Ch1-1

Strategic Management Strategic Management

W P GamageW P Gamage

Ch1-2

Sustained Competitive AdvantageSustained Competitive Advantage

Above-Average ReturnsAbove-Average ReturnsReturns in excess of what an investor expects to Returns in excess of what an investor expects to earn from other investments with similar riskearn from other investments with similar risk

Occurs when a firm develops a strategy that Occurs when a firm develops a strategy that competitors are not simultaneously implementingcompetitors are not simultaneously implementing

Provides benefits which current and potential Provides benefits which current and potential competitors are unable to duplicatecompetitors are unable to duplicate

Strategic CompetitivenessStrategic CompetitivenessAchieved when a firm successfully formulates Achieved when a firm successfully formulates and implements a value-creating strategyand implements a value-creating strategy

Ch1-3

which are required for firms to achieve:which are required for firms to achieve:

Above-Average ReturnsAbove-Average Returns

Strategic CompetitivenessStrategic Competitiveness

Sustained Competitive AdvantageSustained Competitive Advantage

The Strategic Management ProcessThe Strategic Management Process

Involves the full set of:Involves the full set of:

ActionsActionsCommitmentsCommitments DecisionsDecisions

Ch1-4

DEFINITIONS OF STRATEGIC MANAGEMENT

• Strategic management is a process that combines three major interrelated activities

• Strategy analysis

• Strategy formulation

• Strategy implementation

Gregory G Dess and Alex Miller

Ch1-5

• Strategic management is the process by which and organization establishes its objectives formulates actions designed to achieve these objectives in the desired timescales, implements the actions and assesses progress and results.

• Arthur A Thompson

Ch1-6

• Strategic management can be defined as the art and science of formulating implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.

• Fred R David

Ch1-7

• Strategic management is the set of managerial decisions and actions that determines the long-run performance of a corporation. It includes environmental scanning, strategy formulation, strategy implementation, strategy evaluation and control.

Ch1-8

As a whole, the core of the strategic

management • Understanding the organization’s s/w relative to any

competition• Evaluating current and potential o/t to the organization• Understanding of the relative power an influences of

various stakeholders• Identifying and evaluating suitable changes • Concentrating the element of management

Ch1-9

Stages of sm

• Strategic management process consists of three stages

• Strategy formulation

• Strategy implementation

• Strategy evaluation and control

Ch1-10

The StrategicThe StrategicManagementManagement

ProcessProcess

The StrategicThe StrategicManagementManagement

ProcessProcessInternalInternalEnvironmentEnvironment

ExternalExternalEnvironmentEnvironment

Strategic IntentStrategic Intent

Strategic MissionStrategic Mission

Strategy FormulationStrategy Formulation Strategy ImplementationStrategy Implementation

Objective Objectivesettingsetting

CompetitiveCompetitiveDynamicsDynamics

Corporate-LevelCorporate-LevelStrategyStrategy

InternationalInternationalStrategyStrategy

functionalfunctionalStrategiesStrategiesBusiness level

strategyBusiness levelstrategy

Action planAction plan StructureStructure& Control& Control

StrategicStrategicLeadershipLeadership

motivation & Innovation motivation & Innovation

Str

ateg

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puts

Feedback

Str

ateg

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utc

omes

Str

ateg

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trat

egic

Act

ion

sA

ctio

ns

StrategicStrategicEvaluation andEvaluation and Control of Control of

ReturnsReturns

Ch1-11

Why sm is important

• SM is aimed toward achieving corporate goals

• SM considers a broad range of stakeholders

• SM entails multiple time horizons

• SM is concerned with both efficiency and effectiveness

• Environment is dynamic and volatile

Ch1-12

Historical development of strategic management

• Phase 1

• Type of plan Basic financial plan

(budgeting, control)

• Effectiveness of Operational control

Formal planning Annual budgeting

Functional focus

• Value system Meet budget

Ch1-13

• Phase II

• Forecast based planning

• Effective planning for future

• Planning for growth

• Multi-year forecast

• Static allocation of resources

• Predictive future

Ch1-14

• Phase III

• External oriented planning

• Environmental analysis

• Necessary response to market competition

• Competitive assessment

• Dynamic allocation of resources

• Think strategically

Ch1-15

• Phase IV

• Strategic planning

• Organization of all resources to create competitive advantage

• Strategically chosen planning framework

• Create flexible planning process

• Supportive value system and climate

• Create future