Chapter One: Strategic Management Overview

Learning Goals for Chapter One:

• Understand the benefits of strategic management.
• Explain globalization and environmental sustainability and their influences on strategic choices.
• Understand basic models of strategic management and its components.

Concepts Overview:

• Strategic management as a set of decisions aimed at improving long-term company performance.
• Phases of strategic management:

1. Basic financial planning
2. Forecasting-based planning
3. Externally-oriented strategic planning
4. Strategic management

Benefits of Strategic Management:

• Helps a company find its place and performance in the market.
• Enables quicker reactions to environmental changes to maintain competitiveness.
• Provides a clearer strategic vision for the firm.

Globalization:

• Important for integrating the company into international markets and competing against global corporations.
• Growing necessity for companies to address broader world demand and production.

Innovation and Strategic Management:

• Companies should constantly seek improvements in products/services, organizational structure, and customer engagement.
• Staying competitive includes adopting innovative approaches.

Sustainability and Triple Bottom Line:

• Modern strategies should maximize profits while also considering social and environmental responsibilities.
• Triple bottom line includes:

1. Profit maximization
2. Social responsibility
3. Environmental responsibility

Organizational Theories:

• Population Theory: Focus on successful establishment in environmental niches.
• Institutional Theory: Adapting to changing conditions inspired by successful organizations.
• Organizational Learning Theory: Four main skills:

1. Systematic problem-solving
2. Experimentation with new approaches
3. Learning from experiences
4. Effective knowledge transfer

Strategic Flexibility:

• Companies must adapt and shift in response to competitive environments.
• Learning organizations are more flexible and can better capitalize on changes.

Elements of Strategic Management:

• Environmental Scanning: Assessing internal and external environments to inform strategic decisions.
• SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) is a common method used.
• Strategic Formulation: Creating plans that define competitive advantages and set achievable objectives.
• Strategic Implementation: Putting strategies into action through programs, budgets, and procedures.
• Evaluation and Control: Reviewing performance against objectives to determine effectiveness.

Triggering Events for Strategic Change:

• New leadership or management team.
• External interventions (e.g., banks, mergers, etc.).
• Performance gaps: when actual performance does not meet expectations.
• Inflection points: introduction or shifts in technology or industry direction.

Strategic Decision Types:

• Rare Decisions: Unique strategic choices not previously made.
• Consequential Decisions: High commitment affecting resources and future actions.
• Directive Decisions: Leading to a new strategic direction.

Modes of Strategic Decision Making:

• Entrepreneurial Mode: Focus on innovation and allowing individuals to pursue creative projects.
• Adaptive Mode: Reactive adjustments to existing problems rather than proactive opportunities.
• Planning Mode: Systematic gathering of information and analysis to define alternatives.
• Logical Incrementalism: Merging planning, adapting, and entrepreneurship in decision making.

Eight-Step Decision-Making Process:

1. Evaluate current performance results.
2. Review corporate governance and adherence to strategy.
3. Scan and assess the external environment for changes.
4. Assess internal corporate environment.
5. Conduct SWOT analysis.
6. Generate and select the best alternative strategy.
7. Implement the strategy.
8. Evaluate effectiveness.

Strategic Audit:

• A review process to analyze corporate functions and activities, ensuring strategic goals were met and identifying areas for improvement.

Conclusion of Chapter One:

• Emphasizes the need for companies to adopt formalized processes for strategy development and implementation.
• Highlights that companies require structured approaches to achieve their missions and measure success accurately as they navigate a competitive landscape.
• Future chapters will provide more in-depth material and reinforce concepts discussed.