1. Chapter 1 The Strategic Management Process

2. Overview Why do some firms succeed while others fail?
A central objective of strategic management is to learn why this happens.
What is strategy?
An action a company takes to attain superior performance.
What is the strategic management process?
The process by which managers choose a set of strategies for the enterprise to pursue its vision.

3. Strategic Planning Rational planning by top management?
Basic Strategic Planning Model
Defining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and Threats
Internal Analysis of Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Chosen Strategies 4

4. The Main Components of the Strategic Planning Process
FIGURE 1.1

5. Mission and Goals Mission Major goals Secondary goals
Sets out why the organization exists and what it should be doing.
Major goals
Specify what the organization hopes to fulfill in the medium to long term.
Secondary goals
Are objectives to be attained that lead to superior performance.

6. External Analysis
Identify strategic opportunities and threats in the operating environment.
Immediate (Industry)
Macroenvironment
National

7. Internal Analysis Identify strengths Identify weaknesses
Quality and quantity of resources available
Distinctive competencies
Identify weaknesses
Inadequate resources
Managerial and organizational deficiencies

8. SWOT and Strategic Choice
Strengths and Weaknesses
Opportunities and Threats (SWOT Analysis)
Strategic Choice Business Functional Global Corporate

9. Business-Level Strategies
Cost leadership
Attaining, then using the lowest total cost basis as a competitive advantage.
Differentiation
Using product features or services to distinguish the firm’s offerings from its competitors.
Market niche focus
Concentrating competitively on a specific market segment.

10. Functional-Level Strategies
Focus is on improving the effectiveness of operations within a company.
Manufacturing
Marketing
Materials management
Research and development
Human resources

11. Global-Level Strategies
Multidomestic
International
Global
Transnational

12. Corporate-Level Strategies
Vertical integration
Diversification
Strategic alliances
Acquisitions
New ventures
Business portfolio restructuring

13. Strategy Implementation
Structure
Designing organizational structure
Designing control systems
Market and output controls
Bureaucratic controls
Control through organizational culture
Rewards and incentives
Matching strategy, structure, and controls
Congruence (fit) among strategy, structure, and controls
Controls
Strategy

14. Managing Strategic Change
The only constant is change.
Success requires adapting strategy and structure to a changing world.
The feedback loop in strategic planning.
Corporate
Functional
Business
Operational

15. Strategic Managers General managers Operations managers
Responsible for the overall (strategic) performance and health of the total organization.
Operations managers
Responsible for specific business functions or operations. 26

16. Strategic Managers for All Levels
FIGURE 1.2

17. Strategic Leadership Vision, eloquence, and consistency
Commitment to the vision
Being well informed
Willingness to delegate and empower
Astute use of power
Emotional intelligence 28

18. Strategy as an Emergent Process
Strategy making in an unpredictable world
Creates the necessity for flexible strategic approaches.
Strategy making by lower-level managers
Strategy evolves through autonomous action.
Serendipity and strategy
Accidental discoveries and happenstances can have dramatic effects on strategic direction.
Intended and emergent strategies
Realized strategies are combinations of intended and emergent strategies. 29

19. Intended and Emergent Strategies
FIGURE 1.3
Source: Reprinted from “Strategy Formation in an Adhocracy,” by Henry Mintzberg and Alexandra McGugh, published in Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by permission of Administrative Science Quarterly.

20. The Strategic Management Process for Intended and Emergent Strategies
FIGURE 1.4

21. Strategic Planning in Practice
Planning under uncertainty
Scenario planning for dynamic environmental change
Ivory tower planning
Lack of contact with operational realities
The importance of involving operating managers
Procedural justice in the decision-making process
Engagement, explanation, and expectations
Planning for the present: Strategic Intent
Recognition of the static nature of the strategic fit model
Strategic intent in focusing the organization on winning by achieving stretch goals 33

22. Improving Strategic Decision Making
Cognitive biases systematically influence the rationality of decision makers.
FIGURE 1.5

23. Groupthink and Strategic Decisions
Pitfalls of groupthink
Failing to question underlying assumptions.
Coalescing around a single person or policy.
Filtering out conflicting information.
Developing after-the-fact rationalizations.
Having an emotional (nonobjective) commitment to an action. 34

24. Techniques for Improving Decision Making
Two decision- making processes that counteract cognitive biases and groupthink.
FIGURE 1.6