QUEENS COLLEGE

MBA PROGRAM

WELCOME TO:
Strategic Management
Credit hours: 2

1
 Ground Rules
 Free exit and free entry
 Arrive on time to the class as much as u can
 Participation
Not interrupting fellow students
Respecting other people’s contribution

Ch 1 -2
 Chapter 1
The Nature of Strategic Management

Strategic Management:
Concepts & Cases
11th Edition
Fred David

Ch 1 -4
 CHAPTER OBJECTIVES
After studying this chapter, you should
be able to do the following:

4. Discuss the nature of Strategy

1.Describe the strategic-
formulation, implementation, and
management process.
evaluation activities.
2. Explain the need for
5. Describe the benefits of good
integrating analysis and
strategic management.
intuition in strategic
management. 6. Discuss the relevance of Sun
Tzu’s The Art of War to strategic
3. Define and give
management.
examples of key terms
in strategic 7. Discuss how a firm may achieve
management. sustained competitive advantage.

Ch 1 -5
Strategic Management –
Defined
 History of Strategy began in the
military.
 Word ‘Strategy’ comes from Greek

word ‘Straegos’, that refers to

military general and combines
‘stratos’ (army) and ‘ago’ (to lead).
 1st used around 360 BC, when the

Chinese military strategist sun Tzu

wrote the art of war,
Ch 1 -6
Strategic Management –
Defined
Both Military Strategy and Business Strategy
focus how to use their own strengths to
exploit enemy’s / competitor’s weaknesses.

 Fundamental difference between Military

Strategy and Business Strategy is that
Military strategy is based on the assumption
of ‘Conflict’, whereas Business Strategy is
based on the assumption of ‘Competition’.
 Strategic Management as an academic
discipline started to develop in the 1950s.
Ch 1 -7
Strategic Management –
Defined

Art & science of formulating,

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

Ch 1 -8
Strategic Management
achieves a firm’s success
through integration ––

Management Marketing

Finance/Accounting Production/Operations

Research & Development MIS

Ch 1 -9
Strategic Management

In essence, the strategic plan is a

company’s game plan

Ch 1 -10
Stages of Strategic
Management

ch 1 - 10
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
Newbusine
busineopportunities
opportunities
Businesses
Businessesto toabandon
abandon
Allocation
Allocationofofresources
resources
Expansion
Expansionor or
diversification
diversification
International
Internationalmarkets
markets
Mergers
Mergersororjoint
jointventures
ventures
Avoidance
Avoidanceof ofhostile
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
Mostdifficult
difficultstage
stage
Mobilization
Mobilizationof of
employees
employees&&managers
managers
Interpersonal
Interpersonalskills
skills
critical
critical
Consensus
Consensuson ongoal
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
Subjectto
tofuture
future
modification
modification

Today’s
Today’ssuccess
successnono
guarantee
guaranteeofoffuture
futuresuccess
success

New
New&&different
differentproblems
problems

Complacency
Complacencyleads
leadsto
to
demise
demise

Ch 1 -17
Integrating Intuition and
Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under conditions of
uncertainty

Ch 1 -18
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 -19
Integrating Intuition &
Analysis

Intuition & Judgment

Involve Management at all levels

Influence all Analyses

Ch 1 -20
Intuition + Analysis

Effective Strategic
Decisions

Ch 1 - 21
 The
The Stages
Stages and
and Activities
Activities in
in the
the
Strategic
Strategic Management
Management Process
Process
Stages Activities
Strategy Conduct Integrate Make
formulation investigation intuition with
analysis decisions

Strategy Establish Devise Allocate

implementation annual policies resources
objectives

Review internal Measure Take

Strategy and external performance corrective
evaluation factors action
Ch 1-17
Adapting to Change

Organizations must monitor events

 On-going process
 Internal and external events

 Timely changes

Ch 1 -23
Adapting to Change

Rate & magnitude of change

increasing dramatically

E-commerce

Globalization

Technology

Ch 1 -24
Adapting to Change

Effective Adaptation

Requires long-term focus

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
Key Terms

Strategists – Firm’s success/failure

Various Job Titles:

•Chief Executive Officer (CEO)

•Chief Strategy Officer (CSO)
•President

•Owner

•Board Chair

•Executive Director

Ch 1 -27
Competitive Advantage

“Anything that a firm does especially

well compared to rival firms”
Strategic Management is Gaining
and Maintaining Competitive
Advantage

Ch 1 -28
Achieving Sustained
Competitive Advantage

1. Adapting to change in external trends,

internal capabilities and resources

2. Effectively formulating, implementing &

evaluating strategies

Ch 1 -29
Key Terms

Vision Statement –
What do we want to become?

Mission Statement –
What is our business?

Ch 1 -30
Key Terms

Opportunities and Threats (External)

 Largely beyond the control of a single

organization

Ch 1 -31
Key Terms

Opportunities & Threats (External)

Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors

Ch 1 -32
Key Terms
Opportunities & Threats

Environmental Scanning (Industry Analysis)

 Process of conducting research and

gathering and assimilating external
information

Ch 1 -33
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 -34
Key Terms

Strengths & Weaknesses (Internal)

 Controllable activities performed especially

well or poorly

Ch 1 -35
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 -36
Key Terms
Strengths & Weaknesses
Assessing the Internal Environment

Financial Ratios

Performance Metrics
Internal Factors
Industry Averages

Survey Data

Ch 1 -37
Key Terms

Long-term Objectives

 Objectives can be defined as specific results

that an organization seeks to achieve in
pursuing its basic mission. Long-term
means more than five year.

Ch 1 -38
Key Terms

Long-term Objectives

Essential for ensuring the firm’s success

• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and
controlling

Ch 1 -39
Key Terms

Strategies

 Means by which long-term objectives are

achieved

Ch 1 -40
Key Terms

Strategies
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Retrenchment
• Liquidation
• Joint venture

Ch 1 -41
Key Terms

Annual Objectives

 Short-term milestones that firms must

achieve to attain long-term objectives

Ch 1 -42
Key Terms

Policies

 Means by which annual objectives will be

achieved

Ch 1 -43
Over view of types/levels of strategy

Ch 1 -44
1) Corporate level strategies
 A corporate level strategy specifies actions a firm
takes to gain a competitive advantage by selecting
and managing a group of different businesses
competing in different product markets.
2) Business Level Strategies
 A business-level strategy is an integrated and coordinated
set of commitments and actions the firm uses to gain a
competitive advantage by exploiting core competencies in
specific product markets
3) Functional Level Strategies
 This is the approach taken by a functional area to achieve
corporate and business unit objectives and strategies
 They are strategies, which are designed by different
functions of a company; Finance, Accounting, Research
and Development, Personnel, Marketing and Production
Corporate level strategy

Business level
strategy

Functional level strategy

Ch 1-46
Comprehensive strategic
management model

Ch 1 -47
Strategic Management Model

Strategic Management Process

 Dynamic & Continuous

 More formal in larger organizations

Ch 1 -49
Strategic Management Model

1. Identify Existing --

• Vision
• Mission
• Objectives
• Strategies

Ch 1 -50
Strategic Management Model

2. Audit external environment

3. Audit internal environment
4. Establish long-term objectives
5. Generate, evaluate & select
strategies
6. Implement selected strategies
7. Measure & evaluate performance

Ch 1 -51
Benefits of Strategic
Management

• Proactive in shaping firm’s future

• Initiate and influence firm’s activities
• Formulate better strategies
•Systematic, logical, rational

Ch 1 -52
Benefits of Strategic
Management

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement

Ch 1 -53
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 -54
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 -55
Benefits of Strategic
Management (Greenley – cont’d)

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 -56
Benefits of Strategic
Management (Greenley – cont’d)

11. Encourages favorable attitude toward

change
12. Provides
discipline and formality to the
management of the business

Ch 1 -57
Why Some Firms Do No
Strategic Planning

Poor reward structures

Fire-fighting

Waste of time
Too expensive
Laziness

Content with success

Ch 1 -58
Why Some Firms Do No
Strategic Planning

Fear of failure
Overconfidence

Prior bad experience

Self-interest

Fear of the unknown

Suspicion

Ch 1 -59

END OF THE CHAPTER
 QUESTION?

Ch 1 -60
Copyright 2007 Prentice Hall