MGT420 Ch04

PowerPoint Presentation by Charlie Cook
The University of West Alabama
© 2007 Thomson/South-Western. All rights reserved.
Strategic
Management
and Planning
in a Global
Environment
Chapter
4
Part 2 Planning Challenges in the 21st Century

© 2007 Thomson/South-Western. All rights reserved. 4–2
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.
4. Explain how an organization can develop a
competitive advantage.
5. Explain the purpose of strategy formulation and
describe the two levels of strategic alternatives.
LEARNING OBJECTIVES
When you have finished studying this chapter, you
should be able to:

6. Explain the role of strategy implementation.
7. Explain the importance of evaluation and control of
strategy and its implementation.
8. Discuss the importance of strategic planning.
LEARNING OBJECTIVES (cont’d)
When you have finished studying this chapter, you
should be able to:

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.

Figure 4.1 The Strategic Management Process

Key Terms
• Strategic Management
 Overall, long-run management.
• Strategic Planning
 The process of making plans and decisions that are
focused on long-run performance.
• Strategic Plan
 A comprehensive plan that provides overall direction
for the organization.

Key Terms (cont’d)
• Strategic Analysis
 An assessment of the external and internal
environments of an organization.
• Strategy Formulation
 Establishing strategy and tactics necessary to
achieve the mission of the organization.

Strategic Analysis: Assessment in a
Global Environment
• The purpose of strategic analysis is to evaluate
the present situation of the organization.
 Analysis requires three primary activities:
 Assessing the mission of the organization
 Internal environmental analysis
 External environmental analysis

Figure 4.2 The Components of Strategic Analysis

SWOT Analysis
• The combined internal and external strategic
analysis is referred to as a SWOT analysis.
Strengths
Weaknesses
Opportunities
Threats

Assessing the Mission of an Organization
• The mission of an organization reflects its
fundamental reasons for existence.
• Though mission statements vary greatly, every
mission statement should describe three primary
aspects of an organization:
1. The organization’s primary products or services.
2. The organization’s primary target markets.
3. The organization’s overall strategy for ensuring long-
term success.

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

Table 4.1 Ford Motor Company’s Mission Statement
Ford Motor Company
Our Vision
To become the world’s leading consumer company for automotive products and
services.
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 people’s 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 everyone’s 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.

External Analysis
• Purpose of External Analysis
 To identify aspects of the external environment that
represent either an opportunity for or a threat to the
organization.
 Opportunities:
 Those environmental trends on which the organization can
capitalize and improve its competitive position.
 Threats
 Conditions that jeopardize the organization’s ability to prosper
and its competitive position in the long term.

External Analysis Factors
• General Environment
 Includes environmental forces that are beyond the
influence of the organization and over which it has no
(or little) control.
• Task Environment
 Includes environmental forces that are within the
organization’s operating environment and may be
influenced to some degree.
• Economic Environment
 The economic components of the general
environment.

Figure 4.3 Dimensions of the Global External Environment

Table 4.2 Sample Issues in the General Environment
Economic
• Inflation rates
• Unemployment rates
• Wage rates
• Exchange rates
• Stock market fluctuations
• Per capita income
• GDP trends
• Economic development
Sociocultural
• Norms and values
• 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
• Productivity improvements
• Telecommunications infrastructure
Political–Legal
• Tax laws
• Environmental protection
• International trade regulation
• Antitrust regulation
• Federal Reserve policy
• Intellectual property and patent laws

External Environment
• General Environment
 Economic factors
 Technological factors
 Socio-cultural factors
 Political-legal factors
• Task Environment
 Customer Profiles
 Competitive Structure
 Resource Availability

Figure 4.4 Five Forces Model of Industry Analysis
Source: Adapted from Michael E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 57, no. 2 (March/April 1979): 137–145.

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 organization’s operations that represent
potential competitive advantages or distinctive competencies.
 Weaknesses
 Areas that are in need of improvement.

Table 4.3 Internal Factors for Analysis
Marketing Operations
Product, service Productivity
Brand equity Quality
Market research Facilities
Sales force Supply chain
Market share Technology
Size of market Purchasing
Distribution channels Safety
Price Ecological issues
Promotion
Finance
Profitability
Revenue
Asset utilization
Debt/leverage
Equity
Per unit costs
Profit margins
Cash flow
Human Resources
Skills
Selection
Training and development
Leadership
Motivation
Communication
Rewards
Other Factors
Organization culture
Overall control
Information system
Information technology
Organizational structure

Strategy Formulation
• Answers the question:
 “Where does the organization want to be?”
• Steps in strategy formulation include:
 Casting the vision for the organization.
 Setting strategic goals.
 Identifying strategic alternatives.
 Evaluating and choosing strategies that provide a
competitive advantage and optimize the performance
of the organization in the long term.

Casting the Vision for the Organization
• The development of a vision for the organization
is central to any strategic plan.
• Vision versus Mission
 A vision statement describes what the organization
aspires to be in the long run.
 A mission statement describes the products, services,
and target markets for an organization.

Setting Strategic Goals
• Goals
 Are very broad statements of the results that an
organization wishes to achieve in the long run.
 Relate to the mission and vision of the organization
and specify the level of performance that the
organization wants to achieve.
• SMART goals are:
 Specific…Measurable…Achievable…Results-
oriented…Timeline

Identifying Strategic Alternatives
• Strategic Alternatives
 Are developed in light of the organizational mission
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.

Identifying Strategic Alternatives (cont’d)
• Generic Strategies
 The primary ways in which an organization can
compete in its chosen market(s).
 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.

Figure 4.5 Generic Strategies Matrix

Evaluating and Choosing Strategy
• Portfolio Assessment
 Provides a mechanism for evaluating an
organization’s portfolio of business, products and
services.
 Boston Consulting Group (BCG) Growth-Share matrix
 General Electric Industry Attractiveness–Business Strength
matrix
• Decision Matrices
 A decision matrix provides a method for evaluating
alternative strategies according to the criteria that the
organization’s leaders consider more important.

Strategy Implementation: Focusing on
Results
• The best-formulated strategy is virtually
worthless if it cannot be implemented effectively.
 A direct, specific, clear strategy must be developed.
 Strategies must be established at all levels of the
organization to align each part of the organization
with the organization’s overall mission and goals.
 The organization’s system must be designed to
ensure that strategies can be institutionalized in its
culture.

Evaluation and Control: Achieving
Effectiveness and Efficiency
• Strategic Control
 Involves monitoring the implementation of the
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 organization’s ability to fulfill
its mission and meet its strategic goals.
 Feedback Controls
 Compare the actual performance of the organization to its
planned performance.

Information Technology and Strategic
Planning
• Positive
 The increasing availability of information technology
has had a tremendous impact on the ability of
organizations to develop effective strategic plans.
• Negative
 Many organizations fail to use the information made
available by management information systems to
ensure effective strategic planning.

Organizational Leadership
• The Importance of Leadership
 If an organization is to implement its strategy
effectively, it must have the appropriate leadership.
 Without effective leadership, an organization is
unlikely to realize the benefits of its selected strategy.

Implications for Leaders
• Understand the realities of the external environment in
which you operate.
• 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.

Implications for Leaders (cont’d)
• Strategic goals serve as targets for achievement. Make
sure that they are specific, measurable, results oriented,
and have a established time for their achievement.
• Strategy should be designed to provide the organization
with a distinctive competitive advantage in the long run.
• A strategic plan is meaningless if it is not implemented
well.
• Provide for evaluation and control to be sure that
operations are on track for accomplishment of the
organization’s mission.

MGT420 Ch04

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