’d)
Business actions always unethical include:
Misleading advertising
Misleading labeling
Environmental harm
Poor product or service safety
Dumping flawed products on foreign markets

43. Nature of Global Competition
Companies conduct business across borders
International or multinational corporations
Parent company
Host country
Strategy implementation more difficult
Cultural differences
Norms, values, work ethics

44. Advantages of International Operations
Reduce unit costs
Low-cost production facilities
Lower labor costs
Competition less intense
Reduced tariffs, lower taxes
Favorable political climate

45. Disadvantages of International Operations
Communication difficulties between parent and subsidiaries
Based on cultural, political, social, language, demographic, and competitive forces
Foreign-based competitors
Strengths underestimated
Weaknesses overestimated