Strategic Management Essential

Source: Fred R. David, A Competitive Advantage Approach, 16 th Edition

Presented By: Yuniati Fransisca, S.E., M.M.
Defining Strategic Management
Strategic management is the art and science of formulating,
implementing, and evaluating cross-functional decisions that enable
an organization to achieve its objectives.
As this definition implies, strategic management focuses on
integrating management, marketing, finance and accounting,
production and operations, research and development (R&D), and
information systems to achieve organizational success.
Stages of Strategic Management
Strategy formulation includes developing a vision and a mission, identifying an
organization’s external opportunities and threats, determining internal strengths
and weaknesses, establishing long-term objectives, generating alternative
strategies, and choosing particular strategies to pursue.
Strategy-formulation issues include deciding what new businesses to enter, what
businesses to abandon, whether to expand operations or diversify, whether to
enter international markets, whether to merge or form a joint venture, and how to
avoid a hostile takeover.
Stages of Strategic Management
Strategy implementation requires a firm to establish annual objectives, devise
policies, motivate employees, and allocate resources so that formulated strategies
can be executed.
Strategy implementation includes developing a strategy-supportive culture,
creating an effective organizational structure, redirecting marketing efforts,
preparing budgets, developing and using information systems, and linking
employee compensation to organizational performance.
Stages of Strategic Management
Strategy evaluation is the final stage in strategic management. Managers
desperately need to know when particular strategies are not working well;
strategy evaluation is the primary means for obtaining this information.
Three fundamental strategy-evaluation activities are (1) reviewing external and
internal factors that are the bases for current strategies, (2) measuring
performance, and (3) taking corrective actions.

Because success today is no guarantee of success tomorrow!

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, and policies
Competitive Advantage
Any activity a firm does
especially well compared
to activities done by rival
firms, or any resource a
firm possesses that rival
firms desire.
Strategists
Strategists are the individuals most
responsible for the success or failure
of an organization. They have
various job titles, such as chief
executive officer, president, owner,
chair of the board, executive
director, chancellor, dean, and
entrepreneur.
Vision and Mission Statements
“What do we want to become?”
Developing a vision statement is
often considered the first step in
strategic planning, preceding even
development of a mission statement.
Many vision statements are a single
sentence.
Vision and Mission Statements
“What is our business?”
Mission statements are “enduring
statements of purpose that distinguish one
business from other similar firms. A mission
statement identifies the scope of a firm’s
operations in product and market terms.” A
clear mission statement describes the values
and priorities of an organization.
External Opportunities and
Threats
External opportunities and external threats refer to
economic, social, cultural, demographic, environmental,
political, legal, governmental, technological, and
competitive trends and events that could significantly benefit
or harm an organization in the future. Opportunities and
threats are largely beyond the control of a single
organization—thus the word external.
Internal Strengths and
Weaknesses
Internal strengths and internal weaknesses are an
organization’s controllable activities that are performed
especially well or poorly. They arise in the management,
marketing, finance/ accounting, production/operations,
research and development, and management information
systems (MIS) activities of a business.
Long-term Objectives
Objectives can be defined as specific results that an
organization seeks to achieve in pursuing its basic
mission. Long-term means more than one year.
Objectives should be challenging, measurable,
consistent, reasonable, and clear.
Strategies
Strategies are the means by which long-term
objectives will be achieved. Business strategies may
include geographic expansion, diversification,
acquisition, product development, market penetration,
retrenchment, divestiture, liquidation, and joint
ventures.
Annual Objectives
Annual objectives are short-term milestones that organizations must
achieve to reach long-term objectives. Like long-term objectives,
annual objectives should be measurable, quantitative, challenging,
realistic, consistent, and prioritized. They must also be established at
the corporate, divisional, and functional levels in a large organization.
Annual objectives should be stated in terms of management,
marketing, finance/accounting, production/operations, R&D, and
MIS accomplishments.
Policies
Policies are the means by which annual objectives will be achieved.
Policies include guidelines, rules, and procedures established to
support efforts to achieve stated objectives. Policies are guides to
decision making and address repetitive or recurring situations.
Usually, policies are stated in terms of management, marketing,
finance/accounting, production/ operations, R&D, and MIS activities.
The Strategic Management Model
Three important questions to
answer in developing a
strategic plan are as follows:
Where are we now?
Where do we want to go?
How are we going to get there?
The Strategic Management Model
INDEPENDENT LEARNING
1. Benefit of engaging in strategic management: financial
benefits and nonfinancial benefits
2. Reasons why some firms do no strategic planning
3. Pitfalls in strategic planning
THANK YOU