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Chapter 1The Nature of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-1 Chapter 1The Nature of Strategic Management Strategic Management: Concepts and Cases. 9th edition Fred R. David PowerPoint Slides by Anthony F. Chelte Western New England College

The Nature of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-2 The Nature of Strategic Management A global perspective is a matter of survival for businesses. E-commerce is a vital strategic management tool. The natural environment is an important strategic issue.

Strategic Management Achieves Organizational Success : 

Fred R. David Prentice Hall Ch. 1-3 Strategic Management Achieves Organizational Success Process of Integrating: management marketing finance/accounting production/operations research and development computer information systems

Three-Stage Process : 

Fred R. David Prentice Hall Ch. 1-4 Three-Stage Process Strategy Formulation Strategy Implementation Strategy Evaluation

Slide 5: 

Fred R. David Prentice Hall Ch. 1-5 Strategy Formulation Vision & Mission Alternative Strategies Long-Term Objectives Strengths & Weaknesses Opportunities & Threats Strategy Selection

Strategy Formulation : 

Fred R. David Prentice Hall Ch. 1-6 Strategy Formulation Issues include: What new businesses to enter What businesses to abandon How to allocate resources Expand operations or diversify Enter international markets Merge or form joint venture Avoidance of hostile takeover

Slide 7: 

Fred R. David Prentice Hall Ch. 1-7 Strategy Implementation Employee Motivation Policies Annual Objectives Resource Allocation

Strategy Implementation : 

Fred R. David Prentice Hall Ch. 1-8 Strategy Implementation Action Stage of strategic management: Most difficult stage Mobilizing employees and managers Interpersonal skills are critical Consensus on pursuing goals

Slide 9: 

Fred R. David Prentice Hall Ch. 1-9 Strategy Evaluation Performance Measurement External Review Internal Review Corrective Action

Strategy Evaluation : 

Fred R. David Prentice Hall Ch. 1-10 Strategy Evaluation Final stage of strategic management: All strategies subject to future modification Success today is no guarantee of success tomorrow Success creates new and different problems Complacency leads to demise

Prime Task of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-11 Prime Task of Strategic Management According to Peter Drucker… The prime task is to think through the overall mission of a business Ask the question: What is our Business?

Integrating Intuition and Analysis : 

Fred R. David Prentice Hall Ch. 1-12 Integrating Intuition and Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty.

Integrating Intuition and Analysis : 

Fred R. David Prentice Hall Ch. 1-13 Integrating Intuition and Analysis Intuition based on: Past experiences Judgment Feelings Useful for decision making Conditions of great uncertainty Conditions with little precedent

Integrating Intuition and Analysis : 

Fred R. David Prentice Hall Ch. 1-14 Integrating Intuition and Analysis Intuition and judgment Management at all levels Analyses are influenced Analytical thinking and intuitive thinking Complement each other

Adaptation to Change : 

Fred R. David Prentice Hall Ch. 1-15 Adaptation to Change Organizations must monitor events On-going process Internal and external events Timely changes

Adaptation to Change : 

Fred R. David Prentice Hall Ch. 1-16 Adaptation to Change Rate and magnitude of changes Increasing dramatically E-commerce Demographics Technology Merger-mania Effective Adaptation Long-run focus

Adaptation to Change : 

Fred R. David Prentice Hall Ch. 1-17 Adaptation to Change Key strategic-management questions: What kind of business should we become? Are we in the right fields? Should we reshape our business? What new competitors are entering our industry? What strategies should we pursue? How are our customers changing?

Key Terms : 

Fred R. David Prentice Hall Ch. 1-18 Key Terms Strategists Most responsible for success or failure of an organization Various job titles: Chief executive officer President Owner Chair of the Board Executive Director Entrepreneur

Key Terms : 

Fred R. David Prentice Hall Ch. 1-19 Key Terms Vision Statement What do we want to become? Mission Statement What is our business?

Key Terms : 

Fred R. David Prentice Hall Ch. 1-20 Key Terms External Opportunities and Threats Significantly benefit or harm the organization in the future. Include the following trends: Economic Social Cultural Demographic Environmental Political, legal, governmental Technological Competitive trends

Key Terms : 

Fred R. David Prentice Hall Ch. 1-21 Key Terms External Opportunities and Threats Largely beyond the control of a single organization. Basic tenet of strategic management Strategy formulation to: Take advantage of external opportunities Avoid or reduce impact of external threats

Key Terms : 

Fred R. David Prentice Hall Ch. 1-22 Key Terms Environmental Scanning Industry Analysis Process of conducting research and gathering and assimilating external information

Key Terms : 

Fred R. David Prentice Hall Ch. 1-23 Key Terms Internal Strengths and Weaknesses Controllable activities performed especially well or poorly. Arise in functional areas of the business: Management Marketing Finance/accounting Production/operations Research & development Computer Information Systems

Key Terms : 

Fred R. David Prentice Hall Ch. 1-24 Key Terms Determining Internal Factors: Financial ratios Measuring performance Industry averages Survey data

Key Terms : 

Fred R. David Prentice Hall Ch. 1-25 Key Terms Long-term objectives: Mission-driven pursuit of specific results more than one-year out. Essential for organizational success State direction Aid in evaluation Create synergy Focus coordination Basis for planning, motivating and controlling

Key Terms : 

Fred R. David Prentice Hall Ch. 1-26 Key Terms Strategies: Means by which long-term objectives will be achieved. May include: Geographic expansion, diversification Acquisition Product development, market penetration Retrenchment, divestiture Liquidation, joint venture

Key Terms : 

Fred R. David Prentice Hall Ch. 1-27 Key Terms Annual Objectives: Short-term milestones that organizations must achieve to reach long-term objectives.

Key Terms : 

Fred R. David Prentice Hall Ch. 1-28 Key Terms Policies: Means by which annual objectives will be achieved.

Comprehensive Strategic Management Model : 

Fred R. David Prentice Hall Ch. 1-29 Comprehensive Strategic Management Model 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 Vision & Mission Chapter 2

Strategic-Management Model : 

Fred R. David Prentice Hall Ch. 1-30 Strategic-Management Model Strategic-Management Process – Dynamic and Continuous More formal in larger organizations

Strategic-Management Model : 

Fred R. David Prentice Hall Ch. 1-31 Strategic-Management Model Identify Organization’s existing: Vision Mission Objectives Strategies

Strategic-Management Model : 

Fred R. David Prentice Hall Ch. 1-32 Strategic-Management Model Perform External Audit Perform Internal Audit Establish long-term objectives Generate, evaluate, select strategies Implement strategies Measure and evaluate performance

Benefits of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-33 Benefits of Strategic Management Proactive in shaping organization’s future Initiate and influence activities Formulate better strategies Systematic, logical, rational approach

Benefits of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-34 Benefits of Strategic Management Financial benefits Improvement in sales Improvement in profitability Improvement in productivity

Benefits of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-35 Benefits of Strategic Management Non-Financial benefits Enhanced awareness of xternal threats Improved understanding of competitors’ strategies Increased employee productivity Reduced resistance to change Understanding of performance-reward relationships Enhances problem-prevention capabilities

Benefits of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-36 Benefits of Strategic Management Identification of opportunities Objective view of management problems Improved coordination and control Minimizes adverse conditions and changes Decisions to better support objectives Effective allocation of time and resources Internal communication among personnel

Benefits of Strategic Management : 

Fred R. David Prentice Hall Ch. 1-37 Benefits of Strategic Management Integration of individual behaviors Clarifies individual responsibilities Encourages forward thinking Encourages favorable attitude toward change Discipline and formality to the management of the business

Why Some Firms Do No Strategic Planning : 

Fred R. David Prentice Hall Ch. 1-38 Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success Why Some Firms Do No Strategic Planning

Why Some Firms Do No Strategic Planning (Cont’d) : 

Fred R. David Prentice Hall Ch. 1-39 Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion Why Some Firms Do No Strategic Planning (Cont’d)

Business Ethics and Strategic Management : 

Fred R. David Prentice Hall Ch. 1-40 Business ethics defined: Principles of conduct within organizations that guide decision making and behavior. Business Ethics and Strategic Management

Business Ethics and Strategic Management : 

Fred R. David Prentice Hall Ch. 1-41 Good business ethics: prerequisite for good strategic management Business Ethics and Strategic Management

Business Ethics and Strategic Management : 

Fred R. David Prentice Hall Ch. 1-42 Code of business ethics: Provides basis on which policies can be devised to guide daily behavior and decisions at the workplace Business Ethics and Strategic Management

Business Ethics and Strategic Management : 

Fred R. David Prentice Hall Ch. 1-43 Internet privacy Emerging ethical issue of immense proportion Business Ethics and Strategic Management

Business Ethics and Strategic Management : 

Fred R. David Prentice Hall Ch. 1-44 Internet and business ethics -- 38% of companies store and review employees email messages Up from 15% in 1997 54% of companies monitor employees’ Internet connections Business Ethics and Strategic Management

Business Ethics & Strategic Planning : 

Fred R. David Prentice Hall Ch. 1-45 Business actions always unethical include: Misleading advertising Misleading labeling Environmental harm Poor product or service safety Padding expense accounts Insider trading Dumping flawed products on foreign markets Business Ethics & Strategic Planning

Nature of Global Competition : 

Fred R. David Prentice Hall Ch. 1-46 Nature of Global Competition Companies conduct business across borders International or multinational corporations Parent company Host country Strategy implementation more difficult Cultural differences Norms, values, work ethics

Advantages of International Operations : 

Fred R. David Prentice Hall Ch. 1-47 Absorb excess capacity Reduce unit costs Spread economic risks over wider markets Low-cost production facilities Competition may be less intense Reduced tariffs, lower taxes Economies of scale Advantages of International Operations

Disadvantages of International Operations : 

Fred R. David Prentice Hall Ch. 1-48 Different social, cultural demographic, legal forces may create difficult communication Weaknesses of foreign competition may be underestimated Barriers to communication and effective management of personnel Complications from different monetary systems Disadvantages of International Operations

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