CHAPTER 1 Basic Concepts of Strategic Management STRATEGIC
CHAPTER 1 Basic Concepts of Strategic Management STRATEGIC MANAGEMENT & BUSINESS POLICY 11 TH EDITION THOMAS L. WHEELEN Prentice Hall, Inc. © 2008 J. DAVID HUNGER 11 -
Basic Concepts of Strategic Management Globalization Internationalization of markets and corporations Global (worldwide) markets rather than national markets www. iugaza. edu. ps/emp/melfarra Electronic Commerce Use of the Internet to conduct business transactions Basis for competition on a more strategic level rather than traditional focus on product features and costs Prentice Hall, Inc. © 2008 21 -
Basic Concepts of Strategic Management Electronic Commerce -- Trends • • Forcing company transformation Market access & branding changing – disintermediation of traditional distribution channels Balance of power shift to consumer Competition changing Prentice Hall, Inc. © 2008 31 -
Basic Concepts of Strategic Management Electronic Commerce -- Trends • • • Pacespeed of business increasing Internet purchasing beyond traditional boundaries Knowledge key asset – source of competitive advantage Prentice Hall, Inc. © 2008 41 -
Strategic Management Defined Set of managerial decisions and actions that determines the long-run performance of a firm. It includes environmental scanning, strategy formulation, strategy implementation, and evaluation and control. Prentice Hall, Inc. © 2008 51 -
Strategy formulation • Strategy formulation is typically not a regular, continuous process but is often initiated by generating events, such as a new CEO or a performance gap. Prentice Hall, Inc. © 2008 61 -
Basic Concepts of Strategic Management 4 Phases of Strategic Management • Firms evolve through the following faces of strategic management. 1. Basic financial planning 2. Forecast-based planning 3. Externally-oriented planning 4. Strategic management Prentice Hall, Inc. © 2008 71 -
Basic Concepts of Strategic Management 1. Basic financial planning: initiate some planning when they requested to set up their budgets; considers activities for one year. 2. Forecast-based planning: consider projects for more than a year. The time horizon is usually 3 -5 years. 3. Externally-oriented planning: conduct strategic planning by top management and they leave implementation to low level. 4. Strategic management: planning by forming a team from all levels in the company. Prentice Hall, Inc. © 2008 81 -
Basic Concepts of Strategic Management Highly Rated Benefits • • • Clearer sense of strategic vision Sharper focus on strategic importance Improved understanding of changing environment Prentice Hall, Inc. © 2008 91 -
Basic Concepts of Strategic Management Not Always a Formal Process • • Where is the organization now? (not where do we hope it is) If no changes are made, where will the organization be in 1, 2, 5 or 10 years? What specific actions should management undertake? What are the risks and payoffs? Prentice Hall, Inc. © 2008 101 -
Basic Concepts of Strategic Management Basic Elements of the Strategic Management Process Prentice Hall, Inc. © 2008 111 -
Environmental Scanning Defined Monitoring, evaluation, and disseminating information from external and internal environments –to key people in the firm Prentice Hall, Inc. © 2008 121 -
Basic Concepts of Strategic Management Environmental Variables Prentice Hall, Inc. © 2008 131 -
Environmental Scanning SWOT Analysis • Strengths – Weaknesses • Opportunities - Threats Prentice Hall, Inc. © 2008 141 -
Strategy Formulation Development of long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses Prentice Hall, Inc. © 2008 151 -
Strategy Formulation Mission Statement • • Purpose/reason for organization Promotes shared expectations Communicates public image Who we are; what we do; what we aspire to Prentice Hall, Inc. © 2008 161 -
Organizational Adaptation Organization “fit” with environment • • Theory of population ecologybiology: org. unable to adapt to changing conditions. Institution theory: org. can adapt to changes. Strategic choice perspective: not only adapt to changes but also it can reshape its environment. Organizational learning theory: Prentice Hall, Inc. © 2008 171 -
Organizational Adaptation Strategic flexibility • Demands long-term commitment to development of critical resources • Demands firm become a learning organization Prentice Hall, Inc. © 2008 181 -
Learning Organizations An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights Prentice Hall, Inc. © 2008 191 -
Learning Organizations 4 Chief Activities • • Systematic problem solving New approach experimentation Learning from experiences Intra-organization knowledge transfer Prentice Hall, Inc. © 2008 201 -
Basic Concepts of Strategic Management Hierarchy of Strategy Prentice Hall, Inc. © 2008 211 -
levels of strategyhierarchy • A large corporation tends to have three levels of strategy (corporate, business, and functional) which form a hierarchy of strategy. Prentice Hall, Inc. © 2008 221 -
Goals & Objectives Corporate Goals/Objectives –Profitability (net profit) –Growth –Resource utilization (ROE, ROI) –Market leadership Prentice Hall, Inc. © 2008 231 -
Basic Concepts of Strategic Management 3 Types of Strategy –Corporate strategy –Business strategy –Functional strategy Prentice Hall, Inc. © 2008 241 -
Basic Concepts of Strategic Management Corporate Strategy –Stability –Growth –Retrenchment Prentice Hall, Inc. © 2008 251 -
Basic Concepts of Strategic Management Business Strategy –Competitive strategies –Cooperative strategies Prentice Hall, Inc. © 2008 261 -
Basic Concepts of Strategic Management Functional Strategy –Technological leadership –Technological followership Prentice Hall, Inc. © 2008 271 -
Basic Concepts of Strategic Management Strategic Decision-Making Process Prentice Hall, Inc. © 2008 281 -
Strategic Decision Making Strategic Decisions –Rare –Consequential –Directive Prentice Hall, Inc. © 2008 291 -
Strategic Decision Making Top managers tend to use one of four modes of strategy formulation: Mintzberg’s Modes –Entrepreneurial mode –Adaptive mode –Planning mode –Logical incrementalism Prentice Hall, Inc. © 2008 301 -
Hambrick and Fredrickson – Good Strategy 5 Elements of Good Strategy 1. 2. 3. 4. 5. Arenas Vehicles Differentiators Staging Economic logic Prentice Hall, Inc. © 2008 311 -
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