Strategic Management and taxation management

Strategic Management

1. The Nature of The Nature of
Strategic Strategic
ManagementManagement

2. Organizing ThemesOrganizing Themes
►Global considerations impact virtually all Global considerations impact virtually all
strategic decisions.strategic decisions.
►E-commerce has become a vital strategic E-commerce has become a vital strategic
management tool.management tool.
►The natural environment has become an The natural environment has become an
important strategic issue.important strategic issue.

3. Strategic Management DefinedStrategic Management Defined
Art and science of formulating, Art and 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 objectives.organization to achieve its objectives.

4. TerminologyTerminology
““Strategic ManagementStrategic Management””
Synonymous withSynonymous with
“ “Strategic PlanningStrategic Planning””
•Strategic managementStrategic management

Used more often in academiaUsed more often in academia
•Strategic planningStrategic planning

Used more often in the business worldUsed more often in the business world

5. TerminologyTerminology
►Strategic managementStrategic management
Refers to:Refers to:
Strategy formulationStrategy formulation
Strategy implementationStrategy implementation
Strategy evaluationStrategy evaluation
►Strategic planningStrategic planning
Refers to:Refers to:
Strategy formulationStrategy formulation

6. Brief HistoryBrief History
►1950s1950s
Term strategic planning originatesTerm strategic planning originates
1960s – 1970s1960s – 1970s
Strategic planning very popularStrategic planning very popular

Widely viewed as panacea for problemsWidely viewed as panacea for problems

7. Brief HistoryBrief History
►1980s1980s
Strategic planning cast asideStrategic planning cast aside

Planning models did not yield higher returnsPlanning models did not yield higher returns
►1990s–20001990s–2000
Revival of strategic planningRevival of strategic planning
Widely practiced in business worldWidely practiced in business world

8. Strategic-Management Strategic-Management
Process Three StagesProcess Three Stages
Strategy Formulation
Strategy Implementation
Strategy Evaluation

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

10. Strategy Implementation
Motivate Employees
Policies
Annual Objectives
Resource Allocation

11. Strategy Evaluation
Corrective Action
Measure Performance
Review
External & Internal

12. Key Strategic Management Terms Key Strategic Management Terms
(Cont’d)(Cont’d)
1. Strategists1. Strategists
2. Vision statements2. Vision statements
3. Mission statements3. Mission statements
4. External opportunities and threats4. External opportunities and threats
5. Internal strengths and weaknesses5. Internal strengths and weaknesses

13. Key Strategic Management Key Strategic Management
Terms (Cont’d)Terms (Cont’d)
6. Long-term objectives6. Long-term objectives
7. Strategies7. Strategies
8. Annual objectives8. Annual objectives
9. Policies9. Policies

14. Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)
StrategistsStrategists
•Usually found in high levels of management (CEO)Usually found in high levels of management (CEO)
Help organization gather, analyze, and Help organization gather, analyze, and
organize informationorganize information

Track industry and competitive trendsTrack industry and competitive trends
Develop forecasting modelDevelop forecasting model
Evaluate corporate and divisional Evaluate corporate and divisional
performanceperformance

15. Vision StatementsVision Statements
•Answers the question: “What do we want to Answers the question: “What do we want to
become?”become?”

First step in strategic planningFirst step in strategic planning

Oftentimes a single sentenceOftentimes a single sentence
““Our vision is to take care of your vision.”Our vision is to take care of your vision.”
(Stokes Eye Clinic, Florence, South Carolina)(Stokes Eye Clinic, Florence, South Carolina)
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

16. External Opportunities & ThreatsExternal Opportunities & Threats
•Largely beyond the control of a single organizationLargely beyond the control of a single organization
EconomicEconomic
SocialSocial
CulturalCultural
DemographicDemographic
EnvironmentalEnvironmental
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

17. External Opportunities & Threats (cont’d)External Opportunities & Threats (cont’d)
PoliticalPolitical
GovernmentalGovernmental
TechnologicalTechnological
Competitive trends & eventsCompetitive trends & events
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

18. Internal Strengths & WeaknessesInternal Strengths & Weaknesses
•Controllable activities that are performed Controllable activities that are performed
well or poorly relative to competitorswell or poorly relative to competitors

Based on functional analysis of activities in Based on functional analysis of activities in
the firm’s:the firm’s:
ManagementManagement
MarketingMarketing
Finance/accountingFinance/accounting
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

19. Internal Strengths & Weaknesses Internal Strengths & Weaknesses
(Cont’d)(Cont’d)
•Based on functional analysis of activities Based on functional analysis of activities
in the firm’s:in the firm’s:
Production/operationsProduction/operations
Research and developmentResearch and development
Computer information systemsComputer information systems
•Organizations strive to pursue strategies Organizations strive to pursue strategies
that capitalize on strengths and improve that capitalize on strengths and improve
weaknessesweaknesses
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

20. Long-Term ObjectivesLong-Term Objectives
•Results to be achieved in pursuing the Results to be achieved in pursuing the
organization’s mission. Time frame is beyond one organization’s mission. Time frame is beyond one
year.year.

State directionState direction

Aid in evaluationAid in evaluation

Create synergyCreate synergy

Reveal prioritiesReveal priorities

Focus coordinationFocus coordination

Provide basis for effective managementProvide basis for effective management
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

21. StrategiesStrategies
•Potential actions that require top Potential actions that require top
management decisions and large amounts management decisions and large amounts
of firm’s resourcesof firm’s resources
Mechanisms by which long-term objectives are Mechanisms by which long-term objectives are
realizedrealized
Geographic expansionGeographic expansion
DiversificationDiversification
AcquisitionAcquisition
Product developmentProduct development
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

22. Strategies (cont’d)Strategies (cont’d)
•Mechanisms by which long-term objectives are Mechanisms by which long-term objectives are
realizedrealized

Market penetrationMarket penetration

RetrenchmentRetrenchment

DivestitureDivestiture

LiquidationLiquidation

Joint ventureJoint venture
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

23. Annual ObjectivesAnnual Objectives
•Short-term milestones necessary to achieve Short-term milestones necessary to achieve
long-term objectives.long-term objectives.

Represent the basis for allocating resourcesRepresent the basis for allocating resources

Established at corporate, divisional, and Established at corporate, divisional, and
functional levelsfunctional levels
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

24. Annual Objectives (cont’d)Annual Objectives (cont’d)
►Stated in terms of accomplishments for:Stated in terms of accomplishments for:
managementmanagement
 marketingmarketing
 finance/accountingfinance/accounting
 production/operationsproduction/operations
 research and developmentresearch and development
 information systems accomplishmentsinformation systems accomplishments
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

25. PoliciesPolicies
•Important in strategy implementation as the Important in strategy implementation as the
means by which annual objectives will be achievedmeans by which annual objectives will be achieved

Guide to decision making and address repetitive Guide to decision making and address repetitive
situationssituations

Established at corporate, divisional, or functional Established at corporate, divisional, or functional
levelslevels

Allow consistency & coordination within and between Allow consistency & coordination within and between
organizational departmentsorganizational departments
Strategic Management Terms Strategic Management Terms
(Cont’d)(Cont’d)

26. Comprehensive Strategic Management Comprehensive Strategic Management
ModelModel
Vision
&
Mission
Statements
Chapter 2
External
Audit
Chapter 3
Internal
Audit
Chapter 4
Long-Term
Objectives
Chapter 5
Generate,
Evaluate,
Select
Strategies
Chapter 6
Implement
Strategies:
Mgmt Issues
Chapter 7
Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS
Chapter 8
Measure &
Evaluate
Performance
Chapter 9

27. ►Proactive vs. ReactiveProactive vs. Reactive
Initiate and influence activities Initiate and influence activities
Helps shape firm’s own futureHelps shape firm’s own future
►Principal BenefitPrincipal Benefit
Formulate better strategiesFormulate better strategies
Systematic, logical, and rational approachSystematic, logical, and rational approach
►CommunicationCommunication
Key to successful strategic managementKey to successful strategic management
Benefits of Strategic Benefits of Strategic
ManagementManagement

28. ►Financial BenefitsFinancial Benefits
More profitable and successfulMore profitable and successful
Improvements in sales, profitability, and Improvements in sales, profitability, and
productivityproductivity
High-Performing FirmsHigh-Performing Firms
Systematic planning Systematic planning
Fluctuations in external and internal environmentsFluctuations in external and internal environments
Benefits of Strategic Benefits of Strategic
Management (Cont’d)Management (Cont’d)

29. ►Nonfinancial BenefitsNonfinancial Benefits
Enhanced awareness of external threatsEnhanced awareness of external threats
Understanding of competitors’ strategiesUnderstanding of competitors’ strategies
Increased employee productivityIncreased employee productivity
Reduced resistance to changeReduced resistance to change
Clear performance-reward relationshipsClear performance-reward relationships
Order and discipline to the firmOrder and discipline to the firm
View change as opportunityView change as opportunity
Benefits of Strategic Benefits of Strategic
Management (Cont’d)Management (Cont’d)

30. ►Poor reward structuresPoor reward structures
►Fire-fightingFire-fighting
►Waste of timeWaste of time
►Too expensiveToo expensive
►LazinessLaziness
►Content with successContent with success
Why Some Firms Do Why Some Firms Do NoNo
Strategic Planning Strategic Planning

31. ►Fear of failureFear of failure
►OverconfidenceOverconfidence
►Prior bad experiencePrior bad experience
►Self-interestSelf-interest
►Fear of the unknownFear of the unknown
►SuspicionSuspicion
Why Some Firms Do Why Some Firms Do NoNo
Strategic Planning (Cont’d) Strategic Planning (Cont’d)

32. ►Using to gain control over decisions & Using to gain control over decisions &
resourcesresources
►Doing only to satisfy regulatory requirementsDoing only to satisfy regulatory requirements
►Moving hastily from mission to strategy Moving hastily from mission to strategy
formulationformulation
►Failing to communicate to employeesFailing to communicate to employees
►Intuitive decisions that conflict with formal Intuitive decisions that conflict with formal
planplan
►Top management not supportive of processTop management not supportive of process
Pitfalls to Avoid in Strategic Pitfalls to Avoid in Strategic
PlanningPlanning

33. ►Failing to use as standard for performance Failing to use as standard for performance
measurementmeasurement
►Delegating to a “planner” vs. involvement of Delegating to a “planner” vs. involvement of
managersmanagers
►Failing to involve key personnelFailing to involve key personnel
►Failing to create collaborative environmentFailing to create collaborative environment
►Formality that stifles creativity and flexibilityFormality that stifles creativity and flexibility
Pitfalls to Avoid in Strategic Pitfalls to Avoid in Strategic
Planning Planning (Cont’d)(Cont’d)

34. Defined:Defined:
Principles of conduct within organizations Principles of conduct within organizations
that guide decision making and behaviorthat guide decision making and behavior
►Good business ethics is a prerequisite Good business ethics is a prerequisite
for good strategic managementfor good strategic management
►Good ethics is just good business!Good ethics is just good business!
Business Ethics & Strategic Business Ethics & Strategic
PlanningPlanning

35. ►Strategists responsible for high Strategists responsible for high
ethical principlesethical principles
►All strategic processes have ethical All strategic processes have ethical
ramificationsramifications
►Formal codes of ethics are in place Formal codes of ethics are in place
for many businessesfor many businesses
►Internet privacy emerging as ethical Internet privacy emerging as ethical
issue of immense proportionsissue of immense proportions
Business Ethics & Strategic Business Ethics & Strategic
Planning (Cont’d)Planning (Cont’d)

36. Business actions Business actions alwaysalways unethical include: unethical include:
•Misleading advertisingMisleading advertising
•Misleading labelingMisleading labeling
•Environmental harmEnvironmental harm
•Poor product or service safetyPoor product or service safety
•Padding expense accountsPadding expense accounts
•Insider tradingInsider trading
•Dumping flawed products on foreign marketsDumping flawed products on foreign markets
Business Ethics & Strategic Business Ethics & Strategic
Planning (Cont’d)Planning (Cont’d)

37. Nature of Global Nature of Global
CompetitionCompetition
►Companies conduct business across Companies conduct business across
bordersborders
International or multinational corporationsInternational or multinational corporations
Parent company Parent company
Host countryHost country
►Strategy implementation more difficultStrategy implementation more difficult
Cultural differencesCultural differences

Norms, values, work ethicsNorms, values, work ethics

38. Advantages of International Advantages of International
OperationsOperations
►Absorb excess capacityAbsorb excess capacity
►Reduce unit costsReduce unit costs
►Low-cost production facilitiesLow-cost production facilities
►Lower labor costsLower labor costs
►Competition less intenseCompetition less intense

39. Advantages of International Advantages of International
Operations (Cont’d)Operations (Cont’d)
►Reduced tariffs, lower taxesReduced tariffs, lower taxes
►Favorable political climateFavorable political climate
►Economies of scaleEconomies of scale

40. Communication difficulties between parent and Communication difficulties between parent and
subsidiariessubsidiaries
•Based on cultural, political, social, language, Based on cultural, political, social, language,
demographic, and competitive forcesdemographic, and competitive forces
Foreign-based competitors Foreign-based competitors
•Strengths underestimatedStrengths underestimated
•Weaknesses overestimatedWeaknesses overestimated
Disadvantages of International Disadvantages of International
OperationsOperations

41. Key Terms & ConceptsKey Terms & Concepts
►Annual objectivesAnnual objectives
►Business ethicsBusiness ethics
►Code of ethicsCode of ethics
►E-commerceE-commerce
►EmpowermentEmpowerment
►Environmental Environmental
scanningscanning
►External opportunitiesExternal opportunities
►External threatsExternal threats
►Internal strengthsInternal strengths
►Internal weaknessesInternal weaknesses
►IntuitionIntuition
►Long-term objectivesLong-term objectives
►Mission statementsMission statements
►PoliciesPolicies
►Strategic managementStrategic management
►Strategic-Strategic-
management modelmanagement model

42. Key Terms & Concepts (Cont’d)Key Terms & Concepts (Cont’d)
►Strategic-Strategic-
management processmanagement process
►StrategiesStrategies
►StrategistsStrategists
►Strategy evaluationStrategy evaluation
►Strategy formulationStrategy formulation
►Strategy Strategy
implementationimplementation
►LobbyingLobbying
►Vision statementVision statement
►VisionVision
►Host country Host country
►International firmsInternational firms
►Long-range planning Long-range planning
►Multinational Multinational
corporationcorporation