◼ Course: Strategic Management

◼ 4th Year –Georgia program

◼ All Majors:Finance + Marketing + Accounting + BIS

Chapter 1
Strategic Management Essentials:
The Nature of Strategic Management

Ch 1 -1
Ch 1 -2
Strategic Management – Defined

Art & science of formulating,

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

Ch 1 -3
Strategic Management

In essence, the strategic

plan is a company’s game
plan.

Ch 1 -4
Strategic Management achieves a firm’s
success through integration --

Management Marketing

Finance/Accounting Production/Operations

Research & Development MIS

Ch 1 -5
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

Ch 1 -6
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

Ch 1 -7
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

Ch 1 -8
 Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions

Strategy Evaluation is to determine which strategies are

not working well
Ch 1 -9
Integrating Insights and Analysis

The strategic management

process attempts to organize
quantitative and qualitative
information under conditions of
uncertainty.
Ch 1 -10
Integrating Insights and Analysis

Insights is based on:

❑ Past experiences

❑ Judgment

❑ Feelings

Insights is Useful for decision

making
❑ Conditions of great uncertainty
❑ Conditions with little model

Ch 1 -11
Strategic Management is Gaining and
Maintaining Competitive Advantage

“Anything that a firm does

especially well compared
to rival firms”

Ch 1 -12
Achieving Sustained Competitive
Advantage

1. Adapting to change in external

trends, internal capabilities and
resources
2. Effectively formulating,
implementing & evaluating
strategies

Ch 1 -13
Adapting to Change

Rate & magnitude of change

increasing dramatically

E-commerce

Demographics

Technology

Ch 1 -14
Adapting to Change

Effective Adaptation

Requires long-term focus

Ch 1 -15
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
follow?
◼ How are our customers
changing?

Ch 1 -16
Key Terms

❑ A vision statement answers

the question “What do we
want to become?”
❑ A mission statement answers
the question “What is our
business?”

Ch 1 -17
Key Terms

Opportunities and Threats (External)

❑ Largely beyond the control of a single

organization

Ch 1 -18
Key Terms

Opportunities & Threats (External)

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

Ch 1 -19
Key Terms
Opportunities & Threats

Environmental Scanning (Industry Analysis)

❑ Process of conducting research

and gathering and assimilating
external information

Ch 1 -20
Key Terms
Opportunities & Threats

Basic Tenet of Strategic Management

Take advantage of
External Opportunities

Strategy Formulation

Avoid/minimize impact of
External Threats

Ch 1 -21
Key Terms

Strengths & Weaknesses (Internal)

❑ Controllable activities performed

especially well or poorly

Ch 1 -22
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 -23
Key Terms
Strengths & Weaknesses
Assessing the Internal Environment

Financial Ratios

Performance Metrics
Internal Factors
Industry Averages

Survey Data

Ch 1 -24
Key Terms

Long-term Objectives

❑ Mission-driven chase of specified results

more than one year out

Ch 1 -25
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 -26
Key Terms

Strategies

❑ Means by which long-term objectives are

achieved

Ch 1 -27
Key Terms

Strategies
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Reduction of expenditure
• Liquidation
• Joint venture

Ch 1 -28
Key Terms

Annual Objectives

❑ Short-term milestones that firms must

achieve to attain long-term objectives

Ch 1 -29
Key Terms

Policies

❑ Means by which annual objectives will be

achieved

Ch 1 -30
Ch 1 -31
Strategic Management Model

1. Identify Existing --

• Vision
• Mission
• Objectives
• Strategies

Ch 1 -32
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 -33
Benefits of Strategic
Management

• Proactive in shaping firm’s future

• Initiate and influence firm’s activities

• Formulate better strategies
•Systematic, logical, rational

Ch 1 -34
Benefits of Strategic
Management

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement

Ch 1 -35
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 -36
Benefits of Strategic
Management (cont’d)

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 -37
Benefits of Strategic
Management (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 -38
Benefits of Strategic
Management (cont’d )

11. Encourages favorable attitude toward

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

Ch 1 -39
Benefits to a Firm That Does
Strategic Planning

Ch 1 -40
Why Some Firms Do No
Strategic Planning

➢Poor reward structures

➢Fire-fighting
➢Waste of time
➢Too expensive
➢Laziness
➢Content with success

Ch 1 -41
Why Some Firms Do No
Strategic Planning

➢Fear of failure
➢Overconfidence
➢Prior bad experience
➢Self-interest
➢Fear of the unknown
➢Suspicion

Ch 1 -42
Disadvantages of International
Operations

➢Difficult communications
➢Underestimate foreign competition
➢Cultural barriers to effective management
➢Complications arising from currency
differences

Ch 1 -43