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Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -1
Chapter 1
The Nature of Strategic Management
Strategic Management:
Concepts & Cases
13th
Edition
Fred David
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -2
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives
Strategic Management –Defined
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -3
Purpose of Strategic Management
To exploit and create new and different
opportunities for tomorrow
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -4
Strategic Management
In essence, the strategic plan is a
company’s game plan
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -5
3 Stages of the Strategic
Management Process
 Strategy formulation
 Strategy implementation
 Strategy evaluation
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -6
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -7
Issues in Strategy
Formulation
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -8
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -9
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
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -10
Issues in Strategy
Implementation
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -11
Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -12
Peter Drucker: Think through the
overall mission of a business. Ask
the key question:
“What is our Business?”
Prime Task of
Strategic Management
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -13
The strategic management process
attempts to organize quantitative and
qualitative information under conditions of
uncertainty
Integrating Intuition & Analysis
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -14
Intuition is based on:
 Past experiences
 Judgment
 Feelings
Integrating Intuition & Analysis
Intuition is useful for decision making in
conditions of:
 Great uncertainty
 Little precedent
 Highly interrelated variables
 Several plausible alternatives
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -15
Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -16
Organizations should continually
monitor internal and external
events and trends so that timely
changes can be made as needed
Adapting to Change
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -17
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
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -18
Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -19
1. Continually adapting to changes in
external trends and events and internal
capabilities, competencies, and resources
Achieving Sustained Competitive
Advantage
2. Effectively formulating, implementing, and
evaluating strategies that capitalize on those
factors
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -20
Strategists
Gather Information
Analyze Information
Organize Information
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -21
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -22
External Opportunities and Threats
Analysis of Trends
 Economic
 Social
 Cultural
 Demographic/Environmental
 Political, Legal, Governmental
 Technological
 Competitors
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -23
Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats
Avoid/minimize impact of
External Threats
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -24
 Controllable activities performed
especially well or poorly
 Determined relative to competitors
Internal Strengths and Weaknesses
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -25
 Typically located in functional areas of the firm
 Management
 Marketing
 Finance/Accounting
 Production/Operations
 Research & Development
 Management Information Systems
Internal Strengths and Weaknesses
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -26
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -27
 Specific results that an organization
seeks to achieve in pursuing its basic
mission
 Long-term means more than one year
Long-Term Objectives
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -28
Long-Term Objectives
 Essential for ensuring the firm’s success
 Provide direction
 Aid in evaluation
 Create synergy
 Reveal priorities
 Focus coordination
 Provide basis for planning, organizing,
motivating, and controlling
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -29
Means by which long-term objectives
are achieved
Strategies
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -30
Strategies
 Examples
 Geographic expansion
 Diversification
 Acquisition
 Product development
 Market penetration
 Retrenchment
 Divestiture
 Liquidation
 Joint venture
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -31
Sample Strategies
 Table 1-1
 Best Buy
 Levi Strauss
 New York Times Company
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -32
Short-term milestones that firms must
achieve to reach long-term objectives
Annual Objectives
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -33
Means by which annual objectives will
be achieved
Policies
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -34
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -35
 Strategic Management Process
Dynamic & continuous
More formal in larger
organizations
Strategic Management Model
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -36
Strategic Management
 Communication is a key to
successful strategic management
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -37
Benefits of Strategic Management
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -38
Benefits of Strategic Management
 Nonfinancial Benefits
 Enhanced awareness of threats
 Improved understanding of competitors’ strategies
 Increased employee productivity
 Reduced resistance to change
 Clearer understanding of performance-reward
relationship
 Enhanced problem-prevention capabilities
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -39
Why Some Firms Do No Strategic
Planning
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -40
Why Some Firms Do No Strategic
Planning (continued)
 Fear of failure
 Overconfidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -41
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate,
and complex process that takes an
organization into uncharted territory
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -42
Effective Strategic Planning is:
 A people process more than a paper process
 A learning process
 Words supported by numbers
 Simple and nonroutine
 Varying assignments, team membership,
meeting formats, and planning calendars
 Challenging assumptions underlying
corporate strategy
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -43
Effective Strategic Planning
continued
 Welcomes bad news
 Requires open-mindedness and a spirit of
inquiry
 Is not a bureaucratic mechanism
 Is not ritualistic or stilted
 Is not too formal, predictable, or rigid
 Does not contain jargon or arcane language
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -44
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
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -45
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.
Publishing as Prentice Hall
Ch 1 -46
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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David sm13 ppt_01

  • 1. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -1 Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13th Edition Fred David
  • 2. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -2 Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives Strategic Management –Defined
  • 3. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -3 Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow
  • 4. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -4 Strategic Management In essence, the strategic plan is a company’s game plan
  • 5. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -5 3 Stages of the Strategic Management Process  Strategy formulation  Strategy implementation  Strategy evaluation
  • 6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -6 Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection
  • 7. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -7 Issues in Strategy Formulation Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover
  • 8. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -8 Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation
  • 9. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -9 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
  • 10. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -10 Issues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical
  • 11. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -11 Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action
  • 12. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -12 Peter Drucker: Think through the overall mission of a business. Ask the key question: “What is our Business?” Prime Task of Strategic Management
  • 13. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -13 The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Integrating Intuition & Analysis
  • 14. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -14 Intuition is based on:  Past experiences  Judgment  Feelings Integrating Intuition & Analysis Intuition is useful for decision making in conditions of:  Great uncertainty  Little precedent  Highly interrelated variables  Several plausible alternatives
  • 15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -15 Involve management at all levels Intuition & Judgment Influence all analyses Integrating Intuition & Analysis
  • 16. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -16 Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Adapting to Change
  • 17. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -17 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
  • 18. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -18 Anything that a firm does especially well compared to rival firms Strategic Management is Gaining and Maintaining Competitive Advantage
  • 19. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -19 1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources Achieving Sustained Competitive Advantage 2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors
  • 20. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -20 Strategists Gather Information Analyze Information Organize Information
  • 21. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -21 Vision Statement – What do we want to become? Mission Statement – What is our business? Vision and Mission Statements
  • 22. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -22 External Opportunities and Threats Analysis of Trends  Economic  Social  Cultural  Demographic/Environmental  Political, Legal, Governmental  Technological  Competitors
  • 23. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -23 Basic Tenet of Strategic Management External Opportunities and Threats Strategy Formulation Take advantage of External Opportunities Take advantage of External Opportunities Avoid/minimize impact of External Threats Avoid/minimize impact of External Threats
  • 24. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -24  Controllable activities performed especially well or poorly  Determined relative to competitors Internal Strengths and Weaknesses
  • 25. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -25  Typically located in functional areas of the firm  Management  Marketing  Finance/Accounting  Production/Operations  Research & Development  Management Information Systems Internal Strengths and Weaknesses
  • 26. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -26 Assessing the Internal Environment Internal Strengths and Weaknesses Internal Factors Performance Measures Ratios Industry Averages Survey Data
  • 27. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -27  Specific results that an organization seeks to achieve in pursuing its basic mission  Long-term means more than one year Long-Term Objectives
  • 28. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -28 Long-Term Objectives  Essential for ensuring the firm’s success  Provide direction  Aid in evaluation  Create synergy  Reveal priorities  Focus coordination  Provide basis for planning, organizing, motivating, and controlling
  • 29. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -29 Means by which long-term objectives are achieved Strategies
  • 30. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -30 Strategies  Examples  Geographic expansion  Diversification  Acquisition  Product development  Market penetration  Retrenchment  Divestiture  Liquidation  Joint venture
  • 31. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -31 Sample Strategies  Table 1-1  Best Buy  Levi Strauss  New York Times Company
  • 32. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -32 Short-term milestones that firms must achieve to reach long-term objectives Annual Objectives
  • 33. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -33 Means by which annual objectives will be achieved Policies
  • 34. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -34
  • 35. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -35  Strategic Management Process Dynamic & continuous More formal in larger organizations Strategic Management Model
  • 36. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -36 Strategic Management  Communication is a key to successful strategic management
  • 37. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -37 Benefits of Strategic Management
  • 38. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -38 Benefits of Strategic Management  Nonfinancial Benefits  Enhanced awareness of threats  Improved understanding of competitors’ strategies  Increased employee productivity  Reduced resistance to change  Clearer understanding of performance-reward relationship  Enhanced problem-prevention capabilities
  • 39. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -39 Why Some Firms Do No Strategic Planning  Lack of knowledge of strategic planning  Poor reward structures  Fire fighting  Waste of time  Too expensive  Laziness  Content with success
  • 40. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -40 Why Some Firms Do No Strategic Planning (continued)  Fear of failure  Overconfidence  Prior bad experience  Self-interest  Fear of the unknown  Honest difference of opinion  Suspicion
  • 41. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -41 Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory
  • 42. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -42 Effective Strategic Planning is:  A people process more than a paper process  A learning process  Words supported by numbers  Simple and nonroutine  Varying assignments, team membership, meeting formats, and planning calendars  Challenging assumptions underlying corporate strategy
  • 43. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -43 Effective Strategic Planning continued  Welcomes bad news  Requires open-mindedness and a spirit of inquiry  Is not a bureaucratic mechanism  Is not ritualistic or stilted  Is not too formal, predictable, or rigid  Does not contain jargon or arcane language
  • 44. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -44 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
  • 45. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -45 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
  • 46. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -46 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.