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STRATEGIC MANAGEMENT

Chapter 1

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Learning Objectives
Explain the concept of strategic
management
Describe how strategic decisions differ from
other decisions that managers make
Name the benefits and risks of a
participative approach to strategic decision
making
Understand the types of strategic decisions
for which different managers are responsible
Describe a comprehensive model of
strategic decision making
Appreciate the importance of strategic
management as a process
Give examples of strategic decisions that
companies have recently made

STRATEGIC
MANAGEMENT?

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The Nature and Value

of Strategic Management
Strategic management:
The set of decisions and actions that
result in formulation and
implementation of plans designed to
achieve a companys objectives
Manajemen strategik didefinisikan sebagai sekumpulan
keputusan dan tindakan yang menghasilkan perumusan dan
pelaksanaan rencana-rencana yang dirancang untuk
mencapai sasaran-sasaran perusahaan.

Nine Critical Tasks of Strategic

Management

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Nine Critical Tasks of Strategic

Management
Formulate the companys
Tasks 1-5:
mission
Conduct an internal analysis
Assess the external
environment competitive and
general contexts
Analyze the companys options
by matching its resources with
the external environment
Identify the most desirable
options in light of the mission

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Nine Critical Tasks of Strategic

Management -- Tasks 6-9:
Select a set of long-term
objectives and grand strategies
that will achieve the most
desirable options
Develop annual objectives and
short-term strategies that are
compatible with long-term
objectives and grand strategies
Implement the strategic
choices
Evaluate the success of the
strategic process for future
decision making

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What is Strategy.?
Large-scale, futureoriented plan
Used to interact within
competitive
environment to achieve
company goals
Provides a framework
for managerial decisions
Reflects a companys
awareness of the main
elements of competition

DIMENSION S of ..

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Dimensions of Strategic
Decisions
Strategic issues require
top-management
decisions
Strategic issues require
large amounts of the
firms resources
Strategic issues often
affect the firms longterm prosperity

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Dimensions of Strategic
Decisions.
Strategic issues are
future-oriented
Strategic issues usually
have multifunctional
or multibusiness
consequences
Strategic issues require
considering the
firms external
environment

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Three Levels of Strategy

Corporate level: board
of directors, CEO &
administration [Highest]
Business level:
business and corporate
managers [Middle]
Functional level:
Product, geographic, and
functional area
managers [Lowest]

Alternative Strategic Management

Structures

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Characteristics of
Strategic
Management

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Characteristics of Strategic
Management Decisions:
Often carry
greater
Corporate

risk, cost, and profit

potential
Greater need for
flexibility
Longer time horizons
Choice of businesses,
dividend policies,
sources of long-term
financing, and
priorities for growth

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Characteristics of Strategic
Management Decisions:
Implement the overall
Functional
strategy formulated at
the corporate and
business levels
Involve action-oriented
and operational issues
Relatively short range
and low risk
Modest costs: depend
upon available
resources
Relatively concrete and
quantifiable

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Characteristics of Strategic
Management Decisions:
Help bridge decisions at the corporate
Business
and functional levels
Less costly, risky, and potentially
profitable than corporate-level decisions
More costly, risky, and potentially
profitable than functional-level decisions
Include decisions on plant location,
marketing segmentation, and distribution

IN
Y
T
I
L
A
C
M
I
R
G
FO RATE
T
N
E
ST GEM
NA
A
M

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Formality in Strategic
Management

Formality is the degree to which

participation, responsibility, authority,
and discretion in decision-making are
specified in strategic management

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Forces Determining Formality

Organizational
Problems in the
Size
Firm
Predominant
Purpose of the
Management
Planning System
Styles
Stage of Firms
Complexity of
Development
Environment
Production Process

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Three Modes of Formality

Entrepreneurial
Mode most small
firms
Planning Mode
most large firms
Adaptive Mode
most medium size
firms

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Strategy Makers
Ideal strategic team
includes decision
makers from all
three levels
Top managers must
give final approval
Strategic decisions
coincide with
managers
responsibilities

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Strategy Makers: The CEO

A firms CEO plays a dominant
role in strategic planning
The CEOs principal duty is giving
long-term direction to the firm
The CEO bears ultimate
responsibility for the firms
success and strategic success
CEOs are typically strong-willed,
company-oriented individuals

Benefits of Strategic
Management
Strategy formulation activities
enhance the firms ability to
prevent problems
Group-based strategic
decisions are likely to be
drawn from the best available
alternative
The involvement of employees
in strategy formulation
improves their understanding
of the productivity-reward
relationship in every strategic
plan

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Benefits of Strategic
Management
Gaps and overlaps in activities among
individuals and group
Resistance to change is reduced

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Strategic Management

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Strategic Management as
Process..
Businesses vary in formulation and other

processes
The basic components of the models used to
analyze strategic management are similar
Strategic management is a processa flow of
information through interrelated stages of
analysis toward the achievement of an aim.

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Strategic Management as
Process
..
A change in any
component will affect
several or all of the
component
Strategy formulation and
implementation are
sequential
The necessity of
feedback from
institutionalization
The need to regard it a
dynamic system

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Strategic Management Model

Components of Strategic
Management Model
Company Mission
External Environtment
Long-Term Objectives
Short-Term Objectives
Policies Empowering
Action
Strategic Control &
Continuous
Improvement

Internal Analysis
Strategic Analysis &
Choice
Generic & Grand
Strategies
Functional Tactics
Restructuring,
Reengineering &
Refocusing
Action Plans

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McGraw-Hill/Irwin
Strategic Management, 10/e

Copyright 2007 The McGraw-Hill Companies, Inc. All rights reserved.