Chapter 1
The Nature of Strategic Management
Dr. Firend Rasheed
Strategy Defined
Strategy is an action take to
generate a desire reaction
(achieving goal/objective) that
benefit the business, stakeholders,
employees, a group of people or
one person, or the environment.
Von Clausewitz view of strategy
Strategy was not a formula. Detailed planning
always failed due to chance events, imperfections
in execution, and the leadership of the opposition.
Strategy was the art of the broken-field runner;
strategy was not a lengthy plan, but an idea that
evolved through changing circumstances.
Strategy involved the instinctive savvy of the best
generals.
Strategic Management
Defined
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve
its objectives.
Strategic Management
In essence, the strategic plan is a
companys game plan
Strategic Management
achieves a firms success
through integration
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
MIS
Copyright 2007 Prentice
Hall
Ch 1 -6
Issues in Strategy
Formulation
New business
opportunities
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint ventures
Avoidance of hostile
takeover
Copyright 2007 Prentice
Hall
Ch 1 -7
Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
Strategy
Implementation
Action Stage of Strategic
Management
Most difficult stage
Mobilization of
employees & managers
Interpersonal skills
critical
Consensus on goal
pursuit
Copyright 2007 Prentice
Hall
Ch 1 -11
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
Copyright 2007 Prentice
Hall
Ch 1 -12
Prime Task of
Strategic Management
Peter Drucker: -- Think through the
overall mission of a business. Ask
the key question: What is our
Business?
Copyright 2007 Prentice
Hall
Ch 1 -13
Integrating Intuition and
Analysis
The strategic management process
attempts to organize quantitative and
qualitative information under conditions
of uncertainty
Copyright 2007 Prentice
Hall
Ch 1 -14
Integrating Intuition and
Analysis
Intuition is based on:
Past experiences
Judgment
Feelings
Intuition is useful for decision making in:
Conditions of great uncertainty
Conditions with little precedent
Copyright 2007 Prentice
Hall
Ch 1 -15
Integrating Intuition &
Analysis
Intuition & Judgment
Involve Management at all levels
Influence all Analyses
Copyright 2007 Prentice
Hall
Ch 1 -16
Key Terms
Vision Statement
What do we want to become?
Mission Statement
What is our business?
Why we exist???
Opportunities & Threats (External)
Largely beyond the control of a
single organization
Analysis of Trends:
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
Strengths & Weaknesses (Internal)
Environmental Scanning (Industry Analysis)
Process of conducting research and gathering and
assimilating external information
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Computer Information Systems
Strategy
is about the search for competitive
advantage
Strategies
Means (Actions/Tactics) by which longterm objectives are achieved
Key Terms
Strengths & Weaknesses (Internal)
Controllable activities performed especially
well or poorly
Copyright 2007 Prentice
Hall
Ch 1 -21
Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios
Performance Metrics
Internal Factors
Industry Averages
Survey Data
Copyright 2007 Prentice
Hall
Ch 1 -22
Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation
Avoid/minimize impact of
External Threats
Copyright 2007 Prentice
Hall
Ch 1 -23
Key Terms
Long-term Objectives
Mission-driven pursuit of specified results
more than one year out
Copyright 2007 Prentice
Hall
Ch 1 -24
Key Terms
Long-term Objectives
Essential for ensuring the firms success
Provide direction
Aid in evaluation
Create synergy
Focus coordination
Basis for planning, motivating, and
controlling
Copyright 2007 Prentice
Hall
Ch 1 -25
Comprehensive strategic management
model
External
Audit
Chapter 3
Vision
&
Mission
Chapter 2
Long-Term
Objectives
Generate,
Evaluate,
Select
Strategies
Implement
Strategies:
Mgmt Issues
Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS
Measure &
Evaluate
Performance
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Internal
Audit
Chapter 4
Benefits of Strategic
Management
Financial Benefits
Improvement in sales
Improvement in profitability
Productivity improvement
Benefits of Strategic
Management
Non-Financial Benefits
Improved understanding of competitors strategies
Enhanced awareness of threats
Reduced resistance to change
Enhanced problem-prevention capabilities
Business Ethics & Strategic
Management
Code of business ethics
Provides basis on which policies can be
devised to guide daily behavior and
decisions in the workplace
Advantages of International
Operations
Absorb excess capacity
Reduce unit costs
Spread risk over wider markets
Low-cost production facilities
Disadvantages of International
Operations
Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currency
differences
Strategic Management is
Gaining and Maintaining
Competitive Advantage
Anything that a firm does especially
well compared to rival firms
Copyright 2007 Prentice
Hall
Ch 1 -32
Key Terms
Annual Objectives
Short-term milestones that firms must
achieve to attain long-term objectives
Copyright 2007 Prentice
Hall
Ch 1 -33
Key Terms
Policies
Means by which annual objectives will be
achieved
Copyright 2007 Prentice
Hall
Ch 1 -34
