Basic
Concepts of
Strategic
Management
Chapter 1
Learning Objectives
Understand the benefits of strategic
management
Explain how globalization and
environmental sustainability
influence strategic management
Understand the basic model of
strategic management and its
components
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Learning Objectives
Identify some common triggering
events that act as stimuli for
strategic change
Understand strategic decisionmaking modes
Use the strategic audit as a method
of analyzing corporate functions and
activities
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The Study of Strategic Management
Strategic Management
a set of managerial decisions and
actions that determines the long-run
performance of a corporation
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The Study of Strategic Management
Strategic Management includes:
Internal and external environment
scanning
Strategy formulation
Strategy implementation
Evaluation and control
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Phases of Strategic Management
Phase 1: Basic financial
planning
Phase 2: Forecast-based
planning
Phase 3: Externally
oriented strategic
planning
Phase 4: Strategic
management
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Benefits of Strategic Management
The attainment of an appropriate
match, or fit, between an
organizations environment and its
strategy, structure and processes has
positive effects on the organizations
performance.
Strategic planning becomes
increasingly important as the
environment becomes more unstable.
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Benefits of Strategic Management
Clearer sense of strategic vision for
the firm
Sharper focus on what is
strategically important
Improved understanding of a rapidly
changing environment
Improve performance of the firm.
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Impact of Globalization
Globalization
the integrated internationalization of
markets and corporations
has changed the way modern
corporations do business
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Impact of Innovation
Innovation
describes new products, services,
methods and organizational approaches
that allow the business to achieve
extraordinary returns
Innovation is the implementation of
potential innovations that truly drives
businesses to be remarkable.
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Impact of Sustainability
Sustainability
refers to the use of business practices
to manage the triple bottom line
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Impact of Sustainability
The triple bottom line involves:
1. the management of traditional
profit/loss;
2. the management of the companys
social responsibility; and
3. the management of its
environmental responsibility.
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Theories of Organizational
Adaptation
Institution
Population
ecology
once an
organization is
successfully
established in a
particular
environmental
niche, it is unable to
adapt to changing
conditions
theory
organizations can
and do adapt to
changing
conditions by
imitating other
successful
organizations
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Theories of Organizational
Adaptation
Strategic choice perspective
not only do organizations adapt to a
changing environment, but they also
have the opportunity and power to
reshape their environment
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Theories of Organizational
Adaptation
Organizational learning theory
an organization adjusts defensively to a
changing environment and uses
knowledge offensively to improve the fit
between itself and its environment
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Creating a Learning Organization
Strategic flexibility
the ability to shift from one dominant
strategy to another and requires:
Long-term commitment to the
development and nurturing of critical
resources
Learning organization
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Creating a Learning Organization
Learning organization
an organization skilled at creating,
acquiring and transferring knowledge
and at modifying its behavior to reflect
new knowledge and insights
Organizational learning is a critical
component of competitiveness in a
dynamic environment.
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Creating a Learning Organization
Learning organizations are skilled
at four main activities:
Solving problems systematically
Experimenting with new approaches
Learning from their own experiences and
past history as well as from the
experiences of others
Transferring knowledge quickly and
efficiently throughout the organization
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Basic Model of Strategic
Management
Strategic management consists of
four basic elements:
Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control
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Basic Elements of the Strategic
Management Process
Figure 1-1
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Strategic Management Model
Environment
al
Scanning
External
Societal
Environment:
General Forces
Task
Environment:
Industry Analysis
Internal
Structure:
Chain of Command
Strategy
Formulation
Strategy
Implementation
& Control
Mission
Reason for
Existence
(MVV)
Evaluation
Evaluatio
and
Control
and Control
n
Objectives
What results
to
accomplish Strategies
by when
Plan to
achieve the
Mission, vision Policies
&
objectives
Broad
guidelines for
decision
making
Culture:
Beliefs, Expectations,
Values
Programs
Activities
needed to
accomplish
a plan
Resources:
Budgets
Cost of the
programs
Procedures
Sequence
of steps
needed to
do the job
Assets, Skills
Competencies,
Knowledge
Process
to monitor
performance
and take
corrective
action
Performance
Feedback/Learni
ng
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Strategic Management
Model
Figure
1-2
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Basic Model of Strategic
Management
Environmental scanning
the monitoring, evaluating and
disseminating of information from the
external and internal environments to
key people within the organization
SWOT analysis
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Environmental Variables
Figure 1-3
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Basic Model of Strategic
Management
Strategy formulation
process of investigation, analysis and
decision making that provides the
company with the criteria for attaining a
competitive advantage
includes defining the competitive
advantages of the business (Strategy),
crafting the corporate mission, specifying
achievable objectives and setting policy
guidelines.
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Basic Model of Strategic
Management
Mission
the purpose or reason for the
organizations existence
Vision
describes what the organization would
like to become
Objectives
the end results of planned activity
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Basic Model of Strategic
Management
Strategy
forms a comprehensive master
approach that states how the
corporation will achieve its mission and
objectives
maximizes competitive advantage and
minimizes competitive disadvantage
corporate, business, functional
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Hierarchy of Strategy
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Basic Model of Strategic
Management
Policy
a broad guideline for decision making
that links the formulation of a strategy
with its implementation
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Basic Model of Strategic
Management
Strategy implementation
a process by which strategies and
policies are put into action through the
development of programs, budgets and
procedures
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Basic Model of Strategic
Management
Evaluation and control
a process in which corporate activities
and performance results are monitored
so that actual performance can be
compared with desired performance
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Basic Model of Strategic
Management
Performance
the end result of organizational
activities
includes the actual outcomes of the
strategic management process
Feedback/Learning process
revise or correct decisions based on
performance
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Initiation of Strategy: Triggering
Events
Triggering event
something that acts as a stimulus for a
change in strategy and can include:
New CEO
External intervention
Threat of change of ownership
Performance gap
Strategic inflection point
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Strategic Decision Making
Strategic decisions
deal with the long-term future of an
entire organization and have three
characteristics:
Rare
Consequential
Directive
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Three Characteristics of
Strategic Decisions
Rare
Strategic decisions are unusual and typically
have no precedent to follow.
Consequential
Strategic decisions commit substantial
resources and demand a great deal of
commitment from people at all levels.
Directive
Strategic decisions set precedents for lesser
decisions and future actions throughout an
organization
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Mintzbergs Modes of Strategic
Decision Making
Entreprene
urial
Adaptive
Planning
Logical
incrementa
lism
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Strategic Decision-Making Process
1.
2.
3.
4.
5.
6.
7.
8.
Evaluate current performance results
Review corporate governance
Scan and assess the external environment
Scan and assess the internal corporate
environment
Analyze strategic (SWOT) factors
Generate, evaluate and select the best alternative
strategy
Implement selected strategies
Evaluate implemented strategies
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Strategic Decision-Making Process
Figure 1-5
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Strategic Decision-Making Process
Figure 1-5
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The Strategic Audit: Aid to Strategic
Decision Making
Strategic audit
provides a checklist of questions, by
area or issue, that enables a systematic
analysis to be made of various
corporate functions and activities
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