Strategic Management: Publishing As Prentice Hall

Strategic Management
Copyright © 2011 Pearson Education, Inc.

Publishing as Prentice Hall
Strategic Management –Defined
Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives
Copyright © 2011 Pearson Education, Inc. Ch 1 -2

3 Stages of the Strategic
Management Process
 Strategy formulation
 Strategy implementation
 Strategy evaluation

Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation

Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action

Strategists
Gather Information
Analyze Information
Organize Information

Vision and Mission Statements
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?

External Opportunities and Threats
Basic Tenet of Strategic Management
Take advantage of
External Opportunities
Strategy Formulation
Avoid/minimize impact of
External Threats

Internal Strengths and Weaknesses
Assessing the Internal Environment
Financial Ratios
Performance Measures
Internal Factors
Industry Averages
Survey Data

Benefits of Strategic Management

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

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

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

Overview
• Concepts and tools needed to evaluate and write business visions
and mission statement.
• The recents economic recession resulted in many forms changing

direction and there by altering their entire vision and mission.
• In the begining, a new business is simply a collection of ideas.

Starting a new business rests on a set of beliefs that the new
organization can offer some product or services.
• As a business grows, owners or managers find it necessary to

revise the founding set of beliefs, but those original idea usually are
reflected in the revised statement of vision and mission.

What Do We Want to Become ?
• Agreement among managers and executives in any organization on the

basic vision that the firm strives to achieve in the long term.
• A vision statement should answer the basic question “What do we want to

become”.
• A Clear vision provide the foundation for developing a comprehensive

mission statement.
• Many organization have both a vision and mission statement, but the
vision should be established first.
• The vision should be short and the result of idea from manager

Vision Statement Examples
General Motors’ vision is to be the

world leader in transportation
products and related services.

Vision & Mission
 Great benefits can be achieved if

an organization
 Systematically revisits their vision and
mission statement
 Treats them as living documents
 Considers them to be an integral part
of the firm’s culture

Developing Vision & Mission
Participation by as many managers as

possible is important in developing the
mission because through involvement
people become committed to an
organization

Steps to Developing Vision &
Mission Statements
1. Have managers read related articles
2. Have managers prepare a vision and
mission statement for the organization
3. Merge the documents into one and
distribute
4. Gather feedback from managers
5. Meet to revise the final document
Benefits of Mission Statements
 Better financial results

 Unanimity of purpose
 Resource allocation
 Establishment of culture
 Focal point for individuals
 Establishment of work structure
 Basis of assessment and control
 Resolution of divergent views
Vision & Mission Statements
 Provide unity of direction

 Promote shared expectations
 Consolidate values
 Project a sense of worth and intent
 Affirm the company’s commitment

to responsible action
Mission & Customer Orientation
 An effective mission statement:

 Anticipates customer needs
 Identifies customer needs
 Provides product/service to satisfy

needs
 Identifies the utility of a firm’s products
to its customers
External Strategic
Management Audit
Purpose of an External Audit

 Develop a finite list of
 opportunities that could benefit a firm

 threats that should be avoided

External Audit
 Gather competitive intelligence
 Assimilate information
 Evaluate
Resulting in a list of the most

important key external factors

Performing External Audit
Long-term Orientation
Measurable
External
Factors Applicable to
Competing Firms
Hierarchical

Competitive Forces
Collection & evaluation of data on

competitors is essential for successful
strategy formulation

Key Questions Concerning
Competitors
 Their strengths
 Their weaknesses
 Their objectives and strategies
 Their responses to external variables
 Their vulnerability to our alternative
strategies
 Our vulnerability to strategic counterattack

Competitive Intelligence
 A systematic and ethical process for

gathering and analyzing information
about the competition’s activities and
general business trends to further a
business’s own goals

Sources of Competitive Intelligence
 Internet  Consultants
 Employees  Trade journals
 Managers  Want ads
 Suppliers  Newspaper articles
 Distributors  Government filings
 Customers  Competitors
 Creditors

Objectives of Competitive Intelligence
 Provide a general understanding of industry

and competitors
 Identify areas where competitors are
vulnerable and assess impact of actions on
competitors
 Identify potential moves that a competitor
might make

Sources of External Information:
Unpublished Sources
 Customer surveys
 Market research
 Speeches at professional or shareholder
meetings
 Television programs
 Interviews and conversations with
stakeholders

Sources of External Information:
Published Sources
 Periodicals
 Journals
 Reports
 Government documents
 Abstracts
 Books
 Directories
 Newspapers
 Manuals
Internal Audit
 Identify strengths and weaknesses in
 Management
 Marketing
 Finance and accounting
 Production and operations
 Research and development
 Management information systems

Nature of an Internal Audit
Basis for Objectives & Strategies
 Internal strengths/weaknesses
 External opportunities/threats
 Clear statement of mission

Key Internal Forces
Distinctive Competencies:
Firm’s strengths that cannot be

easily matched or imitated by
competitors

Key Internal Forces
Distinctive Competencies:
Building competitive advantage

involves taking advantage of
distinctive competencies

Internal Audit Process
Parallels process of external audit
Information gathered from:

 Management
 Marketing
 Finance/accounting
 Production/operations
 Research & development
 Management information systems
Internal Audit
Managers and employees from

all areas provide information
A team of managers then selects
10 to 15 key organizational
strengths and weaknesses to
focus on
Integrating Strategy & Culture
Organizational Culture
Pattern of behavior developed by an
organization as it learns to cope with its
problem of external adaptation and
internal integration . . . is considered valid
and taught to new members as the correct
way to perceive, think, and feel

Organizational Culture
 Resistant to change
 May represent:
 Strength
 Weakness

Organizational Culture Can Inhibit

Strategic Management
 Miss external changes due to

strongly held beliefs
 Natural tendency to “hold the
course” even during times of
strategic change
Long Term Objectives
 Quantitative  Challenging
 Measurable  Hierarchical
 Realistic  Obtainable
 Understandable  Congruent
Not Managing by Objectives
 Managing by Extrapolation
 Managing by Crisis
 Managing by Subjectives
 Managing by Hopes

Types of Strategies
Forward
Integration
Vertical Backward
Integration Integration
Strategies

Vertical Integration Strategies
Forward Gaining ownership or increased
Integration control over distributors or retailers
Backward Seeking ownership or increased

Integration control of a firm’s suppliers

Types of Strategies
Market
Penetration
Intensive Market
Strategies Development
Product
Development

Intensive Strategies
Seeking increased market share for
Market present products or services in
Penetration present markets through greater
marketing efforts
Market Introducing present products or

Development services into new geographic areas
Seeking increased sales by

Product
improving present products or
Development services or developing new ones

Strategy Analysis & Choice
 Subjective decisions based on objective

information
 Generating alternative strategies
 Selecting strategies to pursue
 Best alternative course of action to
achieve mission & objectives
 Derived from vision, mission, objectives,
external audit, and internal audit
The Strategy-Formulation Analytical
Framework
 Stage 1 (Input Stage) summarizes the basic
input information needed to formulate
strategies.
 Stage 2 (Matching Stage) focuses on
generating feasible alternative strategies by
aligning key external and internal factors.
 Stage 3 (Decision Stage) uses the QSPM to
objectively evaluate feasible alternative
strategies identified in Stage 2.
Strategy-Formulation Framework
External Factor Evaluation

Matrix (EFE)
Stage 1: Internal Factor Evaluation

The Input Stage Matrix (IFE)
Competitive Profile Matrix

(CPM)

Stage 2: The Matching Stage
Match between organization’s internal

resources & skills and the opportunities &
risks created by its external factors

SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix

The Matching Stage
IE Matrix
Grand Strategy Matrix

Stage 2: The Matching Stage
SWOT Matrix
Strengths
Weaknesses
Opportunities
Threats

SWOT Matrix
Four Types of Strategies
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)

SWOT Matrix
 SO strategies use a firm’s internal strengths

to take advantage of external opportunities
 WO strategies improve internal weaknesses
by taking advantage of external opportunities
 ST strategies use a firm’s strengths to avoid
or reduce the impact of external threats
 WT strategies defensive tactics aimed at
reducing internal weakness and avoiding
external threats
SWOT Matrix
SPACE Matrix
Stage 2: BCG Matrix

The Matching Stage
IE Matrix
Grand Strategy Matrix

Strategy-Formulation Analytical
Framework
Quantitative Strategic
Stage 3: Planning Matrix
The Decision Stage (QSPM)

Strategy Review, Evaluation,
and Control
The best formulated and best implemented strategies

become obsolete as a firm’s external and internal
environments change. Therefore, it is essential for
strategists to systematically review, evaluate, and control
the execution of strategies.

Strategy Review, Evaluation, and
Control
Strategy Evaluation is vital to an organization’s well
being. Timely evaluations can alert management to
potential or actual problems before a situation
becomes critical.
Strategy Evaluation includes three basic activities:

(1) Examining the underlying bases of a firm’s
strategy.
(2) Comparing expected results to actual results.
(3) Taking corrective actions to ensure that
performance conforms to plans.
Strategy Review, Evaluation, and
Control
Strategy Evaluation
 Adequate and timely feedback is the
cornerstone of effective Strategy Evaluation.
 Strategy Evaluation is important because
organizations face dynamic environments in
which key external and internal factors can
change quickly and dramatically.
 Strategy Evaluation is essential to ensure that
the stated objectives of an organization are
being achieved.
and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats
 Are our strengths still strengths?

 Has our organization added additional strengths?
 Are our weaknesses still weaknesses?
 Has our organization developed other
weaknesses?

and Control
Monitor Strengths & Weaknesses;
Opportunities & Threats
 Are our opportunities still opportunities?
 Have other opportunities developed?
 Are our threats still threats?
 Have other threats emerged?

Taking Corrective Action
 Taking corrective action is the final strategy
evaluation activity. It requires making changes to
competitively reposition a firm for the future.
Examples of changes that may be needed are
altering an organization’s structure, replacing one or
more key employees, selling a division, devising new
policies, issuing stock to raise capital, allocating
resources differently, or revising the firm’s mission.
 Taking corrective action is necessary to keep an
organization on track toward achieving its
objectives.

Business Ethics
 Principles of conduct within

organizations that guide decision
making and behavior

Business Ethics
 Code of Business Ethics

 A document that provides behavioral
guidelines that cover daily activities
and decisions within the organization

Ethics Culture
 Ethics training should include:

 A message from the CEO
 Development and discussion of codes
of ethics
 Procedures for discussing and
reporting unethical behavior

Social Policy
 Concerns what responsibilities the firm has to

its employees, consumers, environmentalists,
minorities, communities, shareholders, and
other groups
 Should be considered during each stage of

strategy formulation, implementation, and
evaluation

Global Issues
 Global considerations impact

virtually all strategic decisions
 A world market has emerged
 It is difficult for a firm to survive

relying solely on domestic markets

Multinational Organizations
 International firms or multinational
corporations face many complex variables:
 Social
 Cultural
 Demographic
 Environmental
 Political
 Governmental
 Legal
 Technological
 Competitive opportunities and threats
Potential Advantages of International
Operations
 Gain new customers
 Absorb excess capacity, reduce unit
costs, and spread economic risks
 Allow firms to establish low-cost
production facilities
 Competition may be less intense

Potential Advantages of International
Operations (continued)
 Reduced tariffs, lower taxes, and
favorable political treatment
 Joint ventures can enable firms to learn
new technology, culture, and business
practices
 Economies of scale
 Power and prestige in domestic markets
may be significantly enhanced
Potential Disadvantages of
International Operations
 Foreign operations could be seized
 Different and often little-understood social,
cultural, demographic, environmental, political,
governmental, legal, technological, economic,
and competitive forces
 Weakness of competitors overestimated
 Different language, culture, and value systems
 Understanding of regional organizations needed
 Dealing with two or money systems
Terima Kasih
Copyright © 2011 Pearson Education, Inc. 75


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Strategic Management

Copyright © 2011 Pearson Education, Inc.

Art & science of formulating,

Copyright © 2011 Pearson Education, Inc. Ch 1 -2

Copyright © 2011 Pearson Education, Inc. Ch 1 -3

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Copyright © 2011 Pearson Education, Inc. Ch 1 -4

Copyright © 2011 Pearson Education, Inc. Ch 1 -5

Copyright © 2011 Pearson Education, Inc. Ch 1 -6

Copyright © 2011 Pearson Education, Inc. Ch 1 -7

Copyright © 2011 Pearson Education, Inc. Ch 1 -8

Basic Tenet of Strategic Management

Copyright © 2011 Pearson Education, Inc. Ch 1 -9

Assessing the Internal Environment

Copyright © 2011 Pearson Education, Inc. Ch 1 -10

Copyright © 2011 Pearson Education, Inc. Ch 1 -11

Copyright © 2011 Pearson Education, Inc. Ch 1 -12

Copyright © 2011 Pearson Education, Inc. Ch 1 -13

Copyright © 2011 Pearson Education, Inc. Ch 1 -14

• The recents economic recession resulted in many forms changing

• In the begining, a new business is simply a collection of ideas.

• As a business grows, owners or managers find it necessary to

Copyright © 2011 Pearson Education, Inc. Ch 2 -15

• Agreement among managers and executives in any organization on the

• A vision statement should answer the basic question “What do we want to

• A Clear vision provide the foundation for developing a comprehensive

Copyright © 2011 Pearson Education, Inc. Ch 2 -16

General Motors’ vision is to be the

Copyright © 2011 Pearson Education, Inc. Ch 2 -17

 Great benefits can be achieved if

 Considers them to be an integral part

of the firm’s culture

Participation by as many managers as

Copyright © 2011 Pearson Education, Inc. Ch 2 -19

 Better financial results

 Provide unity of direction

 Project a sense of worth and intent

 Affirm the company’s commitment

 An effective mission statement:

 Provides product/service to satisfy

Purpose of an External Audit

 opportunities that could benefit a firm

Copyright © 2011 Pearson Education, Inc. Ch 3 -24

Resulting in a list of the most

Copyright © 2011 Pearson Education, Inc. Ch 3 -25

Copyright © 2011 Pearson Education, Inc. Ch 3 -26

Collection & evaluation of data on

Copyright © 2011 Pearson Education, Inc. Ch 3 -27

Copyright © 2011 Pearson Education, Inc. Ch 3 -28

 A systematic and ethical process for

Copyright © 2011 Pearson Education, Inc. Ch 3 -29

Copyright © 2011 Pearson Education, Inc. Ch 3 -30

 Provide a general understanding of industry

Copyright © 2011 Pearson Education, Inc. Ch 3 -31

Copyright © 2011 Pearson Education, Inc. Ch 3 -32

 Finance and accounting

 Production and operations

 Research and development

 Management information systems

Copyright © 2011 Pearson Education, Inc. Ch 4 -34

Basis for Objectives & Strategies