Basic Concepts of Strategic Management

Defined: General management orientation that looks inward for properly integrating the firms functional activities.

Defined: Set of managerial decisions and actions that determines the longrun performance of a firm.

Basic financial planning Forecast-based planning Externally-oriented planning (strategic) Strategic management

Highly Rated Benefits:

x Clearer sense of strategic vision for the firm x Sharper focus on what is strategically important x Improved understanding of a rapidly changing environment

Not always a formal process:

Where is the organization now? (Not where do we hope it is!) If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 years? What specific actions should management undertake? What are the risks and payoffs involved?

Globalization
Internationalization of markets and corporations
x Global (worldwide) markets rather than national markets

Electronic Commerce
Use of the Internet to conduct business

transactions
x Basis for competition on a more strategic level rather than traditional focus on product features and costs

7 Trends:
Internet forcing companies to transform

themselves
Market access and branding are changing,

causing disintermediation of traditional distribution channels

Balance of power shifting to the consumer Competition is changing

Pace of business increasing drastically Internet purchasing corporations out of their traditional boundaries Knowledge becoming a key asset and source of competitive advantage

How organizations obtain fit within their environment:

Theory of population ecology Institution theory Strategic choice perspective Organizational learning theory

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Strategic flexibility:
Demands a long-term commitment to the development

and nurturing of critical resources

Demands that the firm become a learning organization

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Defined: An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights.

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Four Main Activities: Solving problems systematically Experimenting with new approaches Learning from their won experiences and that of others Transferring knowledge quickly and efficiently throughout the organization

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Strategic Management Model

Environmental Scanning External
Societal Environment General Forces Task Environment Industry Analysis

Strategy Formulation
Mission
Reason for existence

Strategy Implementation

Evaluation and Control and Control

Objectives
What results to accomplish by when

Strategies
Plan to achieve the mission & objectives

Policies
Broad guidelines for decision making

Internal
Structure Chain of Command Culture Beliefs, Expectations, Values Resources Assets, Skills Competencies, Knowledge

Programs
Activities needed to accomplish a plan

Budgets
Cost of the programs

Process to monitor performance and take corrective action

Procedures
Sequence of steps needed to do the job

Performance

Feedback/Learning

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Four Basic Elements

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Defined: The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the firm.

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Identify strategic factors

SWOT Analysis
x Strengths, Weaknesses x Opportunities, Threats

Internal Environment x Strengths & Weaknesses

x Within the organization but not subject to short-run control of management

External Environment x Opportunities & Threats

x External to the organization but not subject to shortrun control of management

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Defined: Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses.

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Mission Statement
Purpose or reason for the organizations

existence Promotes shared expectations among employees Communicates public image important to stakeholders Who we are, what we do, what wed like to become

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Mission Statement To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world.

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Objectives
The end results of planned activity x What is to be accomplished x Time in which to accomplish it x Quantified when possible

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Goals vs. Objectives

A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion.

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Corporate goals and objectives include:

Profitability (net profits) Growth (increase in total assets, etc.) Utilization of resources (ROE or ROI) Market leadership (market share)

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Defined: A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.

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3 Types of Strategy
Corporate strategy Business strategy Functional strategy

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Corporate Strategy Stability Growth Retrenchment

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Business Strategy
Competitive strategies Cooperative strategies

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Functional Strategy Technological leadership Technological followership

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Corporate Strategy
Business (Division Level) Strategy

Functional Strategy

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Defined: Broad guidelines for decision making that link the formulation of strategy with its implementation.

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Programs Strategy Implementation Budgets Procedures

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New CEO External intervention

Triggering event

Threat of change in ownership Performance gap Strategic inflection point

Stimulus for change in strategy

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Strategic Decisions
Rare Consequential Directive

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Mintzbergs Modes Entrepreneurial mode Adaptive mode Planning mode Logical incrementalism

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