Chapter 1
Strategic Management
Chapter Summary
Strategic management is the set of decisions and actions that result in the formulation and
implementation of plans designed to achieve a company’s objectives. Because it involves long-
term, future-oriented, complex decision making and requires considerable resources, top-
management participation is essential. This chapter describes strategic management as a three-tier
process involving corporate-, business-, and functional-level planners, and support personnel. At
each progressively lower level, strategic activities are more specific, narrow, short-term, and
action-oriented, with lower risks but fewer opportunities for dramatic impact.
The strategic management model presented in this chapter serves as the structure for
understanding and integrating all the major phases of strategy formulation and implementation.
The chapter provides a summary account of these phases, each of which is given extensive
individual attention in subsequent chapters. Finally, the chapter stresses that the strategic
management process centers on the belief that a firm’s mission can be best achieved through a
systematic and comprehensive assessment of both its internal capabilities and its external
environment.
Number range NL1Learning Objectives
1. Explain the concept of strategic management.
2. Number range NL_aDescribe how strategic decisions differ from other decisions that
managers make.
3. Number range NL_aName the benefits and risks of a participative approach to strategic
decision making.
4. Number range NL_aUnderstand the types of strategic decisions for which managers at
different levels of the company are responsible.
5. Number range NL_aDescribe a comprehensive model of strategic decision making.
6. Number range NL_aAppreciate the importance of strategic management as a process.
7. Number range NL_aGive examples of strategic decisions that companies have recently
made.
,Number range NL1Lecture Outline
INumber range NLA. The Nature and Value of Strategic Management
ANumber range NL1. Exhibit 1.1, Strategy in Action gives an example of how a
poor decision affected Xerox to the tune of $107 billion. Strategic management
is defined as the set of decisions and actions that result in the formulation and
implementation of plans designed to achieve a company’s objectives.
, 1Number range NL_a. Strategic management comprises nine critical tasks:
aNumber range NL_1_)Formulate the company’s mission, including broad
statements about its purpose, philosophy, and goals.
bNumber range NL_1_)Conduct an analysis that reflects the company’s internal
conditions and capabilities.
cNumber range NL_1_)Assess the company’s external environment, including
both the competitive and the general contextual factors.
dNumber range NL_1_)Analyze the company’s options by matching its
resources with the external environment.
eNumber range NL_1_)Identify the most desirable options by evaluating each
option in light of the company’s mission.
fNumber range NL_1_) Select a set of long-term objectives and grand strategies
that will achieve the most desirable options.
gNumber range NL_1_)Develop annual objectives and short-term strategies that
are compatible with the selected set of long-term objectives and grand
strategies.
hNumber range NL_1_)Implement the strategic choices by means of budgeted
resource allocations in which the matching of tasks, people, structures,
technologies, and reward systems is emphasized.
iNumber range NL_1_) Evaluate the success of the strategic process as an input
for future decision making.
2Number range NL_a. As these tasks indicate, strategic management involves
the planning, directing, organizing, and controlling of a company’s strategy-
related decisions and actions.
aNumber range NL_1_)Strategy means managers’ large-scale, future-oriented
plans for interacting with the competitive environment to achieve company
objectives.
bNumber range NL_1_)A strategy is a company’s game plan. It does not
precisely detail all future deployments, but it does provide a framework for
managerial decisions.
cNumber range NL_1_)A strategy reflects a company’s awareness of how,
when, and where it should compete; against whom it should compete; and
for what purposes it should compete.
BNumber range NL1. Dimensions of Strategic Decisions
1Number range NL_a. Typically, strategic issues have the following
dimensions:
, aNumber range NL_1_)Strategic issues require top-management decisions.
(1)Number range NL_(a) Because strategic decisions overarch several
areas of a firm’s operations, they require top-management
involvement.
(2)Number range NL_(a) Usually only top management has the
perspective needed to understand the broad implications of such
decisions and the power to authorize the necessary resource
allocations.
Strategic Management
Chapter Summary
Strategic management is the set of decisions and actions that result in the formulation and
implementation of plans designed to achieve a company’s objectives. Because it involves long-
term, future-oriented, complex decision making and requires considerable resources, top-
management participation is essential. This chapter describes strategic management as a three-tier
process involving corporate-, business-, and functional-level planners, and support personnel. At
each progressively lower level, strategic activities are more specific, narrow, short-term, and
action-oriented, with lower risks but fewer opportunities for dramatic impact.
The strategic management model presented in this chapter serves as the structure for
understanding and integrating all the major phases of strategy formulation and implementation.
The chapter provides a summary account of these phases, each of which is given extensive
individual attention in subsequent chapters. Finally, the chapter stresses that the strategic
management process centers on the belief that a firm’s mission can be best achieved through a
systematic and comprehensive assessment of both its internal capabilities and its external
environment.
Number range NL1Learning Objectives
1. Explain the concept of strategic management.
2. Number range NL_aDescribe how strategic decisions differ from other decisions that
managers make.
3. Number range NL_aName the benefits and risks of a participative approach to strategic
decision making.
4. Number range NL_aUnderstand the types of strategic decisions for which managers at
different levels of the company are responsible.
5. Number range NL_aDescribe a comprehensive model of strategic decision making.
6. Number range NL_aAppreciate the importance of strategic management as a process.
7. Number range NL_aGive examples of strategic decisions that companies have recently
made.
,Number range NL1Lecture Outline
INumber range NLA. The Nature and Value of Strategic Management
ANumber range NL1. Exhibit 1.1, Strategy in Action gives an example of how a
poor decision affected Xerox to the tune of $107 billion. Strategic management
is defined as the set of decisions and actions that result in the formulation and
implementation of plans designed to achieve a company’s objectives.
, 1Number range NL_a. Strategic management comprises nine critical tasks:
aNumber range NL_1_)Formulate the company’s mission, including broad
statements about its purpose, philosophy, and goals.
bNumber range NL_1_)Conduct an analysis that reflects the company’s internal
conditions and capabilities.
cNumber range NL_1_)Assess the company’s external environment, including
both the competitive and the general contextual factors.
dNumber range NL_1_)Analyze the company’s options by matching its
resources with the external environment.
eNumber range NL_1_)Identify the most desirable options by evaluating each
option in light of the company’s mission.
fNumber range NL_1_) Select a set of long-term objectives and grand strategies
that will achieve the most desirable options.
gNumber range NL_1_)Develop annual objectives and short-term strategies that
are compatible with the selected set of long-term objectives and grand
strategies.
hNumber range NL_1_)Implement the strategic choices by means of budgeted
resource allocations in which the matching of tasks, people, structures,
technologies, and reward systems is emphasized.
iNumber range NL_1_) Evaluate the success of the strategic process as an input
for future decision making.
2Number range NL_a. As these tasks indicate, strategic management involves
the planning, directing, organizing, and controlling of a company’s strategy-
related decisions and actions.
aNumber range NL_1_)Strategy means managers’ large-scale, future-oriented
plans for interacting with the competitive environment to achieve company
objectives.
bNumber range NL_1_)A strategy is a company’s game plan. It does not
precisely detail all future deployments, but it does provide a framework for
managerial decisions.
cNumber range NL_1_)A strategy reflects a company’s awareness of how,
when, and where it should compete; against whom it should compete; and
for what purposes it should compete.
BNumber range NL1. Dimensions of Strategic Decisions
1Number range NL_a. Typically, strategic issues have the following
dimensions:
, aNumber range NL_1_)Strategic issues require top-management decisions.
(1)Number range NL_(a) Because strategic decisions overarch several
areas of a firm’s operations, they require top-management
involvement.
(2)Number range NL_(a) Usually only top management has the
perspective needed to understand the broad implications of such
decisions and the power to authorize the necessary resource
allocations.
