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business policy chapterTRANSCRIPT
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STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER
CHAPTER 1 Basic Concepts of Strategic Management
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Basic Concepts of Strategic Management
Strategic ManagementSet of managerial decisions and actions that determines the long-run performance of a firm.
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Basic Concepts of Strategic Management
4 Phases in the Evolution of Strategic Management
1. Basic financial planning – internal focus on budgeting (1 yr horizon)
2. Forecast-based planning – extrapolate the current situation into the future (3-5 yr horizon)
3. Externally-oriented planning – planning department and/or consultants develop a top-down strategy with no lower level involvement.
4. Strategic management – involves various departments and levels across the organization. An ongoing process that includes implementation, evaluation and control issues.
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Basic Concepts of Strategic Management
Highly Rated Benefits
• Clearer sense of strategic vision• Sharper focus on strategic importance• Improved understanding of changing
environment
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Basic Concepts of Strategic Management
Not Always a Formal Process
• Where is the organization now? (not where do we hope it is)
• If no changes are made, where will the organization be in 1, 2, 5 or 10 years?
• What specific actions should management undertake?
• What are the risks and payoffs?
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Most Popular Management Tools2003 Survey
• Strategic Planning – 89%• Mission/Vision Statements – 84%
Basic Concepts of Strategic Management
Real Value?• Strategic Thinking• Organizational Learning
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Basic Concepts of Strategic Management
GlobalizationInternationalization of markets and corporations
Global (worldwide) markets rather than national markets
Electronic CommerceUse 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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Regional Trade Organizations• European Union (EU) – 25 member nations promote
60% local content to avoid tariffs• North American Free Trade Agreement (NAFTA) –
Canada, Mexico and US 62.5% local content.• Mercosur/Mercosul – South American equivalent of
NAFTA• Central American Free Trade Agreement (CAFTA) –
duty free textiles, consumer goods and farm exports.• Association of South Eastern Asian Nations (ASEAN) –
less powerful due to due to Chine, Japan and Korea exclusion.
Basic Concepts of Strategic Management
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Basic Concepts of Strategic Management
Electronic Commerce -- Trends
• Forcing company transformation – networking of suppliers, customers and partners
• Market access & branding changing – disintermediation of traditional distribution channels
• Balance of power shift to consumer – access to many options and comparative shopping
• Competition changing – due to low barriers to entry
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Basic Concepts of Strategic Management
Electronic Commerce -- Trends
• Pace of business increasing –dog years = Internet years
• Internet pushing companies beyond traditional boundaries – supply chain management and virtual companies
• Knowledge key asset – source of competitive advantage
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Population Ecology vs. Institutional Theory(Can’t Change) (imitate successful
organizations)
Strategic Choice Perspective(Management decisions have at
least as much impact as industry factors)
Organizational Learning Theory
Basic Concepts of Strategic Management
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“Sustainable Competitive Advantage doesn’t lie in doggedly following a centrally managed 5 year strategic plan but in stringing together a series of strategic short term thrusts”
Richard D’Aventi – Hypercompetition
Basic Concepts of Strategic Management
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Learning Organizationis skilled at creating, acquiring and transferring knowledge
and modifying its behavior to reflect new knowledge and insight.
• Key Activities:– Solve problems systematically– Experiment with new approaches– Learn from experience– Transfer knowledge throughout the organization
Basic Concepts of Strategic Management
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Organizational Knowledge– Technical Skills – research– Functional Skills – manufacturing and marketing– Managerial Expertise – plan, organize, influence and
control
Basic Concepts of Strategic Management
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Basic Concepts of Strategic Management
Basic Elements of the Strategic Management Process
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Basic Concepts of Strategic Management
Environmental ScanningMonitoring, evaluation, and disseminating information from external and internal environments –to key people in the firm
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Environmental Scanning
SWOT Analysis• Strengths – Weaknesses• Opportunities – Threats
Environmental Variables• Societal – technological, political, legal,
social, economic• Task/Industry – customers, suppliers,
competitors• Internal – structure, resources, culture
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Basic Concepts of Strategic Management
Strategy FormulationDevelopment of long-range plans for
effective management of opportunities and threats in light of corporate strengths and weaknesses
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Strategy Formulation
Mission Statement
• Purpose/reason for organization• Promotes shared expectations• Communicates public image• Who we are; what we do; what we
aspire to
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Goals & Objectives
Corporate Goals/Objectives flow from the Mission/Vision statement
–Profitability (net profit)–Growth–Resource utilization (ROE, ROI)–Market leadership
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Goals & Objectives
Corporate Goals/Objectives need to be:SpecificMeasurableAction orientedRealisticTiming is identified
SMART Goals
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Basic Concepts of Strategic Management
Hierarchy of Strategy
Corporate strategy – general direction(stability, growth, retrenchment)
Business strategy – industry or market segment focus
(competitive vs. cooperative)
Functional strategy – functional planning to support the Corporate and Business strategy.
(technology leader or follower)
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Strategy Implementation
Process by which strategies and policies are put into action through development of programs and procedures
Basic Concepts of Strategic Management
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Strategy Implementation• Programs – single use plans (projects)
• Budgets – costs associated with a program
• Procedures – system of sequential steps that describe how a particular task or job is to be done
Basic Concepts of Strategic Management
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Evaluation and Control
Process by which corporate activities and performance results are monitored so that actual performance can be compared with desired performance.
Basic Concepts of Strategic Management
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Punctuated Equilibrium
Corporations usually take 15 – 20 years before making a significant change in strategy orientation
Basic Concepts of Strategic Management
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Triggering Event• New CEO• External Intervention• Threat of change in ownership• Performance Gap• Strategic inflection point (industry)
Basic Concepts of Strategic Management
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Strategic Decision Making
Strategic Decisions
Rare – unusual, no precedent
Consequential – commit substantial resources
Directive – set precedents for decision making
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Strategic Decision Making
Mintzberg’s Modes
Entrepreneurial mode – founders visionAdaptive mode – “muddling through” (reactive)Planning mode – systematic gathering and
analysis of informationLogical incrementalism – interactive strategy
development (Planning + Adaptive)
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Basic Concepts of Strategic Management
Strategic Decision-Making
Process
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Hambrick and Fredrickson – Good Strategy
5 Elements of Good Strategy
1. Arenas – Where?2. Vehicles – How to get there?3. Differentiators – How to win?4. Staging – Speed and sequence - tactics5. Economic logic – How will we gain a return?