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Prentice Hall, 2000 Chapter 1 1
Definition ofDefinition of
Strategic ManagementStrategic Management
Strategic ManagementStrategic ManagementThat set of managerial decisions and actionsThat set of managerial decisions and actions
that determines the longthat determines the long--run performance of arun performance of a
corporationcorporation
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Prentice Hall, 2000 Chapter 1 2
PRESENTATIONONPRESENTATIONON
STRATEGIC MANAGEMENTSTRATEGIC MANAGEMENT
BY HASEEB & IRFANBY HASEEB & IRFAN
CLASS NO 27, 21CLASS NO 27, 21
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Prentice Hall, 2000 Chapter 1 3
B
enefits of Strategic ManagementB
enefits of Strategic Management
Clearer sense of strategic visionClearer sense of strategic vision
Sharper focus on what is strategically importantSharper focus on what is strategically important
Improved understanding of rapidly changingImproved understanding of rapidly changing
environmentenvironment
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Prentice Hall, 2000 Chapter 1 4
Three Key Strategic QuestionsThree Key Strategic Questions
Where is the organization now?Where is the organization now?
If no changes are made, where will theIf no changes are made, where will the
organization be in one, two, five or ten years?organization be in one, two, five or ten years?
Are the answers acceptable?Are the answers acceptable?
If the answers are not acceptable, what specificIf the answers are not acceptable, what specific
actions should management undertake? Whatactions should management undertake? Whatare the risks and payoffs involved?are the risks and payoffs involved?
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Prentice Hall, 2000 Chapter 1 6
L
earningL
earningO
rganizationO
rganization
An organization skilled at creating, acquiring,An organization skilled at creating, acquiring,
transferring knowledge, and at modifying itstransferring knowledge, and at modifying its
behavior to reflect new knowledge and insightsbehavior to reflect new knowledge and insights
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Prentice Hall, 2000 Chapter 1 7
Composition ofComposition of
Strategic ManagementStrategic Management
Strategic Management is Composed ofStrategic Management is Composed of1.1. Environmental scanningEnvironmental scanning
2.2. Strategy formulationStrategy formulation
3.3. Strategy implementationStrategy implementation
4.4. Evaluation and controlEvaluation and control
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Prentice Hall, 2000 Chapter 1 8
Basic Elements of the StrategicBasic Elements of the StrategicManagement ProcessManagement Process
Evaluationand
Control
StrategyImplementation
EnvironmentalScanning
StrategyFormulation
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Prentice Hall, 2000 Chapter 1 9
Evaluation
and Controland Control
Strategic Management ModelStrategic Management Model
StrategyFormulation
StrategyImplementation
Mission
Objectives
Strategies
Policies
Feedback/Learning
Environmental
Scanning
Societal
Environment
General Forces
Task
Environment
Industry Analysis
Structure
Chain of Command
Resources
Assets, Skills
Competencies,
Knowledge
Culture
Beliefs, Expectations,
Values
Reason for
existence
What results
toaccomplish
by when Plan to
achieve the
mission &
objectives Broad
guidelines for
decision
making
Programs
Activities
needed to
accomplish
a plan
Budgets
Cost of theprograms Procedures
Sequence
of steps
needed to
do the job
Process
to monitor
performance
and take
corrective
action
Performance
External
Internal
Evaluation
and Control
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Prentice Hall, 2000 Chapter 1 10
Environmental VariablesEnvironmental Variables
Societal Environment
Economic
Forces
Technological
Forces
Political-Legal
Forces
SocioculturalForces
InternalEnvironment
StructureCulture
Resources
Shareholders
Governments
Customers
Creditors
Communities
Competitors
Employees/
Labor Unions
Suppliers
SpecialInterestGroups
Trade Associations
TaskEnvironment
(Industry)
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Prentice Hall, 2000 Chapter 1 11
SocietalE
nvironmentSocietalE
nvironment
Composed of general forces in environmentComposed of general forces in environment
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Prentice Hall, 2000 Chapter 1 12
Task EnvironmentTask Environment
Composed ofComposed of
Groups in environment that directly affect or areGroups in environment that directly affect or are
affected by the organizations operationsaffected by the organizations operations
(Often called industry)(Often called industry)
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Prentice Hall, 2000 Chapter 1 13
StructureStructure
The way a corporation is organized in terms ofThe way a corporation is organized in terms of
communication, authority, and workflowcommunication, authority, and workflow
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Prentice Hall, 2000 Chapter 1 14
Corporate CultureCorporate Culture
Collection of beliefs, expectations, and valuesCollection of beliefs, expectations, and values
learnedlearnedandand sharedsharedby members andby members and transmittedtransmitted
from one generation of employees to anotherfrom one generation of employees to another
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Prentice Hall, 2000 Chapter 1 15
ResourceResource
An asset, competency, process, skill, orAn asset, competency, process, skill, or
knowledge controlled by the corporationknowledge controlled by the corporation
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Prentice Hall, 2000 Chapter 1 16
Definition of Strategy FormulationDefinition of Strategy Formulation
Strategy FormulationStrategy Formulation
The process of developing longThe process of developing long--range plans torange plans to
deal effectively with environmental opportunitiesdeal effectively with environmental opportunitiesand threats in light of corporate strengths andand threats in light of corporate strengths and
weaknessesweaknesses
Composed ofComposed of
MissionMission ObjectivesObjectives
StrategiesStrategies
PoliciesPolicies
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Prentice Hall, 2000 Chapter 1 18
Definition ofO
bjectivesDefinition ofO
bjectives
ObjectivesObjectivesThe end results of planned activity. They stateThe end results of planned activity. They state
WHAT is to be accomplished by WHEN. TheyWHAT is to be accomplished by WHEN. They
should be quantified, if possible.should be quantified, if possible.
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Prentice Hall, 2000 Chapter 1 19
Areas in Which toAreas in Which to
Set ObjectivesSet Objectives
ProfitabilityProfitability
EfficiencyEfficiency
GrowthGrowth Shareholder wealthShareholder wealth
Utilization of resourcesUtilization of resources
ReputationReputation
Contributions to employeesContributions to employees
Contributions to societyContributions to society
Market leadershipMarket leadership
Technological leadershipTechnological leadership
SurvivalSurvival
Personal needs of managementPersonal needs of management
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Prentice Hall, 2000 Chapter 1 20
Definition of StrategyDefinition of Strategy
StrategyStrategyA comprehensive master plan stating HOW theA comprehensive master plan stating HOW the
corporation will achieve its mission andcorporation will achieve its mission and
objectivesobjectives
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Prentice Hall, 2000 Chapter 1 22
Definition ofDefinition ofBusiness StrategyBusiness Strategy
Emphasizes improving the competitive positionEmphasizes improving the competitive position
of a corporations products or unitsof a corporations products or units
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Prentice Hall, 2000 Chapter 1 23
Definition ofDefinition ofFunctional StrategyFunctional Strategy
Maximizes resource productivityMaximizes resource productivity
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Prentice Hall, 2000 Chapter 1 24
Hierarchy of StrategyHierarchy of Strategy
Corporate StrategyCorporate Strategy
Business
(Division Level)Strategy
Functional
Strategy
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Prentice Hall, 2000 Chapter 1 25
Definition of PoliciesDefinition of Policies
PoliciesPoliciesBroad guidelines for making decisionsBroad guidelines for making decisions
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Prentice Hall, 2000 Chapter 1 26
Definition of StrategyDefinition of StrategyImplementationImplementation
Strategy ImplementationStrategy ImplementationThe process of putting strategies and policies intoThe process of putting strategies and policies into
action through the development ofaction through the development of
ProgramsPrograms
BudgetsBudgets ProceduresProcedures
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Prentice Hall, 2000 Chapter 1 27
Definition ofP
rogramDefinition ofP
rogram
ProgramProgramA statement of activities or steps needed toA statement of activities or steps needed to
accomplish a singleaccomplish a single--use planuse plan
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Prentice Hall, 2000 Chapter 1 28
Definition of BudgetDefinition of Budget
BudgetBudgetA statement of a corporations program in dollarA statement of a corporations program in dollar
termsterms
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Prentice Hall, 2000 Chapter 1 29
Definition of ProceduresDefinition of Procedures
ProceduresProcedures
A system of sequential steps or techniquesA system of sequential steps or techniques
that describe in detail how to perform athat describe in detail how to perform a
particular task or jobparticular task or job
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Prentice Hall, 2000 Chapter 1 31
TriggeringEvents forTriggeringEvents for
Strategic ChangeStrategic Change
New CEONew CEO
External interventionExternal intervention
Threat of a change in ownershipThreat of a change in ownership
Performance gapPerformance gap
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Prentice Hall, 2000 Chapter 1 32
Characteristics ofCharacteristics ofStrategic DecisionsStrategic Decisions
RareRare
ConsequentialConsequential
DirectiveDirective
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Prentice Hall, 2000 Chapter 1 33
Modes of Strategy FormulationModes of Strategy Formulation
EntrepreneurialEntrepreneurial
AdaptiveAdaptive
PlanningPlanning
Logical incrementalismLogical incrementalism
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Prentice Hall, 2000 Chapter 1 34
Strategic DecisionStrategic Decision--MakingProcessMakingProcess)
Review andRevise asNecessary:yMissiony Objectives
GenerateandEvaluateStrategicAlterna-tives
SelectandRecommendBestAlternative
ImplementStrategies:y Programsy Budgetsy Procedures
EvaluateandControl
Strategy
Implementation
Step 7
5(b) 6(a) 6(b) 7 8
AnalyzeExternalFactors:y Opportun-
itiesy Threats
Scan andAssessInternalEnvironment:y StructureyCultureyResources
AnalyzeInternalFactors:y Strengthsy Weak-
nesses
SelectStrategicFactors(SWOT)in Light ofCurrentSituation
Scan andAssessExternalEnvironment:ySocietalyTask
EvaluateCurrentPerformanceResults
Examine andEvaluate theCurrent:y MissionyObjectivesy Strategiesy Policies
ReviewCorporateGovernance:y Board of
Directorsy Top Man-
agement
Strategy
Formulation:
Steps 1 6
3(a)
1(a) 1(b) 2 5(a)
4(a)
3(b)
4(b)
Evaluationand
Control:Step 8
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Prentice Hall, 2000 Chapter 1 35
Strategic Management Process at MaytagStrategic Management Process at MaytagC
orporation (1993): Mission &O
bjectivesC
orporation (1993): Mission &O
bjectives
Strategy FormulationStrategy Formulation
MissionMission
BroadBroad: To serve the best interests of shareowners,: To serve the best interests of shareowners,
customers, and employeescustomers, and employees
NarrowNarrow: To become a full: To become a full--line globallyline globally--oriented majororiented major
home appliance manufacturer and marketerhome appliance manufacturer and marketer
ObjectivesObjectives Increased profitabilityIncreased profitability
Number one in customer satisfactionNumber one in customer satisfaction
Number three in North American unit salesNumber three in North American unit sales
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Prentice Hall, 2000 Chapter 1 36
Strategic ManagementP
rocess atStrategic ManagementP
rocess atMaytagCorporation (1993): StrategiesMaytagCorporation (1993): Strategies& Policies& Policies
StrategiesStrategies To grow horizontally where the corporation is not yet well representedTo grow horizontally where the corporation is not yet well represented
through external acquisition or joint venturesthrough external acquisition or joint ventures
To grow horizontally internally by improving efficiency and quality ofTo grow horizontally internally by improving efficiency and quality of
acquired companies and by using one business units expertise in oneacquired companies and by using one business units expertise in oneacquired are to introduce quality products from a business unit inacquired are to introduce quality products from a business unit in
another areaanother area
PoliciesPolicies No cost reduction proposal will be approved if it reduces product qualityNo cost reduction proposal will be approved if it reduces product quality
in any wayin any way
Every product, from the least expensive to the highest priced, should beEvery product, from the least expensive to the highest priced, should be
superior to the competition in overall quality and performancesuperior to the competition in overall quality and performance
The corporation must not emphasize market share at the expense ofThe corporation must not emphasize market share at the expense of
profitabilityprofitability
Business units must be managed for synergies, while simultaneously theBusiness units must be managed for synergies, while simultaneously the
specialized expertise among those units must be allowed to flourishspecialized expertise among those units must be allowed to flourish
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Prentice Hall, 2000 Chapter 1 37
Strategic Management Process at MaytagStrategic Management Process at Maytag
Corporation (1993): Programs & BudgetsCorporation (1993): Programs & Budgets
ProgramsPrograms
Work with BoschWork with Bosch--Siemens to develop joint marketing andSiemens to develop joint marketing and
supplier agreements for Hoover appliancessupplier agreements for Hoover appliances
Analyze and develop Asian markets through currentAnalyze and develop Asian markets through current
distributors and licensees and through joint venturesdistributors and licensees and through joint ventures
Develop new appliances for continental EuropeDevelop new appliances for continental Europe
Develop TV advertising for JennDevelop TV advertising for Jenn--Air and Magic ChefAir and Magic Chef
Consolidate production of washers and dryers inConsolidate production of washers and dryers in
dedicated plantsdedicated plants
BudgetsBudgets
Prepare budgets for each planned programPrepare budgets for each planned program
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Prentice Hall, 2000 Chapter 1 38
Strategic Management Process at MaytagStrategic Management Process at Maytag
Corporation (1993): ProceduresCorporation (1993): Procedures
ProceduresProcedures Develop procedures for joint purchasing and jointDevelop procedures for joint purchasing and joint
marketing ofBoschmarketing ofBosch--Siemens with HooverSiemens with Hoover
Coordinate marketing, manufacturing, andCoordinate marketing, manufacturing, and
purchasing activities of business units throughpurchasing activities of business units through
committeescommittees
Research and development takes place in unitResearch and development takes place in unit
housing each product linehousing each product line Consolidate all advertising under one agency, butConsolidate all advertising under one agency, but
establish internal advertising for each brandestablish internal advertising for each brand
categorycategory
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Prentice Hall, 2000 Chapter 1 39
Strategic Management Process at MaytagStrategic Management Process at Maytag
Corporation (1993): Evaluation & ControlCorporation (1993): Evaluation & Control
Evaluation & ControlEvaluation & Control Require all business units to provideRequire all business units to provide monthlymonthly statusstatus
reports on sales and costs by product line plus anyreports on sales and costs by product line plus any
trends in expensestrends in expenses
Require all business units to provideRequire all business units to provide annualannual reportsreports
giving operating revenues, costs, and expenses as wellgiving operating revenues, costs, and expenses as wellas identifiable assets in dollars, plus property additionsas identifiable assets in dollars, plus property additions
and deletionsand deletions
Require all business units to provideRequire all business units to provide quarterlyquarterly
assessments of competitive activity and overall trendsassessments of competitive activity and overall trends
affecting each of their product linesaffecting each of their product linesHASEEB ASGHAR BALOCHHASEEB ASGHAR BALOCH