Introducing the

Concepts

Chapter 1

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 Chapter One Learning Objectives
1.1 The importance of strategic management
1.2 The concept of strategic management.
1.3 People involved with strategic
management.
1.4 Two important factors impacting strategic
management today.

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• Despite your job function, everyone in the
organization has a role in strategic management

• Studies have shown that SM is important:

Makes a difference in how well organizations performs.
Helps organizations to deal with continuous change,
both internally and externally
Enables the coordination of various divisions,
departments, and work activities in pursing
organizational goals

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 Learning Outcome 1.1. – cont’d
• No matter what the business or industry is,
strategic management is involved.
• e.g. Disneyland, Toyota, 世界宣明會
• Companies have varying levels of performance
because of differences in their strategic
positions and differences in how they have
used strategic management.
• e.g. McDonald’s, Burger King, Hardee’s

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 The Four Characteristics of Strategic
Management
• Interdisciplinary
– It focuses on the whole organization, rather than
any functional part
• External Focus – interaction of organization
with external environment
– Economy
– Competitors
– Market demographics

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 The Four Characteristics of Strategic
Management – cont’d
• Internal Focus
– Understands the resources and capabilities the
organization does or does not have

• Future Direction of the Organization, includes

– Decisions
– Planning
– Shifts or changes in products or markets

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• Strategy is a series of goal-directed plans and actions
that align an organization’s skills and resources with
the opportunities and threats in its environment
• Strategy:
 Involves an organization’s goals
 Engages goal directed action
 Includes a series of related decisions and actions
throughout the various level and divisions of organization
 Takes into account organizational internal strengths
(resources and capabilities) and external opportunities and
threats.

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• Strategy management is a process for
situation analysis and strategy formulation,
implementation, and evaluation.

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• Strategic management involves those
decisions and actions of organizational
members that includes:
Analysis of current situation
Development of appropriate strategies
Putting the strategies into action
Evaluating, modifying, changing strategies as
needed

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The Strategic Management Process

• The Strategic Management process is a series

of interrelated and continuous steps leading
to an outcome

• The Strategic Management Process employs

its four characteristics to create a set of
strategies used to conduct its business

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 Situation Analysis
1. Situation analysis is required before deciding
upon a strategic direction or response and it
involves scanning and evaluating
– The current organizational context
– The external environment
– The organizational environment

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 Strategy Formulation
2. Strategy formulation is developing and choosing
appropriate strategies, as guided by the
situation analysis, and includes three main types
of strategies
Functional Strategies (also called operational
strategies)
Competitive Strategies (also called business strategies)
Corporate Strategies (these are guiding strategies by
which all efforts are aligned) e.g. Google and
Facebook

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 Functional Strategies
• Functional strategies are goal oriented plans
and actions of the functional areas of an
organization, they include:
– Production-Operations
– Marketing
– Research & Development
– Human Resources
– Financial-Accounting
– Information Technology & Support

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 Competitive Strategies
• Competitive strategies or business strategies
are goal directed plans and actions concerned
with how an organization competes in a
specific business or industry
– Looks at all aspects of strategies and actions
– Seeks to determine what the company currently
can do and what it wants to do
– Focus is on how it might more effectively compete

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 Corporate Strategy
• Corporate strategies are goal directed plans
and actions that are concerned with what
business or businesses a firm wants to be in
and what to do with those businesses; for
example
– FedEx’s decision to acquire Kinko's
– PepsiCo’s decision to spin off their fast-food
division

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 Strategy Implementation
3. Strategy implementation is putting the various
stages of strategies into action
How a strategy is implemented must be considered
4. Strategy evaluation involves evaluating both the
outcomes of the strategies and how they have
been implemented
Determine if they produced the expected strategic goals
Helps with the evaluation of results and, if necessary,
any modification of strategies

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 Looking at Strategic Management’s
Past
1. Strategy’s military roots
Origin of the word (strategy) is Greek referring to
military commander
Historical references to the design of plans and
actions to gain an edge on the enemy
The concept involves analyzing the situation and
effecting an appropriate response

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• Principles of War are the nine principles
taught by leading US military academies that
can be used in business to develop strategies
Objective
Offensive
Unity of Command
Mass
Economy of Force
Maneuver
Surprise
Security
Simplicity

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 2. Academic Origins of Strategic
Management
Strategic management is a relatively young
field.
The theoretical foundation is from economics
and organization studies
Focus by academics on
Role of managers
Efficiency and effectiveness

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3. Strategic Planning and Strategic
Management Emerge
During the 1960s, organization theorists searched
for explanations of organizational differences in
functioning and performance
Attempts made to determine if there was one best
way to manage in all situations
Contingency approaches emerged when it was
determined that each organization was different
and the best way to manage depended on the
situation

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 Who’s Involved with Strategic
Management?
• Strategic management is more than the
responsibility of an organization’s top
managers
• People at all levels of the organization play a
role in strategy
– Developing it
– Implementing it
– Changing it

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 1. The Board of Directors
• Usually an elected group that represents a
company’s shareholders
They have a legal obligation to represent and
protect the interests of shareholders through
corporate governance
In the past, board participation was viewed as
approving strategies designed by management
With increasing shareholder activism, boards are
more involved in the strategic process

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 Typical Board Responsibilities
 Review and approve strategic goals and plans
 Review and approve organization’s financial standards and
policies
 Ensure the integrity of organization’s financial controls and
reporting system
 Approve an organizational philosophy
 Monitor organizational performance and regularly review
performance results
 Select, and compensate top level managers
 Develop management succession plans
 Review and approve capital allocations and expenditures
 Monitor relations with shareholders and other key
stakeholders

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 2. Top Management
• Responsible for every decision and outcome,
top management plays a most significant role
in strategic management process
• Top management includes C-Suite level
officers, including
CEO, Chief Executive Officer
COO, Chief Operating Officer
CFO, Chief Finance Officer
CIO, Chief Information Officer

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 3. Other Managers and
Organizational Employees
• Managers and employees at all levels have
strategic responsibilities that include:
Strategy implementation, putting strategies into
action
Strategy evaluation, determining if the strategies
are working
Adjust the strategies to achieve desired ends

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The Global Economy and Globalization
• In past twenty-five years, globalization has
become a leading focus of company strategies
• Increasing number of companies have
revenues coming from outside their country of
origin
• Global recession creates strategic challenges
Reduced consumer demand
Restricted access to capital
Pressures to reduce costs

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 The Global Economy and
Globalization(cont’)
• Globalization has created a greater sense of
openness
• Benefits from global expansion are economic
(profits, market opportunities) and social
(political and cultural)

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Global Economy: Key Mechanisms
• World Trade Organization (WTO)
– Helps 153 member countries conduct business
– Open up trade
• World Bank Group
– Cooperative of 185 member countries that provides
financial and technical assistance, to promote
economic development and poverty reduction
– Break down barriers
• International Monetary Fund (IMF)
– Loans and assistance to establish financial stability
– Creates economic interdependence

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 Problems with globalization
• Economic interdependence means when one
country’s economy falters, it can have a
domino effect on the other countries it does
business with
• Economic crises may result
U.S.A. creates barriers in import Chinese
products, effect Chinese business then effect
other countries depended to export to China.

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 Globalization brings Challenges
• Beyond openness and interdependence
Cultural differences  management and
customers
Misunderstands and disagreements between
countries born of resentment, distrust
Need for greater understanding and
awareness by strategic decision makers

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 Corporate Governance
• What is corporate governance?
– The way the a corporation is governed
– The way the board uses organizational resources
– The manner in which conflicts are resolved among
multiple participants in the organization
– The sum of how a corporation uses its resources
to protect the interests of shareholders

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 The Role of Boards of Directors
• The original role of the board of directors was
to ensure a group, independent from
management to look out for investors who
• In practice, the boards developed a “cozy”
relationship with the CEO and management
It resulted in reciprocal “care taking”
Finally effect the profit of investors.

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 Corporate Governance
• Greater awareness of the value of corporate
governance driven by the financial scandals of
the past decade
Destroyed billions of dollars in shareholder value
Directors of boards failed to find or address
organizational problems
• Scandals have led to legislative system reform
Government views business as willing or unable to
regulate.
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 Results in Stricter Regulations on
Financial Reporting
• Sarbanes-Oxley also called for more disclosure
and transparency of financial information,
creating specific requirements for businesses
Certification of the accuracy of financial
statements by requiring senior managers to sign
off on them
Mandated publicly traded firms establish an
auditing of internal financial controls through
independent auditors
These mandates have created compliance costs

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 Concluding Thought
• Strategic management is a business reality
No matter where in an organization a person
works or what their particular job may be, they
will be involved with and affected in some way by
strategic management

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