Chapter 1

1. Chapter 1 Basic Concepts of Strategic Management PowerPoint Slides Dr.Vijaya Kumar Skyline College Chapter 1 Wheelen/Hunger

2. Strategic Management Defined: Set of managerial decisions and actions that determines the long-run performance of a firm. Chapter 1 Wheelen/Hunger

3. Business Policy Defined: General management orientation that looks inward for properly integrating the firm’s functional activities. Chapter 1 Wheelen/Hunger

4. Four Phases ofStrategic Management • Basic financial planning • Forecast-based planning • Externally-oriented planning (strategic) • Strategic management Chapter 1 Wheelen/Hunger

5. Strategic Management Highly Rated Benefits: • Clearer sense of strategic vision for the firm • Sharper focus on what is strategically important • Improved understanding of a rapidly changing environment Chapter 1 Wheelen/Hunger

6. 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 year, 2 years, 5 years, 10 years? • What specific actions should management undertake? What are the risks and payoffs involved? Chapter 1 Wheelen/Hunger

7. Challenges to 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 Chapter 1 Wheelen/Hunger

8. Global Issues • European Union(EU) • Economic integration of 15 member countries • North American Free Trade Agreement(NAFTA) • Improved trade among 3 member countries • Mercosur • Free-trade area among Argentina, Brazil, Uruguay, and Paraguay • Association of South East Asian Nations(ASEAN) • Attempting to link members into a borderless economic zone Chapter 1 Wheelen/Hunger

9. E-Commerce 7 Trends: • Internet forcing companies to transform themselves • Market access and branding are changing, causing disintermediation of traditional distribution channels • Balance of power shifting to the consumer • Competition is changing Chapter 1 Wheelen/Hunger

10. 7 Trends (continued) • Pace of business increasing drastically • Internet purchasing corporations out of their traditional boundaries • Knowledge becoming a key asset and source of competitive advantage Chapter 1 Wheelen/Hunger

11. OrganizationalAdaptation How organizations obtain “fit” within their environment: • Theory of population ecology • Institution theory • Strategic choice perspective • Organizational learning theory Chapter 1 Wheelen/Hunger

12. Adaptation to Changing Environmental Conditions Strategic flexibility: • Demands a long-term commitment to the development and nurturing of critical resources • Demands that the firm become a learning organization Chapter 1 Wheelen/Hunger

13. Learning Organizations Defined: An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights. Chapter 1 Wheelen/Hunger

14. Learning Organizations Four Main Activities: • Solving problems systematically • Experimenting with new approaches • Learning from their won experiences and that of others • Transferring knowledge quickly and efficiently throughout the organization Chapter 1 Wheelen/Hunger

15. Strategic Management Model Environmental Evaluation and Control Strategy Strategy Evaluation and Control and Control Scanning Formulation Implementation Mission External Reason for Societal existence Objectives Environment General Forces What results to Strategies Task accomplish Environment by when Plan to Industry Analysis achieve the Policies mission & Internal objectives Broad guidelines for Programs Structure Process decision to monitor Chain of Command making Activities performance needed to Budgets Culture and take accomplish corrective Beliefs, Expectations, a plan Cost of the action Values programs Procedures Resources Sequence Assets, Skills of steps Competencies, needed to Knowledge Performance do the job Feedback/Learning Chapter 1 Wheelen/Hunger

16. Basic Model of Strategic Management Four Basic Elements Chapter 1 Wheelen/Hunger

17. Environmental Scanning Defined: The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the firm. Chapter 1 Wheelen/Hunger

18. Environmental Scanning Chapter 1 Wheelen/Hunger

19. Environmental Scanning Identify strategic factors • SWOT Analysis • Strengths, Weaknesses • Opportunities, Threats • Internal Environment • Strengths & Weaknesses • Within the organization but not subject to short-run control of management • External Environment • Opportunities & Threats • External to the organization but not subject to short-run control of management Chapter 1 Wheelen/Hunger

20. Strategy Formulation Defined: Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses. Chapter 1 Wheelen/Hunger

21. Strategy Formulation Mission Statement • Purpose or reason for the organization’s existence • Promotes shared expectations among employees • Communicates public image important to stakeholders • Who we are, what we do, what we’d like to become Chapter 1 Wheelen/Hunger

22. Strategy Formulation Maytag Corporation Mission Statement To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world. Chapter 1 Wheelen/Hunger

23. Strategy Formulation Objectives • The end results of planned activity • What is to be accomplished • Time in which to accomplish it • Quantified when possible Chapter 1 Wheelen/Hunger

24. Strategy Formulation Goals vs. Objectives A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion. Chapter 1 Wheelen/Hunger

25. Goals & Objectives Corporate goals and objectives include: • Profitability (net profits) • Growth (increase in total assets, etc.) • Utilization of resources (ROE or ROI) • Market leadership (market share) Chapter 1 Wheelen/Hunger

26. Strategies Defined: A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage. Chapter 1 Wheelen/Hunger

27. Strategies 3 Types of Strategy • Corporate strategy • Business strategy • Functional strategy Chapter 1 Wheelen/Hunger

28. Strategies Corporate Strategy • Stability • Growth • Retrenchment Chapter 1 Wheelen/Hunger

29. Strategies Business Strategy • Competitive strategies • Cooperative strategies Chapter 1 Wheelen/Hunger

30. Strategies Functional Strategy • Technological leadership • Technological followership Chapter 1 Wheelen/Hunger

31. Hierarchy of Strategy Corporate Strategy Business (Division Level) Strategy Functional Strategy Chapter 1 Wheelen/Hunger

32. Policies Defined: Broad guidelines for decision making that link the formulation of strategy with its implementation. Chapter 1 Wheelen/Hunger

33. Strategy Implementation Programs Strategy Implementation Budgets Procedures Chapter 1 Wheelen/Hunger

34. Initiation of Strategy • New CEO • External intervention • Threat of change in • ownership • Performance gap • Strategic inflection point Stimulus for change in strategy Triggering event Chapter 1 Wheelen/Hunger

35. Strategic Decision Making Strategic Decisions • Rare • Consequential • Directive Chapter 1 Wheelen/Hunger

36. Strategic Decision Making Mintzberg’s Modes • Entrepreneurial mode • Adaptive mode • Planning mode • Logical incrementalism Chapter 1 Wheelen/Hunger

37. Strategic Decision Making Chapter 1 Wheelen/Hunger

38. Strategic Decision Making Chapter 1 Wheelen/Hunger