Part 1

Introduction of Strategy,
The Nature of Strategic Management

Strategic Management: Concepts & Cases

11th Edition Fred David

Ch 1 -1

Course Requirement

1+1 examinations
Max 2 absenteeism
Group presentation
Student activity
Book: Fred David: Strategic Management:
Concepts & Cases

Ch 1 -2

STRATEGIC
MANAGEMENT
Ch 1 -3

Strategic Management
Defined
Strategic management includes understanding the
strategic position of a organization, making strategic
choices for the future, and managing strategy in
action.
Art & science of formulating, implementing, and
evaluating, cross-functional decisions that enable
an organization to achieve its objectives

Ch 1 -4

Prime Task of
Strategic Management

Peter Drucker: -- Think through the

overall mission of a business. Ask
the key question: What is our
Business?

Ch 1 -5

Integrating Intuition and

Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under conditions
of uncertainty

Ch 1 -6

Integrating Intuition and

Analysis
Intuition is based on:
Past experiences
Judgment
Feelings

Intuition is useful for decision making in:

Conditions of great uncertainty
Conditions with little precedent

Ch 1 -7

Integrating Intuition &

Analysis
Intuition & Judgment

Involve Management at all levels

Influence all Analyses

Ch 1 -8

Integrating Intuition &

Analysis
Analytical Thinking

Intuitive Thinking

Ch 1 -9

Comprehensive strategic management model

External
Audit

Chapter 3

Vision
&
Mission

Chapter 2

Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Measure &
Evaluate
Performance

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Internal
Audit

Chapter 4

Ch 1 -10

Strategic Management
achieves a firms success
through integration

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

MIS

Ch 1 -11

Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

Ch 1 -12

Issues in Strategy
Formulation
New business
New business

opportunities
opportunities
Businesses to abandon
Businesses to abandon
Allocation of resources
Allocation of resources
Expansion or
Expansion or
diversification
diversification
International markets
International markets
Mergers or joint ventures
Mergers or joint ventures
Avoidance of hostile
Avoidance of hostile
takeover
takeover

Ch 1 -13

Strategy Implementation

Annual Objectives
Policies
Employee Motivation
Resource Allocation

Ch 1 -14

Strategy
Implementation
Action
ActionStage
Stageof
ofStrategic
Strategic
Management
Management
Most difficult stage
Most difficult stage
Mobilization of employees

Mobilization of employees
&&managers
managers
Interpersonal skills
Interpersonal skills
critical
critical
Consensus on goal
Consensus on goal
pursuit
pursuit

Ch 1 -15

Strategy Evaluation

Internal Review
External Review
Performance Metrics
Corrective Actions

Ch 1 -16

Strategy
Evaluation
Final
FinalStage
Stageof
ofStrategic
Strategic
Management
Management
Subject to future
Subject to future

modification
modification
Todays success no
Todays success no
guarantee
guaranteeof
offuture
futuresuccess
success
New & different problems
New & different problems
Complacency leads to
Complacency leads to
demise
demise

Ch 1 -17

Adapting to Change

Organizations must monitor events

On-going process
Internal and external events
Timely changes

Ch 1 -18

STRATEGIC SCHOOLS
Ch 1 -19

Strategy - definitions

Strategy is planning that allows you to get more

than your fair share.
Strategy is about getting customers and keeping
them.

Drucker: The purpose of a business is to create a

customer.

Build it and they will come.

As Michael Porter: "Strategy is the creation of a
unique and valuable position, involving a different
set of activities"

The three prescriptive schools

School
Design

Planning

Positioning

Nature of Process
Conception
Formal Planning
Analysis

Source: Adapted from Mintzberg,Ahlstrand and Lampel Strategy Safari Prentice Hall (1998)
(c) Macmillan & Tampoe
2001

21

The seven descriptive schools

School
Entrepreneurial
Cognitive
Learning
Power
Cultural
Environmental
Configuration

Nature of Process
Vision
Mental Process
Emergent
Negotiation
Collective process
Reactive process
Transformational

Source: Adapted from Mintzberg,Ahlstrand and Lampel Strategy Safari Prentice Hall
(c) Macmillan
(1998)
& Tampoe
2001

22

Aspects of Strategy

Statement of ends, purposes and intent

High level plan
Element of leadership
Positioning for the future
Building capability
Fit between capabilities and opportunities
Result of deep involvement with business
Pattern of behaviour resulting from embedded culture
An emerging pattern of successful behaviour

23

Achieving Sustained
Competitive Advantage
1. Adapting to change in external trends,
internal capabilities and resources

2. Effectively formulating, implementing &

evaluating strategies
Anything that a firm does especially well
compared to rival firms

Ch 1 -24

Adapting to Change
Requires long-term focus

Rate & magnitude of change

increasing dramatically
E-commerce
Demographics
Technology
Ch 1 -25

Adapting to Change Key

Strategic Management
Questions

What kind of business should we

become?
Are we in the right fields
Are there new competitors?
What strategies should we
pursue?
How are our customers changing?

Ch 1 -26

Ch 1 -27

Key Terms
Strategists Firms success/failure
Various Job Titles:
Chief Executive Officer (CEO)
Chief Strategy Officer (CSO)
President
Owner
Board Chair
Executive Director

Ch 1 -28

Key Terms

Vision Statement
What do we want to become?

Mission Statement
What is our business?

Ch 1 -29

Key Terms

Opportunities and Threats (External)

Largely beyond the control of a single

organization

Ch 1 -30

Key Terms
Opportunities & Threats (External)
Analysis of Trends:

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors
Ch 1 -31

Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)

Process of conducting research and

gathering and assimilating external
information

Ch 1 -32

Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take
Takeadvantage
advantageof
of
External
ExternalOpportunities
Opportunities
Strategy Formulation

Avoid/minimize
Avoid/minimizeimpact
impactof
of
External
ExternalThreats
Threats
Ch 1 -33

Key Terms
Strengths & Weaknesses (Internal)

Controllable activities performed especially

well or poorly

Ch 1 -34

Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

Computer Information Systems

Ch 1 -35

Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios

Performance Metrics

Internal Factors
Industry Averages

Survey Data

Ch 1 -36

Key Terms

Long-term Objectives

Mission-driven pursuit of specified results

more than one year out

Ch 1 -37

Key Terms
Long-term Objectives
Essential for ensuring the firms success

Provide direction

Aid in evaluation

Create synergy

Focus coordination

Basis for planning, motivating, and

controlling

Ch 1 -38

Key Terms

Strategies

Strategy is the direction and scope of an

organisation over the long term, which achieves
advantage in a changing environment through its
configuration of resources and competences with
the aim of fulfilling stakeholder expectations.

Means by which long-term objectives are

achieved
Ch 1 -39

Characteristics of Strategic Decisions

Long-term direction
Scope of an organisations activities
Competitive advantage
Strategic fit with business environment
Organisation resources and competences
Values and expectations of power players

1-40

Implications of Strategic Decisions

1-41

Complexity
Uncertainty
Operational
decisions

Integration
Relationships and
networks
Change

Levels of Strategy
Corporatelevel
strategy
Business-level
strategy
Operational strategy
1-42

What is a Strategic Business Unit?

A strategic business unit (SBU) is a part of an
organisation for which there is a distinct
external market for goods or services that is
different from another SBU.

1-43

Key Terms
Strategies
Some Examples

Geographic expansion

Diversification

Acquisition

Market penetration

Retrenchment

Liquidation

Joint venture
Ch 1 -44

Key Terms

Annual Objectives

Short-term milestones that firms must

achieve to attain long-term objectives

Ch 1 -45

Key Terms

Policies

Means by which annual objectives will be

achieved

Ch 1 -46

BENEFITS OF STRATEGIC
MANAGEMENT
Ch 1 -47

Strategic Management Model

Strategic Management Process

Dynamic & Continuous

More formal in larger organizations

Ch 1 -48

Strategic Management Model

2.
3.
4.
5.
6.
7.

Audit external environment

Audit internal environment
Establish long-term objectives
Generate, evaluate & select
strategies
Implement selected strategies
Measure & evaluate performance

Ch 1 -49

Benefits of Strategic
Management

Proactive in shaping firms future

Initiate and influence firms activities

Formulate better strategies

Systematic, logical, rational

Ch 1 -50

Benefits of Strategic
Management
Financial Benefits

Improvement in sales

Improvement in profitability

Productivity improvement

Ch 1 -51

Benefits of Strategic
Management
Non-Financial Benefits

Improved understanding of competitors strategies

Enhanced awareness of threats

Reduced resistance to change

Enhanced problem-prevention capabilities

Ch 1 -52

Benefits of Strategic
Management (Greenley)
1.

Identification of Opportunities

2.

Objective view of management problems

3.

Improved coordination & control

4.

Minimizes adverse conditions & changes

5.

Decisions that better support objectives

Ch 1 -53

Benefits of Strategic
Management (Greenley contd)
6.

Effective allocation of time & resources

7.

Internal communication among personnel

8.

Integration of individual behaviors

9.

Clarify individual responsibilities

10.

Encourage forward thinking

Ch 1 -54

Benefits of Strategic
Management (Greenley contd)

11. Encourages

favorable attitude toward

change
12. Provides

discipline and formality to the

management of the business

Ch 1 -55

Why Some Firms Do No

Strategic Planning
Poor

reward structures

Fire-fighting
Waste
Too

of time

expensive

Laziness
Content

with success
Ch 1 -56

Why Some Firms Do No

Strategic Planning
Fear

of failure

Overconfidence
Prior

bad experience

Self-interest
Fear

of the unknown

Suspicion

Ch 1 -57

The Summary of Corporate Strategy

Model

1-58