david ppt exp ch01
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Davide lecture 1TRANSCRIPT
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Chapter 1
The Nature of Strategic Management
Strategic Management:
Concepts & Cases
11thEdition
Fred David
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Themes in the Text
Global Considerat ions
impact virtually all strategic decisions
E-commercevital strategic management tool
Natural env ironmentimportant strategic issue
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Art & science of formulat ing,
implement ing, and evaluat ing,cross-functional decisions that
enable an organization to achieve its
objectives
Strategic Management
Defined
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Strategic Management
In essence, the strategic p lanis a
companys game plan
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Strategic Management
achieves a firms success
through integration
Management
MIS
Production/OperationsFinance/Accounting
Marketing
Research & Development
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Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Issues in Strategy
Formulation
New business
opportunities
Businesses to abandon
Allocation of resources
Expansion ordiversification
International markets
Mergers or joint ventures
Avoidance of hostile
takeover
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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Strategy
Implementation
Action Stage of Strategic
Management
Most difficult stage
Mobilization ofemployees & managers
Interpersonal skills
critical
Consensus on goal
pursuit
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Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
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Strategy
Evaluation
Final Stage of Strategic
Management
Subject to future
modification
Todays success no
guarantee of future success
New & different problems
Complacency leads to
demise
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Peter Drucker: -- Think through the
overall mission of a business. Askthe key question: What is our
Business?
Prime Task of
Strategic Management
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The strategic management processattempts to organize quantitative and
qualitative information under conditions of
uncertainty
Integrating Intui t ionand
Analys is
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Intuition is based on:
Past experiences
Judgment
Feelings
Integrating Intui t ionand
Analys is
Intuition isuseful for decision making in:
Conditions of great uncertainty
Conditions with little precedent
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Involve Management at all levels
Intuition & Judgment
Influence all Analyses
Integrating Intui t ion&
Analys is
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Analytical Thinking
Integrating Intui t ion&
Analys is
Intuitive Thinking
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Organizations must monitor
events On-going process
Internal and external events
Timely changes
Adapting to Change
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Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Compet it ive Advantage
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1. Adapting to change in external trends,internal capabilities and resources
Achieving Sustained
Compet it ive Advantage
2. Effectively formulating, implementing &evaluating strategies
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Rate & magnitude of changeincreasing dramatically
Adapting to Change
E-commerce
Demographics
Technology
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Effective Adaptation
Adapting to Change
Requires long-term focus
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What k ind of bus iness shou ldwe become?
Are we in the r igh t f ields Are there new competi tors?
What strategies should wepursue?
How are ou r custom erschanging?
Adapting to ChangeKey
Strategic Management
Questions
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Key Terms
Various Job Titles:
Chief Executive Officer (CEO)
Chief Strategy Officer (CSO)
President
OwnerBoard Chair
Executive Director
StrategistsFirms success/failure
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Vision Statement
What do we want to become?
Mission Statement
What is our bus iness?
Key Terms
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Largely beyond the control of a singleorganization
Key Terms
Opportunities and Threats (External)
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Opportun it ies & Threats (External)
Key Terms
Analysis of Trends:
Economic
Social Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
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Process of conducting research andgathering and assimilating externalinformation
Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)
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Basic Tenet of Strategic Management
Key Terms
Opportunities & Threats
Strategy Formulation
Take advantage ofExternal Opportunities
Avoid/minimize impact of
External Threats
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Controllable activities performed especiallywell or poorly
Key Terms
Strengths & Weaknesses (Internal)
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Strength s & Weaknesses (In ternal)
Key Terms
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Computer Information Systems
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Assessing the Internal Environment
Key Terms
Strengths & Weaknesses
Internal Factors
Performance Metrics
Financial Ratios
Industry Averages
Survey Data
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Mission-driven pursuit of specified resultsmore than one year out
Key Terms
Long-term Objectives
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Long -term Object ives
Key Terms
Essential for ensuring the firms success
Provide direction
Aid in evaluation
Create synergy
Focus coordination
Basis for planning, motivating, andcontrolling
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Means by which long-term objectives areachieved
Key Terms
Strategies
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Strategies
Key Terms
Some Examples
Geographic expansion
Diversification
Acquisition
Market penetration
Retrenchment
Liquidation
Joint venture
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Short-term milestones that firms mustachieve to attain long-term objectives
Key Terms
Annual Objectives
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Means by which annual objectives will beachieved
Key Terms
Policies
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Example Strategies in Action in 2005
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Example Strategies in Action in 2005
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ExternalAudit
Chapter 3
InternalAudit
Chapter 4
Long-TermObjectives
Chapter 5
Generate,Evaluate,
SelectStrategies
Chapter 6
ImplementStrategies:
Mgmt Issues
Chapter 7
ImplementStrategies:
Marketing,Fin/Acct,R&D, CIS
Chapter 8
Measure &Evaluate
Performance
Chapter 9
Vision&
Mission
Chapter 2
Comprehensive strategic management model
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Dynamic & Continuous
More formal in larger organizations
Strategic Management Model
Strategic Management Process
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1. Identify Existing --
Strategic Management Model
Vision
Mission
Objectives
Strategies
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2. Audit external environment
3. Audit internal environment
4. Establish long-term objectives
5. Generate, evaluate & selectstrategies
6. Implement selected strategies
7. Measure & evaluate performance
Strategic Management Model
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Benefits of Strategic
Management
Proactive in shaping firms future
Initiate and influence firms activitiesFormulate better strategies
Systematic, logical, rational
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Benefits of Strategic
Management
Financial Benefits
Improvement in sales
Improvement in profitability
Productivity improvement
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Benefits of Strategic
Management
Non-Financial Benefits
Improved understanding of competitors strategies
Enhanced awareness of threats
Reduced resistance to change
Enhanced problem-prevention capabilities
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Benefits of Strategic
Management (Greenley)
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
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Benefits of Strategic
Management (Greenleycontd)
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
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Benefits of Strategic
Management (Greenleycontd)
11. Encourages favorable attitude toward
change
12. Provides discipline and formality to the
management of the business
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Why Some Firms Do No
Strategic Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
LazinessContent with success
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Why Some Firms Do No
Strategic Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknownSuspicion
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Principles of conduct within organizationsthat guide decision making and behavior
Business Ethics & Strategic
Management
Business Ethics defined
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Prerequisite for good strategic management
Business Ethics & Strategic
Management
Good business ethics
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Provides basis on which policies can bedevised to guide daily behavior anddecisions in the workplace
Business Ethics & Strategic
Management
Code of business ethics
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Misleading advertising
Misleading labeling
Harm to the environment
Insider trading
Dumping flawed products on foreign markets Poor product or service safety
Padding expense accounts
Business Ethics & Strategic
Management
Business practices always considered unethical
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ISO 9000 focuses on quality control
> 1.5 million companies incorporate ISO
Natural Environment
Perspective
ISO used to gain strategic advantage
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Voluntary standards
ISO 14001 standard for EnvironmentalManagement System
Firms minimize harmful effects onenvironment
Natural Environment
Perspective
ISO 14000 standards
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Parent company
Host country
The Nature of Global
Competition
International/multinational corporations
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Cultural differences Norms
Values
Work ethic
The Nature of Global
Competition
Strategy implementation may be difficult
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Advantages of International
Operations
Absorb excess capacity
Reduce unit costsSpread risk over wider markets
Low-cost production facilities
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Advantages of International
Operations (contd)
Less intense competition
Lower taxes
Economies of scale
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Disadvantages of International
Operations
Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currencydifferences