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Chapter 1
Basic Concepts of
Strategic Management
PowerPoint Slides
Anthony F. Chelte
Western New England College
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Strategic Management
Defined:
Set of managerial decisions and
act ions that determ ines the long-
run performance of a fi rm .
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Business Policy
Defined:
General management o rien tat ion
that looks inward for p roper ly
integrating the firms functionalact ivi t ies.
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Four Phases of
Strategic Management
Basic financial planning
Forecast-based planning
Externally-oriented planning
(strategic)
Strategic management
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Strategic Management
High ly Rated Benefi ts:
Clearer sense of strategic vision for the firm
Sharper focus on what is strategically
important
Improved understanding of a rapidly
changing environment
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Strategic Management
Not always a formal process:
Where is the organization now? (Not where do wehope it is!)
If no changes are made, where will theorganization be in 1 year, 2 years, 5 years, 10years?
What specific actions should managementundertake? What are the risks and payoffsinvolved?
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Challenges to
Strategic ManagementGlobalization
Internationalization of markets andcorporations
Global (worldwide) markets rather than nationalmarkets
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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Adaptation to Changing
Environmental Conditions
Strategic flexibility:
Demands a long-term commitment to the development
and nurturing of critical resources
Demands that the firm become a learnin g o rganizat ion
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Learning Organizations
Defined:
An organizat ion sk i l led at creat ing ,
acquir ing , and trans ferr ing
know ledge and at mod i fy ing i ts
behavior to ref lect new know ledgeand ins ights .
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Learning Organizations
Four Main Act iv i t ies:
Solving problems systematically Experimenting with new approaches
Learning from their won experiences and
that of others
Transferring knowledge quickly and
efficiently throughout the organization
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Evaluation
and Controland Control
Strategic Management Model
StrategyFormulation
StrategyImplementation
Mission
Objectives
Strategies
Policies
Feedback/Learning
Environmental
Scanning
Societal
Environment
General Forces
TaskEnvironment
Industry Analysis
Structure
Chain of Command
Resources
Assets, Skills
Competencies,
Knowledge
Culture
Beliefs, Expectations,
Values
Reason for
existence
What results
to
accomplish
by when Plan to
achieve the
mission &
objectives Broad
guidelines for
decision
making
Programs
Activities
needed to
accomplish
a plan
Budgets
Cost of the
programsProcedures
Sequence
of steps
needed to
do the job
Process
to monitor
performance
and take
corrective
action
Performance
External
Internal
Evaluation
and Control
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Basic Model of
Strategic Management
Four Basic Elements
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Environmental Scanning
Defined:
The monito r ing , evaluat ing , anddissem inat ing of informat ion from
the external and internal
envi ronments to key peop le w i th in
the f irm .
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Environmental Scanning
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Environmental Scanning
Identify strategic factors
SWOT Analysis Strengths, Weaknesses
Opportunities, Threats
Internal Environment Strengths & Weaknesses
Within the organization but not subject to short-run
control of management
External Environment Opportunities & Threats
External to the organization but not subject to short-
run control of management
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Strategy Formulation
Defined:
Development o f long -range plans for
the effect ive management of
envi ronmental oppo rtuni t ies and
threats in l ight of co rpo rate strengthsand weaknesses.
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Strategy Formulation
Mission Statement
Purpose or reason for the
organizations existence Promotes shared expectations among
employees
Communicates public image important
to stakeholders Who we are, what we do, what wed like
to become
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Strategy Formulation
Objectives
The end resul ts o f planned act iv i ty
What is to be accomplished
Time in which to accomplish it Quantified when possible
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Strategy Formulation
Goals vs. Objectives
A goal is an open-ended statement of
what one wants to accompl ish wi th no
quant i f icat ion of what is to be ach ieved
and no t ime cr i ter ia for complet ion.
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Goals & Objectives
Corporate goals and ob ject ives include:
Profitability (net profits)
Growth (increase in total assets, etc.)
Utilization of resources (ROE or ROI)
Market leadership (market share)
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Strategies
Defined:
A strategy o f a co rpo rat ion fo rms a
comprehensive master plan stat ing
how the corporat ion w i ll achieve i ts
m ission and ob ject ives. It maxim izes
compet i tive advantage andm inim izes compet it ive disadvantage.
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Strategies
3 Types of Strategy
Corporate strategy
Business strategy
Functional strategy
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Strategies
Corporate Strategy
Stability
Growth
Retrenchment
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Strategies
Business Strategy
Competitive strategies
Cooperative strategies
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Strategies
Functional Strategy
Technological leadership
Technological followership
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Hierarchy of Strategy
Corporate Strategy
Business
(Division Level)Strategy
Functional
Strategy
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Initiation of Strategy
Triggering
event
New CEO
External intervention
Threat of change in
ownership
Performance gap
Strategic inflection point
Stimulusfor change
in
strategy
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Strategic Decision Making
Strategic Decisions
Rare
Consequential
Directive
