chapter 1 of strategic management of MBA

strategy management

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Chapter 1Chapter 1
The Strategic Management ProcessThe Strategic Management Process
StrategicStrategic Charles W. L. HillCharles W. L. Hill
ManagementManagement Gareth R. JonesGareth R. Jones
Fifth EditionFifth Edition
PowerPoint Presentation PowerPoint Presentation
by Charlie Cookby Charlie Cook
An Integrated ApproachAn Integrated Approach

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OverviewOverview
Why do some firms succeed while others fail?Why do some firms succeed while others fail?
A central objective of strategic management is to A central objective of strategic management is to
learn why this happens.learn why this happens.
What is strategy?What is strategy?
An action a company takes to attain superior An action a company takes to attain superior
performance.performance.
What is the strategic management process?What is the strategic management process?
The process by which managers choose a set of The process by which managers choose a set of
strategies for the enterprise to pursue its vision.strategies for the enterprise to pursue its vision.

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Defining the Mission and Setting Top-Level GoalsDefining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and ThreatsExternal Analysis of Opportunities and Threats
Internal Analysis of Strengths and WeaknessesInternal Analysis of Strengths and Weaknesses
Selection of Appropriate StrategiesSelection of Appropriate Strategies
Implementation of Chosen StrategiesImplementation of Chosen Strategies
Strategic PlanningStrategic Planning
Rational planning by top management?Rational planning by top management?
Basic Strategic Planning ModelBasic Strategic Planning Model

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FIGURE 1.1
The Main The Main
Components of Components of
the Strategic the Strategic
Planning ProcessPlanning Process

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Mission and GoalsMission and Goals
MissionMission
Sets out why the organization Sets out why the organization
exists and what it should be doing.exists and what it should be doing.
Major goalsMajor goals
Specify what the organization hopesSpecify what the organization hopes
to fulfill in the medium to long term.to fulfill in the medium to long term.
Secondary goalsSecondary goals
Are objectives to be attained that lead to superior Are objectives to be attained that lead to superior
performance.performance.

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External AnalysisExternal Analysis
Identify Identify strategic opportunities and threatsstrategic opportunities and threats in in
the operating environment.the operating environment.
MacroenvironmentMacroenvironment NationalNational
Immediate (Industry)Immediate (Industry)

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Internal AnalysisInternal Analysis
Identify strengthsIdentify strengths
Quality and quantity of resources availableQuality and quantity of resources available
Distinctive competenciesDistinctive competencies
Identify weaknessesIdentify weaknesses
Inadequate resourcesInadequate resources
Managerial and Managerial and
organizational deficienciesorganizational deficiencies

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Strengths and WeaknessesStrengths and Weaknesses
Opportunities and ThreatsOpportunities and Threats
(SWOT Analysis)(SWOT Analysis)
Strategic ChoiceStrategic Choice
BusinessBusiness
FunctionalFunctional
GlobalGlobal
CorporateCorporate
SWOT and Strategic ChoiceSWOT and Strategic Choice

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Business-Level StrategiesBusiness-Level Strategies
Cost leadershipCost leadership
Attaining, then using the lowest total cost basis as a Attaining, then using the lowest total cost basis as a
competitive advantage.competitive advantage.
DifferentiationDifferentiation
Using product features or services to distinguish the Using product features or services to distinguish the
firm’s offerings from its competitors.firm’s offerings from its competitors.
Market niche focusMarket niche focus
Concentrating competitively on Concentrating competitively on
a specific market segment.a specific market segment.

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Functional-Level StrategiesFunctional-Level Strategies
Focus is on improving the effectiveness of Focus is on improving the effectiveness of
operations within a company.operations within a company.
ManufacturingManufacturing
MarketingMarketing
Materials managementMaterials management
Research and developmentResearch and development
Human resourcesHuman resources

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Global-Level StrategiesGlobal-Level Strategies
MultidomesticMultidomestic
InternationalInternational
GlobalGlobal
TransnationalTransnational

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Corporate-Level StrategiesCorporate-Level Strategies
Vertical integrationVertical integration
DiversificationDiversification
Strategic alliancesStrategic alliances
AcquisitionsAcquisitions
New venturesNew ventures
Business portfolio Business portfolio
restructuringrestructuring

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Strategy ImplementationStrategy Implementation
Designing organizational structureDesigning organizational structure
Designing control systemsDesigning control systems
Market and output controlsMarket and output controls
Bureaucratic controlsBureaucratic controls
Control through organizational cultureControl through organizational culture
Rewards and incentivesRewards and incentives
Matching strategy, structure, Matching strategy, structure,
and controlsand controls
Congruence (fit) among strategy, Congruence (fit) among strategy,
structure, and controlsstructure, and controls
StructureStructure
StrategyStrategy
ControlsControls

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Managing Strategic ChangeManaging Strategic Change
The only constant is change.The only constant is change.
Success requires adapting strategy and Success requires adapting strategy and
structure to a changing world.structure to a changing world.
The The feedback loopfeedback loop in in
strategic planning.strategic planning. CorporateCorporate
FunctionalFunctional
BusinessBusinessOperationalOperational

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Strategic ManagersStrategic Managers
General managersGeneral managers
Responsible for the overall (strategic) performance Responsible for the overall (strategic) performance
and health of the total organization.and health of the total organization.
Operations managersOperations managers
Responsible for specific businessResponsible for specific business
functions or operations.functions or operations.

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Strategic Managers for All LevelsStrategic Managers for All Levels
FIGURE 1.2

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Strategic LeadershipStrategic Leadership
Vision, eloquence, and consistencyVision, eloquence, and consistency
Commitment to the visionCommitment to the vision
Being well informedBeing well informed
Willingness toWillingness to
delegate and empower delegate and empower
Astute use of powerAstute use of power
Emotional intelligenceEmotional intelligence

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Strategy as an Emergent ProcessStrategy as an Emergent Process
Strategy making in an unpredictable worldStrategy making in an unpredictable world
Creates the necessity for flexible strategic approaches.Creates the necessity for flexible strategic approaches.
Strategy making by lower-level managersStrategy making by lower-level managers
Strategy evolves through autonomous action.Strategy evolves through autonomous action.
Serendipity and strategySerendipity and strategy
Accidental discoveries and happenstances can have dramatic Accidental discoveries and happenstances can have dramatic
effects on strategic direction.effects on strategic direction.
Intended and emergent strategiesIntended and emergent strategies
Realized strategies are combinations of intended and Realized strategies are combinations of intended and
emergent strategies. emergent strategies.

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FIGURE 1.3
Intended and Emergent StrategiesIntended and Emergent Strategies
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.

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Some illustrations
Honda entering U.S. motorcycle market in
1960s and 70s.
•Honda admitted that they “…had no
strategy other than the idea of seeing if we
could sell something in the United States.”
General Mills’ cereal business (see the
following slides).
maintain premium pricing with coupons.
Strategy: A Pattern in a Strategy: A Pattern in a
Stream of DecisionsStream of Decisions

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Intended
Strategy:
"The Plan"
Deliberate
Strategy
Realized
Strategy
Unrealized
Strategy
Emergent
Strategy
Strategy Formulation as a Product of Strategy Formulation as a Product of
Intended & Emergent ProcessesIntended & Emergent Processes

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Intended
Strategy:
"The Plan"
+ Maintain
premium
prices
+ Couponing
Deliberate
Strategy
Realized
Strategy
Unrealized
Strategy
Emergent
Strategy
Strategy Formulation Activities at Strategy Formulation Activities at
General Mills’ Cereal BusinessGeneral Mills’ Cereal Business

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Strategy Formulation Activities at General Strategy Formulation Activities at General
Mills’ Cereal BusinessMills’ Cereal Business
Intended
Strategy:
"The Plan"
+ Maintain
premium
prices
+ Couponing
Deliberate
Strategy
+ Maintain
premium
prices
Realized
Strategy
+ Premium
prices
+ Lower market
share
Unrealized
Strategy
+ Couponing
Emergent
Strategy
+ Store brands,
generics

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FIGURE 1.4
The Strategic Management Process The Strategic Management Process
for Intended and Emergent for Intended and Emergent
StrategiesStrategies

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Strategic Planning in PracticeStrategic Planning in Practice
Planning under uncertaintyPlanning under uncertainty
Scenario planning for dynamic environmental changeScenario planning for dynamic environmental change
Ivory tower planningIvory tower planning
Lack of contact with operational realitiesLack of contact with operational realities
The importance of involving operating managersThe importance of involving operating managers
Procedural justice in the decision-making processProcedural justice in the decision-making process

Engagement, explanation, and expectationsEngagement, explanation, and expectations
Planning for the present: Strategic IntentPlanning for the present: Strategic Intent
Recognition of the static nature of the strategic fit modelRecognition of the static nature of the strategic fit model
Strategic intent in focusing the organization on winning by Strategic intent in focusing the organization on winning by
achieving stretch goalsachieving stretch goals

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Improving Strategic Decision Improving Strategic Decision
MakingMaking
Cognitive biasesCognitive biases systematically influence the systematically influence the
rationality of decision makers.rationality of decision makers.
FIGURE 1.5

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Groupthink and Strategic DecisionsGroupthink and Strategic Decisions
Pitfalls of groupthinkPitfalls of groupthink
Failing to question underlying assumptions.Failing to question underlying assumptions.
Coalescing around a single person or policy.Coalescing around a single person or policy.
Filtering out conflicting information.Filtering out conflicting information.
Developing after-the-fact rationalizations.Developing after-the-fact rationalizations.
Having an emotional (nonobjective) Having an emotional (nonobjective)
commitment to an action.commitment to an action.

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Techniques for Improving Decision Techniques for Improving Decision
MakingMaking
Two decision-Two decision-
making processesmaking processes
that counteractthat counteract
cognitive biases cognitive biases
and groupthink.and groupthink.
FIGURE 1.6