Strategic management planning for domestic and global competition 14th ed pearce robinson chapter 1

Nine Critical Tasks of Strategic Management -- Tasks 1-5: • Formulate the company’s mission • Conduct an internal analysis • Assess the external environment – competitive and general con

Strategic

Management

Chapter 1

Learning Objectives

1 Explain the concept of strategic management

2 Describe how strategic decisions differ from other decisions that managers make

3 Name the benefits and risks of a participative approach to

strategic decision making

4 Understand the types of strategic decisions for which different managers are responsible

5 Describe a comprehensive model of strategic decision making

6 Appreciate the importance of strategic management as a

process

7 Give examples of strategic decisions that companies have

recently made

The Nature and Value of Strategic Management

Nine Critical Tasks of Strategic Management

Tasks 1-5:

• Formulate the company’s mission

• Conduct an internal analysis

• Assess the external environment – competitive and general contexts

• Analyze the company’s options by matching its resources with the external environment

• Identify the most desirable options in light

of the mission

Nine Critical Tasks of Strategic Management

Tasks 6-9:

• Select a set of long-term objectives and grand strategies that will achieve the most desirable options

• Develop annual objectives and short-term strategies that are compatible with long-term objectives and grand strategies

• Implement the strategic choices

• Evaluate the success of the strategic process for future decision making

What is Strategy?

 Large-scale, future-oriented plan

 Used to interact within competitive

environment to achieve company goals

 Provides a framework for managerial

decisions

 Reflects a company’s awareness of the main elements of competition

Dimensions of Strategic Decisions

• Strategic issues require top-management team decisions

• Strategic issues require large amounts of the firm’s

resources

• Strategic issues often affect the firm’s long-term

prosperity

• Strategic issues are future oriented

• Strategic issues usually have multifunctional or

multibusiness consequences

• Strategic issues require considering the firm’s external

Dimensions of Strategic Decisions

 Usually only top management has the perspective

needed to understand their broad implications

 Usually only top managers have the power to

authorize necessary resource allocations

Dimensions of Strategic Decisions (contd.)

• Strategic issues require large amounts of the firm’s

Dimensions of Strategic Decisions (contd.)

• Strategic issues often affect the firm’s

long-term prosperity

 Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer

 Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy

 Firms become known for what they do and where they compete Shifting away from that can jeopardize their previous gains.

Dimensions of Strategic Decisions (contd.)

• Strategic issues are future-oriented

They are based on what managers forecast, rather than what they know

Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options

A firm will succeed only if it takes a proactive (anticipatory) stance toward change

Dimensions of Strategic Decisions (contd.)

• Strategic issues usually have

Dimensions of Strategic Decisions (contd.)

• Strategic issues require considering the

firm’s external environment

• All businesses exist in an open system

They affect and are affected by external conditions that are largely beyond their control

• Successful positioning requires that strategic managers look beyond

operations and consider what relevant others are likely to do

Levels of Strategy

• Corporate level: board of

directors, CEO & administration

[Highest]

• Business level: business and

corporate managers [Middle]

• Functional level: Product,

geographic, and functional area

managers [Lowest]

Ex 1.2 Alternative Strategic Management

Structures

Ex 1.4 Hierarchy of Objectives and Strategy

Characteristics of Strategic Management

Decisions: Corporate

• Often carry greater risk, cost, and profit

potential

• Greater need for flexibility

• Longer time horizons

• Choice of businesses, dividend policies,

sources of long-term financing, and

priorities for growth

Characteristics of Strategic Management

Decisions: Functional

• Implement the overall strategy formulated at the corporate and business levels

• Involve action-oriented operational issues

• Relatively short range and low risk

• Modest costs: depend upon available resources

• Relatively concrete and quantifiable

Characteristics of Strategic Management

• Include decisions on plant location, marketing

segmentation, and distribution

Formality in Strategic Management

• Formality is the degree to which

participation, responsibility, authority, and discretion in decision-making are specified in strategic management

Forces Determining Formality

• Stage of Firm’s Development

Three Modes of Formality

• Entrepreneurial Mode – most small firms

• Planning Mode – most large firms

• Adaptive Mode – most medium size firms

Entrepreneurial Mode

• The informal, intuitive, and limited approach

to strategic management associated with

owner-managers of smaller firms.

Planning Mode

• The strategic formality associated with large

firms that operate under a comprehensive,

formal planning system.

Adaptive Mode

• The strategic formality associated with

medium-sized firms that emphasize the

incremental modification of existing

competitive approaches.

Strategy Makers

• Ideal strategic management planning process

includes decision makers from all three levels

• Top managers must give final approval

• Strategic decisions coincide with managers’ responsibilities

Strategy Makers: The CEO

• A firm’s CEO plays a prominent role in

strategic planning

• The CEO’s principal duty is giving

long-term direction to the firm

• The CEO bears ultimate responsibility for

the firm’s success and strategic success

• CEOs are typically strong-willed,

company-oriented individuals

Benefits of a Participative Approach to Strategic

Management

• Managers at all levels interact in planning and

implementing strategy

• Similar to participative decision making

• Assessing strategy formulation requires looking at

nonfinancial evaluations as well as financial ones

• Promoting positive behavioral consequences enables achievement of financial goals

The Strategic Management Process

• Businesses vary in formulation and other processes

• The basic components of the models used to analyze strategic management are similar

• Strategic management is a process—a flow of

information through interrelated stages of analysis toward the achievement of some goal

Ex 1.5 Strategic Management Model

Components of the Strategic Management Model

• Strategic Analysis & Choice

• Generic & Grand Strategies

• Action Plans & Functional Tactics

• Restructuring, Reengineering &

Refocusing

Strategic Management Terms Defined

• Company Mission: The unique purpose that

sets a company apart from others of its type and identifies the scope of its operations.

• Long-term Objectives: The results than an

organization seeks to achieve over a multiyear period.

Strategic Management Terms Defined

• Generic Strategies: Fundamental

philosophical options for the design of

strategies.

• Grand Strategies: The means by which

objectives are achieved.

Strategic Management Terms Defined

• Short-term Objectives: Desired results that provide

specific guidance for action during a period of one year or less

• Functional Tactics: Short-term, narrow scoped plans

that detail the “means” or activities that a company will use to achieve short-term objectives

• Policies: Predetermined decisions that substitute

for managerial discretion in repetitive decision

making

Strategic Management Terms Defined

• Strategic Control: Tracking a strategy as it is

being implemented, detecting problems or

changes in its underlying premises, and

making necessary adjustments.

• Continuous Improvement: A form of strategic

control in which managers are encouraged to

be proactive in improving all operations of the firm.

• Influential people who are vitally interested in the actions of the business