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Chapter
4
Strategic Management and Planning in a Global Environment
PowerPoint Presentation by Charlie Cook The University of West Alabama 2007 Thomson/South-Western. All rights reserved.
LEARNING OBJECTIVES
When you have finished studying this chapter, you should be able to:
1. Define strategic management and describe its purpose.
2. Explain the four stages of the strategic management process. 3. Identify and explain the components of strategic analysis, as well as explain the value of conducting this analysis.
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Strategic Planning
Strategic Planning
The process by which an organization makes
decisions and takes actions that affect its long-run performance. Strategic plan: the output of the strategic planning process that provides direction by defining its strategic approach to business.
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Figure 4.1
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Key Terms
Strategic Management
Overall, long-run management.
Strategic Planning
The process of making plans and decisions that are
Strategic Plan
A comprehensive plan that provides overall direction
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environments of an organization.
Strategy Formulation
Establishing strategy and tactics necessary to
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Assessing the mission of the organization Internal environmental analysis External environmental analysis
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Figure 4.2
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SWOT Analysis
The combined internal and external strategic analysis is referred to as a SWOT analysis. Strengths Weaknesses Opportunities Threats
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term success.
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Key Terms
Strategic Direction
Direction of the organization toward success in the
long run.
Vision
The ability to predict opportunities and threats in the
future.
A vision statement is intended to guide the organization in the future, what the organization wants to become or where it wants to be. Vision is derived from a careful analysis of the external and internal environments
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Table 4.1
Our Mission We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. We anticipate consumer need and deliver outstanding products and services that improve peoples lives. Our Values Our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit. We are an inspired, diverse team. We respect and value everyones contribution. The health and safety of our people are paramount. We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders.
Source: Ford Motor Co. website (http://www.ford.com), 30 June 2005. 2007 Thomson/South-Western. All rights reserved.
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External Analysis
Purpose of External Analysis
To identify aspects of the external environment that
Those environmental trends on which the organization can capitalize and improve its competitive position.
Conditions that jeopardize the organizations ability to prosper and its competitive position in the long term.
Threats
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influence of the organization and over which it has no (or little) control.
Task Environment
Includes environmental forces that are within the
Economic Environment
The economic components of the general
environment.
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Figure 4.3
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Inflation rates
Unemployment rates
Wage rates Exchange rates Stock market fluctuations Per capita income GDP trends Economic development
Demographic trends
Age groups Regional shifts in population Household composition Diversity Ecological awareness Life expectancy
Technological
Spending on research and development Internet availability Availability of information technology Production technology trends
PoliticalLegal
Tax laws Environmental protection International trade regulation Antitrust regulation
Productivity improvements
Telecommunications infrastructure
2007 Thomson/South-Western. All rights reserved.
External Environment
General Environment
Economic factors Technological factors Socio-cultural factors
Task Environment
Customer Profiles Competitive Structure Resource Availability
Political-legal factors
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Figure 4.4
Source: Adapted from Michael E. Porter, How Competitive Forces Shape Strategy, Harvard Business Review 57, no. 2 (March/April 1979): 137145. 2007 Thomson/South-Western. All rights reserved. 419
Internal Analysis
Purpose of Internal Analysis
To identify the assets, resources, skills, and
processes that represent either strengths or weaknesses for the organization. Strengths
Aspects of the organizations operations that represent potential competitive advantages or distinctive competencies.
Areas that are in need of improvement.
Weaknesses
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Finance
Profitability Revenue Asset utilization Debt/leverage Equity Per unit costs Profit margins Cash flow
Product, service Brand equity Market research Sales force Market share Size of market Distribution channels Price Promotion
Human Resources
Skills Selection Training and development Leadership Motivation Communication Rewards
Other Factors
Organization culture Overall control Information system Information technology Organizational structure
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Strategy Formulation
Answers the question:
Where does the organization want to be?
competitive advantage and optimize the performance of the organization in the long term.
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and specify the level of performance that the organization wants to achieve.
orientedTimeline
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considering its strengths, weaknesses, opportunities, and threats, and its vision and strategic goals.
Grand Strategies
Stability strategies: intended to ensure continuity in
the operations and performance of the organization. Growth strategies: designed to increase the sales and profits of the organization. Retrenchment strategies: designed to reverse negative sales and profitability trends.
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Cost leadership: competing on the basis of price. Differentiation: offering products or services that are differentiated from those of competitors in some way. Focus: avoiding competing in broad markets by targeting a narrow market segment. Best-Cost provider: competing on the basis of both low-cost and differentiation.
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Figure 4.5
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Decision Matrices
A decision matrix provides a method for evaluating
alternative strategies according to the criteria that the organizations leaders consider more important.
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organization to align each part of the organization with the organizations overall mission and goals.
The organizations system must be designed to
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strategic plan to ensure quality and effectiveness in terms of organizational performance. Feedforward controls
Are designed to identify changes in the external environment or internal operations that affect organizations ability to fulfill its mission and meet its strategic goals. Compare the actual performance of the organization to its planned performance.
Feedback Controls
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has had a tremendous impact on the ability of organizations to develop effective strategic plans.
Negative
Many organizations fail to use the information made
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Organizational Leadership
The Importance of Leadership
If an organization is to implement its strategy
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Understand the importance of a thorough and accurate assessment of the current situation of the organization.
A plan will be only as good as the analysis upon which it is based. Strategic vision is critical for ensuring a common strategic direction for the organization.
Make sure that the mission statement is a working document that provides direction for the members of the organization.
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