strategic management

Fred R. DavidPrentice HallCh. 1-*Chapter 1The Nature of Strategic ManagementStrategic Management: Concepts and Cases. 9th editionFred R. David

PowerPoint Slides byAnthony F. ChelteWestern New England College

Fred R. DavidPrentice Hall*

Fred R. DavidPrentice HallCh. 1-*The Nature of Strategic ManagementA global perspective is a matter of survival for businesses.E-commerce is a vital strategic management tool.The natural environment is an important strategic issue.


Fred R. DavidPrentice HallCh. 1-*Strategic Management Achieves Organizational SuccessProcess of Integrating:management marketing finance/accounting production/operations research and development computer information systems


Fred R. DavidPrentice HallCh. 1-*Three-Stage ProcessStrategy FormulationStrategy ImplementationStrategy Evaluation


Fred R. DavidPrentice HallCh. 1-*Strategy FormulationVision & Mission Alternative Strategies Long-Term Objectives Strengths & Weaknesses Opportunities & Threats Strategy Selection


Fred R. DavidPrentice HallCh. 1-*Strategy FormulationIssues include:What new businesses to enterWhat businesses to abandonHow to allocate resourcesExpand operations or diversifyEnter international marketsMerge or form joint ventureAvoidance of hostile takeover


Fred R. DavidPrentice HallCh. 1-*Strategy Implementation Employee MotivationPolicies Annual Objectives Resource Allocation


Fred R. DavidPrentice HallCh. 1-*Strategy ImplementationAction Stage of strategic management:Most difficult stage Mobilizing employees and managersInterpersonal skills are criticalConsensus on pursuing goals


Fred R. DavidPrentice HallCh. 1-*Strategy Evaluation Performance MeasurementExternal ReviewInternal Review Corrective Action


Fred R. DavidPrentice HallCh. 1-*Strategy EvaluationFinal stage of strategic management:All strategies subject to future modification Success today is no guarantee of success tomorrowSuccess creates new and different problemsComplacency leads to demise


Fred R. DavidPrentice HallCh. 1-*Prime Task of Strategic ManagementAccording to Peter DruckerThe prime task is to think through the overall mission of a businessAsk the question:What is our Business?


Fred R. DavidPrentice HallCh. 1-*Integrating Intuition and AnalysisThe strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty.


Fred R. DavidPrentice HallCh. 1-*Integrating Intuition and AnalysisIntuition based on:Past experiencesJudgmentFeelings

Useful for decision makingConditions of great uncertaintyConditions with little precedent


Fred R. DavidPrentice HallCh. 1-*Integrating Intuition and AnalysisIntuition and judgmentManagement at all levelsAnalyses are influenced

Analytical thinking and intuitive thinkingComplement each other


Fred R. DavidPrentice HallCh. 1-*Adaptation to ChangeOrganizations must monitor eventsOn-going processInternal and external eventsTimely changes


Fred R. DavidPrentice HallCh. 1-*Adaptation to ChangeRate and magnitude of changesIncreasing dramaticallyE-commerceDemographicsTechnologyMerger-maniaEffective AdaptationLong-run focus


Fred R. DavidPrentice HallCh. 1-*Adaptation to ChangeKey strategic-management questions:What kind of business should we become?Are we in the right fields?Should we reshape our business?What new competitors are entering our industry?What strategies should we pursue?How are our customers changing?


Fred R. DavidPrentice HallCh. 1-*Key TermsStrategistsMost responsible for success or failure of an organizationVarious job titles:Chief executive officerPresidentOwnerChair of the BoardExecutive DirectorEntrepreneur


Fred R. DavidPrentice HallCh. 1-*Key TermsVision StatementWhat do we want to become?

Mission StatementWhat is our business?


Fred R. DavidPrentice HallCh. 1-*Key TermsExternal Opportunities and ThreatsSignificantly benefit or harm the organization in the future.

Include the following trends:EconomicSocialCulturalDemographic EnvironmentalPolitical, legal, governmentalTechnologicalCompetitive trends


Fred R. DavidPrentice HallCh. 1-*Key TermsExternal Opportunities and ThreatsLargely beyond the control of a single organization.

Basic tenet of strategic managementStrategy formulation to: Take advantage of external opportunitiesAvoid or reduce impact of external threats


Fred R. DavidPrentice HallCh. 1-*Key TermsEnvironmental Scanning

Industry AnalysisProcess of conducting research and gathering and assimilating external information


Fred R. DavidPrentice HallCh. 1-*Key TermsInternal Strengths and WeaknessesControllable activities performed especially well or poorly.

Arise in functional areas of the business:ManagementMarketingFinance/accountingProduction/operationsResearch & developmentComputer Information Systems


Fred R. DavidPrentice HallCh. 1-*Key TermsDetermining Internal Factors:

Financial ratiosMeasuring performanceIndustry averagesSurvey data


Fred R. DavidPrentice HallCh. 1-*Key TermsLong-term objectives:

Mission-driven pursuit of specific results more than one-year out.Essential for organizational successState directionAid in evaluationCreate synergyFocus coordinationBasis for planning, motivating and controlling


Fred R. DavidPrentice HallCh. 1-*Key TermsStrategies:Means by which long-term objectives will be achieved.

May include:Geographic expansion, diversificationAcquisitionProduct development, market penetrationRetrenchment, divestitureLiquidation, joint venture


Fred R. DavidPrentice HallCh. 1-*Key TermsAnnual Objectives:

Short-term milestones that organizations must achieve to reach long-term objectives.


Fred R. DavidPrentice HallCh. 1-*Key TermsPolicies:

Means by which annual objectives will be achieved.


Fred R. DavidPrentice HallCh. 1-*Comprehensive Strategic Management ModelExternalAudit

Chapter 3InternalAudit

Chapter 4Long-TermObjectives

Chapter 5Generate,Evaluate,SelectStrategies

Chapter 6ImplementStrategies:Mgmt Issues

Chapter 7ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8Measure &EvaluatePerformance

Chapter 9Vision & Mission

Chapter 2


Fred R. DavidPrentice HallCh. 1-*Strategic-Management ModelStrategic-Management Process

Dynamic and ContinuousMore formal in larger organizations


Fred R. DavidPrentice HallCh. 1-*Strategic-Management ModelIdentify Organizations existing:

VisionMissionObjectivesStrategies


Fred R. DavidPrentice HallCh. 1-*Strategic-Management ModelPerform External AuditPerform Internal AuditEstablish long-term objectivesGenerate, evaluate, select strategiesImplement strategiesMeasure and evaluate performance


Fred R. DavidPrentice HallCh. 1-*Benefits of Strategic ManagementProactive in shaping organizations futureInitiate and influence activitiesFormulate better strategiesSystematic, logical, rational approach


Fred R. DavidPrentice HallCh. 1-*Benefits of Strategic ManagementFinancial benefitsImprovement in salesImprovement in profitabilityImprovement in productivity


Fred R. DavidPrentice HallCh. 1-*Benefits of Strategic ManagementNon-Financial benefitsEnhanced awareness of xternal threatsImproved understanding of competitors strategiesIncreased employee productivityReduced resistance to changeUnderstanding of performance-reward relationshipsEnhances problem-prevention capabilities


Fred R. DavidPrentice HallCh. 1-*Benefits of Strategic ManagementIdentification of opportunitiesObjective view of management problemsImproved coordination and controlMinimizes adverse conditions and changesDecisions to better support objectivesEffective allocation of time and resourcesInternal communication among personnel


Fred R. DavidPrentice HallCh. 1-*Benefits of Strategic ManagementIntegration of individual behaviorsClarifies individual responsibilitiesEncourages forward thinkingEncourages favorable attitude toward changeDiscipline and formality to the management of the business


Fred R. DavidPrentice HallCh. 1-*Poor reward structuresFire-fightingWaste of timeToo expensiveLazinessContent with success

Why Some Firms Do No Strategic Planning


Fred R. DavidPrentice HallCh. 1-*Fear of failureOverconfidencePrior bad experienceSelf-interestFear of the unknownSuspicion

Why Some Firms Do No Strategic Planning (Contd)


Fred R. DavidPrentice HallCh. 1-*Business ethics defined:Principles of conduct within organizations that guide decision making and behavior.

Business Ethics and Strategic Management


Fred R. DavidPrentice HallCh. 1-*Good business ethics:

prerequisite for good strategic management



Fred R. DavidPrentice HallCh. 1-*Code of business ethics:

Provides basis on which policies can be devised to guide daily behavior and decisions at the workplace



Fred R. DavidPrentice HallCh. 1-*Internet privacy

Emerging ethical issue of immense proportion



Fred R. DavidPrentice HallCh. 1-*Internet and business ethics --

38% of companies store and review employees email messagesUp from 15% in 199754% of companies monitor employees Internet connections



Fred R. DavidPrentice HallCh. 1-*Business actions always unethical include:

Misleading advertisingMisleading labelingEnvironmental harmPoor product or service safetyPadding expense accountsInsider tradingDumping flawed products on foreign markets Business Ethics & Strategic Planning


Fred R. DavidPrentice HallCh. 1-*Nature of Global CompetitionCompanies conduct business across bordersInternational or multinational corporationsParent company Host country

Strategy implementation more difficult

Cultural differencesNorms, values, work ethics


Fred R. DavidPrentice HallCh. 1-*Absorb excess capacityReduce unit costsSpread economic risks over wider marketsLow-cost production facilitiesCompetition may be less intenseReduced tariffs, lower taxesEconomies of scale

Advantages of International Operations


Fred R. DavidPrentice HallCh. 1-*Different social, cultural demographic, legal forces may create difficult communicationWeaknesses of foreign competition may be underestimatedBarriers to communication and effective management of personnelComplications from different monetary systems

Disadvantages of International Operations


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