Strategic Management - Lecture 1

1. CHAPTER 1
THE NATURE OF STRATEGIC MANAGEMENT
Strategic Management:
Concepts & Cases
13th Edition
Global Edition
Fred David
Ch 1 -1

2. JILL MITCHELL
• Email: jmitchell@pkrush.com website: www.jillmitchell.net
Background
• BSc(Hons) Chemical Engineering
• Chartered/Professional Engineer
• MBA – Bristol Business School, UK
• Currently studying for a PhD in Entrepreneurship at Pretoria University
• 25 years+ industry experience, specifically brewing , food & packaging
industry
• 12 years+ small business management experience, UK & RSA:-
setting up and running businesses
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3. ADMINISTRATION
• Form 4 groups of 3 people. Keep these groups for
the rest of the course. Help each other during the
week with all tasks and assignments. Work in these
groups on group assignments in class
• EMAIL addresses – please input into my
spreadsheet. I will communicate with you this way
and send any specific instructions via email
• Keep checking www.jmitchell.net. I post the course
slides and any other relevant information to this
website – bear in mind there are other courses here
– just look for strategic management
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4. LECTURE NOTES
www.jillmitchell.net
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5. DID YOU KNOW?
Show video
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6. Strategic Management –Defined
Art & science of formulating,
implementing, and evaluating, cross-
functional decisions that enable an
organisation to achieve its objectives
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7. PURPOSE OF STRATEGIC MANAGEMENT
To exploit and create new and different
opportunities for tomorrow
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8. Strategic Management
In essence, the strategic plan is a company’s
game plan
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9. 3 STAGES OF THE STRATEGIC
MANAGEMENT PROCESS
• Strategy formulation
• Strategy implementation
• Strategy evaluation
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10. Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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11. Issues in Strategy
Formulation
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
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12. Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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13. STRATEGY IMPLEMENTATION STEPS
• Developing a strategy-supportive culture
• Creating an effective organisational structure
• Redirecting marketing efforts
• Preparing budgets
• Developing and utilising information systems
• Linking employee compensation to
organisational performance
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14. Issues in Strategy
Implementation
Action Stage of Strategic
Management
Mobilisation of employees
& managers
Most difficult stage
Interpersonal skills
critical
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15. Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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16. Prime Task of
Strategic Management
Peter Drucker: Think through the overall
mission of a business. Ask the key
question:
“What is our Business?”
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17. Integrating Intuition & Analysis
The strategic management process attempts to
organise quantitative and qualitative information
under conditions of uncertainty
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18. Integrating Intuition & Analysis
Intuition is based on:
• Past experiences
• Judgment
• Feelings
Intuition is useful for decision making in
conditions of:
 Great uncertainty
 Little precedent
 Highly interrelated variables
 Several plausible alternatives
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19. Integrating Intuition & Analysis
Intuition & Judgment
Involve management at all levels
Influence all analyses
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20. Adapting to Change
Organisations should continually monitor
internal and external events and trends
so that timely changes can be made as
needed
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21. KEY TERMS IN STRATEGIC
MANAGEMENT
• Competitive advantage
• Strategists
• Vision and mission statements
• External opportunities and threats
• Internal strengths and weaknesses
• Long-term objectives
• Strategies
• Annual objectives
• Policies
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22. Strategic Management is
Gaining and Maintaining
Competitive Advantage
Anything that a firm does especially well
compared to rival firms
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23. Achieving Sustained Competitive
Advantage
1. Continually adapting to changes in external trends
and events and internal capabilities, competencies,
and resources
2. Effectively formulating, implementing, and
evaluating strategies that capitalize on those
factors
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24. Strategists
Gather Information
Analyse Information
Organise Information
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25. Vision and Mission Statements
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
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26. External Opportunities and Threats
Analysis of Trends
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
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27. External Opportunities and Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation
Avoid/minimise impact of
External Threats
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28. Internal Strengths and Weaknesses
Controllable activities performed
especially well or poorly
Determined relative to competitors
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29. Internal Strengths and Weaknesses
• Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Management Information Systems
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30. Internal Strengths and Weaknesses
Assessing the Internal Environment
Ratios
Performance Measures
Internal Factors
Industry Averages
Survey Data
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31. Long-Term Objectives
Specific results that an organisation seeks to
achieve in pursuing its basic mission
Long-term means more than one year
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32. Long-Term Objectives
• Essential for ensuring the firm’s success
• Provide direction
• Aid in evaluation
• Create synergy
• Reveal priorities
• Focus coordination
• Provide basis for planning, organizing, motivating,
and controlling
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33. Strategies
Means by which long-term objectives are
achieved
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34. Strategies
• Examples
• Geographic expansion
• Diversification
• Acquisition
• Product development
• Market penetration
• Retrenchment
• Divestiture
• Liquidation
• Joint venture
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35. Sample Strategies
• Table 1-1
• Best Buy
• Levi Strauss
• New York Times Company
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36. Annual Objectives
Short-term milestones that firms must achieve
to reach long-term objectives
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37. Policies
Means by which annual objectives will be
achieved
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38. COPYRIGHT © 2011 PEARSON
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EDUCATION

39. Strategic Management Model
Strategic Management Process
• Dynamic & continuous
• More formal in larger organizations
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40. STRATEGIC MANAGEMENT
• Communication is a key to successful
strategic management
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41. Benefits of Strategic Management
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42. BENEFITS OF STRATEGIC
MANAGEMENT
• Nonfinancial Benefits
• Enhanced awareness of threats
• Improved understanding of competitors’ strategies
• Increased employee productivity
• Reduced resistance to change
• Clearer understanding of performance-reward
relationship
• Enhanced problem-prevention capabilities
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43. WHY SOME FIRMS DO NO STRATEGIC
PLANNING
• Lack of knowledge of strategic planning
• Poor reward structures
• Fire fighting
• Waste of time
• Too expensive
• Laziness
• Content with success
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44. WHY SOME FIRMS DO NO STRATEGIC
PLANNING (CONTINUED)
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Honest difference of opinion
• Suspicion
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45. PITFALLS IN STRATEGIC PLANNING
Strategic planning is an involved, intricate, and
complex process that takes an organisation into
uncharted territory
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46. EFFECTIVE STRATEGIC PLANNING IS:
• A people process more than a paper process
• A learning process
• Words supported by numbers
• Simple and non - routine
• Varying assignments, team membership,
meeting formats, and planning calendars
• Challenging assumptions underlying
corporate strategy
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47. EFFECTIVE STRATEGIC PLANNING
CONTINUED
• Welcomes bad news
• Requires open-mindedness and a spirit of
enquiry
• Is not a bureaucratic mechanism
• Is not ritualistic or stilted
• Is not too formal, predictable, or rigid
• Does not contain jargon or arcane language
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48. EFFECTIVE STRATEGIC PLANNING
CONTINUED
• Is not a formal system for control
• Does not disregard qualitative information
• Is not controlled by “technicians”
• Does not pursue too many strategies at once
• Continually strengthens the “good ethics is
good business” policy
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49. COMPARING BUSINESS AND MILITARY
STRATEGY
• Strategic planning started in the military
• Similarity
• Both business and military organisations must adapt to
change and constantly improve
• Difference
• Business strategy assumes competition
• Military strategy assumes conflict
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50. INDIVIDUAL EXERCISE
• Read Turbulent Flight Plan
• Complete Exercise 4.2
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51. FOR NEXT WEEK
• Assurance of learning exercise 1d: strategic planning at
Nestlé (p 70) - Table 1-3 page 53
• Readings 1 & 2 from Strategic Management supplement for
Southern Africa
• Steps 1, 3, 4, of gathering strategy information on Adidas
AG. I will email you step 2. Step 5 will be done in class next
week
• Read Business report 2010, www.busrep.co.za
• Read CNBC 2010, www,cnbc.com
• Read news for South Africa and the world 2010,
www.iol.co.za
• Read Knowledge to power your business,
www.quickmba.com , specifically The Strategic Planning
Process and Business Vision & Mission Statements
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