Concepts

Concepts of
of Strategic
Strategic Management
Management
Fred
Fred R.
R. David
David
Prentice-Hall,
Prentice-Hall, Inc.
Inc.
Sixth
Sixth Edition
Edition

Chapter
Chapter 11
The
The Nature
Nature of
of Strategic
Strategic
Management
Management

Three
Three Themes
Themes in
in the
the Text
Text
Global Considerations Impact Virtually
All Strategic Decisions
Information Technology Has Become a
Vital Strategic Management Tool
Preserving the Natural Environment is
an Important Strategic Issue

Chapter
Chapter Objectives
Objectives
Describe the strategic management process
Explain the need for integrating analysis and
intuition in strategic management
Define and give examples of key terms in strategic
management
Discuss the nature of strategy formulation,
implementation, and evaluation activities
Describe the benefits of good strategic management
Explain why good ethics is good business in strategic
management

Global Considerations
Impact Virtually All
Strategic Decisions
Should
Should we
we
import?
import?

Should
Should II
learn
learn aa foreign
foreign
language?
language?

Will
Will NAFTA
NAFTA
affect
affect our
our firm?
firm?

Should
Should we
we
export?
export?

Information Technology Has Become

A Vital Strategic Management Tool

Should
Should we
we set
set
up
up aa Web
Web site?
site?

Should
Should we
we
upgrade
upgrade our
our
PCs?
PCs?

Should
Should we
we
outsource
outsource MIS?
MIS?

Should
Should we
we buy
buy
our
our sales
sales staff
staff
laptops?
laptops?

Preserving the Natural

Environment is an Important
Strategic Issue

Is
Is our
our firm
firm
environmentally
environmentally
friendly?
friendly?

Should
Should we
we
burn
burn low-sulfur
low-sulfur
coal?
coal?

Should
Should we
we
recycle?
recycle?

Will
Will Congress
Congress
pass
pass tougher
tougher
laws?
laws?

The
The Definition
Definition of
of
Strategic
Strategic Management
Management
The Art and Science of
Formulating, Implementing, and
Evaluating Cross-Functional
Decisions That Enable an
Organization to Achieve Its
Objectives

The
The Stages
Stages and
and Activities
Activities in
in the
the
Strategic
Strategic Management
Management Process
Process
Stages

Activities

Strategy
formulation

Conduct
research

Integrate
intuition
with analysis

Make
decisions

Strategy
implementation

Establish
annual
objectives

Devise
policies

Allocate
resources

Strategy
evaluation

Review internal
and external
factors

Measure
performance

Take
corrective
action

The
The Basis
Basis for
for Good
Good
Strategic
Strategic Decisions
Decisions
Intuition + Analysis

Effective Strategic Decisions

Global
Global Perspective
Perspective
The
TheWorlds
WorldsLargest
LargestCompanies
Companies
The Worlds Ten Largest Companies in
Rank Order Based on 1994 Revenues
1. Mitsubishi

6. Marubeni

2. Mitsui

7. Ford Motor

3. Itochu

8. Exxon

4. Sumitomo

9. Nissho Iwai

5. General Motors

10. Royal Dutch/Shell Group

What
What Traits
Traits CEOs
CEOs Have
Have Now
Now -- And
And Will
Will
Need
Need in
in the
the Year
Year 2000
2000
Personal Behaviors

Now

Year 2000

Conveys strong sense of vision

Links compensation to performance
Communicates frequently with employees
Emphasizes ethics
Plans for management succession
Communicates frequently with customers
Reassigns or terminates
Rewards loyalty
Makes all major decisions
Behaves conservatively

75%
66%
59%
74%
56%
41%
34%
39%
39%
32%

98%
91%
89%
85%
85%
78%
71%
44%
21%
13%

What
What Traits
Traits CEOs
CEOs Have
Have Now
Now -- And
And Will
Will
Need
Need in
in the
the Year
Year 2000
2000 (cont.)
(cont.)
Knowledge and Skills

Now

Year 2000

Strategy formulation
Human resource management
International economics and politics
Science and technology
Computer literacy
Marketing and sales
Negotiation
Accounting and finance
Handling media and public speaking
Production

68%
41%
10%
11%
3%
50%
34%
33%
16%
21%

78%
53%
19%
15%
7%
48%
24%
24%
13%
9%

Ten
Ten Key
Key External
External Forces
Forces
Competitive
Economic

Technological

Social

Governmental

Cultural

Political

Demographic

Environmental
Legal

Fourteen
Fourteen Key
Key Internal
Internal Forces
Forces
Management
Marketing

Research &
Development

Purchasing

Manufacturing
Production/
Operations

Distribution

Key
Key Internal
Internal Forces
Forces (cont.)
(cont.)
Finance/Accounting
Packaging

Promotion

Human
Resource
Management

Employee/
Manager
Relations

Vendor
Relations

Computer
Information
Systems

Keys to Formulating Strategies

Business
Business Mission
Mission

Internal
Internal
Strengths
Strengthsand
and
Weaknesses
Weaknesses

External
External
Opportunities
Opportunities
and
andThreats
Threats

Strategy
Strategy Formulation
Formulation

A
AComprehensive
Comprehensive Strategic
StrategicManagement
Management Model
Model
Feedback

Perform
Perform
External
External
Audit
Audit

Establish
Establish
LongLongterm
term
Objectives
Objectives

Develop
Develop
Mission
Mission
Statement
Statement

Generate,
Generate,
Evaluate,
Evaluate,
and
and
Select
Select
Strategies
Strategies

Establish
Establish
Policies
Policiesand
and
Annual
Annual
Objectives
Objectives

Allocate
Allocate
Resources
Resources

Measure
Measure
and
and
Evaluate
Evaluate
Performance
Performance

Perform
Perform
Internal
Internal
Audit
Audit

Strategy Formulation

Strategy Implementation

Strategy Evaluation

Forces
Forces Influencing
Influencing Design
Design of
of Strategic
Strategic
Management
Management Systems
Systems
Toward more
formality and
more details

Organization
Small one-plant companies
Large companies

Management Styles
Policy maker
Democratic-permissive
Authoritarian
Day-to-day operational thinker
Intuitive thinker
Experienced in planning
Inexperienced in planning

Toward less
formality and
fewer details

Forces
Forces Influencing
Influencing Design
Design of
of Strategic
Strategic
Management
Management Systems
Systems
Toward more
formality and
more details

Complexity of
Environment
Stable environment
Turbulent environment
Little competition
Many markets and customers
Single market and customer
Competition severe

Toward less
formality and
fewer details

Forces
Forces Influencing
Influencing Design
Design of
of Strategic
Strategic
Management
Management Systems
Systems
Toward more
formality and
more details

Complexity of
Production Process
Long production lead times
Short production lead times
Capital intensive
Labor intensive
Integrated manufacturing processes
Simple manufacturing processes
High technology
Low technology
Market reaction time for new
product is short

Toward less
formality and
fewer details

Forces
Forces Influencing
Influencing Design
Design of
of Strategic
Strategic
Management
Management Systems
Systems
Toward more
formality and
more details

Nature of Problems
Facing new, complex, tough
problems having long-range
aspects
Facing tough short-range problems

Purpose of Planning
System
Coordinate division activities
Train managers

Toward less
formality and
fewer details

Benefits
Benefits of
of Strategic
Strategic Management
Management

- Improved Communication - Greater Productivity

- Increased Understanding

- More Effective Strategies

- Enhanced Commitment

- Higher Productivity

- Allow Firm to Influence, Initiate, and Anticipate

- Be Proactive Rather Than Reactive

How
How to
to Create
Create an
an Ethical
Ethical Culture
Culture
Develop a Code of Business Ethics
Ask All Managers and Employers to Sign
the Code
Offer Business Ethics Workshops
Include Ethics Factors in Performance
Appraisal Instruments
Link Compensation to Ethical Behavior

How
How to
to Create
Create an
an Ethical
Ethical Culture
Culture
(cont.)
(cont.)
Encourage Whistle Blowing
Encourage Good Business Ethics
Behavior
Publicize Good Business Ethics Behavior
Reward Good Business Ethics Behavior
Set a Good Example

The
The Communications
Communications Benefits
Benefits of
of
Engaging
Engaging In
In Strategic
Strategic Management
Management
Managers from all functional
areas listen and discuss their
views in strategic
management meetings. This
interaction yields learning,
appreciation, and
understanding among
managers who otherwise do
not communicate with each
other