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McGraw-Hill/Irwin Copyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
1. 2. 3. 4. 5. 6.
7.
Explain the concept of strategic management Describe how strategic decisions differ from other decisions that managers make Name the benefits and risks of a participative approach to strategic decision making Understand the types of strategic decisions for which different managers are responsible Describe a comprehensive model of strategic decision making Appreciate the importance of strategic management as a process Give examples of strategic decisions that companies have recently made
1-3
Strategic management:
The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a companys objectives
1-4
Nine Critical Tasks of Strategic Management - Tasks 1-5: Formulate the companys mission Conduct an internal analysis Assess the external environment
competitive and general contexts Analyze the companys options by matching its resources with the external environment Identify the most desirable options in light of the mission
1-5
Nine Critical Tasks of Strategic Management - Tasks 6-9: Select a set of long-term objectives and
grand strategies that will achieve the most desirable options Develop annual objectives and short-term strategies that are compatible with longterm objectives and grand strategies Implement the strategic choices Evaluate the success of the strategic process for future decision making
1-6
What is Strategy?
Large-scale, future-oriented plan
Used to interact within competitive
environment to achieve company goals Provides a framework for managerial decisions Reflects a companys awareness of the main elements of competition
1-7
decisions
Strategic decisions overarch several
areas of a firms operations Usually only top management has the perspective needed to understand their broad implications Usually only top managers have the power to authorize necessary resource allocations
1-8
firms resources
They involve substantial allocations of
people, physical assets, and money Strategic decisions commit the firm to actions over an extended period In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm
1-9
prosperity
Strategic decisions commit the firm for a
long time, typically 5 years; however the impact lasts much longer Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains.
1-10
forecast, rather than what they know Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options A firm will succeed only if it takes a proactive (anticipatory) stance toward change
1-11
implications for most areas of the firm Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firms SBUs, divisions, or program units
1-12
They affect and are affected by external conditions that are largely beyond their control Successful positioning requires that strategic managers look beyond operations and consider what relevant others are likely to do
1-13
directors, CEO & administration [Highest] Business level: business and corporate managers [Middle] Functional level: Product, geographic, and functional area managers [Lowest]
1-14
1-15
Often carry greater risk, cost, and profit potential Greater need for flexibility Longer time horizons Choice of businesses, dividend
corporate and business levels Involve action-oriented operational issues Relatively short range and low risk Modest costs: depend upon available resources Relatively concrete and quantifiable
1-17
1-18
participation, responsibility, authority, and discretion in decision-making are specified in strategic management
1-19
Size Firm Predominant Purpose of the Management Planning System Styles Stage of Firms Complexity of Development Environment Production Process
1-20
Problems in the
1-21
Strategy Makers
Ideal strategic team includes decision
makers from all three levels Top managers must give final approval Strategic decisions coincide with managers responsibilities
1-22
in strategic planning The CEOs principal duty is giving long-term direction to the firm The CEO bears ultimate responsibility for the firms success and strategic success CEOs are typically strong-willed, company-oriented individuals
1-23
implementing strategy Similar to participative decision making Assessing strategy formulation requires looking at nonfinancial evaluations as well as financial ones Promoting positive behavioral consequences enables achievement of financial goals
1-24
1-25
strategic management are similar Strategic management is a processa flow of information through interrelated stages of analysis toward the achievement of some goal
1-26
Management
Model
1-27
Choice Generic & Grand Strategies Functional Tactics Restructuring, Reengineering & Refocusing
1-28