Smm - 14th Aug 07

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Chapter 1: The Strategic Management Process

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Preview ✔ Overview ✔ Strategic Planning ✔ Strategic Managers ✔ Strategic Leadership ✔ Strategy as an Emergent Process ✔ Strategic Planning in Practice ✔ Improving Strategic Decision Making

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Overview • Why do some firms succeed while others fail? • Strategy Defined • Strategic Management Process

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Strategic Planning • Rational Planning by Top Management?

Strategic Planning

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(Continued) • A Basic Planning Model Figure 1.1: Basic Planning Process

Missions and Goals External Analysis - Opportunities and Threats Internal Analysis - Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Strategies

• Let’s Look More Closely at Each Step . . .

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Strategic Planning

(Continued)

Figure 1.1: Basic Planning Process Missions and Goals

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Strategic Planning

(Continued)

Mission and Major Goals • Mission • Major Goals • Secondary Goals

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Strategic Planning

(Continued)

Figure 1.1: Basic Planning Process Missions and Goals External Analysis - Opportunities and Threats

Strategic Planning

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(Continued)

External Analysis Immediate (Industry)

Macroenvironment

National

• Identify Strategic Opportunities and Threats in Three Environments

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Strategic Planning

(Continued)

Figure 1.1: Basic Planning Process Missions and Goals External Analysis - Opportunities and Threats Internal Analysis - Strengths and Weaknesses

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Strategic Planning

(Continued)

Internal Analysis • Identify Strengths

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Strategic Planning

(Continued)

Internal Analysis • Identify Strengths

• and Weaknesses

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Strategic Planning

(Continued)

Figure 1.1: Basic Planning Process Missions and Goals External Analysis - Opportunities and Threats Internal Analysis - Strengths and Weaknesses Selection of Appropriate Strategies

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Strategic Planning

(Continued)

SWOT and Strategic Choice Weaknesses

Strengths

Opportunities

Threats

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Strategic Planning SWOT and Strategic Choice (Continued)

(Continued)

Functi

onal

Business Corp o

rate

Global

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Strategic Planning

(Continued)

SWOT and Strategic Choice

(Continued)

• Functional-Level Strategy – – – – –

Manufacturing Marketing Materials Management Research and Development Human Resources

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Strategic Planning

(Continued)

SWOT and Strategic Choice • Business-Level Strategy – Cost Leadership – Differentiation – Market Niche Focus

(Continued)

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Strategic Planning

(Continued)

SWOT and Strategic Choice • Global Strategies – – – –

Multidomestic International Global Transnational

(Continued)

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Strategic Planning

(Continued)

SWOT and Strategic Choice • Corporate-Level Strategy – – – – – –

Vertical Integration Diversification Strategic Alliances Acquisitions New Ventures Business Portfolio Restructuring

(Continued)

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Strategic Planning

(Continued)

Figure 1.1: Basic Planning Process Missions and Goals External Analysis - Opportunities and Threats Internal Analysis - Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Strategies

Strategic Planning

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(Continued)

Strategy Implementation • Designing Organizational Structure

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Strategic Planning

(Continued)

Strategy Implementation (Continued) • Designing Control Systems – Market and Output Controls – Bureaucratic Controls – Control Through Organizational Culture – Rewards and Incentives

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Strategic Planning

(Continued)

Strategy Implementation (Continued) • Matching Strategy, Structure and Controls Structure Strategy

Controls

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Strategic Planning

(Continued)

Strategy Implementation (Continued) • Managing Strategic Change – The Only Constant Is Change – Strategy and Structure Adaptation

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Strategic Planning

(Continued)

Strategy Implementation (Continued) • Managing Strategic Change – The Only Constant Is Change – Strategy and Structure Adaptation

• The Feedback Loop

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Strategic Managers • General Managers • Functional Managers

Strategic Managers (Continued) Figure 1.2: Levels of Strategic Management Corporate Level CEO, Board of Directors Corporate Staff

Head Office

Business Level Divisional Managers and Staff

Division A

Division B

Division C

Functional Level Functional Managers

Business Functions

Business Functions

Business Functions

Market A

Market B

Market C

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Strategic Leadership • Vision, Eloquence, and Consistency • Commitment • Being Well Informed • Willingness to Delegate and Empower • Astute Use of Power

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Strategy as an Emergent Process • Strategy Making in an Unpredictable World • Strategy Making by Lower Level Managers • Intended and Emergent Strategies

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Figure 1.3: Emergent and Deliberate Strategies Intended Strategy

Deliberate Strategy

Unrealized Strategy

Realized Strategy

Emergent Strategy

From “Strategy Formation in an Adhocracy” by Henry Mintzberg and Alexandra McHugh, Administrative Science Quarterly, Vol. 30, No. 2, June 1985. Reprinted by permission of Administrative Science Quarterly.

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Figure 1.4.A: Strategic Management Process for Intended Strategies Missions and Goals

External Analysis

Strategic Choice

INTENDED STRATEGY

Organizing for Implementation

Internal Analysis

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Figure 1.4.B: Strategic Management Process for Emergent Strategies External Analysis

Missions and Goals

Strategic Choice Does It Fit?

EMERGENT STRATEGY

Organizational Grassroots

Internal Analysis

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Strategic Planning In Practice • Planning Under Uncertainty • Ivory Tower Planning • Planning for the Present – Strategic Intent

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Improving Strategic Decision Making • Cognitive Biases and Strategic Decisions

Improving Strategic Decision Making (Continued) Figure 1.5: Five Well-Known Cognitive Biases

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Improving Strategic Decision Making (Continued) Figure 1.5: Five Well-Known Cognitive Biases

Prior Hypothesis Bias

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Improving Strategic Decision Making (Continued) Figure 1.5: Five Well-Known Cognitive Biases

Prior Hypothesis Bias

Escalating Commitment

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Improving Strategic Decision Making (Continued) Figure 1.5: Five Well-Known Cognitive Biases

Prior Hypothesis Bias

Escalating Commitment

Reasoning by Analogy

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Improving Strategic Decision Making (Continued) Figure 1.5: Five Well-Known Cognitive Biases

Prior Hypothesis Bias

Reasoning by Analogy

Escalating Commitment

Representativeness

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Improving Strategic Decision Making (Continued) Figure 1.5: Five Well-Known Cognitive Biases Illusion of Control Prior Hypothesis Bias

Reasoning by Analogy

Escalating Commitment

Representativeness

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Improving Strategic Decision Making • Cognitive Biases and Strategic Decisions • Groupthink and Strategy Decisions • Techniques for Improving Decision Making – Devil’s Advocacy – Dialectic Inquiry

Improving Strategic Decision Making (Continued)

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Figure 1.6: Two Decision-Making Processes Devil’s Advocacy Expert Plan

Dialectic Inquiry Expert Expert Plan #1 Plan #2 (Thesis) (Antithesis)

Devil’s Advocate Plan

Debate (Synthesis)

Final Plan

Final Plan

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Chapter Summary

✔STRATEGIC PLANNING ✔STRATEGIC MANAGERS ✔STRATEGIC LEADERSHIP T N E G R E M E N A S A Y G E T A R ✔ST PROCESS IN G IN N N A L P IC G E T A ✔STR PRACTICE N IO IS C E D IC G E T A R T S ✔IMPROVING MAKING