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Learning Objectives
To understand:
• the elements or stages of the strategic
management process
• the different perspectives on strategy
development
• the characteristics of strategic thinking and
how strategic thinking fits into the strategic
management process
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Strategic Management
is the process through which organizations…
 analyze and learn from stakeholders inside and outside
of the organization,
 establish strategic direction,
 create strategies that are intended to help achieve
established goals, and
 execute those strategies….
all in an effort to satisfy key
organizational stakeholders.
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Internal and External
Analysis
Strategic
Direction
Strategy Formulation
(corporate and
business level)
Strategy Implementation
and Control
Strategic Restructuring
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THE BROAD ENVIRONMENT
socio-cultural
forces
technological
forces
THE TASK ENVIRONMENT
competitors
suppliers
THE ORGANIZATION
owners/board of directors
managers
employees
financial
intermediaries
customers
unions
local communities
government
economic
forces
activists
political/legal
forces
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External Environmental
Analysis
• The external environment of business may be
divided into two sectors:
Broad
Task
• All trends and stakeholders in the external
environment should be analyzed at both the
domestic and international level
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Broad Environment
The broad environment consists of domestic and global forces
such as
socio-cultural trends (e.g. demographics)
technological trends (e.g. internet)
political trends (e.g. open markets)
economic trends (e.g. growing economy)
The broad environment forms the context within which the firm
and its task environment exist.
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Task Environment
The task environment consists of external
stakeholders -- groups or individuals outside the
organization that are significantly influenced by aor
have a major impact on the organization -- such as:
Customers
Suppliers
Competitors
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Internal Environmental
Analysis
• Internal stakeholders include managers,
employees and the owners and their
representatives (e.g., board of directors).
• Internal analysis includes an evaluation of
internal stakeholders and the organization’s
resources and capabilities
• Purpose of internal analysis to determine
 strengths and opportunities for competitive advantage,
and
 weaknesses and organizational vulnerabilities that should
be corrected.
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Strategic Direction
Strategic direction involves
• setting long-term goals and objectives, such as
mission and vision
• defines the purposes for which an organization
exists and operates
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Strategy Formulation
• Strategy is an organizational plan of action intended to
accomplish goals.
• Corporate strategy formulation refers to domain
definition, or the choice of business areas. Usually
decided by the CEO and the board of directors.
• Business strategy formulation involves domain direction
and navigation, or how to compete in a given area.
Usually decided by division heads and business unit
managers.
• Functional strategy formulation contains the details of
how the functional areas such as marketing, operations,
finance, and research should work together to achieve the
business-level strategy.
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Strategy Implementation
and Control
• Strategy implementation involves creating the
functional strategies, systems, structures, and
processes needed by the organization in achieving
strategic ends.
• Strategic control refers to the processes that lead to
adjustments in strategic direction, strategies, or the
implementation plan when necessary.
• Strategic restructuring involves a renewed emphasis
on what an organization does well, combined with a
variety of tactics to revitalize the organization and
strengthen its competitive position.
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Alternative Perspectives on
Strategy Development
Traditional Strategic Management Process
• Situation Analysis--Strengths, Weaknesses, Opportunities
and Threats (SWOT)
• Strategies should take advantage of strengths and
opportunities or neutralize or overcome weaknesses and
threats
• Environmental Determinism--the best strategy involves
adapting to environmental, technical and human forces
• Strategy is deliberate (always planned and intended by
management)
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Alternative Perspectives on
Strategy Development
Contemporary Views
• Adaptation--strategy involves submitting to existing forces.
• Enactment--firms can, in part, create their environments.
• Deliberate--intended by management (planned)
• Emergent--organizations learn as they go by trial and error.
Strategy is the pattern in a stream of decisions.
Stakeholder view
• Organizations are at the center of a network of contacts
• Increasing use of partnering
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Alternative Perspectives on
Strategy Development
Resource-based View
• Organization is made up of resources: financial, physical, human,
general organizational (structure, systems, culture, reputation,
relationships with stakeholders).
• Sustainable competitive advantage--Comes from a resource that
is valuable in the market, possessed by only a small number of
firms (rare), and costly or difficult to imitate in the short term.
• Effective development or acquisition of organizational resources
may be the most important reason that some organizations are
more successful than others.
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The Most Successful Organizations
Analyze and Manage Their
Stakeholders Well
Stakeholder Analysis
• Identifying and Prioritizing Key
Stakeholders
• Assessing Their Needs
• Collecting Ideas From Them
• Integrating this Knowledge into the
Strategic Management Process
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The Most Successful Organizations
Analyze and Manage Their
Stakeholders Well
Stakeholder Management
• Communicating with Stakeholders
• Negotiating and Contracting with
Them
• Managing Relationships with Them
• Motivating Them to Act in Beneficial
Ways
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Global Strategic Management
Most successful firms eventually look to the global environment
for opportunities to grow and develop
•Saturated domestic markets
•Profitable foreign markets
•Falling trade barriers
•Newly industrialized countries
•Similarity of industrialized nations
•Shift towards market economies
•English a universal business language
•Availability of lower-cost resources
•Uniformity in technical standards
•Opportunities to learn from foreign ventures
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A Combined Approach to Strategic
Management
• Traditional/contemporary perspective--firms should adapt to
forces in the external environment when it is unreasonable to try
to change them, while being proactive in other areas. Also,
strategy making is a combination of planning and learning. The
approach also draws from organizational economics, especially
pertaining to industry analysis
• Resource-based perspective--internal analysis leading to
identification of sources of sustainable competitive advantage
• Stakeholder perspective--part of external analysis and alliance
formation
• Global perspective--integrated throughout all aspects of strategic
management
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Strategic Thinking
Strategic thinking is the term used to describe the
creative aspects of strategic management
 Focus on strategic intent
 Long-term orientation
 Consideration of past and present
 Systems perspective
 Ability to seize unanticipated opportunities
 Scientific approach
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