Learning Objectives

1. Explain the concept of strategic management

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Lecture 1, Week 1

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Learning Objectives
1. Explain the concept of strategic management
2. Describe how strategic decisions differ from other decisions that
managers make
3. Name the benefits and risks of a participative approach to strategic
decision making
4. 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

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The Nature and Value of Business Policy
Defining business policy - key concept - integration

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Key tasks of business policy
1) mission
2) internal analysis
3) external environment
4) Analyze the company’s options by
matching its resources with the external
environment
5) Identify the most desirable options in
light of the mission

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Task cont.’
6) long-term objectives and grand strategies
7) Annual objectives and short-term
strategies that are compatible with long-
term objectives and grand strategies
8) Execute the strategic choices
9) Evaluate the success of the strategic
process for future decision making

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Attribute of policy Decisions
1) Top management decision
2)
3)
4)
5)
6)

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Levels of policy
Corporate level: board of directors,
CEO & administration [Highest]
Business level: business and
corporate managers [Middle]
Functional level: Product,
geographic, and functional area
managers [Lowest]

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Ex. 1.2 Alternative Strategic Management
Structures

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Hierarchy of Objectives and Strategy

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Formality of business policy

Formality is the degree to which

participation, responsibility, authority,
and discretion in decision-making are
specified in strategic management

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Forces Determining Formality

1) Organizational Size
2)
3)
4)
5)
6)

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Three Modes of Formality
Entrepreneurial Mode – most small firms
Planning Mode – most large firms
Adaptive Mode – most medium size firms

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Entrepreneurial Mode
The informal, intuitive, and limited approach to strategic management
associated with owner-managers of smaller firms.

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Planning Mode
The strategic formality associated with large firms that operate under a
comprehensive, formal planning system.

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Adaptive Mode
The strategic formality associated with medium-sized firms that
emphasize the incremental modification of existing competitive
approaches.

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Strategy Makers
Ideal strategic management planning process
includes decision makers from all three levels
Top managers must give final approval
Strategic decisions coincide with managers’
responsibilities

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Policy Makers: The CEO
A firm’s CEO plays a prominent role in
strategic planning
1)
2)
3)

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Benefits of a Participative Approach to policy
making
Managers at all levels interact in planning and
implementing strategy
1)
2)
3)
4)
5)

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Business Policy Process
Businesses vary in formulation and other processes
The basic components of the models used to
analyze strategic management are similar
Strategic management is a process—a flow of
information through interrelated stages of analysis
toward the achievement of some goal

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Ex. 1.5 Strategic Management Model

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State the components of the policy model

Company Mission Internal Analysis

External Analysis Strategic Analysis & Choice
Long-Term Objectives Generic & Grand Strategies
Short-Term Objectives Action Plans & Functional
Tactics
Policies Empowering Action
Restructuring, Reengineering
Strategic Control & & Refocusing
Continuous Improvement

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Key Terms
• Adaptive mode • Grand strategies
• Company mission • Long-term objectives
• Continuous improvement • Planning mode

• Dynamic • Policies

• Entrepreneurial mode • Processes

• Feedback • Short-term objectives

• Stakeholders
• Formality
• Strategic control
• Functional tactics
• Strategic management
• Generic strategies
• Strategy

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