Transcript Strategic Management 5e. (Hill & Jones)

Chapter 1
The Strategic Management Process
Overview
Why do some firms succeed while others fail?
 A central objective of strategic management is to
learn why this happens.
What is strategy?
 An action a company takes to attain superior
performance.
What is the strategic management process?
 The process by which managers choose a set of
strategies for the enterprise to pursue its vision.
1-2
Strategic Planning
Rational planning by top management?
Basic Strategic Planning Model
Defining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and Threats
Internal Analysis of Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Chosen Strategies
1-3
The Main
Components of
the Strategic
Planning Process
FIGURE 1.1
1-4
Mission and Goals
Mission
 Sets out why the organization
exists and what it should be doing.
Major goals
 Specify what the organization hopes
to fulfill in the medium to long term.
Secondary goals
 Are objectives to be attained that lead to superior
performance.
1-5
External Analysis
Identify strategic opportunities and threats in
the operating environment.
Immediate (Industry)
Macroenvironment
National
1-6
Internal Analysis
Identify strengths
 Quality and quantity of resources available
 Distinctive competencies
Identify weaknesses
 Inadequate resources
 Managerial and
organizational deficiencies
1-7
SWOT and Strategic Choice
Strengths and Weaknesses
Opportunities and Threats
(SWOT Analysis)
Strategic Choice
Business
Functional
Global
Corporate
1-8
Business-Level Strategies
Cost leadership
 Attaining, then using the lowest total cost basis as a
competitive advantage.
Differentiation
 Using product features or services to distinguish the
firm’s offerings from its competitors.
Market niche focus
 Concentrating competitively on
a specific market segment.
1-9
Functional-Level Strategies
Focus is on improving the effectiveness of
operations within a company.
 Manufacturing
 Marketing
 Materials management
 Research and development
 Human resources
1-10
Global-Level Strategies
Multidomestic
International
Global
Transnational
1-11
Corporate-Level Strategies
Vertical integration
Diversification
Strategic alliances
Acquisitions
New ventures
Business portfolio
restructuring
1-12
Strategy Implementation
Designing organizational structure
Designing control systems
Structure
 Market and output controls
 Bureaucratic controls
 Control through organizational culture
 Rewards and incentives
Controls
Matching strategy, structure,
and controls
 Congruence (fit) among strategy,
structure, and controls
Strategy
1-13
Managing Strategic Change
The only constant is change.
Success requires adapting strategy and
structure to a changing world.
The feedback loop in
Corporate
strategic planning.
Operational
Business
Functional
1-14
Strategic Managers
General managers
 Responsible for the overall (strategic) performance
and health of the total organization.
Operations managers
 Responsible for specific business
functions or operations.
1-15
Strategic Managers for All Levels
FIGURE 1.2
1-16
Strategic Leadership
Vision, eloquence, and consistency
Commitment to the vision
Being well informed
Willingness to
delegate and empower
Astute use of power
Emotional intelligence
1-17
Strategy as an Emergent Process
Strategy making in an unpredictable world
 Creates the necessity for flexible strategic approaches.
Strategy making by lower-level managers
 Strategy evolves through autonomous action.
Serendipity and strategy
 Accidental discoveries and happenstances can have dramatic
effects on strategic direction.
Intended and emergent strategies
 Realized strategies are combinations of intended and
emergent strategies.
1-18
Intended and Emergent Strategies
FIGURE 1.3
Source: Reprinted from “Strategy Formation in an Adhocracy,”
by Henry Mintzberg and Alexandra McGugh, published in
Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by
permission of Administrative Science Quarterly.
1-19
The Strategic Management Process
for Intended and Emergent Strategies
FIGURE 1.4
1-20
Strategic Planning in Practice
Planning under uncertainty
 Scenario planning for dynamic environmental change
Ivory tower planning
 Lack of contact with operational realities
 The importance of involving operating managers
 Procedural justice in the decision-making process
 Engagement, explanation, and expectations
Planning for the present: Strategic Intent
 Recognition of the static nature of the strategic fit model
 Strategic intent in focusing the organization on winning by
achieving stretch goals
1-21
Improving Strategic Decision Making
Cognitive biases systematically influence the
rationality of decision makers.
FIGURE 1.5
1-22
Groupthink and Strategic Decisions
Pitfalls of groupthink
 Failing to question underlying assumptions.
 Coalescing around a single person or policy.
 Filtering out conflicting information.
 Developing after-the-fact rationalizations.
 Having an emotional (nonobjective)
commitment to an action.
1-23
Techniques for Improving Decision Making
Two decisionmaking processes
that counteract
cognitive biases
and groupthink.
FIGURE 1.6
1-24