Chapter Strategic Management © 2015 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Learning Objectives Explain the concept of strategic management Describe how strategic decisions differ from other decisions that managers make Name the benefits and risks of a participative approach to strategic decision making Understand the types of strategic decisions for which different managers are responsible Describe a comprehensive model of strategic decision making Appreciate the importance of strategic management as a process Give examples of strategic decisions that companies have recently made The Nature and Value of Strategic Management • Strategic management: The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives 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 environment Dimensions of Strategic Decisions (in detail) Strategic issues require top-management team decisions Strategic decisions overarch several areas of a firm’s operations 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 resources They involve substantial allocations of people, physical assets, and money Strategic decisions commit the firm to actions over an extended period In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm 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 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 and where they compete Shifting away from that can jeopardize their previous gains 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 longterm 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 • Company Mission • External Analysis • Long-Term Objectives • Short-Term Objectives • Policies Empowering Action • Strategic Control & Continuous Improvement • Internal Analysis • 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 Stakeholders • Influential people who are vitally interested in the actions of the business Key Terms • Adaptive mode • Company mission • Continuous improvement • Dynamic • Entrepreneurial mode • Feedback • Formality • Functional tactics • Generic strategies • Grand strategies • Long-term objectives • Planning mode • Policies • Processes • Short-term objectives • Stakeholders • Strategic control • Strategic management • Strategy ... of strategic decisions that companies have recently made The Nature and Value of Strategic Management • Strategic management: The set of decisions and actions that result in the formulation and. .. 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. .. 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