Chapter 1
The Strategic Management Process
Strategic
Management
An Integrated Approach
Charles W. L. Hill
Gareth R. Jones
PowerPoint Presentation
by Charlie Cook
Fifth Edition
Copyright © 2001 Houghton Mifflin Company. All rights reserved.
Overview
Why do some firms succeed while others fail?
 A central objective of strategic management is to
learn why this happens.
What is strategy?
 An action a company takes to attain superior
performance.
What is the strategic management process?
 The process by which managers choose a set of
strategies for the enterprise to pursue its vision.
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1-2
Strategic Planning
Rational planning by top management?
Basic Strategic Planning Model
Defining the Mission and Setting Top-Level Goals
External Analysis of Opportunities and Threats
Internal Analysis of Strengths and Weaknesses
Selection of Appropriate Strategies
Implementation of Chosen Strategies
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The Main
Components of
the Strategic
Planning Process
FIGURE 1.1
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Mission and Goals
Mission
 Sets out why the organization
exists and what it should be doing.
Major goals
 Specify what the organization hopes
to fulfill in the medium to long term.
Secondary goals
 Are objectives to be attained that lead to superior
performance.
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1-5
External Analysis
Identify strategic opportunities and threats in
the operating environment.
Immediate (Industry)
Macroenvironment
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National
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Internal Analysis
Identify strengths
 Quality and quantity of resources available
 Distinctive competencies
Identify weaknesses
 Inadequate resources
 Managerial and
organizational deficiencies
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1-7
SWOT and Strategic Choice
Strengths and Weaknesses
Opportunities and Threats
(SWOT Analysis)
Strategic Choice
Business
Functional
Global
Corporate
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1-8
Business-Level Strategies
Cost leadership
 Attaining, then using the lowest total cost basis as a
competitive advantage.
Differentiation
 Using product features or services to distinguish the
firm’s offerings from its competitors.
Market niche focus
 Concentrating competitively on
a specific market segment.
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1-9
Functional-Level Strategies
Focus is on improving the effectiveness of
operations within a company.
 Manufacturing
 Marketing
 Materials management
 Research and development
 Human resources
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1-10
Global-Level Strategies
Multidomestic
International
Global
Transnational
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1-11
Corporate-Level Strategies
Vertical integration
Diversification
Strategic alliances
Acquisitions
New ventures
Business portfolio
restructuring
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1-12
Strategy Implementation
Designing organizational structure
Designing control systems
Structure
 Market and output controls
 Bureaucratic controls
 Control through organizational culture
 Rewards and incentives
Controls
Matching strategy, structure,
and controls
 Congruence (fit) among strategy,
structure, and controls
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Strategy
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Managing Strategic Change
The only constant is change.
Success requires adapting strategy and
structure to a changing world.
The feedback loop in
Corporate
strategic planning.
Operational
Business
Functional
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1-14
Strategic Managers
General managers
 Responsible for the overall (strategic) performance
and health of the total organization.
Operations managers
 Responsible for specific business
functions or operations.
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1-15
Strategic Managers for All Levels
FIGURE 1.2
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1-16
Strategic Leadership
Vision, eloquence, and consistency
Commitment to the vision
Being well informed
Willingness to
delegate and empower
Astute use of power
Emotional intelligence
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1-17
Strategy as an Emergent Process
Strategy making in an unpredictable world
 Creates the necessity for flexible strategic approaches.
Strategy making by lower-level managers
 Strategy evolves through autonomous action.
Serendipity and strategy
 Accidental discoveries and happenstances can have dramatic
effects on strategic direction.
Intended and emergent strategies
 Realized strategies are combinations of intended and
emergent strategies.
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1-18
Intended and Emergent Strategies
FIGURE 1.3
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Source: Reprinted from “Strategy Formation in an Adhocracy,”
by Henry Mintzberg and Alexandra McGugh, published in
Administrative Science Quarterly, Vol. 30, No. 2, June 1985, by
permission of Administrative Science Quarterly.
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Strategy: A Pattern in a
Stream of Decisions
Some
illustrations
Honda
entering U.S. motorcycle market in
1960s and 70s.
•Honda admitted that they “…had no
strategy other than the idea of seeing if we
could sell something in the United States.”
General
Mills’ cereal business (see the
following slides).
maintain
premium pricing with coupons.
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1-20
Strategy Formulation as a Product of
Intended & Emergent Processes
Intended
Strategy:
"The Plan"
Deliberate
Strategy
Unrealized
Strategy
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Realized
Strategy
Emergent
Strategy
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Strategy Formulation Activities at
General Mills’ Cereal Business
Intended
Strategy:
"The Plan"
+
Deliberate
Strategy
Maintain
premium
prices
Realized
Strategy
+ Couponing
Unrealized
Strategy
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Emergent
Strategy
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Strategy Formulation Activities at General
Mills’ Cereal Business
Intended
Strategy:
"The Plan"
+
+
Maintain
premium
prices
Deliberate
Strategy
+ Maintain
premium
prices
Couponing
Unrealized
Strategy
+ Couponing
Copyright © 2001 Houghton Mifflin Company. All rights reserved.
Realized
Strategy
+ Premium
prices
+ Lower market
share
Emergent
Strategy
+ Store brands,
generics
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The Strategic Management Process
for Intended and Emergent Strategies
FIGURE 1.4
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Strategic Planning in Practice
Planning under uncertainty
 Scenario planning for dynamic environmental change
Ivory tower planning
 Lack of contact with operational realities
 The importance of involving operating managers
 Procedural justice in the decision-making process
 Engagement, explanation, and expectations
Planning for the present: Strategic Intent
 Recognition of the static nature of the strategic fit model
 Strategic intent in focusing the organization on winning by
achieving stretch goals
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1-25
Improving Strategic Decision Making
Cognitive biases systematically influence the
rationality of decision makers.
FIGURE 1.5
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Groupthink and Strategic Decisions
Pitfalls of groupthink
 Failing to question underlying assumptions.
 Coalescing around a single person or policy.
 Filtering out conflicting information.
 Developing after-the-fact rationalizations.
 Having an emotional (nonobjective)
commitment to an action.
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Techniques for Improving Decision Making
Two decisionmaking processes
that counteract
cognitive biases
and groupthink.
FIGURE 1.6
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