David PPT Exp Ch01

5/19/2018 David PPT Exp Ch01

1/63Copyright 2007 Prentice Hall Ch 1 -1

Chapter 1

The Nature of Strategic Management

Strategic Management:

Concepts & Cases

11thEdition

Fred David


2/63Copyright 2007 Prentice Hall Ch 1 -2

Themes in the Text

Global Considerat ions

impact virtually all strategic decisions

E-commercevital strategic management tool

Natural env ironmentimportant strategic issue


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Copyright 2007 Prentice Hall Ch 1 -3

Art & science of formulat ing,

implement ing, and evaluat ing,cross-functional decisions that

enable an organization to achieve its

objectives

Strategic Management

Defined


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In essence, the strategic p lanis a

companys game plan


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achieves a firms success

through integration

Management

MIS

Production/OperationsFinance/Accounting

Marketing

Research & Development


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Copyright 2007 Prentice HallCh 1 -6

Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection


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Issues in Strategy

Formulation

New business

opportunities

Businesses to abandon

Allocation of resources

Expansion ordiversification

International markets

Mergers or joint ventures

Avoidance of hostile

takeover


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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation


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Strategy

Implementation

Action Stage of Strategic

Management

Most difficult stage

Mobilization ofemployees & managers

Interpersonal skills

critical

Consensus on goal

pursuit


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Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions


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Strategy

Evaluation

Final Stage of Strategic

Management

Subject to future

modification

Todays success no

guarantee of future success

New & different problems

Complacency leads to

demise


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Peter Drucker: -- Think through the

overall mission of a business. Askthe key question: What is our

Business?

Prime Task of



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The strategic management processattempts to organize quantitative and

qualitative information under conditions of

uncertainty

Integrating Intui t ionand

Analys is


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Intuition is based on:

Past experiences

Judgment

Feelings

Integrating Intui t ionand

Analys is

Intuition isuseful for decision making in:

Conditions of great uncertainty

Conditions with little precedent


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Involve Management at all levels

Intuition & Judgment

Influence all Analyses

Integrating Intui t ion&

Analys is


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Analytical Thinking

Integrating Intui t ion&

Analys is

Intuitive Thinking


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Organizations must monitor

events On-going process

Internal and external events

Timely changes

Adapting to Change


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Anything that a firm does especially

well compared to rival firms

Strategic Management is

Gaining and Maintaining

Compet it ive Advantage


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1. Adapting to change in external trends,internal capabilities and resources

Achieving Sustained

Compet it ive Advantage

2. Effectively formulating, implementing &evaluating strategies


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Rate & magnitude of changeincreasing dramatically

Adapting to Change

E-commerce

Demographics

Technology


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Effective Adaptation

Adapting to Change

Requires long-term focus


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What k ind of bus iness shou ldwe become?

Are we in the r igh t f ields Are there new competi tors?

What strategies should wepursue?

How are ou r custom erschanging?

Adapting to ChangeKey


Questions


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Key Terms

Various Job Titles:

Chief Executive Officer (CEO)

Chief Strategy Officer (CSO)

President

OwnerBoard Chair

Executive Director

StrategistsFirms success/failure


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Vision Statement

What do we want to become?

Mission Statement

What is our bus iness?

Key Terms


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Largely beyond the control of a singleorganization

Key Terms

Opportunities and Threats (External)


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Opportun it ies & 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 andgathering and assimilating externalinformation

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 ofExternal Opportunities

Avoid/minimize impact of

External Threats


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Controllable activities performed especiallywell or poorly

Key Terms

Strengths & Weaknesses (Internal)


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Strength s & Weaknesses (In ternal)

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 resultsmore than one year out

Key Terms

Long-term Objectives


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Long -term Object ives

Key Terms

Essential for ensuring the firms success

Provide direction

Aid in evaluation

Create synergy

Focus coordination

Basis for planning, motivating, andcontrolling


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Means by which long-term objectives areachieved

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 mustachieve to attain long-term objectives

Key Terms

Annual Objectives


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Copyright 2007 Prentice Hall

Ch 1 -38

Means by which annual objectives will beachieved

Key Terms

Policies


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Ch 1 -39

Example Strategies in Action in 2005


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Ch 1 -40

Example Strategies in Action in 2005


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Ch 1 -41

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, CIS

Chapter 8

Measure &Evaluate

Performance

Chapter 9

Vision&

Mission

Chapter 2

Comprehensive strategic management model


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Ch 1 -42

Dynamic & Continuous

More formal in larger organizations

Strategic Management Model

Strategic Management Process


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Ch 1 -43

1. Identify Existing --


Vision

Mission

Objectives

Strategies


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Ch 1 -44

2. Audit external environment

3. Audit internal environment

4. Establish long-term objectives

5. Generate, evaluate & selectstrategies

6. Implement selected strategies

7. Measure & evaluate performance



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Ch 1 -45

Benefits of Strategic

Management

Proactive in shaping firms future

Initiate and influence firms activitiesFormulate better strategies

Systematic, logical, rational


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Ch 1 -46


Management

Financial Benefits

Improvement in sales

Improvement in profitability

Productivity improvement


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Ch 1 -47


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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Ch 1 -48


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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Ch 1 -49


Management (Greenleycontd)

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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Ch 1 -50


Management (Greenleycontd)

11. Encourages favorable attitude toward

change

12. Provides discipline and formality to the

management of the business


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Ch 1 -51

Why Some Firms Do No

Strategic Planning

Poor reward structures

Fire-fighting

Waste of time

Too expensive

LazinessContent with success


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Ch 1 -52

Why Some Firms Do No

Strategic Planning

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknownSuspicion


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Ch 1 -53

Principles of conduct within organizationsthat guide decision making and behavior

Business Ethics & Strategic

Management

Business Ethics defined


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Ch 1 -54

Prerequisite for good strategic management


Management

Good business ethics


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Ch 1 -55

Provides basis on which policies can bedevised to guide daily behavior anddecisions in the workplace


Management

Code of business ethics


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Ch 1 -56

Misleading advertising

Misleading labeling

Harm to the environment

Insider trading

Dumping flawed products on foreign markets Poor product or service safety

Padding expense accounts


Management

Business practices always considered unethical


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Ch 1 -57

ISO 9000 focuses on quality control

> 1.5 million companies incorporate ISO

Natural Environment

Perspective

ISO used to gain strategic advantage


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Ch 1 -58

Voluntary standards

ISO 14001 standard for EnvironmentalManagement System

Firms minimize harmful effects onenvironment

Natural Environment

Perspective

ISO 14000 standards


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Ch 1 -59

Parent company

Host country

The Nature of Global

Competition

International/multinational corporations


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Ch 1 -60

Cultural differences Norms

Values

Work ethic

The Nature of Global

Competition

Strategy implementation may be difficult


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Ch 1 -61

Advantages of International

Operations

Absorb excess capacity

Reduce unit costsSpread risk over wider markets

Low-cost production facilities


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Ch 1 -62

Advantages of International

Operations (contd)

Less intense competition

Lower taxes

Economies of scale


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Ch 1 63

Disadvantages of International

Operations

Difficult communications

Underestimate foreign competition

Cultural barriers to effective management

Complications arising from currencydifferences

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