CHAPTER 1
Basic Concepts
of Strategic
Management
CONCEPTS IN STRATEGIC MANAGEMENT & BUSINESS POLICY
12TH EDITION
THOMAS L. WHEELEN
J. DAVID HUNGER
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Basic Concepts of Strategic Management
New Challenges
Electronic Commerce
Use of the Internet to conduct business
transactions and Social Networking to promote
Basis for competition on a more strategic level rather
than traditional focus on product features and costs
Globalization
Internationalization of markets and corporations
Global (worldwide) markets rather than national
markets
Sustainability
Long-term viability
Focuses on the company, its employees, its
neighborhood, and the world environment – not just
the stockholders.
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Basic Concepts of Strategic Management
Electronic Commerce -- Trends
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Forcing company transformation
Market access & branding changing –
disintermediation of traditional distribution channels
Balance of power shift to consumer
Competition changing
Pace of business increasing
Internet purchasing beyond traditional boundaries
Knowledge key asset – source of competitive
advantage
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Basic Concepts of Strategic Management
Globalization -- Trends
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Old model: US only, grow large, move into ‘foreign’
markets
New model: early or immediate growth in global
markets
Enablers:
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Ubiquitous communications
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Cheap transportation of people and goods
(but energy costs rising)
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Global culture
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Basic Concepts of Strategic Management
Sustainability -- Trends
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Longer-term view
Sustainable competitive advantage
Long-term needs of the business
Needs of the community
Ecological sensitivity
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Strategic Management Defined
Set of managerial decisions and actions
that determines the long-run performance
of a firm.
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Basic Concepts of Strategic Management
4 Phases of Strategic Management
Implementation as Companies
Grow in Complexity and
Sophistication
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Basic financial planning
Forecast-based planning
Externally-oriented planning
Strategic management
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Basic Concepts of Strategic Management
Benefits of Strategic Planning Highly
Rated by Companies Who Do It
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Clearer sense of strategic vision
Sharper focus on strategic importance
Improved understanding of changing
environment
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Basic Concepts of Strategic Management
Strategic Management Need not be a
Formal Process in Smaller
Companies
1. Where is the organization now?
(not where do we wish it was)
2. If no changes are made, where will the
organization be in 1,2,5 or 10 years?
3. What specific actions should
management undertake?
4. What are the risks and payoffs?
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Basic Concepts of Strategic Management
Basic Elements of the Strategic
Management Process
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Environmental Scanning Defined
Monitoring, evaluation, and disseminating
information from external and internal
environments to key people in the firm
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Basic Concepts of Strategic Management
Environmental
Variables
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Environmental Scanning
SWOT Analysis
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Strengths – Weaknesses
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Opportunities – Threats
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Strategy Formulation
Developing long-range plans for effective
management of opportunities and
threats in light of corporate strengths
and weaknesses
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Strategy Formulation – How to Codify a Strategy
Mission Statement
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Purpose/reason for organization
Promotes shared expectations
Communicates public image
Who we are; what we do; what we
aspire to
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Organizational Adaptation
Organization “fit” with environment
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Theory of population ecology
Institution theory
Strategic choice perspective
Organizational learning theory
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Organizational Adaptation
Strategic flexibility
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Demands long-term commitment to
development of critical resources
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Demands firm become a learning
organization
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Learning Organizations
An organization skilled at creating,
acquiring, and transferring
knowledge and at modifying its
behavior to reflect new knowledge
and insights
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Learning Organizations
4 Chief Activities
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Systematic problem solving
New approach experimentation
Learning from experiences
Intra-organization knowledge transfer
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Basic Concepts of Strategic Management
Hierarchy of
Strategy
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Goals & Objectives
Corporate Goals/Objectives
–Profitability (net profit)
–Growth
–Resource utilization (ROE, ROI)
–Market leadership
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Basic Concepts of Strategic Management
3 Types of Strategy
–Corporate strategy
–Business strategy
–Functional strategy
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Basic Concepts of Strategic Management
Corporate Strategy seeks one of these:
–Stability
–Growth
–Retrenchment
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Basic Concepts of Strategic Management
Business Strategy
–Competitive strategies
–Cooperative strategies
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Basic Concepts of Strategic Management
Functional Strategy
–Technological leadership
–Technological followership
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Basic Concepts of Strategic Management
Strategic
Decision-Making
Process
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Strategic Decision Making
Strategic Decisions
– Rare
– Consequential
– Directive
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Strategic Decision Making
Mintzberg’s Modes
–Entrepreneurial mode
–Adaptive mode
–Planning mode
–Logical incrementalism
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Hambrick and Fredrickson – Good Strategy
5 Elements of Good Strategy
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5.
Arenas
Vehicles
Differentiators
Staging
Economic logic
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