David sm13 ppt_01

Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -1
Book:
Strategic Management:
Concepts & Cases
14th
Edition
Fred David
Lecturer:
Murat KOÇ
Asst.Prof
Interview: Friday 15.00
e-mail: muratkoc@cag.edu.tr
Course:
Strategic Management/
Business Policy
Assesment Methods:
%40 Mid Term
%10 Quizes+Term Paper
%50 Final Exam

Ch 1 -2
Introduction
 Welcome to strategic management course.
 This is a challenging and exciting capstone
course that will allow you to function as the
owner or chief executive officer of different
organizations.
 In this course, you can look forward to
making strategic decisions both as an
individual and as a member of a team.

Ch 1 -3
Introduction
 No matter how hard employees work, an
organization is in real trouble if strategic
decisions are not made effectively.
 You will have the opportunity in this course to
make actual strategic decisions, perhaps for
the first time in your academic career.
 You will also need to integrate knowledge
acquired in previous business courses.

Ch 1 -4
Chapter 1
The Nature of Strategic Management
 STRATEGY (Etymology of word): "art of a general," from strategos
"general, commander of an army," from stratos "multitude, army,
expedition, encamped army + agos "leader.
 We will discuss the relevance of Sun Tzu’s The Art of War to
strategic management.
-Masters of Fighting
don’t get angry.
-Masters of
Winning don’t fear.
-Smarts win without
fighting.
-Ignorant fight to
win.(544-496 BC)

Ch 1 -5
SUN TZU
 Sun Tzu (also rendered as Sun Zi)
(544-496 BC) was a Chinese
military general, strategist and
philosopher who lived in the
Spring and Autumn Period of
ancient China. The name he is
best known by is actually an
honorific which means "Master
Sun": His birth name was Sun Wu
and he was known outside of his
family by his courtesy name
Changqing. He is traditionally
credited as the author of The Art
of War, an extremely influential
ancient Chinese book on military
strategy. Sun Tzu has had a
significant impact on Chinese and
Asian history and culture, both as
the author of The Art of War and
as a legendary historical figure.

Ch 1 -6
Chapter 1
Excerpts from THE ART OF WAR:
(Note: Substitute the words strategy or strategic planning for war or
warfare)
War is a matter of vital importance to the state: a matter
of life or death, the road either to survival or ruin. Hence, it
is imperative that it be studied thoroughly.
Warfare is based on deception. When near the enemy,
make it seem that you are far away; when far away, make
it seem that you are near.

Ch 1 -7
Chapter 1
 Hold out baits to lure the enemy.
 Strike the enemy when he is in disorder.
 Avoid the enemy when he is stronger.

Ch 1 -8
Chapter 1
 If your opponent is of choleric temper, try to irritate him.
 If he is arrogant, try to encourage his egotism.
 If enemy troops are well prepared after reorganization, try to wear
them down.

Ch 1 -9
Chapter 1
 If they are united, try to sow dissension among them.
 Attack the enemy
 Where he is unprepared, and appear where you are not expected.
 These are the keys to victory for a strategist. It is not possible to
formulate them in detail beforehand.

Ch 1 -10
Chapter 1 The Nature of Strategic Management
 A speedy victory is the main object in war.
 If this is long in coming, weapons are blunted and morale
depressed.When the army engages in protracted campaigns, the
resources of the state will fall short.
 To capture the enemy’s entire army is better than to destroy it; to
take intact a regiment, a company, or a squad is better than to
destroy it.
 For to win one hundred victories in one hundred battles is not the
acme of skill. To subdue the enemy without fighting is the supreme
excellence.

Ch 1 -11
 The art of using troops is this:
- When ten to the enemy’s one, surround him.
- When five times his strength, attack him.
- If double his strength, divide him.
- If equally matched, you may engage him with some good plan.
- If weaker, be capable of withdrawing.
- And if in all respects unequal, be capable of eluding him.
 ! Know your enemy and know yourself, and in a hundred
battles you will never be defeated.
 ! When you are ignorant of the enemy but know yourself, your
chances of winning or losing are equal.
 ! If ignorant both of your enemy and of yourself, you are sure
to be defeated in every battle.

Ch 1 -12
 He who occupies the field of battle first and awaits his enemy is at
ease, and he who comes later to the scene and rushes into the
fight is weary.
 When the enemy is at ease, be able to tire him.
 When well fed, be able to starve him; when at rest, be able to
make him move.
 Analyze the enemy’s plans so that you will know his shortcomings
as well as his strong points.
 Agitate him to ascertain the pattern of his movement.
 Lure him out to reveal his dispositions and to ascertain his
position.
 Launch a probing attack to learn where his strength is abundant
and where deficient.
 And as water has no constant form, there are in warfare no
constant conditions.
 Thus, one able to win the victory by modifying his tactics in
accordance with the enemy situation.

Ch 1 -13
 Brilliant strategists rarely go to battle or to court; they generally
achieve their objectives through tactical positioning well in advance
of any confrontation.
 When you do decide to challenge another company (or army),
much calculating, estimating, analyzing, and positioning bring
triumph.
 Little computation brings defeat.
 If you wait long enough near the river, corpses of enemies come
by
swim.

Ch 1 -14
Once there were two company
presidents who competed in the same
industry.
These two presidents decided to go on a
camping trip to discuss a possible
merger.
They hiked deep into the woods.
Suddenly, they came upon a grizzly
bear that rose up on its hind legs and
snarled.
Instantly, the first president took off his
knapsack and got out a pair of jogging
shoes.
The second president said, “Hey, you
can’t outrun that bear.” The first
president responded, “Maybe I can’t
outrun that bear, but I surely can
outrun you!“
Strategic Management –A Story
This story captures the notion of
strategic management, which is to
achieve and maintain competitive
advantage
“Hey, you can’t
outrun that bear.”
“Maybe I can’t outrun
that bear, but I surely
can outrun you!”

Ch 1 -15
SM: Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that enable an
organization to achieve its objectives.
Strategic Management (SM) –Defined

Ch 1 -16
Purpose of Strategic Management
As this definition implies,
Strategic Management focuses on;
INTEGRATING MANAGEMENT,
MARKETING,
FINANCE/ACCOUNTING,
PRODUCTION/OPERATIONS,
RESEARCH AND DEVELOPMENT,
INFORMATION SYSTEMS,
to Achieve Organizational Success.

Ch 1 -17
Purpose of Strategic Management
The purpose of strategic management is to
exploit and create new and different
opportunities for tomorrow;
long-range planning,
in contrast, tries to optimize for
tomorrow
the trends of today.

Ch 1 -18
Strategic Management
In essence, the strategic plan is a
company’s game plan
Just as a football team
needs a good game
plan to have a chance
for success, a company
must have a good
strategic plan to
compete successfully.

Ch 1 -19
Profit margins among firms in most industries
have been so reduced by the global
economic recession that there is little room
for error in the overall strategic plan.
A strategic plan results from tough managerial
choices among numerous good alternatives, and it
signals commitment to
specific markets,
policies,
procedures,
and operations in lieu of other, “less desirable”
courses of action.

Ch 1 -20
The Strategic Management Process
consists of three stages:
 Strategy formulation
 Strategy implementation
 Strategy evaluation

Ch 1 -21
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

Ch 1 -22
Issues in Strategy
Formulation
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover

Ch 1 -23
 Strategy formulation
No organization has unlimited resources.
Strategists must decide which alternative
strategies will benefit the firm most.
Strategy-formulation decisions commit an
Organization to specific products,
markets, resources, and
technologies over an extended period of
time.

Ch 1 -24
Strategy-formulation decisions commit an
Organization to specific
products,
markets,
resources,
technologies
over an extended period of time.

Ch 1 -25
Strategy Implementation
(so that formulated strategies can be
Executed)
Annual Objectives
Devise Policies
Employee Motivation
Resource Allocation

Ch 1 -26
Strategy Implementation Steps
 Developing a strategy-supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts

Ch 1 -27
Strategy Implementation Steps
 Preparing budgets
 Developing and utilizing
information systems
 Linking employee compensation
to organizational performance

Ch 1 -28
Issues in Strategy
Implementation
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
Requires;
Personal Discipline,
Commitment,
Sacrifice

Ch 1 -29
Successful
strategy implementation
hinges upon managers’
ability to motivate
employees,
which is more
an art than a science.

Ch 1 -30
Every division
and
department
must decide
on answers
to questions,
such as;
“What must we
do to implement our
part of
the organization’s
strategy?”

Ch 1 -31
“How best can we
get the job
done?”

Ch 1 -32
The challenge of implementation is to
stimulate managers and employees
Throughout an organization to work with
pride and enthusiasm
toward achieving stated objectives.
+ =

Ch 1 -33
Strategy Evaluation
(Managers desperately need
to know when particular strategies are not working well; strategy evaluation is the primary
means for obtaining this information.)
Internal Review
External Review
Performance Measurement
Taking Corrective Action
Selling in
cash
Selling
on credit
All strategies are subject to future modification because
external and internal factors are constantly changing.
are based
on the
current
strategies
Strategy evaluation is needed
because success today is no guarantee of success tomorrow!

Ch 1 -34
Don’t Forget!
Success always creates newand
different problems;
complacent organizations
experience demise!...

Ch 1 -35
Peter Drucker: Think through the overall
mission of a business. Ask the key
question:
“What is our business?”
Prime Task of

Ch 1 -36
The strategic management
process attempts to
organize quantitative and
qualitative information
under conditions of
uncertainty.
Integrating Intuition & Analysis
The strategic management process can be described as an objective,
logical, systematic
approach for
making major decisions
in an organization.

Ch 1 -37
Intuition is based on:
 Past experiences
 Judgment
 Feelings
Good Strategic Decisions.

Ch 1 -38
Intuition is useful for decision making in
conditions of:
 Great uncertainty
 Little precedent
 Highly interrelated variables
 Several plausible alternatives
It is also helpful

Ch 1 -39
Albert Einstein acknowledged the importance of intuition when he said;
“I believe in intuition and inspiration. Imagination is
more important than knowledge, because
knowledge is limited, whereas imagination
embraces the entire world.”
Although some organizations today may
survive and prosper because they have
intuitive geniuses managing them, most
are not so fortunate.
In a sense;

Ch 1 -40
Involve management at all levels
Intuition & Judgment
Influence all analyses
Managers at all levels in an
organization inject their intuition and
judgment into strategic-management
analyses.
Above
All !!!!

Ch 1 -41
Organizations should continually monitor internal
and external events and trends so that timely
changes can be made as needed. The accelerating
rate of change today is producing a business world
in which customary managerial habits in
organizations are increasingly inadequate.
managerial habits in organizations are increasingly
inadequate.
Adapting to Change
“adept at dapting”
the only constant is
change.

Ch 1 -42
The need to adapt to change leads organizations
to key strategic-management questions, such as;
“What kind of business should we become?”
“Are we in the right field(s)?”
“Should we reshape our business?”
“What new competitors are entering our industry?”
“What strategies should we pursue?”
“How are our customers changing?”
“Are new technologies being developed that could put us out of business?”

Ch 1 -43
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
 Policies

Ch 1 -44
Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage
When a firm can do something that rival
firms cannot do, or owns something that
rival firms desire, that can represent a
competitive advantage.

Ch 1 -45
Achieving Sustained Competitive
Advantage
1. For example, newspaper circulation in the United States is steadily declining. Most
national newspapers are rapidly losing market share to the Internet, and other media
that consumers use to stay informed.(problem)
2. Daily newspaper circulation in the United States totals about 55 million copies
annually, which is about the same as it was in 1954. Strategists ponder whether the
newspaper circulation slide can be halted in the digital age.(is a must)
3. The six broadcast networks—ABC, CBS, Fox, NBC, UPN, and WB—are being
assaulted by cable channels, video games, broadband, wireless technologies,
satellite radio, high-definition TV, and digital video recorders.(Fact)
4. The three original broadcast networks captured about 90 percent of the prime-time
audience in 1978, but today their combined market share is less than 50 percent.

Ch 1 -46
1. Continually adapting to changes in
external trends and events and internal
capabilities, competencies, and resources
Achieving Sustained Competitive
Advantage
2. Effectively formulating, implementing,
and evaluating strategies that capitalize on
those factors

Ch 1 -47
Strategists
Gather Information
Analyze Information
Organize Information

Ch 1 -48
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements

Ch 1 -49
External Opportunities and Threats
Analysis of Trends
 Economic
 Social
 Cultural
 Demographic/Environmental
 Political, Legal, Governmental
 Technological
 Competitors

Ch 1 -50
Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats
Avoid/minimize impact of
External Threats

Ch 1 -51
 Controllable activities performed
especially well or poorly
 Determined relative to competitors
Internal Strengths and Weaknesses

Ch 1 -52
 Typically located in functional areas of the firm
 Management
 Marketing
 Finance/Accounting
 Production/Operations
 Research & Development
 Management Information Systems

Ch 1 -53
Assessing the Internal Environment
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data

Ch 1 -54
 Specific results that an organization
seeks to achieve in pursuing its basic
mission
 Long-term means more than one year

Ch 1 -55
 Essential for ensuring the firm’s success
 Provide direction
 Aid in evaluation
 Create synergy
 Reveal priorities
 Focus coordination
 Provide basis for planning, organizing,
motivating, and controlling

Ch 1 -56
Means by which long-term objectives
are achieved
Strategies

Ch 1 -57
Strategies
 Examples
 Geographic expansion
 Diversification
 Acquisition
 Product development
 Market penetration
 Retrenchment
 Divestiture
 Liquidation
 Joint venture

Ch 1 -58
Sample Strategies
 Table 1-1
 Best Buy
 Levi Strauss
 New York Times Company

Ch 1 -59
Short-term milestones that firms must
achieve to reach long-term objectives
Annual Objectives

Ch 1 -60
Means by which annual objectives will
be achieved
Policies

Ch 1 -61

Ch 1 -62
 Strategic Management Process
Dynamic & continuous
More formal in larger
organizations
Strategic Management Model

Ch 1 -63
 Communication is a key to
successful strategic management

Ch 1 -64
Benefits of Strategic Management

Ch 1 -65
Benefits of Strategic Management
 Nonfinancial Benefits
 Enhanced awareness of threats
 Improved understanding of competitors’ strategies
 Increased employee productivity
 Reduced resistance to change
 Clearer understanding of performance-reward
relationship
 Enhanced problem-prevention capabilities

Ch 1 -66
Why Some Firms Do No Strategic
Planning
 Lack of knowledge of strategic planning
 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success

Ch 1 -67
Why Some Firms Do No Strategic
Planning (continued)
 Fear of failure
 Overconfidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion

Ch 1 -68
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate,
and complex process that takes an
organization into uncharted territory

Ch 1 -69
Effective Strategic Planning is:
 A people process more than a paper process
 A learning process
 Words supported by numbers
 Simple and nonroutine
 Varying assignments, team membership,
meeting formats, and planning calendars
 Challenging assumptions underlying
corporate strategy

Ch 1 -70
Effective Strategic Planning
continued
 Welcomes bad news
 Requires open-mindedness and a spirit of
inquiry
 Is not a bureaucratic mechanism
 Is not ritualistic or stilted
 Is not too formal, predictable, or rigid
 Does not contain jargon or arcane language

Ch 1 -71
Effective Strategic Planning
continued
 Is not a formal system for control
 Does not disregard qualitative information
 Is not controlled by “technicians”
 Does not pursue too many strategies at once
 Continually strengthens the “good ethics is
good business” policy

Ch 1 -72
Comparing Business and Military
Strategy
 Strategic planning started in the military
 Similarity
 Both business and military organizations must
adapt to change and constantly improve
 Difference
 Business strategy assumes competition
 Military strategy assumes conflict

Ch 1 -73
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

David sm13 ppt_01

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