Learning Objectives

At the end of this module, the students are expected to:

1. Define strategic management and describe the strategic-
management process.
2. Discuss the nature of strategy formulation, implementation,
and evaluation activities.
3. Describe the benefits of good strategic management and
pitfalls in strategic planning.

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 Defining Strategic Management
 the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives
 used synonymously with the term strategic planning.
 used to refer to strategy formulation, implementation, and
evaluation, with strategic planning referring only to strategy
formulation.

Defining Strategic Plan

 A strategic plan is a company’s game plan.

 A strategic plan results from tough managerial choices

among numerous good alternatives, and it signals
commitment to specific markets, policies, procedures, and
operations.

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 Stages of Strategic Management

Strategy Strategy Strategy

formulation implementation evaluation

Stages of Strategic Management

• Strategy formulation
 includes developing a vision and mission, identifying an
organization’s external opportunities and threats,
determining internal strengths and weaknesses,
establishing long-term objectives, generating alternative
strategies, and choosing particular strategies to pursue.

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 Strategy Formulation
 Deciding what new businesses to enter
 What businesses to abandon
 How to allocate resources
 Whether to expand operations or diversify
 Whether to enter international markets
 Whether to merge or form a joint venture
 How to avoid a hostile takeover

Stages of Strategic Management

• Strategy implementation
 requires a firm to establish annual objectives, devise
policies, motivate employees, and allocate resources so
that formulated strategies can be executed
 often called the action stage

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 Stages of Strategic Management
• Strategy evaluation
 Managers desperately need to know when particular
strategies are not working well.
 Three fundamental strategy evaluation activities are: (1)
reviewing external and internal factors that are the bases
for current strategies, (2) measuring performance, and (3)
taking corrective actions.
 It is needed because success today is no guarantee of
success tomorrow!

Worst Company Disasters! _ Top 6 Blunders

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 Some Opportunities and Threats

• Computer hacker problems are increasing.

• Intense price competition is plaguing most firms.
• Unemployment and underemployment rates remain high.
• Interest rates are rising.
• Product life cycles are becoming shorter.
• State and local governments are financially weak.

Key Terms in Strategic Management

• Internal strengths and internal weaknesses

 an organization’s controllable activities that are performed
especially well or poorly
 determined relative to competitors

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 Key Terms in Strategic Management

• Objectives
 specific results that an organization seeks to achieve in
pursuing its basic mission
 long-term means more than one year
 should be challenging, measurable, consistent, reasonable,
and clear

Key Terms in Strategic Management

• Strategies
 the means by which long-term objectives will be achieved
 may include geographic expansion, diversification,
acquisition, product development, market penetration,
retrenchment, divestiture, liquidation, and joint ventures

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 Key Terms in Strategic Management

• Annual objectives
 short-term milestones that organizations must achieve to
reach long-term objectives
 should be measurable, quantitative, challenging, realistic,
consistent, and prioritized
 should be established at the corporate, divisional, and
functional levels in a large organization

Sample Strategies in Action in 2013

TABLE 1-1: Strategies in Action in Sample 2013
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
Walgreen Company___________________________________________________________
Walgreen’s is deepening its penetration into the southeastern portion of the USA by acquiring firms such as USA
Drug, May’s Drug, Med-X, Drug Warehouse, and Super D Drug. Walgreen’s is expanding globally through
acquisition of firms such the U.K.’s Alliance Boots GmbH. Walgreen’s is acquiring firms because sales have dropped
15 percent in the last year, as a result of selling more generic drugs, and their same-store-overall sales have
dropped 10 percent, because of the chain’s exit from Express Scripts Holding.

Netflix, Inc._________________________________________________________________
The long-time DVD-by-mail provider is struggling to survive as it switches from the DVD business to (a) providing
Internet-delivered content and (b) expanding overseas. Major rivals include News Corp.’s Hulu and Coinstar’s
Redbox. Netflix’s overseas efforts are not going well because that strategy requires country-by-country deals to line
up video content. Netflix lost 850,000 DVD subscribers and added 530,000 movie and TV-show streaming
customers. Netflix’s international streaming business lost about $400 million in 2012.

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 Key Terms in Strategic Management

• Policies
 the means by which annual objectives will be achieved
 include guidelines, rules, and procedures established to
support efforts to achieve stated objectives
 guides to decision making and address repetitive or
recurring situations

The Strategic-Management Model

Where are we now?

Where do we want to go?

How are we going to get there?

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 The Strategic-Management Model
Their Key questions: Their Steps:
• Where is the organization going? • Analyze OT or constraints in the
external
• What are its options?
• Analyze SW in its internal
• What is the best way forward for • Establish mission and develop goals
the org
• Formulate strategies at –
• How can it be done?  Top (corporate level)
 Mid (business)
 Rank (functional)
• Implement the strategies
• Control the activities to ensure goals
are attained

Benefits of Strategic Management

• Historically, the principal benefit of strategic management has
been to help organizations formulate better strategies through
the use of a more systematic, logical, and rational approach to
strategic choice.
• Communication is a key to successful strategic management
• Through dialogue and participation, managers and employees
become committed to supporting the organization

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 Benefits to a Firm That Does Strategic Planning

Financial Benefits
• Businesses using strategic-management concepts show
significant improvement in sales, profitability, and productivity
compared to firms without systematic planning activities
• High-performing firms seem to make more informed decisions
with good anticipation of both short- and long-term
consequences

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 Nonfinancial Benefits

• Enhanced awareness of external threats,

• Improved understanding of competitors’ strategies,
• Increased employee productivity,
• Reduced resistance to change,
• Clearer understanding of performance–reward relationships.

Nonfinancial Benefits
• Increased discipline
• Improved coordination
• Enhanced communication
• Increased forward thinking
• Improved decision-making
• Increased synergy
• Effective allocation of time and resources

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 Why Some Firms Do No Strategic Planning

• Lack of knowledge in strategic planning

• Poor reward structures
• Firefighting
• Waste of time
• Too expensive

Why Some Firms Do No Strategic Planning

• Laziness
• Content with success
• Overconfidence
• Prior bad experience
• Honest difference of opinion

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 Pitfalls in Strategic Planning
• Using strategic planning to gain control over decisions and resources
• Doing strategic planning only to satisfy accreditation or regulatory
requirements
• Too hastily moving from mission development to strategy
formulation
• Failing to communicate the plan to employees, who continue
working in the dark
• Top managers making many intuitive decisions that conflict with the
formal plan

Pitfalls in Strategic Planning

• Top managers not actively supporting the strategic-planning

process
• Failing to use plans as a standard for measuring performance
• Delegating planning to a “planner” rather than involving all
managers
• Failing to involve key employees in all phases of planning
• Failing to create a collaborative climate supportive of change

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 Guidelines for Effective Strategic Management

Comparing Business and Military Strategy

• A fundamental difference between military and business

strategy is that business strategy is formulated, implemented,
and evaluated with an assumption of competition, whereas
military strategy is based on an assumption of conflict
• Both business and military organizations must adapt to
change and constantly improve to be successful

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 Excerpts from Sun Tzu’s The Art of War Writings

• War is a matter of vital importance to the state: a matter of life

or death, the road either to survival or ruin. Hence, it is
imperative that it be studied thoroughly
• Know your enemy and know yourself, and in a hundred battles
you will never be defeated
• Skillful leaders do not let a strategy inhibit creative counter-
movement

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Learning Objectives
At the end of this module, the students are expected to:
1. Defined strategic management and described the strategic-
management process.
2. Discussed the nature of strategy formulation,
implementation, and evaluation activities.
3. Described the benefits of good strategic management and
pitfalls in strategic planning.

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