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1Strategic Management in Action

Mary Coulter

Introducing the Concepts

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Learning Outline

Why is strategic management important? Give four reasons why strategic management is important. Discuss what studies have shown about the impact of

strategic management on an organization’s performance. What is strategic management?

Define strategy and strategic management. Describe the strategic management process. Describe the three levels of organizational strategies. Explain the historical evolution of strategic management.

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Learning Outline (contd.)

Who’s involved with strategic management? Explain the role of the board of directors in strategic management. Discuss how top managers can be effective leaders. Describe the role of other managers and organizational employees in

strategy. Strategic management in today’s world

Discuss how globalization issues affect strategic management. Explain the concept of corporate governance and how it’s impacting

strategic management. Describe the three different strategic approaches to e-business.

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Why is Strategic Management Important?

It gives a role to everyone in an organization to manage strategically.

It helps the organization perform well. It helps the organization to effectively cope with

the uncertainties in the external and internal environment.

It helps to coordinate various functions and activities

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Definition of Strategy

Goal-directed decisions and actions in which its capabilities and resources are matched with the opportunities and threats in its environment

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Strategy involves

Organization’s goals Goal-directed actions Matching key internal strengths with

external opportunities and threats

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Definition of Strategic Management

The process of analyzing the current situation, developing appropriate strategies, putting those strategies into action and evaluating, modifying, or changing those strategies as needed

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Figure 1.1 Basic Activities of Strategic Management

Situation Analysis

Strategy Implementation

Strategy Evaluation

Strategy Formulation

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Characteristics of Strategic Management

Four aspects that set apart Strategic Management

Interdisciplinary

External focus

Internal focus

Future direction

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Figure 1.2 Strategic Management in Action

AnalyzingCurrent

Situation

Decidingon

Strategies

PuttingStrategiesin Action

Evaluating andChanging Strategies

SituationAnalysis

StrategyFormulation

StrategyImplementation

StrategyEvaluation

Chapter 2 Chapter 3

Chapter 4

ExternalAnalysis

InternalAnalysis

Organizational Context

Chapter 5 Chapter 6

Chapter 7

Functional Competitive

Corporate

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The Strategic Management Process

Situation Analysis entails scanning and evaluating

Organizational context

External environment

Organizational environment

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Figure 1.3 Levels of Strategies

Competitive:How are we going to compete in

our chosen business(es)?

FunctionalWhat resources and capabilities do

we have to support the corporate and competitive strategies?

CorporateWhat direction are we going and

what business(es) are we in or do we want to be in?

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The Strategic Management Process

Strategy ImplementationPutting the organization’s various

strategies into action

Strategy EvaluationEvaluating how the strategy has been

implemented as well as the outcomes of the strategy

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The Strategic Management Process

A continuous cycle ofSituation analysisStrategy formulationStrategy implementationStrategy evaluation

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Looking at Strategic Management’s Past

Strategy’s Military Roots Battlefield strategies to gain an edge on the enemy Exploit enemy’s weak spots Attack enemy where most vulnerable

Academic Origins of Strategic Management Mainstream economic theory Scientific management (Taylor) Bureaucratic organizations (Weber) Administrative functions/open systems (Barnard)

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Looking at Strategic Management’s Past

The 1960sStrategic management established as

separate field, basic concepts established

The 1970s and 1980sProcess researchers (“how” strategy is

formed)Content researchers (“what” of a strategic

decision)

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Who’s Involved with Strategic Management?

Board of Directors Elected representatives of stockholders Play significant role in corporate governance

Top Management Team Ultimately responsible for every decision and

action of every organizational employee Act as strategic leaders

Other Strategic Managers and Organizational Employees Responsible for strategy implementation and

evaluation

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Table 1.1 Typical Board Responsibilities

Review and approve strategic goals and plans Review and approve organization’s financial standards and

policies Ensure integrity of organization’s financial controls and reporting

system Approve an organizational philosophy Monitor organizational performance and regularly review

performance results Select, evaluate, and compensate top-level managers Develop management succession plans Review and approve capital allocations and expenditures Monitor relations with shareholders and other key stakeholdersOther responsibilities may be assigned depending on the unique

culture and needs of the organization

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Figure 1.4 Board Involvement in the Strategic Management Process

INITIATING ROLE

APPROVING ROLE

(Highest level of board involvement)

(Lowest level of board involvement)

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Figure 1.5 Effective Strategic Leadership Involves

EffectiveStrategic

Leadership

Exploiting andMaintaining

Core Competencies

DevelopingHumanCapital

Creating andSustaining Strong

Organizational Culture

EmphasizingEthical Decisions

and Practices

EstablishingAppropriately

Balanced Controls

DeterminingOrganizational

Purpose or Vision

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Strategic Management in Today’s World

Three important issues affecting strategic management in today’s worldGlobalizationCorporate governanceE-business

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Corporate Governance

Corporate governance is the determination of the broad uses to which organizational resources will be deployed and the resolution of conflicts among the myriad participants in organizations

Sarbanes-Oxley Act of 2002 – a U.S. federal law designed to protect investors by improving the accuracy and reliability of corporate disclosures

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Chapter One

Questions