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STRATEGIC MANAGEMENT

By: Dr. Dennis Anthony A. Kilongkilong, PIE, ASEAN Engr.


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STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


Chapter 1

Strategic
Management:
Creating
Competitive
Advantages

McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
What is MANAGEMENT?
Is the process of
planning, leading, organizing
and controlling the work of
organization members and of
using all available
organizational resources to
reach stated organizational
goals.
Management functions:
1. Planning
the process of establishing objectives
and suitable courses of action before
taking any action.

2. Organizing
the process of arranging an
organization’s structure and coordinating
its managerial practices and use of
resources to achieve its goals.
Management functions:
3. Leading
the process of directing and
motivating workers, influence organization
members to perform in ways that
accomplish the organizational objectives.

4. Controlling
the process of monitoring actual
organizational activities to see that they
conform to planned activities and correcting
flaws or deviations.
Management resources
1. Manpower
2. Materials
3. Machinery
4. Money
5. Methods/management
6. Mother nature
7. Information
ECONOMIC ENVIRONMENT
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1.10 Environmental Variables (Fig. 1.3)

Environmental Variables
Societal Environment

Sociocultural Task Economic


Forces Environment Forces
(Industry)

Shareholders Suppliers

Governments
Internal Employees/
Environment
Special Labor Unions
Interest Structure
Groups Culture
Resources
Competitors

Customers
Trade Associations
Creditors
Political-Legal Communities Technological
Forces Forces

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


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What is Strategic Management?

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Strategic Management Concepts

“Strategic management consists of the


analysis, decisions, and actions an
organization undertakes in order to
create and sustain competitive
advantages.”

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


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Managers must ask: How can we


create competitive advantage in the
marketplace that are not only
unique & valuable but also difficult
for competitors to copy &
substitute.

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


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Operational effectiveness means


performing similar activities better than
rivals. Each of these is important, but not
lead to sustainable competitive advantage,
for the simple reason that everyone is
doing them. Strategy is all about being
different from everyone else. Sustainable
competitive advantage is possible only
through performing different activities from
rivals or performing similar activities in
different ways.
STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin
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Why is STRATEGIC MANAGEMENT


important?

1. StraMa is directed toward Achieving overall


Organizational Goals & Objectives
- effective managers must have a clear
understanding of their organization’s goal.

2. StraMa Considers a Broad Range of


Stakeholders
-organizations must meet the needs of various
constituencies as customers, suppliers,
employees, owners, and the public at large.
STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin
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3. StraMa Entails Multiple Time Horizon


- managers tend to focus on short-term issues alone,
but if they can broaden their time frame
perspectives, they will understand how to position to
make the best contribution both today & tomorrow.

4. StraMa is Concerned with both Efficiency &


Effectiveness
- “doing things right” (efficiency) versus “doing the
right things” (effectiveness).

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Three Key Strategic Questions

• Where is the organization now?


• If no changes are made, where will the
organization be in one, two, five or ten years?
Are the answers acceptable?
• If the answers are not acceptable, what
specific actions should management
undertake? What are the risks and payoffs
involved?

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


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1.3 Benefits of Strategic Management

Benefits of Strategic Management


• Clearer sense of strategic vision
• Sharper focus on what is strategically
important
• Improved understanding of rapidly changing
environment

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


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What is a Strategy?

A comprehensive master plan stating


HOW the corporation will achieve its
mission and objectives

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin


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2 Types of Strategy

1. Strategies that managers propose, design


and expect are Intended Strategies.

2. Strategies that will materialized in time are


Realized Strategies.

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Elements of an Intended Strategy

GOALS

POLICIES
Intended Strategy
PLANS

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GOALS
What the organization seeks
to accomplish

POLICIES
“Rules” Intended to shape organizational actions & it will provide
guidelines for how an organization will work towards its goals.
- we will not be undersold
- we will fund future growth through retained earnings

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PLANS
A statement of organizational actions managers
hope will take place or it will deal with the means to
pursue certain ends.
- to maintain our desired growth rate, we will open 4 new
stores in the next 2 years

Timing
is often a critical elements of plans,
and is therefore explicitly stated or implied.
- to increase demand for our products, we
will spend heavily on advertising to establish brand
recognition.

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Exhibit 1.2 The Strategic Management Process
Chapter 1
Analyzing Goals and
Objectives

Chapter 2 Chapter 3
Analyzing the Analyzing the
External Environment Internal Environment

Chapter 4
Assessing Intellectual
Capital

Strategy Analysis

Chapter 5 Chapter 9
Formulating Business-Level Strategic Control and
Strategies Corporate Governance

Chapter 6 Chapter 7 Chapter 10 Chapter 11


Formulating Corporate- Formulating Creating Effective Excellence, Ethics, and
Level Strategies International Organizational Designs Change
Strategies

Chapter 12
Chapter 8
Fostering Entrepreneurship
Formulating Internet
Strategies

Strategy Formulation Strategy Implementation

Chapter 13
STRATEGIC MANAGEMENT  CHAPTER 1 Case Analysis Gregory G. Dess and G. T. Lumpkin
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The Strategic Management Perspective

STRAMA requires managers to take


an integrative view of the organization &
assess how all of the functional areas &
activities “fit together” to help an
organization achieve its goals &
objectives.

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Some Key Driving Forces

These forces are interrelated & are


accelerating the rate of change &
uncertainty with which managers at all
levels must deal.

1. Globalization
2. Technology
3. Intellectual Capital

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Globalization

The defining feature of the global


economy is not the flow of goods but the
flow of capital, people & information
worldwide. With globalization, time &
space are no longer a barrier to making
deals anywhere in the world.

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Technology

Technological change & diffusion of


new technologies are moving at incredible
pace. Such development & diffusion
accelerates the importance of innovation
for firms if they are to remain competitive.

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Intellectual capital

Knowledge has become the direct


source of competitive advantage for
companies selling ideas & relationship as
well as indirect source of competitive
advantage for all companies trying to
differentiate themselves from rivals by how
they create value.

STRATEGIC MANAGEMENT  CHAPTER 1 Gregory G. Dess and G. T. Lumpkin