Overview of Strategic Management

Overview• Why do some firms succeed while others fail?

– A central objective of strategic management is to learn why this happens.

• What is strategy?– An action a company takes to attain superior

performance.

• What is the strategic management process?– The process by which managers choose a set of

strategies for the enterprise to pursue its vision.

A Company’s Strategy is Partly PlannedPlanned and Partly ReactiveReactive

New initiatives plus ongoing strategy features continued from prior periods

Adaptive reactions to changing

circumstances

Abandoned strategy features

Actual Company Strategy

Company Experiences, Know-how, Resource

Strengths and Weaknesses,

and Competitive Capabilities

Planned Strategy

Reactive Strategy

Factors Shaping the Choice of Company Strategy

Company’s Strategic SituationCraftthe

strategy

External Factors

Internal Factors

Social, political,

regulatory and community

factors

Competitive conditions and

industry attractiveness

Company opportunities and threats to

company’s well-being

Resource strengths,

capabilities, and

weaknesses

Influences of key executives

Shared values and company

culture

Identify and evaluate

alternatives

Determine relevance of internal

and external factors

Strategy as an Emergent Process• Strategy making in an unpredictable world

– Creates the necessity for flexible strategic approaches.

• Strategy making by lower-level managers– Strategy evolves through autonomous action.

• Serendipity and strategy– Accidental discoveries and happenstances can have

dramatic effects on strategic direction.

• Intended and emergent strategies– Realized strategies are combinations of intended and

emergent strategies.

Why Do Strategies Evolve?

• A company’s strategy is a work in progress• Changes may be necessary to react to

– Shifting market conditions– Technological breakthroughs– Fresh moves of competitors– Evolving customer preferences– Emerging market opportunities– New ideas to improve strategy– Crisis situations

Strategic Management

• Set of decisions and actions that result to the formulation and implementation of plans designed to achieve a company’s objectives

• Study of why and how some firms outperform others

Benefits of Strategic Management

• Strategy formulation activities enhance the firm’s ability to prevent problems.

• Group-based strategic decisions are likely to be drawn from the best available alternatives.

• The involvement of employees in strategy formulation improves their understanding of the productivity-reward relationship in every strategic plan and, thus, heightens their motivation.

• Gaps and overlaps in activities among individuals and groups are reduced as participation in strategy formulation clarifies differences in roles.

• Resistance to change is reduced.

Risks of Strategic Management

• The time that managers spend on the strategic management process may have a negative impact on operational responsibilities.

• If the formulators of strategy are not intimately involved in its implementation, they may shirk their individual responsibility for the decision reached.

• Strategic managers must be trained to anticipate and respond to the disappointment of participating subordinates over unattained expectations.

What is Formality?

• The degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management.

Entrepreneurial Mode

• The informal, intuitive, and limited approach to strategic management associated with owner-managers of smaller firms.

Planning Mode

• The strategic formality associated with large firms that operate under a comprehensive, formal planning system.

Adaptive Mode

• The strategic formality associated with medium-sized firms that emphasize the incremental modification of existing competitive approaches.

Key Attributes of Strategic Management• Directs the organization toward overall goals

and objectives• Includes multiple stakeholders in decision

making• Needs to incorporate short-term and long-

term perspectives• Recognizes trade-offs between efficiency

and effectiveness

Critical Tasks of Strategic Management• Formulate the company’s mission• Conduct internal analysis• Assess the company’s external environment• Analyze company’s options• Identify most desirable option/s• Select long-term objectives and grand strategies• Develop annual objectives and short-term strategies• Implement the strategic choices• Evaluate success of the strategic process

Dimensions of Strategic DecisionsStrategic issues• require top-management decisions• require large amounts of the firm’s resources• often affect the firm’s long-term prosperity• are future oriented• usually have multifunctional or multi-business

consequences• require considering the firm’s external environment

FormulateStrategy

to AchieveGoals &

Objectives

SetGoals &

Objectives

DevelopVision

andMission

Implementand

ExecuteStrategy

Improve/Change

Revise asNeeded

Revise asNeeded

Improve/Change

Recycleas Needed

Task 1 Task 2 Task 3 Task 4 Task 5

Monitor,Evaluate,and Take

CorrectiveAction

Develop Mission and VisionWhat is a Company Mission?

This is the fundamental purpose that sets a firm apart from other firms of its type and identifies the scope of its operations in product and market terms.

It sets out why the organization exists and what it should be doing.

It broadly outlines the organization’s future course and serves to communicate “who we are, what we do, and where we’re headed”

Coca-Cola CompanyMission

Everything we do is inspired by our enduring mission:

• To Refresh the World... in body, mind, and spirit. • To Inspire Moments of Optimism... through our

brands and our actions. • To Create Value and Make a Difference...

everywhere we engage.

Develop Mission and VisionWhat is a Vision?

This is a general statement of the organization’s intended direction that evokes emotional feelings in organization members.

A strategic vision describes the route a company intends to take in developing and strengthening

Coca-Cola CompanyVision

To achieve sustainable growth, we have established a vision with clear goals.

• Profit: Maximizing return to shareowners while being mindful of our overall responsibilities.

• People: Being a great place to work where people are inspired to be the best they can be.

• Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples’ desires and needs.

• Partners: Nurturing a winning network of partners and building mutual loyalty.

• Planet: Being a responsible global citizen that makes a difference.

Linking the Vision with Company Values• Companies often develop a statement of values

to guide a company’s pursuit of its vision and strategy and paint the white lines for how the company’s business is to be conducted

• Values statements remain a bunch of nice words until the espoused beliefs, traits, and behaviors are incorporated into company’s operations and work practices and are used as the benchmark for job appraisal, promotions, and rewards.

Coca-Cola CompanyValues

We are guided by shared values that we will live by as a company and as individuals.

• Leadership: "The courage to shape a better future" • Passion: "Committed in heart and mind" • Integrity: "Be real" • Accountability: "If it is to be, it’s up to me" • Collaboration: "Leverage collective genius" • Innovation: "Seek, imagine, create, delight" • Quality: "What we do, we do well"