The Nature of

Strategic
Management

Chapter One

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 Learning Objectives

1. Describe the strategic-management process.

2. Discuss the three stages of strategy
formulation, implementation, and evaluation
activities.
3. Explain the need for integrating analysis and
intuition in strategic management.
4. Define and give examples of key terms in
strategic management.

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 Learning Objectives (cont.)

5. Illustrate the comprehensive strategic-

management model.
6. Describe the benefits of engaging in strategic
management.
7. Explain why some firms do no strategic
planning.
8. Describe the pitfalls in actually doing strategic
planning.
9. Discuss the connection between business and
military strategy.
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 Defining Strategic Management
 Strategic management
is the process of formulating and implementing
strategies to achieve the objectives and goals of an
organization.
It involves analyzing the internal and external
environment, setting goals and objectives, developing and
implementing strategies, and evaluating the results to
ensure the organization's long-term success and
competitiveness.
Strategic management helps organizations align their
resources, capabilities, and activities with the changing
business environment to gain a competitive advantage and
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achieve sustainable growth
Defining Strategic Management
Strategic Management

the art and science of formulating,

implementing, and evaluating cross-
functional decisions that enable an
organization to achieve its objectives

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Defining Strategic Management
Strategic management is used with the
term strategic planning in this course.
Sometimes the term strategic
management is used to refer to strategy
formulation, implementation, and
evaluation, with strategic planning
referring only to strategy formulation.

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Defining Strategic Management
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

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 Stages of Strategic Management
Strategy Formulation
 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
 choosing particular strategies to pursue

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Strategy Formulation Decisions

What new businesses to enter

What businesses to abandon
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

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 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
Determining which strategies are not
working well
Three fundamental activities:
reviewing external and internal factors that
are the bases for current strategies
measuring performance
taking corrective actions

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Key Terms in Strategic Management
Competitive Advantage
any activity a firm does especially well compared
to activities done by rival firms,
Or
A unique advantage that allows an organization to
outperform its competitors and achieve superior
performance in the market.
 A firm must strive to achieve sustained competitive
advantage

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Key Terms in Strategic Management

Strategists
Individuals most responsible for the success or
failure of an organization
Help an organization gather, analyze, and
organize information
Vision and Mission Statements
A vision statement answers the question “What
do we want to become?”
A mission statement answers the question
“What is our business?”
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Key Terms in Strategic Management
External Opportunities and Threats
economic, social, cultural, demographic,
environmental, political, legal, governmental,
technological, and competitive trends and events
that could significantly benefit or harm an
organization
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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 Some Opportunities and Threats
Availability of capital can no longer be
taken for granted.
Consumers expect green operations and
products.
Marketing is moving rapidly to the Internet.
Commodity food prices are increasing.

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Key Terms in Strategic Management

Long-Term 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

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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
Policies
the means by which annual objectives will be
achieved
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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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 Benefits of Strategic Management
Strategic management allows an
organization to be more proactive than
reactive in shaping its own future;

It allows an organization to initiate and

influence (rather than just respond to)
activities—and thus to exert control over
its own destiny.

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 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 tend to do systematic

planning to prepare for future fluctuations in
their external and internal environments

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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

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 Why Some Firms Do No Strategic
Planning
No formal training in strategic management
No understanding of or appreciation for the
benefits of planning
No monetary rewards for doing planning
No punishment for not planning
Too busy “firefighting” (resolving internal
crises) to plan ahead
View planning as a waste of time, since no
product/service is made
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 Why Some Firms Do No Strategic
Planning
Laziness; effective planning takes time and
effort; time is money
Content with current success; failure to
realize that success today is no guarantee for
success tomorrow
Overconfident
Prior bad experience with strategic planning
done sometime/somewhere

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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
 Top managers not actively supporting the strategic-planning
process
 Failing to use plans as a standard for measuring performance
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 Pitfalls in Strategic Planning
 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
 Viewing planning as unnecessary or unimportant
 Becoming so engrossed in current problems that
insufficient or no planning is done
 Being so formal in planning that flexibility and
creativity are stifled
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How to Gain and Sustain
Competitive Advantage

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 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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Business and military strategy share some similarities in terms of
goal-setting, planning, and execution. However, there are also
significant differences between the two.
1. Goal-setting: Both business and military strategies involve setting
clear objectives. In business, these objectives are usually focused
on profitability, market share, or growth. In the military, goals are
typically centered around national security, defense, or the
achievement of specific military objectives.
2. Planning: Business and military strategies require careful
planning to achieve their respective goals. In business, this
involves analyzing market conditions, identifying target
customers, and developing marketing and operational plans. In the
military, planning involves assessing the enemy's capabilities,
identifying potential threats, and devising tactical and operational
plans to achieve military objectives.

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Despite these similarities, there are several key differences
between business and military strategy:
1. Nature of the environment: Business strategies are
developed and executed in a competitive, market-driven
environment where success is often measured by financial
performance. Military strategies, on the other hand, are
implemented in a more hostile and unpredictable environment
where the objective is to overcome adversaries and ensure
national security.
2. Stakeholders: In business, the primary stakeholders are
customers, shareholders, employees, and suppliers. The
success of a business strategy is often measured by its impact
on these stakeholders and the bottom line. In the military, the
primary stakeholders are the government, citizens, and
soldiers. The success of military strategy is often measured by
its impact on national security and the protection of citizens.
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3. Decision-making: Business strategy is typically
developed by a company's leadership and implemented
by managers and employees. Decision-making in
business is often based on market research, financial
analysis, and risk assessment. In the military, strategy
is developed by military leaders and implemented by
soldiers. Decision-making in the military is often based
on intelligence, operational analysis, and the
assessment of military capabilities.

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END

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