Strategic management planing for domestic and global competition 14th john robinson chapter 1

Chapter 1

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
1.
2.
3.
4.

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
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

• 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 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
multifunctional or multibusiness
consequences.
 Strategic decisions have complex
implications for most areas of the firm
 Decisions about customer mix,
competitive emphasis, or
organizational structure involve a
number of the firm’s SBUs, divisions,
or program units


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]


Alternative Strategic Management
Structures
Ex. 1.2


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
Decisions: Business/SBU

• Help bridge decisions at the corporate and functional
levels
• Less costly, risky, and potentially profitable than
corporate-level decisions
• More costly, risky, and potentially profitable than
functional-level decisions
• 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
• Organizational Size
• Problems in the Firm
• Predominant
• Purpose of the
Management Styles
Planning System
• Complexity of
• Stage of Firm’s
Environment
Development
• Production Process


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.