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BasicConceptsof

St t i
Strategic
Management

Chapter 1
Chapter1

Learning Objectives
LearningObjectives
Understandthebenefitsofstrategic
U d t d th b
fit f t t i
management
Explainhowglobalizationandenvironmental
sustainabilityinfluencestrategicmanagement
Understandthebasicmodelofstrategic
managementanditscomponents

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Learning Objectives
LearningObjectives
Identifysomecommontriggeringeventsthat
Id tif
ti
i
t th t
actasstimuliforstrategicchange
Understandstrategicdecisionmakingmodes
Usethestrategicauditasamethodof
analyzingcorporatefunctionsandactivities

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13

The Study of Strategic Management


TheStudyofStrategicManagement
StrategicManagement
St t i M
t
asetofmanagerialdecisionsandactionsthat
d t
determinesthelongrunperformanceofa
i
th l
f
f
corporation

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1-4

The Study of Strategic Management


TheStudyofStrategicManagement
StrategicManagementincludes:
St
t i M
ti l d
Internalandexternalenvironmentscanning
Strategyformulation
Strategyimplementation
Strategy implementation
Evaluationandcontrol

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Phases
of Strategic Management
PhasesofStrategicManagement
Phase 1: Basic financial
Phase1:Basicfinancial
planning
Phase2:Forecastbased
Phase2:Forecast
planning
Phase3:Externallyoriented
strategicplanning
strategic planning
Phase4:Strategic
management
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Benefits of Strategic Management


BenefitsofStrategicManagement
Theattainmentofanappropriatematch,orfit,
Th tt i
t f
i t
t h
fit
betweenanorganizationsenvironmentandits
strategy structure and processes has positive
strategy,structureandprocesseshaspositive
effectsontheorganizationsperformance.

Strategicplanningbecomesincreasingly
importantastheenvironmentbecomesmore
unstable.
bl

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Benefits of Strategic Management


BenefitsofStrategicManagement
Clearersenseofstrategicvisionforthefirm
Cl
f t t i i i f th fi
Sharperfocusonwhatisstrategically
important
Improvedunderstandingofarapidlychanging
environment

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1-8

Impact of Globalization
ImpactofGlobalization
Globalization
Gl b li ti
theintegratedinternationalizationofmarketsand
corporations
ti
haschangedthewaymoderncorporationsdo
business

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Impact of Innovation
ImpactofInnovation
Innovation
I
ti
describesnewproducts,services,methodsand
organizationalapproachesthatallowthebusiness
i ti
l
h th t ll th b i
toachieveextraordinaryreturns

Innovation istheimplementationofpotential
innovationsthattrulydrivesbusinessestobe
remarkable.

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110

Impact of Sustainability
ImpactofSustainability
Sustainability
S t i bilit
referstotheuseofbusinesspracticestomanage
th t i l b tt
thetriplebottomline
li

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Impact of Sustainability
ImpactofSustainability
Thetriplebottomlineinvolves:
Th
t i l b tt
li i l
1. themanagementoftraditionalprofit/loss;
2. themanagementofthecompanyssocial
responsibility;and
3. themanagementofitsenvironmental
responsibility.

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112

Theories of Organizational Adaptation


TheoriesofOrganizationalAdaptation
Populationecology
P
l ti
l
onceanorganization
is successfully
issuccessfully
establishedina
particular
p
environmentalniche,
itisunabletoadapt
tochanging
h
conditions

Institutiontheory
I tit ti th
organizationscanand
do adapt to changing
doadapttochanging
conditionsby
imitatingother
g
successful
organizations

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113

Theories of Organizational Adaptation


TheoriesofOrganizationalAdaptation
Strategicchoiceperspective
St t i h i
ti
notonlydoorganizationsadapttoachanging
environment,buttheyalsohavetheopportunity
i
t b t th
l h
th
t it
andpowertoreshapetheirenvironment

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114

Theories of Organizational Adaptation


TheoriesofOrganizationalAdaptation
Organizationallearningtheory
O
i ti
ll
i th
anorganizationadjustsdefensivelytoachanging
environmentandusesknowledgeoffensivelyto
i
t d
k
l d
ff i l t
improvethefitbetweenitselfandits
environment

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115

Creating a Learning Organization


CreatingaLearningOrganization
Strategicflexibility
St t i fl ibilit
theabilitytoshiftfromonedominantstrategyto
anotherandrequires:
th
d
i
Longtermcommitmenttothedevelopment
andnurturingofcriticalresources
Learningorganization

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Creating a Learning Organization


CreatingaLearningOrganization
Learningorganization
L
i
i ti
anorganizationskilledatcreating,acquiringand
t
transferringknowledgeandatmodifyingits
f i k
l d
d t
dif i it
behaviortoreflectnewknowledgeandinsights

Organizationallearningisacriticalcomponentof
competitivenessinadynamicenvironment.

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Creating a Learning Organization


CreatingaLearningOrganization
LLearningorganizationsareskilledatfourmain
i
i ti
kill d t f
i
activities:

Solvingproblemssystematically
Experimentingwithnewapproaches
Learningfromtheirownexperiencesandpast
historyaswellasfromtheexperiencesofothers
Transferringknowledgequicklyandefficiently
throughouttheorganization

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118

Basic Model of Strategic Management


BasicModelofStrategicManagement
Strategicmanagementconsistsoffourbasic
St
t i
t
i t ff
b i
elements:
Environmentalscanning
Strategyformulation
Strategyimplementation
Evaluationandcontrol
Evaluation and control

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BasicElementsoftheStrategic
ManagementProcess
Figure 11
Figure11

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Strategic Management Model


StrategicManagementModel
Figure1 2
Figure12

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121

Basic Model of Strategic Management


BasicModelofStrategicManagement
Environmentalscanning
E i
t l
i
themonitoring,evaluatinganddisseminatingof
i f
informationfromtheexternalandinternal
ti f
th
t
l di t
l
environmentstokeypeoplewithinthe
organization
SWOTanalysis

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Environmental Variables
EnvironmentalVariables
Figure13
g

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Basic Model of Strategic Management


BasicModelofStrategicManagement
Strategyformulation
St t
f
l ti
processofinvestigation,analysisanddecision
makingthatprovidesthecompanywiththe
ki th t
id th
ith th
criteriaforattainingacompetitiveadvantage
includesdefiningthecompetitiveadvantagesof
includes defining the competitive advantages of
thebusiness(Strategy),craftingthecorporate
mission, specifying achievable objectives and
mission,specifyingachievableobjectivesand
settingpolicyguidelines.

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124

Basic Model of Strategic Management


BasicModelofStrategicManagement
Mission
Mi i
thepurposeorreasonfortheorganizations
existence
it

Vision
describeswhattheorganizationwouldliketo
become

Objectives
theendresultsofplannedactivity
the end results of planned activity
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Basic Model of Strategic Management


BasicModelofStrategicManagement
Strategy
St t
formsacomprehensivemasterapproachthat
stateshowthecorporationwillachieveits
t t h th
ti
ill hi
it
missionandobjectives
maximizescompetitiveadvantageandminimizes
maximizes competitive advantage and minimizes
competitivedisadvantage
corporate,business,functional
corporate business functional

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126

Hierarchy of Strategy
HierarchyofStrategy

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127

Basic Model of Strategic Management


BasicModelofStrategicManagement
Policy
P li
abroadguidelinefordecisionmakingthatlinks
th f
theformulationofastrategywithits
l ti
f t t
ith it
implementation

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Basic Model of Strategic Management


BasicModelofStrategicManagement
Strategyimplementation
St t
i l
t ti
aprocessbywhichstrategiesandpoliciesareput
i t
intoactionthroughthedevelopmentof
ti th
h th d l
t f
programs,budgetsandprocedures

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Basic Model of Strategic Management


BasicModelofStrategicManagement
Evaluationandcontrol
E l ti
d
t l
aprocessinwhichcorporateactivitiesand
performanceresultsaremonitoredsothat
f
lt
it d th t
actualperformancecanbecomparedwith
desired performance
desiredperformance

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130

Basic Model of Strategic Management


BasicModelofStrategicManagement
Performance
P f
theendresultoforganizationalactivities
includestheactualoutcomesofthestrategic
managementprocess

Feedback/Learningprocess
reviseorcorrectdecisionsbasedonperformance

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Initiation of Strategy: Triggering Events


InitiationofStrategy:TriggeringEvents
Triggeringevent
Ti
i
t
somethingthatactsasastimulusforachangein
strategyandcaninclude:
t t
d
i l d
NewCEO
Externalintervention
Threatofchangeofownership
Performancegap
Strategicinflectionpoint
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Strategic Decision Making


StrategicDecisionMaking
Strategicdecisions
St t i d i i
dealwiththelongtermfutureofanentire
organizationandhavethreecharacteristics:
i ti
dh
th
h
t i ti
Rare
Consequentiall
Directive

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ThreeCharacteristicsof
StrategicDecisions
Rare
Strategicdecisionsareunusualandtypicallyhave
noprecedenttofollow.

Consequential

Strategicdecisionscommitsubstantialresources
and demand a great deal of commitment from
anddemandagreatdealofcommitmentfrom
peopleatalllevels.

Directive

Strategicdecisionssetprecedentsforlesser
decisionsandfutureactionsthroughoutan
organization
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134

MintzbergsModesofStrategic
k
DecisionMaking
Entrepreneurial
t ep e eu a

Adaptive
dapt e

Planning

Logical
Logical
incrementalism

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Strategic DecisionMaking
StrategicDecision
MakingProcess
Process
1.
1
2.
3
3.
4.
5.
6.
7.
8
8.

Evaluatecurrentperformanceresults
Evaluate
current performance results
Reviewcorporategovernance
Scan and assess the external environment
Scanandassesstheexternalenvironment
Scanandassesstheinternalcorporate
environment
Analyzestrategic(SWOT)factors
Generate,evaluateandselectthebest
alternativestrategy
lt
ti
t t
Implementselectedstrategies
Evaluate implemented strategies
Evaluateimplementedstrategies
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Strategic DecisionMaking
StrategicDecision
MakingProcess
Process
Figure15
g

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Strategic DecisionMaking
StrategicDecision
MakingProcess
Process
Figure15
g

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TheStrategicAudit:AidtoStrategic
DecisionMaking
k
Strategicaudit
St t i
dit
providesachecklistofquestions,byareaorissue,
th t
thatenablesasystematicanalysistobemadeof
bl
t
ti
l i t b
d f
variouscorporatefunctionsandactivities

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