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Chapter 4. Strategic Management. Learning Outcomes. Define strategy , and explain its importance to organizational success Explain the three levels of strategy that exist in an organization Discuss the stages of the strategic management process. Learning Outcomes.

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Chapter 4


Strategic Management

Learning outcomes
Learning Outcomes

  • Define strategy, and explain its importance to organizational success

  • Explain the three levels of strategy that exist in an organization

  • Discuss the stages of the strategic management process

Learning outcomes1
Learning Outcomes

  • Define organizational mission, and explain how mission relates to long- and short-range objectives

  • Discuss the components of a SWOT analysis

  • Explain how strategic alternatives are identified and selected

What is strategy
What is Strategy?

  • Outlines the basic steps that management plans to take to reach an objective or goal

  • 3 levels of Strategy:

    • Corporate Strategies

    • Business Strategies

    • Functional Strategies

Corporate strategies
Corporate Strategies


Trying to expand

Concentration of current businesses

Vertical integration



Satisfied with present course

Maintain status quo

Usually elected by default

Corporate strategies1
Corporate Strategies

3. Defensive

  • Wants or needs to reduce its operations

  • Turnaround

  • Reverse a negative trend

  • Divestiture

  • Liquidation

  • Company is sold or dissolved

    4. Combination

  • Employing different strategies for different parts of company

Business strategies
Business Strategies

  • Also called competitive strategies

  • Provides a focus on how to compete in a given business

  • Applies to a single business unit

Business strategies1
Business Strategies

  • Overall cost leadership

    • Produce and deliver goods or services for lower cost than competition (i.e., Wal-Mart)

  • Differentiation

    • Make the product unique in its category, allowing higher than average prices (i.e., Rolex)

  • Focus

    • Direct attention to a narrow market segment (i.e., a tall men’s clothing store)


  • Functional Business Strategies

    • Narrow in scope

    • Production

    • Marketing

    • Short term

The strategic management process
The Strategic Management Process

  • Application of the basic planning process

  • Determines the long term direction & performance of the organization

  • Performed at the highest levels of organization

    • Requires input from middle & lower managers

The strategic management process1
The Strategic Management Process

Has 3 phases:




Strategic management process formulation phase
Strategic Management Process: Formulation Phase

Set the Mission

Broadest and highest level objectives

Defines the purpose of the organization

Why does the organization exist?

Describes the products/services

Defines the markets or sources or revenue

Identifies what the future business will be

Market potential

Changes in market structure

Alterations that may occur to buying habits

What needs are not being met

Strategic management process formulation phase1
Strategic Management Process: Formulation Phase

  • Identify past and present strategies to see if change is needed

  • Past and present performance

    • Review what did and did not go well

  • Setting objectives

    • Look at internal and external environments

    • Long-range, (derived from mission statement

    • intermediate,

    • short-range objectives

    • Then, set objectives for division / departments

Strategic management process formulation phase2
Strategic Management Process: Formulation Phase

SWOT Analysis

Strengths, Weaknesses, Opportunities and Threats

Used for drawing conclusions about organization’s current state from data

Internal analysis used to determine strengths & weaknesses

Assess external environment to determine threats and opportunities

Broad environment (economy, social, political, technology)

Competitive environment

Strategic management process formulation phase3
Strategic Management Process: Formulation Phase

SWOT Analysis

Competitive environment

5 Forces Model of Competition (Michael Porter)

Analyze competition by looking at:



Competitive rivalry

Product or service substitutes

Potential entrants into the industry

Strategic management process formulation phase4
Strategic Management Process: Formulation Phase

  • Comparing strategic alternatives

    • SWOT analysis limits alternatives

    • Select the corporate strategy that gives the best chance of achieving the mission and objectives

    • Being able to prioritize with limited resources

  • Strategic Business Unit (SBU)

    • A distinct business that has its own set of competitors and can be managed independently of other businesses (i.e., SBU might be a product line)

    • Small businesses ARE SBUs

Strategic management process implementation phase
Strategic Management Process: Implementation Phase

  • Organizational structure

    • Understanding how structure, policies and systems already in place will be impacted with new strategy

    • Costs of altering structure

      • Might mean more training required

      • reorganization

  • Functional strategies’ impact

    • Understand how the functional areas will be impacted by overall strategic plan

Strategic management process evaluation phase
Strategic Management Process:Evaluation Phase

  • Constantly evaluate

    • Companies should constantly evaluate their strategy to determine if it is working

    • Make changes if it isn’t working

  • Respond to internal and environmental changes

    • As things change, such as environment or economy, readjust strategy