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Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13th Edition Fred David Copyright © 2011 Pearson Education, Inc. Ch 1 -1 Publishing as Prentice Hall Course Description This course introduces...

Chapter 1 The Nature of Strategic Management Strategic Management: Concepts & Cases 13th Edition Fred David Copyright © 2011 Pearson Education, Inc. Ch 1 -1 Publishing as Prentice Hall Course Description This course introduces students to the process of developing and managing marketing strategies, examining how firms create and sustain customer value from market analysis, product positioning, communications, and channel systems design. Copyright © 2011 Pearson Education, Inc. Ch 1 -2 Publishing as Prentice Hall Learning Output Groups or teams will be assigned to evaluate, discuss, and present cases/business reports in class. Problem solving and other activities are worked out in the class either individually or in groups. Students are expected to present their solutions and are considered as class participation. Copyright © 2011 Pearson Education, Inc. Ch 1 -3 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 -4 Publishing as Prentice Hall Strategic Marketing Identification of one or more sustainable competitive advantages a firm has in the markets it serves (or intends to serve), and allocation of resources to exploit them. Copyright © 2011 Pearson Education, Inc. Ch 1 -5 Publishing as Prentice Hall Purpose of Strategic Management To exploit and create new and different opportunities for tomorrow Copyright © 2011 Pearson Education, Inc. Ch 1 -6 Publishing as Prentice Hall Strategic Management In essence, the strategic plan is a company’s game plan Copyright © 2011 Pearson Education, Inc. Ch 1 -7 Publishing as Prentice Hall 3 Stages of the Strategic Management Process Strategy formulation Strategy implementation Strategy evaluation Copyright © 2011 Pearson Education, Inc. Ch 1 -8 Publishing as Prentice Hall Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection Copyright © 2011 Pearson Education, Inc. Ch 1 -9 Publishing as Prentice Hall Issues in Strategy Formulation Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover Copyright © 2011 Pearson Education, Inc. Ch 1 -10 Publishing as Prentice Hall Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation Copyright © 2011 Pearson Education, Inc. Ch 1 -11 Publishing as Prentice Hall Strategy Implementation Steps Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to organizational performance Copyright © 2011 Pearson Education, Inc. Ch 1 -12 Publishing as Prentice Hall Issues in Strategy Implementation Action Stage of Strategic Management Mobilization of employees & managers Most difficult stage Interpersonal skills critical Copyright © 2011 Pearson Education, Inc. Ch 1 -13 Publishing as Prentice Hall Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action Copyright © 2011 Pearson Education, Inc. Ch 1 -14 Publishing as Prentice Hall Prime Task of Strategic Management Peter Drucker: Think through the overall mission of a business. Ask the key question: “What is our Business?” Copyright © 2011 Pearson Education, Inc. Ch 1 -15 Publishing as Prentice Hall Integrating Intuition & Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty Copyright © 2011 Pearson Education, Inc. Ch 1 -16 Publishing as Prentice Hall Integrating Intuition & Analysis Intuition is based on:  Past experiences  Judgment  Feelings Intuition is useful for decision making in conditions of:  Great uncertainty  Little precedent  Highly interrelated variables  Several plausible alternatives Copyright © 2011 Pearson Education, Inc. Ch 1 -17 Publishing as Prentice Hall Integrating Intuition & Analysis Intuition & Judgment Involve management at all levels Influence all analyses Copyright © 2011 Pearson Education, Inc. Ch 1 -18 Publishing as Prentice Hall Adapting to Change Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed Copyright © 2011 Pearson Education, Inc. Ch 1 -19 Publishing as Prentice Hall Key Terms in Strategic Management Competitive advantage Strategists Vision and mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies Copyright © 2011 Pearson Education, Inc. Ch 1 -20 Publishing as Prentice Hall Strategic Management is Gaining and Maintaining Competitive Advantage Anything that a firm does especially well compared to rival firms Copyright © 2011 Pearson Education, Inc. Ch 1 -21 Publishing as Prentice Hall Achieving Sustained Competitive Advantage 1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources 2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors Copyright © 2011 Pearson Education, Inc. Ch 1 -22 Publishing as Prentice Hall Strategists Gather Information Analyze Information Organize Information Copyright © 2011 Pearson Education, Inc. Ch 1 -23 Publishing as Prentice Hall Vision and Mission Statements Vision Statement – What do we want to become? Mission Statement – What is our business? Copyright © 2011 Pearson Education, Inc. Ch 1 -24 Publishing as Prentice Hall External Opportunities and Threats Analysis of Trends  Economic  Social  Cultural  Demographic/Environmental  Political, Legal, Governmental  Technological  Competitors Copyright © 2011 Pearson Education, Inc. Ch 1 -25 Publishing as Prentice Hall External Opportunities and Threats Basic Tenet of Strategic Management Take advantage of External Opportunities Strategy Formulation Avoid/minimize impact of External Threats Copyright © 2011 Pearson Education, Inc. Ch 1 -26 Publishing as Prentice Hall Internal Strengths and Weaknesses  Controllable activities performed especially well or poorly  Determined relative to competitors Copyright © 2011 Pearson Education, Inc. Ch 1 -27 Publishing as Prentice Hall Internal Strengths and Weaknesses Typically located in functional areas of the firm  Management  Marketing  Finance/Accounting  Production/Operations  Research & Development  Management Information Systems Copyright © 2011 Pearson Education, Inc. Ch 1 -28 Publishing as Prentice Hall Internal Strengths and Weaknesses Assessing the Internal Environment Ratios Performance Measures Internal Factors Industry Averages Survey Data Copyright © 2011 Pearson Education, Inc. Ch 1 -29 Publishing as Prentice Hall Long-Term Objectives  Specific results that an organization seeks to achieve in pursuing its basic mission  Long-term means more than one year Copyright © 2011 Pearson Education, Inc. Ch 1 -30 Publishing as Prentice Hall Long-Term Objectives Essential for ensuring the firm’s success  Provide direction  Aid in evaluation  Create synergy  Reveal priorities  Focus coordination  Provide basis for planning, organizing, motivating, and controlling Copyright © 2011 Pearson Education, Inc. Ch 1 -31 Publishing as Prentice Hall Strategies Means by which long-term objectives are achieved Copyright © 2011 Pearson Education, Inc. Ch 1 -32 Publishing as Prentice Hall Strategies Examples  Geographic expansion  Diversification  Acquisition  Product development  Market penetration  Retrenchment  Divestiture  Liquidation  Joint venture Copyright © 2011 Pearson Education, Inc. Ch 1 -33 Publishing as Prentice Hall Sample Strategies Table 1-1  Best Buy  Levi Strauss  New York Times Company Copyright © 2011 Pearson Education, Inc. Ch 1 -34 Publishing as Prentice Hall Annual Objectives Short-term milestones that firms must achieve to reach long-term objectives Copyright © 2011 Pearson Education, Inc. Ch 1 -35 Publishing as Prentice Hall Policies Means by which annual objectives will be achieved Copyright © 2011 Pearson Education, Inc. Ch 1 -36 Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. Ch 1 -37 Publishing as Prentice Hall Strategic Management Model  StrategicManagement Process  Dynamic & continuous  More formal in larger organizations Copyright © 2011 Pearson Education, Inc. Ch 1 -38 Publishing as Prentice Hall Strategic Management Communication is a key to successful strategic management Copyright © 2011 Pearson Education, Inc. Ch 1 -39 Publishing as Prentice Hall Benefits of Strategic Management Copyright © 2011 Pearson Education, Inc. Ch 1 -40 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 1 -41 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 1 -42 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 1 -43 Publishing as Prentice Hall Pitfalls in Strategic Planning Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory Copyright © 2011 Pearson Education, Inc. Ch 1 -44 Publishing as Prentice Hall Effective Strategic Planning is: A people process more than a paper process A learning process Words supported by numbers Simple and nonroutine Varying assignments, team membership, meeting formats, and planning calendars Challenging assumptions underlying corporate strategy Copyright © 2011 Pearson Education, Inc. Ch 1 -45 Publishing as Prentice Hall Effective Strategic Planning continued Welcomes bad news Requires open-mindedness and a spirit of inquiry Is not a bureaucratic mechanism Is not ritualistic or stilted Is not too formal, predictable, or rigid Does not contain jargon or arcane language Copyright © 2011 Pearson Education, Inc. Ch 1 -46 Publishing as Prentice Hall Effective Strategic Planning continued Is not a formal system for control Does not disregard qualitative information Is not controlled by “technicians” Does not pursue too many strategies at once Continually strengthens the “good ethics is good business” policy Copyright © 2011 Pearson Education, Inc. Ch 1 -47 Publishing as Prentice Hall Comparing Business and Military Strategy Strategic planning started in the military Similarity  Both business and military organizations must adapt to change and constantly improve Difference  Business strategy assumes competition  Military strategy assumes conflict Copyright © 2011 Pearson Education, Inc. Ch 1 -48 Publishing as Prentice Hall End Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 1 -49 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2011 Pearson Education, Inc. Ch 1 -50 Publishing as Prentice Hall Chapter 2 The Business Vision & Mission Strategic Management: Concepts & Cases 13th Edition Fred David Copyright © 2011 Pearson Education, Inc. Ch 2 -1 Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. Ch 2 -2 Publishing as Prentice Hall Vision “The last thing IBM needs right now is a vision.” (July 1993) “What IBM needs most right now is a vision.” (March 1996) – Louis V. Gerstner, Jr., CEO, IBM Corporation Copyright © 2011 Pearson Education, Inc. Ch 2 -3 Publishing as Prentice Hall Vision Agreement on the basic vision for which the firm strives to achieve in the long term is especially important. Copyright © 2011 Pearson Education, Inc. Ch 2 -4 Publishing as Prentice Hall Vision “What do we want to become?” Copyright © 2011 Pearson Education, Inc. Ch 2 -5 Publishing as Prentice Hall Vision Statement Examples Tyson Foods’ vision is to be the world’s first choice for protein solutions while maximizing shareholder value. Copyright © 2011 Pearson Education, Inc. Ch 2 -6 Publishing as Prentice Hall Vision Statement Examples General Motors’ vision is to be the world leader in transportation products and related services. Copyright © 2011 Pearson Education, Inc. Ch 2 -7 Publishing as Prentice Hall Vision Statement Examples PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Copyright © 2011 Pearson Education, Inc. Ch 2 -8 Publishing as Prentice Hall Vision Statement Examples Dell’s vision is to create a company culture where environmental excellence is second nature. Copyright © 2011 Pearson Education, Inc. Ch 2 -9 Publishing as Prentice Hall Vision Clear Business Vision Comprehensive Mission Statement Copyright © 2011 Pearson Education, Inc. Ch 2 -10 Publishing as Prentice Hall Mission Statement Answers the question:  “What is our business?” Reveals:  what the organization wants to be  whom we want to serve Copyright © 2011 Pearson Education, Inc. Ch 2 -11 Publishing as Prentice Hall Mission Statement An enduring statement of purpose that distinguishes one organization from other similar enterprises A declaration of an organization’s “reason for being” Copyright © 2011 Pearson Education, Inc. Ch 2 -12 Publishing as Prentice Hall Mission Statements are also called Creed statement Statement of purpose Statement of philosophy Statement of beliefs Statement of business principles A statement “defining our business” Copyright © 2011 Pearson Education, Inc. Ch 2 -13 Publishing as Prentice Hall Mission Statement Examples Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries in providing quality products with a passion for customer-driven innovation. We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers. We will lead our industry in the application of appropriate technologies. We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance. We will deliver value to our shareholders, positive operating results and industry- leading earnings. Copyright © 2011 Pearson Education, Inc. Ch 2 -14 Publishing as Prentice Hall Mission Statement Examples We aspire to make PepsiCo the world’s premier consumer products company, focused on convenient foods and beverages. We seek to produce healthy financial rewards for investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity. Copyright © 2011 Pearson Education, Inc. Ch 2 -15 Publishing as Prentice Hall Mission Statement Examples Dell’s mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet consumer expectations of highest quality; leading technology; competitive pricing; individual and company accountability; best-in-class service and support; flexible customization capability; superior corporate citizenship; financial stability. Copyright © 2011 Pearson Education, Inc. Ch 2 -16 Publishing as Prentice Hall Mission Statement Examples Proctor & Gamble will provide branded products and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will reward us with industry leadership in sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper. Copyright © 2011 Pearson Education, Inc. Ch 2 -17 Publishing as Prentice Hall Mission Statement Examples At L’Oreal, we believe that lasting business success is built upon ethical standards which guide growth and on a genuine sense of responsibility to our employees, our consumers, our environment and to the communities in which we operate. Copyright © 2011 Pearson Education, Inc. Ch 2 -18 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 2 -19 Publishing as Prentice Hall Vision & Mission Profit & vision are necessary to effectively motivate a workforce Copyright © 2011 Pearson Education, Inc. Ch 2 -20 Publishing as Prentice Hall Vision & Mission Shared vision creates a community of interests Copyright © 2011 Pearson Education, Inc. Ch 2 -21 Publishing as Prentice Hall Developing Vision & Mission A clear mission is needed before alternative strategies can be formulated and implemented Copyright © 2011 Pearson Education, Inc. Ch 2 -22 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 2 -23 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 2 -24 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 2 -25 Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. Ch 2 -26 Publishing as Prentice Hall Resolution of Divergent Views A genuine decision must be based on divergent views to have a chance to be a right and effective decision Considerable disagreement over vision and mission statements can cause trouble if not resolved Copyright © 2011 Pearson Education, Inc. Ch 2 -27 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 2 -28 Publishing as Prentice Hall Declaration of Attitude Broad in scope Generate strategic alternatives Not overly specific Reconciles interests among diverse stakeholders Finely balanced between specificity & generality Copyright © 2011 Pearson Education, Inc. Ch 2 -29 Publishing as Prentice Hall Declaration of Attitude Arouse positive feelings & emotions Motivate readers to action Generate favorable impression of the firm Copyright © 2011 Pearson Education, Inc. Ch 2 -30 Publishing as Prentice Hall Declaration of Attitude Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Dynamic in nature Copyright © 2011 Pearson Education, Inc. Ch 2 -31 Publishing as Prentice Hall Mission & Customer Orientation – Vern McGinnis Define what the organization is Define what it aspires to be Limited to exclude some ventures Broad enough to allow for growth Distinguishes firm from all others Framework for evaluating activities Stated clearly – understood by all Copyright © 2011 Pearson Education, Inc. Ch 2 -32 Publishing as Prentice Hall 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 Copyright © 2011 Pearson Education, Inc. Ch 2 -33 Publishing as Prentice Hall Utility of Firm’s Products to Customers Do not offer me things. Do not offer me clothes. Offer me attractive looks. Do not offer me shoes. Offer me comfort for my feet and the pleasure of walking. Do not offer me a house. Offer me security, comfort, and a place that is clean and happy. Do not offer me books. Offer me hours of pleasure and the benefit of knowledge. Copyright © 2011 Pearson Education, Inc. Ch 2 -34 Publishing as Prentice Hall Utility of Firm’s Products to Customers Do not offer me CDs. Offer me leisure and the sound of music. Do not offer me tools. Offer me the benefits and the pleasure that come from making beautiful things. Do not offer me furniture. Offer me comfort and the quietness of a cozy place. Do not offer me things. Offer me ideas, emotions, ambience, feelings, and benefits. Please, do not offer me THINGS. Copyright © 2011 Pearson Education, Inc. Ch 2 -35 Publishing as Prentice Hall  Products or Services Markets Customers Mission Technology Employees Components Survival, Growth, Public Profits Image Self-Concept Philosophy Copyright © 2011 Pearson Education, Inc. Ch 2 -36 Publishing as Prentice Hall Copyright © 2011 Pearson Education, Inc. Ch 2 -37 Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2011 Pearson Education, Inc. Ch 2 -38 Publishing as Prentice Hall