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The Nature of Strategic

Chapter Objectives
Describe the strategic-management process.
Explain the need for integrating analysis and intuition in strategic
Define and give examples of key terms in strategic management.
Discuss the nature of strategy formulation, implementation, and
evaluation activities.
Describe the benefits of good strategic management.
Discuss how a firm may achieve sustained competitive advantage.
“To achieve and maintain competitive advantage.”
What is Strategic Management?
The art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives.
Stages of Strategic Management
The strategic-management process consists of three stages:
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Strategy Formulation
It includes, developing a vision and mission, identifying an
organization’s external opportunities and threats,
determining internal strengths and weaknesses, establishing
long-term goals, generating alternative strategies, and
choosing particular strategies to pursue.
Strategy Formulation Issues
What new business to enter?
What business to abandon?
How to allocate resources?
Should we expand operations or diversify?
Are we going to enter international markets?
Should we merge or form a joint venture?
How to avoid a hostile takeover?
Strategy Implementation
Often called as the “action stage.” It includes developing a
strategy-supportive culture, creating an effective
organizational structure, redirecting marketing efforts,
preparing budgets, developing and utilizing information
systems, and linking employee compensation to
organizational performance.
Strategy Implementation Issues
What must we do to implement our part of the
organization’s strategy?
How best can we get the job done?
Strategy Evaluation
Primary means for obtaining information on knowing when
particular strategies are not working well.
Strategy Evaluation
Three fundamental strategy evaluation activities:
Reviewing external and internal factors that are the base
for current strategies;
measuring performance; and
taking corrective actions.
Integrating Intuition and Analysis
Strategic-management process is an attempt both to
duplicate what goes on in the mind of a brilliant, intuitive
person who knows the business and to couple it with
Integrating Intuition and Analysis
Reasons for integrating intuition and analysis:
Intuition is particularly useful for making decisions in
situations of great uncertainty or little precedent.
Intuition is helpful when highly interrelated variable exist
or when it is necessary to chose from several plausible
Adapting to Change
To survive, all organizations must astutely identify and adapt
to change. The strategic-management process is aimed at
allowing organizations to adapt effectively to change over
the long run.
Adapting to Change,
Key Strategic-Management Question
What kind of business should we become?
Are we in the right field(s)?
Should we reshape are business?
What new competitors are entering our industry?
What strategies should we pursue?
How are customer changing?
Are new technologies being develop that could put us out of
“Success today is no guarantee of success tomorrow!”
Key Terms in Strategic Management
Competitive Advantage
Anything that a firm does especially well compared to rival
Something that a firm can do that rival firms cannot do, or
something that a firm own that rival firms desire.
Key Terms in Strategic Management
A frim must strive to achieve a sustained competitive
advantage by:
Continually adapting to changes in external trends and
events and internal capabilities, competencies, and
resources; and
effectively formulating, implementing, and evaluating
strategies that capitalize upon those factors.
Key Terms in Strategic Management
The individuals who are most responsible for the success
or failure of an organization.
They help the organization gather, analyze, and organize
Key Terms in Strategic Management
Vision and Mission Statements
Vision Statement – “What do we want to become?”
Mission Statement – “What is our business?”
Key Terms in Strategic Management
External Opportunities and Threats
It refer to economic, social, cultural, demographic,
environmental, political, legal, governmental, technological,
and competitive trends and events that could signify benefit
or harm an organization in the future.
Key Terms in Strategic Management
External opportunities and threats example:
Global markets offer the highest growth in revenues.
Unemployment rates continue to rise to 10 percent on
Discretionary spending has fallen dramatically; consumers
buy only essential items.
Demand for health service does not change much in a
Key Terms in Strategic Management
Internal Strengths and Weaknesses
Organization's controllable activities that are performed
especially well or poorly.
Superiority or deficiency relative to competitors.
Key Terms in Strategic Management
Long-Term Objectives
Specific results that an organization seeks to achieve in
pursuing its basic mission.

Means by which long-term objectives will be achieved.
Key Terms in Strategic Management
Annual Objectives
Short-term milestones that organizations must achieve to
reach long term objectives.

Means by which annual objectives will be achieved. It
includes guidelines, rules, and procedure established to
support efforts to achieve stated objectives.
The Strategic-
Three Important Question to Answer in
Developing a Strategic Plan
Where are we now?
Where do we want to go?
How are we going to get there?