1. Overview of Strategic Management
Strategic Management:
Concepts & Cases
12th Edition
Fred David
Ch 1 -1

2. 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!”
Ch 1 -2
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3. What is Strategic Management
 The story captures the notion of strategic
management, Which is to achieve and
maintain “Competitive Advantage”.
Ch 1 -3
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4. Strategic Management –
Defined
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives
Ch 1 -4

5. Strategic Management
achieves a firm’s success
through integration ––
Management Marketing
Finance/Accounting Production/Operations
Research & Development MIS
Ch 1 -5

6. Purpose of Strategic Management
To exploit and create new and different
opportunities for tomorrow
Ch 1 -6

7. Three Stage Process
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Fred R. David
Prentice Hall

8. Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Ch 1 -8

9. Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Ch 1 -9

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 -10

11. Strategy
Implementation
Action Stage of Strategic
Action Stage of Strategic
Management –
Management –
Most difficult stage
Most difficult stage
Mobilization of employees
Mobilization of employees
& managers
& managers
Interpersonal skills critical
Interpersonal skills critical
Consensus on goal pursuit
Consensus on goal pursuit
Ch 1 -11

12. Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Actions
Ch 1 -12

13. Strategy
Evaluation
Final Stage of Strategic
Final Stage of Strategic
Management
Management
Subject to future modification
Subject to future modification
Today’s success no
Today’s success no
guarantee of future success
guarantee of future success
New & different problems
New & different problems
Complacency leads to demise
Complacency leads to demise
Ch 1 -13

14. Integrating Intuition and Analysis
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.
Ch 1 -14

15. Integrating Intuition and Analysis
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.
Ch 1 -15

16. Integrating Intuition and Analysis
Where does intuition come from?
Conscious
Subconscious
Unconscious
We think of intuition as a magical phenomenon—but
intuition is formed out of our past experiences and
knowledge.
Intuition is useful for decision making in:
 Conditions of great uncertainty
 Conditions with little precedent
Ch 1 -16

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
Ch 1 -17

18. Integrating Intuition & Analysis
 Excessive reliance on facts limits us.
 Too much reliance on intuition kills the
business.
Analytical Thinking
Intuitive Thinking
Ch 1 -18
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19. Adapting to Change
Organizations should continually
monitor internal and external
events and trends so that timely
changes can be made as needed
Ch 1 -19
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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
Ch 1 -20

21. Strategic Management is
Gaining and Maintaining
Competitive Advantage
“Anything that a firm does especially
well compared to rival firms”
Ch 1 -21
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22. Achieving Sustained
Competitive Advantage
1. Adapting to change in external trends,
internal capabilities and resources
2. Effectively formulating, implementing &
evaluating strategies
Ch 1 -22
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23. Adapting to Change
Rate & magnitude of change
increasing dramatically
E-commerce
Demographics
Technology
Ch 1 -23
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24. Adapting to Change – Key
Strategic Management
Questions
 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?
Ch 1 -24

25. Strategists –
Strategists
Gather Information
Analyze Information
Organize Information
Various Job Titles:
•Chief Executive Officer(CEO)
•Chief Strategy Officer (CSO)
•President
•Board Chair
•Executive Director
Ch 1 -25
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26. Key Terms
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Ch 1 -26
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27. Key Terms
Opportunities and Threats (External)
 Largely beyond the control of a single
organization
Ch 1 -27
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28. Key Terms
Opportunities & Threats (External)
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
Ch 1 -28
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29. Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)
 Process of conducting research and
gathering and assimilating external
information
Ch 1 -29
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30. Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take advantage of
Take advantage of
External Opportunities
External Opportunities
Strategy Formulation
Avoid/minimize impact of
Avoid/minimize impact of
External Threats
External Threats
Ch 1 -30
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31. Key Terms
Strengths & Weaknesses (Internal)
 Controllable activities performed especially
well or poorly
Ch 1 -31
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32. Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
Ch 1 -32
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33. Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios
Performance Metrics
Internal Factors
Industry Averages
Survey Data
Ch 1 -33
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34. Key Terms
Long-term Objectives
 Mission-driven pursuit of specified results
more than one year out
Ch 1 -34
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35. Key Terms
Long-term Objectives
Essential for ensuring the firm’s success
• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and
controlling
Ch 1 -35
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36. Key Terms
Strategies
 Means by which long-term objectives are
achieved
Ch 1 -36
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37. Key Terms
Strategies
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Retrenchment
• Liquidation
• Joint venture
Ch 1 -37
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38. Key Terms
Annual Objectives
 Short-term milestones that firms must
achieve to attain long-term objectives
Ch 1 -38
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39. Key Terms
Policies
 Means by which annual objectives will be
achieved
Ch 1 -39
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40. Comprehensive strategic management model
External
Audit
Chapter 3
Long-Term Generate, Implement Implement Measure &
Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9
Internal
Audit
Chapter 4
Ch 1 -40
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41. Strategic Management Model
Strategic Management Process
 Dynamic & Continuous
 More formal in larger organizations
Ch 1 -41
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42. Strategic Management Model
1. Identify Existing --
• Vision
• Mission
• Objectives
• Strategies
Ch 1 -42
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43. Strategic Management Model
2. Audit external environment
3. Audit internal environment
4. Establish long-term objectives
5. Generate, evaluate & select
strategies
6. Implement selected strategies
7. Measure & evaluate performance
Ch 1 -43
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44. Benefits of Strategic
Management
• Proactive in shaping firm’s future
• Initiate and influence firm’s activities
• Formulate better strategies
•Systematic, logical, rational
Ch 1 -44
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45. Benefits of Strategic
Management
Financial Benefits
• Improvement in sales
• Improvement in profitability
• Productivity improvement
Ch 1 -45
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46. Benefits of Strategic
Management
Non-Financial Benefits
• Improved understanding of competitors strategies
• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
Ch 1 -46
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47. 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
Ch 1 -47
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48. 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
Ch 1 -48
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49. Benefits of Strategic
Management (Greenley – cont’d)
11. Encourages favorable attitude toward
change
12. Provides
discipline and formality to the
management of the business
Ch 1 -49
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50. Why Some Firms Do No
Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
Ch 1 -50
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51. Why Some Firms Do No
Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
Ch 1 -51
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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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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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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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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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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
Copyright © 2011 Pearson Education, Inc. Ch 1 -56
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