STRATEGIC MANAGEMENT
THIRD EDITION
Alex Miller
© The McGraw-Hill Companies, Inc., 1998
Chapter Two
The Process of Strategic
Management
Slide 2-1
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
The Realized Strategy is Usually Both More and
Less than the Strategy That Was Originally
Intended
Unrealized Emergent
Strategy Strategy
Intended
Strategy
Slide 2-2
Exh. 2.1
Irwin/McGraw-Hill
Deliberate Strategy
Realized
Strategy
© The McGraw-Hill Companies, Inc., 1998
The Strategic Ends Pursued by an Organization Can
be Organized as a Hierarchy of Strategic Intent
Most
Integrative
Vision
Fewest in
Number
Mission
Goals
Objectives
Most
Slide 2-3 Specific
Exh. 2.4
Irwin/McGraw-Hill
Plans
Greatest in
Number
© The McGraw-Hill Companies, Inc., 1998
Example of a Mission Statement
ROLM Corporation
ROLM Corporation was founded with four goals:
• To Make a Profit
• To Grow
• To Offer Quality Products and Customer Support
• To Create a Great Place to Work
The four goals are closely interrelated. One cannot exist
without the others. In order for ROLM to profit, it must
offer quality products and customer support. In order
to grow, it must profit. And, in order to develop quality
products and customer support, ROLM must maintain a
work environment conducive to creativity and productivity.
Slide 2-4
Exh. 2.5
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
Key Elements of a Mission Statement
OBLIGATIONS TO STOCKHOLDERS
SCOPE OF THE BUSINESS
FUNDAMENTAL
INTENTIONS
SOURCES OF
COMPETITIVE ADVANTAGE
VIEW OF THE FUTURE
Slide 2-5
Exh. 2.6
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
Examples of Strategic Goals
Financial Goals
Reynolds Aluminum:
“To be an industry leader in profitability and growth and
to achieve an average return on equity of 20 percent.”
Boeing:
“Profitability as measured against our ability to achieve
and then maintain a 20 percent average annual return on
stockholder’s equity.”
Boeing:
“Growth over the plan period as measured against a goal
to achieve: greater than 5 percent average annual real
sales growth from 1988 base.”
Slide 2-6
Exh. 2.7a
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
Examples of Strategic Goals (cont.)
Nonfinancial Goals
Boeing:
“Integrity, in the broadest sense, must pervade our actions in
all relationships, including those with our customers, suppliers,
and each other. This is a commitment to uncompromising
values and conduct. It includes compliance with all laws and
regulations.”
General Electric:
“We will run only businesses that are number one or number
two in their global markets.”
General Electric:
“We will be a more contemporary, more accessible, more
responsive company, in touch with our customers, firmly in
control of our own destiny, driven by more fulfilled people in
Slide 2-7
Exh. 2.7b control of theirs.”
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
A Generic Model of Strategic Programming
Identification
of Mission
Slide 2-8
Exh. 2.8
Irwin/McGraw-Hill
STRATEGY
FORMULATION
Identification of
Alternative Strategies
Evaluation of
Alternatives
Selection of Preferred
Alternatives
Creation of Master
Plan/Program
Establish Master
Budget
Creation of MediumRun Plans/Programs
Establish Medium-Run
Operating Budgets
Creation of Short-Term
Plans/Programs
Establish Short-Term
Tactical Budgets
Evaluation of Results
STRATEGY
IMPLEMENTATION
FEEDBACK LOOP
Derivation of
Objectives
© The McGraw-Hill Companies, Inc., 1998
A Typical Formal Strategic Planning Process
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Evaluate performance in light of goals and identify gaps.
Relate gaps to environmental conditions.
Relate gaps to organizational capabilities.
Identify future goals, given understanding of gaps.
Describe broad action plans aimed at meeting goals.
Identify resources required by each function to implement
plans.
Aggregate needs by function into overall needs of
business.
Allocate resources across multiple business units.
Reallocate resources within functions.
Deploy resources within functions.
Monitor use of resources within functions.
Monitor use of resources across businesses.
Slide 2-9
Exh. 2.9
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
Conditions That Encourage a Strategic
Programming Approach to Implementation
1. Stability
Necessary
Conditions
2. Simplicity
3. Industry Maturity
Motivating
Conditions
4. Capital Intensity
USE OF
STRATEGIC
PROGRAMMING
APPROACH TO
IMPLEMENTATION
5. Tightly Coupled Operations
Slide 2-10
Exh. 2.10
Irwin/McGraw-Hill
6. External Control
© The McGraw-Hill Companies, Inc., 1998
A Comparison of Mechanistic and Organic
Organizations
Traditional Mechanistic
Organization
Emerging Organic
Organization
Internally focused
on pleasing
supervisor
Performance
Periodically fixed
standard
targets
Basis of relationship Vertical, up and down
the hierarchy
Organizational
Tall and static
structure
Employees’
Expected to comply to
expectations
direction
Dominant form of
Command and control
leadership
Externally focused
on pleasing
supervisor
Continuous
improvement
Horizontal, across
functions
Flat and
responsive
Empowered to
decide and act
Visionary and
enabling
Employee focus
Slide 2-11
Exh. 2.11
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998
A Continuum of Approaches to Strategy
Implementation
Dynamism
Relatively
unstable
Relatively
stable
Slide 2-12
Exh. 2.12
Irwin/McGraw-Hill
Relatively
simple
Complexity
Relatively
complex
© The McGraw-Hill Companies, Inc., 1998