STRATEGIC MANAGEMENT & BUSINESS POLICY
13TH EDITION
THOMAS L. WHEELEN
J. DAVID HUNGER
Course Objectives
1. Understand the Strategic management
concepts.
2. Improve student knowledge on corporate
governance.
3. How to create competitive advantages to
business.
4. Develop students’ skills in strategy formulation,
implementation and evaluation.
5. How culture differences affect management.
6. Develop the knowledge on the influence of
social responsibility on business strategy.
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Teaching Techniques
1. Lecturing and discussions.
2. Using cases in teaching : Real cases
and problem solving.
3. Presentations from students.
4. Group work, teamwork and
assignments.
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Evaluation
• See course plan.
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Strategic Management: a set of managerial decisions
and actions that determines the long-run performance
of a corporation.
Includes:
•
•
•
•
Internal and external environment scanning
Strategy formulation
Strategy implementation
Evaluation and control
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Phases of Strategic Management:
•
•
•
•
Phase
Phase
Phase
Phase
1:
2:
3:
4:
Basic financial planning
Forecast-based planning
Externally oriented strategic planning
Strategic management
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Basic Concepts of Strategic Management
1.
2.
3.
4.
Basic financial planning: initiate some
planning when they requested to set up their
budgets; considers activities for one year.
Forecast-based planning: consider projects
for more than a year. The time horizon is
usually 3-5 years. Extrapolate current trends
in the future.
Externally-oriented planning: conduct
strategic planning by top management and
they leave implementation to low level.
Strategic management: planning by forming a
team from all levels in the company.
Benefits of Strategic Management:
• Clearer sense of strategic vision for the
firm
• Sharper focus on what is strategically
important
• Improved understanding of a rapidly
changing environment
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Additional Benefits of Strategic Management:
• Improved organizational
performance
• Achieves a match
between the
organization’s
environment and its
strategy, structure and
processes
• Important in unstable
environments
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• Strategic thinking
• Organizational learning
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Impact of Globalization:
Globalization: the integration and internationalization of
markets and corporations
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Impact of Environmental Sustainability:
Environmental Sustainability: the use of business
practices to reduce a company’s impact on the natural,
physical environment
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Basic Concepts of Strategic Management
Globalization
Internationalization of markets
and corporations
Global (worldwide) markets
rather than national markets
International consideration
have led to the strategic
alliance between BA and
American Airlines.
Basic Concepts of Strategic Management
Electronic Commerce
Use of the Internet to conduct business
transactions. B2B more than 7 trillion in
2004 according to UN.
80% of Global Ecom. In USA, 15% in EU,
4% in Japan.
Basis for competition on a more
strategic level rather than traditional
focus on product features and costs.
AMR Research indicated that industry
leaders are in the process of moving
60-100% of their B2B transactions to
the internet.
Basic Concepts of Strategic Management
Electronic Commerce – Trends
• Forcing company transformation to
use internet in their business.
• Market access & branding changing –
disintermediation of traditional
distribution channels; dealing direct
with end consumer.
• Balance of power shift to consumer:
customer became more
knowledgeable.
• Competition changing; exploiting the
internet to become more innovative.
Basic Concepts of Strategic Management
Electronic Commerce -- Trends
•
•
•
•
Pace\speed of business increasing;
time is compressed into ‘dog years’.
Internet purchasing beyond traditional
boundaries. Separation between
business –supplier-customer became
blurred. E.g., using extranet.
Knowledge key asset – source of
competitive advantage
1 human year= 7 dog years.
Population ecology: established
organizations are unable to adapt to
change. (conservatism).
Institution theory: organizations
adapt by imitating successful
organizations
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Strategic choice perspective:
organizations adapt to change and
have the ability to reshape their
environment
Organizational learning theory:
organizations adapt defensively and
use knowledge to improve their
relationship with the environment
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Strategic flexibility: the ability to shift
from one dominant strategy to another
and requires:
• Long-term commitment to the
development and nurturing of critical
resources
• Learning organization
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Learning organization: an
organization skilled at creating,
acquiring, and transferring
knowledge and at modifying its
behavior to reflect new
knowledge and insights
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Main activities of a learning organization include:
• Solving problems
systematically
• Learning from past
experience, history
and experiences of
others
• Experimenting with
• Transferring
new approaches
knowledge quickly
and easily throughout
the organization
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Basic Elements of Strategic
Management
1.
2.
3.
4.
Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control
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Basic Elements of Strategic
Management
Environmental Scanning is the
monitoring, evaluating and
disseminating of information from the
external and internal environments to
key people within the organization
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Basic Elements of Strategic Management
Strategy Formulation: the development of
long-range plans for the effective
management of environmental opportunities
and threats in light of organizational
strengths and weaknesses (SWOT)
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Basic Elements of Strategic Management
Mission- the purpose or reason for the
organization’s existence
Vision- describes what the organization
would like to become
Objectives- the end results of planned
activity
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Basic Elements of Strategic Management
Strategies- form a comprehensive master plan that
states how the corporation will achieve its mission
and objectives
– Corporate
– Business
– Functional
Policies- the broad guidelines for decision making
that links the formulation of a strategy with its
implementation
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Basic Elements of Strategic Management
Strategy implementation: the process by
which strategies and policies are put
into action through the development of:
• Programs
• Budgets
• Procedures
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Basic Elements of Strategic Management
Evaluation and control: the process
in which corporate activities and
performance results are monitored
so that actual performance can be
compared to desired performance
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Basic Elements of Strategic
Management
Performance: the end result of
organizational activities
Feedback/Learning Process: revise or
correct decisions based on performance
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Triggering event: something that acts as a
•
•
•
•
•
stimulus for a change in strategy and can
include:
New CEO
External intervention
Threat of change of ownership
Performance gap
Strategic inflection point
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What Makes a Strategic Decision?
Strategic decision making focuses on the longrun future of the organization
Characteristics of strategic decision making
include:
• Rare
• Consequential=important
• Directive
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Strategic Decision Making
Strategic Decisions
–Rare: unusual, no precedent to
follow.
– Consequential : require
substantial resources and
commitment from all.
– Directive: set precedent for
future action.
Mintzberg’s Modes of Strategic Decision
Making
•
•
•
•
Entrepreneurial
Adaptive
Planning
Logical incrementalism (Quinn)
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Mintzberg’s Modes
• Entrepreneurial mode: the strategy is made
by powerful individual. The focus on
opportunities.
• Adaptive mode: using reactive solution
rather than proactive.
• Planning mode: it uses reactive and
proactive mode. Data gathering and analysis
and select strategies.
• Logical incrementalism: strategy is set based
on a series of incremental commitment
rather than through global formulation of
total strategies. This suitable when
environment is changing rapidly.
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Strategic Decision Making Process:
1. Evaluate current
performance results
2. Review corporate
governance
3. Scan and assess the
external environment
4. Scan and assess the
internal corporate
environment
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5. Analyze strategic
(SWOT) factors
6. Generate, evaluate and
select the best
alternative strategy
7. Implement selected
strategies
8. Evaluate implemented
strategies
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Strategic audit provides a checklist of questions, by
area or issue, that enables a systematic analysis to be
made of various corporate functions and activities
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1. Why has strategic management become so important
to today’s corporations?
2. How does strategic management typically evolve
in a corporation?
3. What is a learning organization? Is this approach to
strategic management better than the more traditional
top-down approach in which strategic planning is primarily
done by top management?
4. Why are strategic decisions different from other kinds
of decisions?
5. When is the planning mode of strategic decision making
superior to the entrepreneurial and adaptive modes?
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