CHAPTER 1 Basic Concepts of Strategic Management

STRATEGIC MANAGEMENT & BUSINESS POLICY

THOMAS L. WHEELEN J. DAVID HUNGER

10TH EDITION

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Basic Concepts of Strategic Management

Globalization
Internationalization of markets and corporations
Global (worldwide) markets rather than national markets

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

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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

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Basic Concepts of Strategic Management

Electronic Commerce -- Trends Pace of business increasing Internet purchasing beyond traditional boundaries Knowledge key asset source of competitive advantage

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Strategic Management Defined

Set of managerial decisions and actions that determines the long-run performance of a firm.

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Basic Concepts of Strategic Management

4 Phases of Strategic Management

1. 2. 3. 4. Basic financial planning Forecast-based planning Externally-oriented planning Strategic management

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Basic Concepts of Strategic Management

Highly Rated Benefits Clearer sense of strategic vision Sharper focus on strategic importance Improved understanding of changing environment

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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?
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Basic Concepts of Strategic Management

Basic Elements of the Strategic Management Process

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Environmental Scanning Defined

Monitoring, evaluation, and disseminating information from external and internal environments to key people in the firm

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Basic Concepts of Strategic Management

Environmental Variables

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Environmental Scanning

SWOT Analysis
Strengths Weaknesses Opportunities - Threats

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Strategy Formulation

Development of long-range plans for effective management of opportunities and threats in light of corporate strengths and weaknesses

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Strategy Formulation

Mission Statement Purpose/reason for organization Promotes shared expectations Communicates public image Who we are; what we do; what we aspire to

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Organizational Adaptation

Organization fit with environment Theory of population ecology Institution theory Strategic choice perspective Organizational learning theory

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Organizational Adaptation

Strategic flexibility Demands long-term commitment to development of critical resources Demands firm become a learning organization

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Learning Organizations

An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights

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Learning Organizations

4 Chief Activities Systematic problem solving New approach experimentation Learning from experiences Intra-organization knowledge transfer

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Basic Concepts of Strategic Management

Hierarchy of Strategy

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Goals & Objectives

Corporate Goals/Objectives
Profitability (net profit) Growth Resource utilization (ROE, ROI) Market leadership

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Basic Concepts of Strategic Management

3 Types of Strategy
Corporate strategy

Business strategy
Functional strategy

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Basic Concepts of Strategic Management

Corporate Strategy
Stability Growth Retrenchment

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Basic Concepts of Strategic Management

Business Strategy
Competitive strategies Cooperative strategies

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Basic Concepts of Strategic Management

Functional Strategy
Technological leadership Technological followership

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Basic Concepts of Strategic Management

Strategic Decision-Making Process

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Strategic Decision Making

Strategic Decisions
Rare

Consequential
Directive

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Strategic Decision Making

Mintzbergs Modes
Entrepreneurial mode Adaptive mode Planning mode Logical incrementalism

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Hambrick and Fredrickson Good Strategy

5 Elements of Good Strategy

1. 2. 3. 4. 5. Arenas Vehicles Differentiators Staging Economic logic

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