Ch01-The Strategic Management Process

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Copyright 2001 Houghton Mifflin Company. All rights reserved.

Chapter 1Chapter 1

The Strategic Management ProcessThe Strategic Management Process

StrategicStrategic Charles W. L. HillCharles W. L. Hill

ManagementManagement Gareth R. JonesGareth R. Jones

Fifth EditionFifth Edition

PowerPoint PresentationPowerPoint Presentationby Charlie Cookby Charlie Cook

An Integrated ApproachAn Integrated Approach


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Copyright 2001 Houghton Mifflin Company. All rights reserved. 1-2

OverviewOverview

Why do some firms succeed while others fail?Why do some firms succeed while others fail?

A central objective of strategic management is toA central objective of strategic management is to

learn why this happens.learn why this happens.

What is strategy?What is strategy?

An action a company takes to attain superiorAn action a company takes to attain superior

performance.performance.

What is the strategic management process?What is the strategic management process? The process by which managers choose a set ofThe process by which managers choose a set of

strategies for the enterprise to pursue its vision.strategies for the enterprise to pursue its vision.


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Defining the Mission and Setting TopDefining the Mission and Setting Top--Level GoalsLevel Goals

External Analysis of Opportunities and ThreatsExternal Analysis of Opportunities and Threats

Internal Analysis of Strengths and WeaknessesInternal Analysis of Strengths and Weaknesses

Selection of Appropriate StrategiesSelection of Appropriate Strategies

Implementation of Chosen StrategiesImplementation of Chosen Strategies

Strategic PlanningStrategic Planning

Rational planning by top management?Rational planning by top management?

Basic Strategic Planning ModelBasic Strategic Planning Model


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FIGURE 1.1

The Main Components ofthe StrategicThe Main Components ofthe StrategicPlanning ProcessPlanning Process


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Mission and GoalsMission and Goals

MissionMission

Sets out why the organizationSets out why the organization

exists and what it should be doing.exists and what it should be doing.

Major goalsMajor goals

Specify what the organization hopesSpecify what the organization hopes

to fulfill in the medium to long term.to fulfill in the medium to long term.

Secondary goalsSecondary goals Are objectives to be attained that lead to superiorAre objectives to be attained that lead to superior

performance.performance.


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External AnalysisExternal Analysis

IdentifyIdentify strategic opportunities and threatsstrategic opportunities and threats inin

the operating environment.the operating environment.

Macro environmentMacro environment NationalNational

Immediate (Industry)Immediate (Industry)


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Internal AnalysisInternal Analysis

Identify strengthsIdentify strengths

Quality and quantity of resources availableQuality and quantity of resources available

Distinctive competenciesDistinctive competencies

Identify weaknessesIdentify weaknesses

Inadequate resourcesInadequate resources

Managerial andManagerial and

organizational deficienciesorganizational deficiencies


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Strengths and WeaknessesStrengths and Weaknesses

Opportunities and ThreatsOpportunities and Threats

(SWOT Analysis)(SWOT Analysis)

Strategic ChoiceStrategic Choice

BusinessBusinessFunctionalFunctional

GlobalGlobal

CorporateCorporate

SWOT and Strategic ChoiceSWOT and Strategic Choice


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BusinessBusiness--Level StrategiesLevel Strategies

Cost leadershipCost leadership

Attaining, then using the lowest total cost basisAttaining, then using the lowest total cost basis

as a competitive advantage.as a competitive advantage.

DifferentiationDifferentiation

Using product features or services to distinguishUsing product features or services to distinguish

the firms offerings from its competitors.the firms offerings from its competitors.

Market niche focusMarket niche focus Concentrating competitively onConcentrating competitively on

a specific market segment.a specific market segment.


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FunctionalFunctional--Level StrategiesLevel Strategies

Focus is on improving the effectiveness ofFocus is on improving the effectiveness of

operations within a company.operations within a company.

ManufacturingManufacturing

MarketingMarketing

Materials managementMaterials management

Research and developmentResearch and development

Human resourcesHuman resources


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GlobalGlobal--Level StrategiesLevel Strategies

MultidomesticMultidomestic

InternationalInternational

GlobalGlobal

TransnationalTransnational


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CorporateCorporate--Level StrategiesLevel Strategies

Vertical integrationVertical integration

DiversificationDiversification

Strategic alliancesStrategic alliances

AcquisitionsAcquisitions

New venturesNew ventures

Business portfolio restructuringBusiness portfolio restructuring


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Strategy ImplementationStrategy Implementation

Designing organizational structureDesigning organizational structure

Designing control systemsDesigning control systems

Market and output controlsMarket and output controls

Bureaucratic controlsBureaucratic controls Control through organizational cultureControl through organizational culture

Rewards and incentivesRewards and incentives

Matching strategy, structure,Matching strategy, structure,

and controlsand controls Congruence (fit) among strategy,Congruence (fit) among strategy,

structure, and controlsstructure, and controls

StructureStructure

StrategyStrategy

ControlsControls


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Managing Strategic ChangeManaging Strategic Change

The only constant is change.The only constant is change.

Success requires adapting strategy andSuccess requires adapting strategy and

structure to a changing world.structure to a changing world.

TheThe feedback loopfeedback loop inin

strategic planning.strategic planning. CorporateCorporate

FunctionalFunctional

BusinessBusinessOperationalOperational


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Strategic ManagersStrategic Managers

General managersGeneral managers

Responsible for the overall (strategic)Responsible for the overall (strategic)

performance and health of the total organization.performance and health of the total organization.

Operations managersOperations managers Responsible for specific businessResponsible for specific business

functions or operations.functions or operations.


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Strategic Managers for All LevelsStrategic Managers for All Levels

FIGURE 1.2


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Strategic LeadershipStrategic Leadership

Vision, eloquence, and consistencyVision, eloquence, and consistency

Commitment to the visionCommitment to the vision

Being well informedBeing well informed

Willingness toWillingness to

delegate and empowerdelegate and empower

Astute use of powerAstute use of power

Emotional intelligenceEmotional intelligence


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Strategy as an EmergentProcessStrategy as an EmergentProcess

Strategy making in an unpredictable worldStrategy making in an unpredictable world

Creates the necessity for flexible strategic approaches.Creates the necessity for flexible strategic approaches.

Strategy making by lowerStrategy making by lower--level managerslevel managers

Strategy evolves through autonomous action.Strategy evolves through autonomous action.Serendipity and strategySerendipity and strategy

Accidental discoveries and happen stance can haveAccidental discoveries and happen stance can have

dramatic effects on strategic direction.dramatic effects on strategic direction.

Intended and emergent strategiesIntended and emergent strategies Realized strategies are combinations of intended andRealized strategies are combinations of intended and

emergent strategies.emergent strategies.

v1


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Slide 18

v1 imp for fill in the blankvtu, 6/14/2008


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FIGURE 1.3

Intended and EmergentStrategiesIntended and EmergentStrategies

Source: Reprinted from Strategy Formation in an Adhocracy,by Henry Mintzberg and Alexandra McGugh, published in

Administrative Science Quarterly, Vol. 30, No. 2, June 1985, bypermission ofAdministrative Science Quarterly.


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FIGURE 1.4

The Strategic ManagementProcessThe Strategic ManagementProcess

for Intended and

Emergen

tSt

rategie

sfor In

tended and

Emergen

tSt

rategie

s


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Strategic Planning in PracticeStrategic Planning in Practice

Planning under uncertaintyPlanning under uncertainty

Scenario planning for dynamic environmental changeScenario planning for dynamic environmental change

Ivory tower planningIvory tower planning

Lack of contact with operational realitiesLack of contact with operational realities

The importance of involving operating managersThe importance of involving operating managers

Procedural justice in the decisionProcedural justice in the decision--making processmaking process Engagement, explanation, and expectationsEngagement, explanation, and expectations

Planning for the present: Strategic IntentPlanning for the present: Strategic Intent

Recognition of the static nature of the strategic fit modelRecognition of the static nature of the strategic fit model

Strategic intent in focusing the organization on winningStrategic intent in focusing the organization on winningby achieving stretch goalsby achieving stretch goals

v2


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Slide 21

v2 imp for fill in the blanksvtu, 6/14/2008


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Improving Strategic Decision MakingImproving Strategic Decision Making

Cognitive biasesCognitive biases systematically influence thesystematically influence the

rationality of decision makers.rationality of decision makers.

FIGURE 1.5


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Groupthink and Strategic DecisionsGroupthink and Strategic Decisions

Pitfalls of groupthinkPitfalls of groupthink

Failing to question underlying assumptions.Failing to question underlying assumptions.

Coalescing around a single person or policy.Coalescing around a single person or policy.

Filtering out conflicting information.Filtering out conflicting information.

Developing afterDeveloping after--thethe--fact rationalizations.fact rationalizations.

Having an emotional (nonobjective)Having an emotional (nonobjective)

commitment to an action.commitment to an action.


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Techniques for Improving Decision MakingTechniques for Improving Decision Making

Two decisionTwo decision--

making processesmaking processes

that counteractthat counteract

cognitive biasescognitive biases

and groupthink.and groupthink.

FIGURE 1.6

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Ch01-The Strategic Management Process

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