11

INTRODUCING STRATEGIC INTRODUCING STRATEGIC MANAGEMENTMANAGEMENT

22

““Cheshire Puss” she (Alice) began…Cheshire Puss” she (Alice) began… ““Would you tell me, please, which way I Would you tell me, please, which way I

ought to go from here?”ought to go from here?”

““That depends a good deal on where That depends a good deal on where you want to get to “ said the Cat.you want to get to “ said the Cat.

Lewis CarrollLewis Carroll

33

““Without a strategy the organization Without a strategy the organization is like a ship without a rudder, going is like a ship without a rudder, going around in circles”.around in circles”.

Joel Ross and Michael KamiJoel Ross and Michael Kami

44

“ “ All men can see the tactics All men can see the tactics whereby I conquer, but what none whereby I conquer, but what none can see is the strategy out of which can see is the strategy out of which great victory is evolved”great victory is evolved”

Sun-Tzu (Chinese military strategist, Sun-Tzu (Chinese military strategist, 3000 years ago)3000 years ago)

55

Definition of Definition of Strategic ManagementStrategic Management

Strategic ManagementStrategic Management

That set of managerial decisions and That set of managerial decisions and actions that determines the long-run actions that determines the long-run performance of a corporationperformance of a corporation

66

Strategic management is the art and Strategic management is the art and science of formulating, science of formulating, implementing, and evaluating cross-implementing, and evaluating cross-functional decisions that enable an functional decisions that enable an organization to achieve its objectivesorganization to achieve its objectives

77

What is Strategic What is Strategic Management?Management?

Strategic management is undertaken by Strategic management is undertaken by the top management of the organization.the top management of the organization.

88

What is Strategic What is Strategic Management?Management?

It calls for managers to move It calls for managers to move away from the narrow, specialized away from the narrow, specialized technically oriented perspective to technically oriented perspective to a more comprehensive view of the a more comprehensive view of the firm.firm.

99

Definition of StrategyDefinition of Strategy

STRATEGY STRATEGY is the is the direction direction of an of an organization over the organization over the long term, long term, which which achieves achieves advantage advantage of the organization of the organization through its configuration of through its configuration of resources resources within a within a changing environment changing environment and to and to fulfill fulfill stakeholder stakeholder expectationsexpectations

STRATEGY STRATEGY is the is the long term direction of long term direction of an organizationan organization

1010

Benefits of Strategic Benefits of Strategic ManagementManagement

Financial BenefitsFinancial Benefits Non Financial BenefitsNon Financial Benefits

1111

Financial BenefitsFinancial Benefits

More profit and successMore profit and success More informed decisions with good More informed decisions with good

anticipation of both short term and anticipation of both short term and long term consequenceslong term consequences

Less business failuresLess business failures

1212

Non Financial BenefitsNon Financial Benefits

1.1. Allows identification, prioritization Allows identification, prioritization and exploitation of opportunitiesand exploitation of opportunities

2.2. Provides an objective view of Provides an objective view of management problemsmanagement problems

3.3. Represents a framework for Represents a framework for improved coordination and control of improved coordination and control of activitiesactivities

4.4. Minimizes the effects of adverse Minimizes the effects of adverse conditions and changesconditions and changes

1313

5.5. Allows major decisions to better support Allows major decisions to better support established objectivesestablished objectives

6.6. Less ad-hoc decisionsLess ad-hoc decisions7.7. Creates a framework for internal Creates a framework for internal

communicationcommunication8.8. Helps integrate the behavior of Helps integrate the behavior of

individuals into a total effortindividuals into a total effort9.9. Provides a basis for clarifying individual Provides a basis for clarifying individual

responsibilities responsibilities

1414

11.11. Encourages forward thinkingEncourages forward thinking12.12. Provides a cooperative, integrated, Provides a cooperative, integrated,

and enthusiastic approach to and enthusiastic approach to tackling problems and opportunitiestackling problems and opportunities

13.13. Encourages a favorable attitude Encourages a favorable attitude towards changetowards change

14.14. Discipline and formality in Discipline and formality in managing businessmanaging business

1515

Why some firms do no Why some firms do no strategic planningstrategic planning

Poor reward structuresPoor reward structures Fire-fightingFire-fighting Too expensiveToo expensive LazinessLaziness Content with successContent with success fear of failurefear of failure OverconfidenceOverconfidence Prior bad experiencePrior bad experience Self interestSelf interest Fear of the unknownFear of the unknown Honest difference of opinionHonest difference of opinion SuspicionSuspicion

1616

Pitfalls in Strategic PlanningPitfalls in Strategic Planning

Using SP to gain control over decisions and Using SP to gain control over decisions and resourcesresources

Doing SP only to satisfy accreditation or Doing SP only to satisfy accreditation or requirementsrequirements

Quick move from mission development to Quick move from mission development to strategy formulationstrategy formulation

Failing to communicate the plan to Failing to communicate the plan to employeesemployees

Making intuitive decisions conflicting with Making intuitive decisions conflicting with the formal planthe formal plan

1717

Top management not supporting the Top management not supporting the strategic planning processstrategic planning process

Failing to use plans as a standard for Failing to use plans as a standard for measuring performancemeasuring performance

Delegating planning to a ”planner” Delegating planning to a ”planner” rather than involving all managersrather than involving all managers

Failing to involve key employees in Failing to involve key employees in all phases of planningall phases of planning

1818

Failure to create a collaborative Failure to create a collaborative climate supportive of changeclimate supportive of change

Viewing planning to be unnecessary Viewing planning to be unnecessary or unimportantor unimportant

Becoming so involved with current Becoming so involved with current problems that no planning is done problems that no planning is done

Being so formal in planning that Being so formal in planning that flexibility and creativity are stifledflexibility and creativity are stifled

1919

www.entarga.com/stratplan/index.htwww.entarga.com/stratplan/index.htmm

www.mindtools.com/plfailpl.htm/www.mindtools.com/plfailpl.htm/ www.des.calstate.edu/limitations.htmwww.des.calstate.edu/limitations.htm

// www.ethicsweb.ca/codeswww.ethicsweb.ca/codes www.stetson.edu/-rhansen/strategywww.stetson.edu/-rhansen/strategy

2020

Three Key Strategic Three Key Strategic QuestionsQuestions

Where is the organization now?Where is the organization now? If no changes are made, where will the If no changes are made, where will the

organization be in one, two, five or ten organization be in one, two, five or ten years? Are the answers acceptable?years? Are the answers acceptable?

If the answers are not acceptable, If the answers are not acceptable, what specific actions should what specific actions should management undertake? What are the management undertake? What are the risks and payoffs involved?risks and payoffs involved?

2121

Strategic Planning Process -Strategic Planning Process -Three Basic QuestionsThree Basic Questions

Long-TermView

SituationAnalysis

Strategy

1: Where Do We Want To Go?

2: Where Are We Now?

3: What Must We Do To Close The Gap?

2222

Challenges to Strategic Challenges to Strategic ManagementManagement

Globalization Globalization Electronic CommerceElectronic Commerce

2323

GlobalizationGlobalization

Globalization (the internationalization of Globalization (the internationalization of markets and corporations) has changed markets and corporations) has changed the way modern corporations do businessthe way modern corporations do business

A global (worldwide) market instead of a A global (worldwide) market instead of a national marketnational market

SM is a way to keep track of international SM is a way to keep track of international developments and position the company developments and position the company for long-term competitive advantagefor long-term competitive advantage

2424

Regional Trade AssociationsRegional Trade Associations

RTA are changing the way to RTA are changing the way to conduct international businessconduct international business

Force corporations to establish a Force corporations to establish a manufacturing presence wherever manufacturing presence wherever they wishthey wish

Harmonized standards so that Harmonized standards so that products can be sold and moved products can be sold and moved across national boundariesacross national boundaries

2525

Regional Trade Regional Trade Associations/AgreementsAssociations/Agreements

European Union (EU)European Union (EU) North American Free Trade Agreement North American Free Trade Agreement

(NAFTA)(NAFTA) Mercosur (Argentina, Brazil, Urugway and Mercosur (Argentina, Brazil, Urugway and

Paragway)Paragway) Association of South East Asian Nations Association of South East Asian Nations

(ASEAN) (Brunei, Indonesia, Malaysia, the (ASEAN) (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Philippines, Singapore, Thailand and Vietnam)Vietnam)

FTA (Australia, New Zealand)FTA (Australia, New Zealand)

2626

EUROPEAN UNIONEUROPEAN UNION

EuropeEurope European Union (EU)European Union (EU)

Grouping of 25 European Grouping of 25 European countries that agreed to countries that agreed to support mutual economic support mutual economic growthgrowth

2727

NAFTANAFTA

The AmericasThe Americas North American Free North American Free

Trade Agreement (NAFTA)Trade Agreement (NAFTA) Agreement for free flow of Agreement for free flow of

goods and services between goods and services between the U.S., Canada, and Mexicothe U.S., Canada, and Mexico

Free Trade of the Free Trade of the Americas (FTAA)—Alaska Americas (FTAA)—Alaska to Chile—is a possibilityto Chile—is a possibility

2828

Asian and the Pacific Asian and the Pacific RimRim Rivals EU in size and is Rivals EU in size and is

growinggrowing Economic power of Japan Economic power of Japan

and Chinaand China Asia-Pacific Economic Asia-Pacific Economic

Cooperation (APEC) is a Cooperation (APEC) is a growing regional economic growing regional economic alliancealliance

Human rights and Human rights and intellectual property intellectual property issuesissues

2929

AfricaAfrica Beckons international Beckons international

businessbusiness Increased attention to Increased attention to

stable countriesstable countries South African South African

Development Development Community (SADC) Community (SADC) links 14 countries in links 14 countries in trade and economic trade and economic developmentdevelopment

3030

Electronic CommerceElectronic Commerce

refers to the use of the internet to conduct refers to the use of the internet to conduct business transactionsbusiness transactions

internet is breaking down traditional distribution internet is breaking down traditional distribution channelschannels

The balance of power is shifting to the consumerThe balance of power is shifting to the consumer companies exploit the internet to become more companies exploit the internet to become more

innovative and efficientinnovative and efficient The pace of business is increasing The pace of business is increasing The internet is pushing corporations out of their The internet is pushing corporations out of their

traditional boundariestraditional boundaries Knowledge is becoming the key asset and a Knowledge is becoming the key asset and a

source of competitive advantagesource of competitive advantage

3131

Theories of Organizational Theories of Organizational AdaptationAdaptation

1.1. Population EcologyPopulation Ecology: organizations do not : organizations do not change and are replaced by others more change and are replaced by others more suited to the environmentsuited to the environment

2.2. Institution TheoryInstitution Theory: organizations can : organizations can imitate other successful organizationsimitate other successful organizations

3.3. Strategic Choice perspectiveStrategic Choice perspective organizations can reshape the environmentorganizations can reshape the environment

4.4. Organizational Learning TheoryOrganizational Learning Theory: using : using knowledge to improve the fit with the knowledge to improve the fit with the environmentenvironment

3232

Creating a Learning Creating a Learning OrganizationOrganization

Strategic flexibility demands a long term Strategic flexibility demands a long term commitment to the development and commitment to the development and nurturing of critical resourcesnurturing of critical resources

It demands that the company becomes a It demands that the company becomes a learning organizationlearning organization

Strategic management is essential to Strategic management is essential to learning organizations to avoid stagnation learning organizations to avoid stagnation through a continuous self-examination through a continuous self-examination and experimentationand experimentation

3333

Learning OrganizationLearning Organization

An organization skilled at creating, An organization skilled at creating, acquiring, transferring knowledge, and acquiring, transferring knowledge, and at modifying its behavior to reflect new at modifying its behavior to reflect new knowledge and insightsknowledge and insights

3434

Learning organizations are skilled at 4 Learning organizations are skilled at 4 main activities :main activities :

1.1. Solving problems systematicallySolving problems systematically2.2. Experimenting with new approachesExperimenting with new approaches3.3. Learning from their own experiences as Learning from their own experiences as

well as from the experiences of otherswell as from the experiences of others4.4. Transferring knowledge quickly and Transferring knowledge quickly and

efficiently throughout the organizationefficiently throughout the organization

3535

Triggering Events for Triggering Events for Strategic ChangeStrategic Change

New CEONew CEO External interventionExternal intervention Threat of a change in ownershipThreat of a change in ownership Performance gapPerformance gap Strategic Inflection PointStrategic Inflection Point

3636

Characteristics of Characteristics of Strategic DecisionsStrategic Decisions

RareRare ConsequentialConsequential DirectiveDirective

3737

Characteristics of Strategic Characteristics of Strategic DecisionsDecisions

Concerned with the Concerned with the long term directionlong term direction of of an organizationan organization

Trying to achieve some Trying to achieve some advantage advantage to the to the organization over the competitionorganization over the competition

Concerned with the Concerned with the scope of the scope of the organization’s activitiesorganization’s activities

Concerned with Concerned with matching of the resources matching of the resources and activities of an organization to the and activities of an organization to the environment (Strategic Fit)environment (Strategic Fit)

3838

Characteristics of Strategic Characteristics of Strategic DecisionsDecisions

Strategic Fit Strategic Fit is developing strategy by identifying is developing strategy by identifying opportunities in the business environment and opportunities in the business environment and adapting resources and competences so as to take adapting resources and competences so as to take advantage of theseadvantage of these

Concerned with building on or Concerned with building on or “stretching an “stretching an organization’s resources and competences organization’s resources and competences to to create opportunities or to capitalize on themcreate opportunities or to capitalize on them

Stretch Stretch is the leverage of the resources and is the leverage of the resources and competences of an organization to provide competences of an organization to provide competitive advantage and/or yield new competitive advantage and/or yield new opportunitiesopportunities

3939

Characteristics of Strategic Characteristics of Strategic DecisionsDecisions

May require May require major resource major resource changes changes for an organizationfor an organization

Are likely to affect Are likely to affect operational operational decisionsdecisions

Is affected by the Is affected by the values and values and expectations expectations of those who have of those who have power power in and around the organizationin and around the organization

4040

Basic Elements of the Basic Elements of the Strategic Management Strategic Management

ProcessProcess

Evaluation and

Control

Strategy Implementation

Environmental Scanning

Strategy Formulation

4141

Basic Model ofBasic Model ofStrategic ManagementStrategic Management

Strategic Management consistsStrategic Management consists of four of four basic elementsbasic elements

1.1. Environmental scanningEnvironmental scanning

2.2. Strategy formulationStrategy formulation

3.3. Strategy implementationStrategy implementation

4.4. Evaluation and controlEvaluation and control

4242

Evaluation and Control

and Control

Strategic Management Strategic Management ModelModelStrategy

FormulationStrategy

Implementation

Mission

Objectives

Strategies

Policies

Feedback/Learning

Environmental Scanning

Societal Environment

General Forces

Task Environment

Industry Analysis

Structure Chain of Command

Resources Assets, Skills

Competencies, Knowledge

Culture Beliefs, Expectations,

Values

Reason for existence

What results to accomplish by when Plan to

achieve the mission & objectives Broad

guidelines for decision making

Programs

Activities needed to accomplish a plan

Budgets

Cost of the programs Procedures

Sequence of steps needed to do the job

Process to monitor performanceand take corrective action

Performance

External

Internal

Evaluationand Control

4343

Societal EnvironmentSocietal Environment

Composed of general forces in Composed of general forces in environmentenvironment

4444

Environmental VariablesEnvironmental Variables

Societal Environment

Economic

Forces

Technological

Forces

Political-Legal Forces

Sociocultural Forces

Internal Environment

Structure Culture

Resources

Shareholders

Governments

Customers

Creditors

Communities

Competitors

Employees/

Labor Unions

Suppliers

Special

Interest

Groups

Trade Associations

TaskEnvironment

(Industry)

4545

Task EnvironmentTask Environment

Composed ofComposed of Groups in environment that directly Groups in environment that directly

affect or are affected by the affect or are affected by the organization’s operationsorganization’s operations

(Often called industry)(Often called industry)

4646

StructureStructure

The way a corporation is organized in The way a corporation is organized in terms of communication, authority, terms of communication, authority, and workflowand workflow

4747

Corporate CultureCorporate Culture

Collection of beliefs, expectations, Collection of beliefs, expectations, and values and values learnedlearned and and sharedshared by by members and members and transmittedtransmitted from one from one generation of employees to anothergeneration of employees to another

4848

ResourceResource

An asset, competency, process, skill, An asset, competency, process, skill, or knowledge controlled by the or knowledge controlled by the corporationcorporation

4949

Definition of Strategy Definition of Strategy FormulationFormulation

Strategy FormulationStrategy Formulation

The process of developing long-The process of developing long-range plans to deal effectively with range plans to deal effectively with environmental opportunities and environmental opportunities and threats in light of corporate threats in light of corporate strengths and weaknessesstrengths and weaknesses

5050

Composed ofComposed of MissionMission ObjectivesObjectives StrategiesStrategies PoliciesPolicies

5151

Definition of MissionDefinition of Mission

MissionMission

The purpose or reason for the The purpose or reason for the corporation’s existence. It may be corporation’s existence. It may be narrow or broad in scope.narrow or broad in scope.

5252

Mission Elements

CustomersMarkets

Employees

PublicImage

Self-Concept Philosophy

SurvivalGrowthProfit

ProductsServices

Technology

5353

Definition of VisionDefinition of Vision

Vision or Strategic Intent is the Vision or Strategic Intent is the desired future state of the desired future state of the organizationorganization

5454

The Elements of a Strategic The Elements of a Strategic VisionVision

Defining what business the company Defining what business the company is is presentlypresently in in

Deciding on a Deciding on a long termlong term strategic strategic courses for the company to pursuecourses for the company to pursue

Communicating the vision in ways Communicating the vision in ways that are clear, exciting, and inspiringthat are clear, exciting, and inspiring

5555

Vision vs. MissionVision vs. Mission

Amoco mission statement :Amoco mission statement : “ “ Amoco is a worldwide integrated Amoco is a worldwide integrated

petroleum and chemical company. We find petroleum and chemical company. We find and develop petroleum resources and and develop petroleum resources and provide quality products and services for provide quality products and services for our customers. We conduct our business our customers. We conduct our business responsibly to achieve a superior financial responsibly to achieve a superior financial return balanced with our long-term growth, return balanced with our long-term growth, benefiting shareholders and fulfilling our benefiting shareholders and fulfilling our commitment to the community and the commitment to the community and the environment”environment”

5656

Amoco Vision Statement :Amoco Vision Statement : ““Amoco will be a global business enterprise, Amoco will be a global business enterprise,

recognized throughout the world as recognized throughout the world as preeminent by employees, customers, preeminent by employees, customers, competitors, investors, and the public. We will competitors, investors, and the public. We will be the standards by which other businesses be the standards by which other businesses measure their performance. Our hallmarks will measure their performance. Our hallmarks will be the innovation, initiative and teamwork of be the innovation, initiative and teamwork of our people and our ability to anticipate and our people and our ability to anticipate and effectively respond to change and to create effectively respond to change and to create opportunities”opportunities”

5757

Pepsi Co Mission StatementPepsi Co Mission Statement

PepsiCo’s mission is to increase the value of PepsiCo’s mission is to increase the value of our shareholders’ investment. We do this our shareholders’ investment. We do this through sales growth, cost controls, and wise through sales growth, cost controls, and wise investment resources. We believe our investment resources. We believe our commercial success depends upon offering commercial success depends upon offering quality and value to our consumers and quality and value to our consumers and customers providing products that are safe, customers providing products that are safe, wholesome, economically sound, and wholesome, economically sound, and providing a fair return to our investors while providing a fair return to our investors while adhering to the highest standards of integrityadhering to the highest standards of integrity

5858

Ben & Jerry’s MissionBen & Jerry’s Mission Ben & Jerry’s mission is to make, distribute and Ben & Jerry’s mission is to make, distribute and

sell the finest quality all-natural ice cream and sell the finest quality all-natural ice cream and related products in a wide variety of innovative related products in a wide variety of innovative flavors made from Vermont dairy products. To flavors made from Vermont dairy products. To operate the Company on a sound financial basis operate the Company on a sound financial basis of profitable growth, increasing value for our of profitable growth, increasing value for our shareholders, and creating career opportunities shareholders, and creating career opportunities and financial rewards for our employees. To and financial rewards for our employees. To operate the Company in a way that actively operate the Company in a way that actively recognizes the central role that business plays in recognizes the central role that business plays in the structure of society by initiating innovative the structure of society by initiating innovative ways to improve the quality of life of a broad ways to improve the quality of life of a broad community—local, national and international.community—local, national and international.

5959

Mission Statement Evaluation Mission Statement Evaluation MatrixMatrix

COMPONENTS          

Organization CustomersProducts Services Markets

Concern for Survival, Growth,

Profitability Technology

           

PepsiCo Yes No No Yes No

Ben & Jerry's No Yes Yes Yes No

           

6060

Mission Statement Evaluation Mission Statement Evaluation MatrixMatrix

COMPONENTS          

Organization PhilosophySelf-

ConceptConcern for Public Image

Concern for Employees

         

PepsiCo Yes No No No

Ben & Jerry's No Yes Yes Yes

         

6161

Definition of ObjectivesDefinition of Objectives

ObjectivesObjectives

The end results of planned activity. The end results of planned activity. They state WHAT is to be accomplished They state WHAT is to be accomplished by WHEN. They should be quantified, if by WHEN. They should be quantified, if possible.possible.

6262

Strategy Formulation Strategy Formulation Establishing Long Term Establishing Long Term

ObjectivesObjectives

– SpecificSpecific– MeasurableMeasurable– Achievable/AttainableAchievable/Attainable– RationalRational– Time BoundTime Bound

SMARTSMART

6363

Areas for Setting ObjectivesAreas for Setting Objectives

Profitability (Net Profits)Profitability (Net Profits) Efficiency (low costs)Efficiency (low costs) Growth (increase in total assets)Growth (increase in total assets) Shareholder wealth (dividends plus Shareholder wealth (dividends plus

stock price appreciation)stock price appreciation) Utilization of resources (return on Utilization of resources (return on

investment or equity)investment or equity) Reputation (being considered a top Reputation (being considered a top

firm)firm)

6464

Contribution to employeesContribution to employees Contribution to societyContribution to society Market leadershipMarket leadership Technological leadershipTechnological leadership SurvivalSurvival Personal needs of top managementPersonal needs of top management

6565

Definition of StrategyDefinition of Strategy

StrategyStrategy

A comprehensive master plan stating A comprehensive master plan stating HOW the corporation will achieve its HOW the corporation will achieve its mission and objectivesmission and objectives

6666

Definition of Definition of Corporate StrategyCorporate Strategy

Corporation’s overall direction and Corporation’s overall direction and the management of its businessesthe management of its businesses

6767

Definition of Definition of Business StrategyBusiness Strategy

Emphasizes improving the Emphasizes improving the competitive position of a competitive position of a corporation’s products or unitscorporation’s products or units

6868

Definition of Definition of Functional (operational) Functional (operational)

StrategyStrategyMaximizes resource productivityMaximizes resource productivity

6969

Hierarchy of StrategyHierarchy of Strategy CorporateCorporate StrategyStrategy

Business (Division Level)

Strategy

Functional Strategy

7070

Definition of PoliciesDefinition of Policies

PoliciesPolicies

Broad guidelines for making Broad guidelines for making decisionsdecisions

7171

Definition of Strategy Definition of Strategy ImplementationImplementation

Strategy ImplementationStrategy Implementation

The process of putting strategies and The process of putting strategies and policies into action through the policies into action through the development of development of ProgramsPrograms BudgetsBudgets ProceduresProcedures

7272

Definition of ProgramDefinition of Program

ProgramProgram

A statement of activities or steps A statement of activities or steps needed to accomplish a single-use needed to accomplish a single-use planplan

7373

Definition of BudgetDefinition of Budget

BudgetBudget

A statement of a corporation’s A statement of a corporation’s program in dollar termsprogram in dollar terms

7474

Definition of ProceduresDefinition of Procedures

ProceduresProcedures

A system of sequential steps or A system of sequential steps or techniques that describe in detail techniques that describe in detail how to perform a particular task or how to perform a particular task or jobjob

7575

Definition of Evaluation Definition of Evaluation and Controland Control

Evaluation and ControlEvaluation and Control

The process of monitoring corporate The process of monitoring corporate activities and performance results so activities and performance results so that actual performance can be that actual performance can be compared with desired performancecompared with desired performance

7676

Modes of Strategy FormulationModes of Strategy Formulation(Mintzberg)(Mintzberg)

Entrepreneurial Mode (made by a powerful Entrepreneurial Mode (made by a powerful individual, focus on opportunity)individual, focus on opportunity)

Adaptive Mode ( reactive solutions to existing Adaptive Mode ( reactive solutions to existing problems)problems)

Planning Mode (situation analysis and rational Planning Mode (situation analysis and rational selection of alternatives)selection of alternatives)

Logical incrementalism (strategy emerges Logical incrementalism (strategy emerges from debates, discussions, experimentation, from debates, discussions, experimentation, useful when the environment is changing useful when the environment is changing rapidly)rapidly)

7777

Strategic Decision-Making Strategic Decision-Making ProcessProcess

Review and Revise as Necessary: Mission Objectives

Generate and Evaluate Strategic Alterna- tives

Select and Recommend Best Alternative

Implement Strategies: Programs Budgets Procedures

Evaluate and Control

StrategyImplementation

Step 7

5(b) 6(a) 6(b) 7 8

Analyze External Factors: Opportun- ities Threats

Scan and Assess Internal Environment: Structure Culture Resources

Analyze Internal Factors: Strengths Weak- nesses

Select Strategic Factors (SWOT) in Light of Current Situation

Scan and Assess External Environment: Societal Task

Evaluate Current Performance Results

Examine and Evaluate the Current: Mission Objectives Strategies Policies

Review Corporate Governance: Board of Directors Top Man- agement

Strategy

Formulation:

Steps 1 – 6

3(a)

1(a) 1(b) 2 5(a)

4(a)

3(b)

4(b)

Evaluationand

Control:Step 8

7878

Characteristics of a good Characteristics of a good strategystrategy Provides answers for the following questions:Provides answers for the following questions:

1.1. Arenas : where will we be active?Arenas : where will we be active?

2.2. Vehicles: how will we get there?Vehicles: how will we get there?

3.3. Differentiators: how will we win in the market Differentiators: how will we win in the market place?place?

4.4. Staging : what will be our speed and Staging : what will be our speed and sequence of movessequence of moves

5.5. Economic logic: how will we obtain our Economic logic: how will we obtain our returns?returns?

7979

Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):

Mission & ObjectivesMission & ObjectivesStrategy FormulationStrategy Formulation

Mission Mission BroadBroad: To serve the best interests of shareowners, : To serve the best interests of shareowners,

customers, and employeescustomers, and employees NarrowNarrow: To become a full-line globally-oriented major : To become a full-line globally-oriented major

home appliance manufacturer and marketerhome appliance manufacturer and marketer

ObjectivesObjectives Increased profitabilityIncreased profitability Number one in customer satisfactionNumber one in customer satisfaction Number three in North American unit salesNumber three in North American unit sales

8080

Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):

Strategies & PoliciesStrategies & PoliciesStrategiesStrategies To grow horizontally where the corporation is not yet well represented To grow horizontally where the corporation is not yet well represented

through external acquisition or joint venturesthrough external acquisition or joint ventures To grow horizontally internally by improving efficiency and quality of acquired To grow horizontally internally by improving efficiency and quality of acquired

companies and by using one business unit’s expertise in one acquired are to companies and by using one business unit’s expertise in one acquired are to introduce quality products from a business unit in another areaintroduce quality products from a business unit in another area

PoliciesPolicies No cost reduction proposal will be approved if it reduces product quality in No cost reduction proposal will be approved if it reduces product quality in

any wayany way Every product, from the least expensive to the highest priced, should be Every product, from the least expensive to the highest priced, should be

superior to the competition in overall quality and performancesuperior to the competition in overall quality and performance The corporation must not emphasize market share at the expense of The corporation must not emphasize market share at the expense of

profitabilityprofitability Business units must be managed for synergies, while simultaneously the Business units must be managed for synergies, while simultaneously the

specialized expertise among those units must be allowed to flourishspecialized expertise among those units must be allowed to flourish

8181

Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):

Programs & BudgetsPrograms & BudgetsProgramsPrograms Work with Bosch-Siemens to develop joint marketing Work with Bosch-Siemens to develop joint marketing

and supplier agreements for Hoover appliancesand supplier agreements for Hoover appliances Analyze and develop Asian markets through current Analyze and develop Asian markets through current

distributors and licensees and through joint venturesdistributors and licensees and through joint ventures Develop new appliances for continental EuropeDevelop new appliances for continental Europe Develop TV advertising for Jenn-Air and Magic ChefDevelop TV advertising for Jenn-Air and Magic Chef Consolidate production of washers and dryers in Consolidate production of washers and dryers in

dedicated plantsdedicated plants

BudgetsBudgets Prepare budgets for each planned programPrepare budgets for each planned program

8282

Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):

ProceduresProceduresProceduresProcedures Develop procedures for joint purchasing and Develop procedures for joint purchasing and

joint marketing of Bosch-Siemens with Hooverjoint marketing of Bosch-Siemens with Hoover Coordinate marketing, manufacturing, and Coordinate marketing, manufacturing, and

purchasing activities of business units through purchasing activities of business units through committeescommittees

Research and development takes place in unit Research and development takes place in unit housing each product linehousing each product line

Consolidate all advertising under one agency, Consolidate all advertising under one agency, but establish internal advertising for each but establish internal advertising for each brand categorybrand category

8383

Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):

Evaluation & ControlEvaluation & ControlEvaluation & ControlEvaluation & Control Require all business units to provide Require all business units to provide monthlymonthly status reports status reports

on sales and costs by product line plus any trends in expenseson sales and costs by product line plus any trends in expenses Require all business units to provide Require all business units to provide annualannual reports giving reports giving

operating revenues, costs, and expenses as well as operating revenues, costs, and expenses as well as identifiable assets in dollars, plus property additions and identifiable assets in dollars, plus property additions and deletionsdeletions

Require all business units to provide Require all business units to provide quarterlyquarterly assessments of assessments of competitive activity and overall trends affecting each of their competitive activity and overall trends affecting each of their product linesproduct lines

Require all business units to inform corporate headquarters Require all business units to inform corporate headquarters before proceeding on any financially risky planbefore proceeding on any financially risky plan