chap01
TRANSCRIPT
Ch 1 -1
Overview of Strategic Management
Strategic Management: Concepts & Cases
12th Edition
Fred David
What is Strategic Management Once two competing company presidents
went on a camping trip to discuss a possible merger. Suddenly there came a dangerous grizzly bear. The first president took off his backpack and quickly wore his jogging shoes. The second president said, “ Hey! You can’t outrun that bear.” The first president said, “May be I can’t outrun the bear, but I surely can outrun you!”
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The story captures the notion of strategic management, Which is to achieve and maintain “Competitive Advantage”.
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What is Strategic Management
Ch 1 -4
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
Strategic Management – Defined
Ch 1 -5
Strategic Management achieves a firm’s success through integration ––
Management
MIS
Production/OperationsFinance/Accounting
Marketing
Research & Development
Ch 1 -6
Purpose of Strategic Management
To exploit and create new and different opportunities for tomorrow
Fred R. DavidPrentice Hall
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Three Stage Process
Ch 1 -8
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch 1 -9
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -10
Strategy Implementation Steps Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to
organizational performance
Ch 1 -11
Strategy Implementation
Action Stage of Strategic Management –
Most difficult stage
Mobilization of employees & managers
Interpersonal skills critical
Consensus on goal pursuit
Action Stage of Strategic Management –
Most difficult stage
Mobilization of employees & managers
Interpersonal skills critical
Consensus on goal pursuit
Ch 1 -12
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Actions
Ch 1 -13
Strategy Evaluation
Final Stage of Strategic Management
Subject to future modificationToday’s success no guarantee of future successNew & different problemsComplacency leads to demise
Final Stage of Strategic Management
Subject to future modificationToday’s success no guarantee of future successNew & different problemsComplacency leads to demise
Ch 1 -14
Strategic Management is:
An objective, logical, systematic and analytical approach for making major decisions.
The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Yet it is not a pure science that lends itself to a one two three approach.
Integrating Intuition and Analysis
Ch 1 -15
Intuition:
An insight or understanding of a phenomenon without conscious reasoning.
The act or faculty of knowing or sensing without the use of evident rational processes.
Integrating Intuition and Analysis
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Where does intuition come from?
ConsciousSubconsciousUnconscious
We think of intuition as a magical phenomenon—but intuition is formed out of our past experiences and knowledge.
Integrating Intuition and Analysis
Intuition is useful for decision making in: Conditions of great uncertainty Conditions with little precedent
Ch 1 -17
Integrating Intuition & Analysis
“I believe in intuition and inspiration. At times I feel certain that I am right while not knowing the reason. Sometimes, imagination is more important than knowledge, because knowledge is limited, whereas imagination embraces the entire world.”
Albert Einstein
Integrating Intuition & Analysis Excessive reliance on facts limits us. Too much reliance on intuition kills the
business.
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Analytical Thinking
Intuitive Thinking
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Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed
Adapting to Change
Ch 1 -20
Key Terms in Strategic Management Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies
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“Anything that a firm does especially well compared to rival firms”
Strategic Management is Gaining and Maintaining Competitive Advantage
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1. Adapting to change in external trends, internal capabilities and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing & evaluating strategies
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Rate & magnitude of change increasing dramatically
Adapting to Change
E-commerce
Demographics
Technology
Ch 1 -24
What kind of business should we become?
Are we in the right fields? Are there new competitors? What strategies should we
pursue? How are our customers
changing?
Adapting to Change – Key Strategic Management Questions
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Various Job Titles:•Chief Executive Officer(CEO)•Chief Strategy Officer (CSO)•President•Board Chair•Executive Director
Strategists –
Strategists
Gather Information
Analyze Information
Organize Information
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Vision Statement –What do we want to become?
Mission Statement –What is our business?
Key Terms
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Largely beyond the control of a single organization
Key Terms
Opportunities and Threats (External)
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Opportunities & Threats (External)
Key Terms
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
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Process of conducting research and gathering and assimilating external information
Key Terms Opportunities & Threats
Environmental Scanning (Industry Analysis)
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Basic Tenet of Strategic Management
Key Terms Opportunities & Threats
Strategy Formulation
Take advantage of External Opportunities
Take advantage of External Opportunities
Avoid/minimize impact ofExternal Threats
Avoid/minimize impact ofExternal Threats
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Controllable activities performed especially well or poorly
Key Terms
Strengths & Weaknesses (Internal)
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Strengths & Weaknesses (Internal)
Key Terms
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
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Assessing the Internal Environment
Key Terms Strengths & Weaknesses
Internal Factors
Performance Metrics
Financial Ratios
Industry Averages
Survey Data
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Mission-driven pursuit of specified results more than one year out
Key Terms
Long-term Objectives
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Long-term Objectives
Key Terms
Essential for ensuring the firm’s success
• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and controlling
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Means by which long-term objectives are achieved
Key Terms
Strategies
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Strategies
Key Terms
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Retrenchment
• Liquidation
• Joint venture
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Short-term milestones that firms must achieve to attain long-term objectives
Key Terms
Annual Objectives
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Means by which annual objectives will be achieved
Key Terms
Policies
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ExternalAudit
Chapter 3
InternalAudit
Chapter 4
Long-TermObjectives
Chapter 5
Generate,Evaluate,
SelectStrategies
Chapter 6
ImplementStrategies:
Mgmt Issues
Chapter 7
ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8
Measure &Evaluate
Performance
Chapter 9
Vision &
Mission
Chapter 2
Comprehensive strategic management model
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Dynamic & Continuous More formal in larger organizations
Strategic Management Model
Strategic Management Process
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1. Identify Existing --
Strategic Management Model
• Vision
• Mission
• Objectives
• Strategies
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2. Audit external environment3. Audit internal environment4. Establish long-term objectives5. Generate, evaluate & select
strategies6. Implement selected strategies7. Measure & evaluate performance
Strategic Management Model
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Benefits of Strategic Management
• Proactive in shaping firm’s future
• Initiate and influence firm’s activities
• Formulate better strategies
•Systematic, logical, rational
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Benefits of Strategic Management
Financial Benefits
• Improvement in sales
• Improvement in profitability
• Productivity improvement
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Benefits of Strategic Management
Non-Financial Benefits
• Improved understanding of competitors strategies
• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
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Benefits of Strategic Management (Greenley)
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
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Benefits of Strategic Management (Greenley – cont’d)
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
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Benefits of Strategic Management (Greenley – cont’d)
11. Encourages favorable attitude toward change
12. Provides discipline and formality to the management of the business
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Why Some Firms Do No Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
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Why Some Firms Do No Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
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Ch 1 -52
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory
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Ch 1 -53
Effective Strategic Planning is: A people process more than a paper process A learning process Simple and nonroutine Varying assignments, team membership,
meeting formats, and planning calendars
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Ch 1 -54
Effective Strategic Planning continued Welcomes bad news Requires open-mindedness and a spirit of
inquiry Is not a bureaucratic mechanism Is not too formal, predictable, or rigid Does not contain jargon or arcane language
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Ch 1 -55
Effective Strategic Planning continued Is not a formal system for control Does not disregard qualitative information Is not controlled by “technicians” Does not pursue too many strategies at once Continually strengthens the “good ethics is
good business” policy
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Ch 1 -56
Comparing Business and Military Strategy Strategic planning started in the military Similarity
Both business and military organizations must adapt to change and constantly improve
Difference Business strategy assumes competition Military strategy assumes conflict