•Strategic Management and Business Policy

•How Strategic Management Evolves

–Financial planning
–Forecast-based planning
–Strategic Planning: Externally-oriented planning
–Strategic management: Seeks Competitive
Advantage and Consider Implementation & Control)
•Benefits of Strategic Management
–Long term orientation and fit between environment,
strategy, structure and processes may lead to
competitive advantage
•Challenges: Globalization & E-Commerce
Theories of Organization Adaptation

– Theory of Population Ecology

– Institutional theory
– Strategic Choice Perspective
– Organization Learning Theory
• Learning Organizations
• Strategic Flexibility
 Basic Model of
Strategic Management
Four Basic Elements
1. Environmental Scanning
 2. Strategy Formulation
• Mission Statement
– Setting Objectives & Goals
– A statement of purpose (strategic intent) committing the
organization to ambitious overarching (stretch) objectives.
• Provides a sense of direction and purpose.
• Drives strategic decision making and resource allocations.
• Forces the seeking of significant performance improvements
to attain objectives

– Customer Orientation and Business Definition

– Abell’s Framework for Defining the business
– Consumer-oriented
versus Product-oriented business definition
 2. Strategy Formulation
• Selecting Strategy
– Corporate strategy (Stability, Growth,
Retrenchment)
– Business strategy (Competitive,
Cooperative)
– Functional strategy (Technological
Leadership, Technological Followership)
• Defining Policies
– Guidelines for decision making that links
formulation to implementation
3. Strategy Implementation

Programs
Strategy
Implementation Budgets

Procedures
4. Evaluation & Control
- Continuous process
 Characteristics of Strategic
Decisions
• Rare
Strategic decisions are unusual and
typically have no precedent to follow.
• Consequential
Strategic decisions commit substantial
resources and demand a great deal of
commitment from people at all levels.
• Directive
Strategic decisions set precedents for
lesser decisions and future actions
throughout the organization.
 Mintzberg’s Modes of Strategic
Decision Making
• Entrepreneurial Mode:
- Strategy is made by one powerful
individual
- Focus is on opportunities
- Strategy is guided by the founder’s own
vision of direction
- Dominant goal is growth of the
corporation.
• Adaptive Mode: (Muddling Through)
- Characterized by reactive solutions to
existing problems, rather than proactive
search for new opportunities
- Bargaining on priorities of objectives
- Strategy is fragmented and is developed
to move the corporation forward
incrementally.
• Planning Mode:
- Includes both the proactive search for
new opportunities and the reactive solution
of existing problems
- Involves the systematic gathering of
appropriate information for situation
analysis, the generation of feasible
alternative strategies, and the rational
selection of the most appropriate strategy.
• Logical Incrementalism
- is a synthesis of the planning, adaptive,
and entrepreneurial modes of strategic
decision making.
Strategic Decision Making Model
Strategic Decision Making