✨ 💫 ⭐ ✨
🌸
💙
💚
✨ CHAPTER 1 ✨
The Nature of
Strategic Management
📚 ATP30303 – Strategic Management
📖 Reference Textbook
David R. Fred, Forest R. David & Meredith E. David
Strategic Management: Concepts and Cases (17th Edition)
Pearson Education (2020)
🏫 Lecturer: Rooshihan Merican bin Abdul Rahim Merican
☁ Cute Notes • Pastel Vibes • Exam Ready ☁
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💬 By the end of this chapter, you should be able to…
1
Describe the strategic-management process.
2
Discuss the three stages of strategy formulation, implementation, and evaluation.
3
Define key terms in strategic management.
4
Give examples of key terms in strategic management.
5
Describe benefits of engaging in strategic management.
6
Explain why some firms do NOT do strategic planning.
7
Describe the pitfalls in actually doing strategic planning.
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📖 Definition

The art & science of formulating implementing evaluating cross-functional decisions that enable an organization to achieve its objectives & maintain a competitive advantage.

🔗 Integrates

  • Management
  • Marketing
  • Finance & Accounting
  • Production
  • Information Systems

→ To achieve organizational success

🎯 Core Activity

Distributing resources across products & regions to gain a sustainable competitive advantage — by providing unique products/services.

🌟 Real-World Examples

🍎 APPLE

  • All products run on Apple's unique operating system
  • The only way to have an iPhone is to be a user of Apple's OS
  • Creates a locked ecosystem → sustainable advantage

⌚ ROLEX

  • World's leading luxury watch brand
  • Refuses to launch cheaper product lines for market share
  • Disciplined approach preserves exclusivity & brand reputation
💡 Key Insight: Strategic management is about making deliberate choices — deciding what to do AND what NOT to do — to protect your competitive position.
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📖 Definition

The process of defining an organization's direction & making decisions on allocating resources to pursue this direction. It is a systematic effort to answer fundamental questions:

✨ The 4 Fundamental Questions ✨
📍 Where are we now?
Current State Analysis
⬇
🎯 Where do we want to go?
Vision & Goals
⬇
🗺️ How will we get there?
Strategy & Action Plans
⬇
📊 How will we measure progress?
Key Performance Indicators (KPIs)
📌 Additional Notes
  • NOT about predicting the future perfectly
  • About preparing proactively
  • Aligns activities with mission & vision
  • Ensures everyone works toward the same objectives
  • Company's game plan
  • Results from tough managerial choices among good alternatives
  • Signals commitment to specific markets, policies, procedures & operations
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⭐ 3 Important Questions to Answer in Preparing a Strategic Plan
📍
QUESTION 1
Where are we NOW?
🎯
QUESTION 2
Where do we want to GO?
🚀
QUESTION 3
How are we going to GET THERE?
📌 The Model Flow: Business Vision & Mission → External Assessment + Internal Assessment → Strategies in Action → Strategy Analysis & Choice → Implementing Strategies (Management & Marketing) → Implementing Strategies (Finance & Accounting) → Strategy Evaluation & Governance
🔄 Feedback Loop runs throughout! All stages connect back and inform each other.
📌 Overarching context: Chapter 10 (Business Ethics, Sustainability, Social Responsibility) & Chapter 11 (Global & International Issues)
Strategy Formulation
Strategy Implementation
Strategy Evaluation
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①

🌸 Strategy
Formulation

  • Develop vision & mission
  • Identify external opportunities & threats
  • Determine internal strengths & weaknesses
  • Establish long-term objectives
  • Generate alternative strategies
  • Choose strategies to pursue
📌 Key Decisions:
  • New businesses to enter?
  • Businesses to abandon?
  • Expand or diversify?
  • Enter international markets?
  • Merge or joint venture?
  • Avoid hostile takeover?
②

💙 Strategy
Implementation

  • Establish annual objectives
  • Devise policies
  • Motivate employees
  • Allocate resources
📌 Also Includes:
  • Strategy-supportive culture
  • Effective org structure
  • Redirect marketing efforts
  • Prepare budgets
  • Develop information systems
  • Link compensation to performance
⚡ Often called the ACTION STAGE
③

💚 Strategy
Evaluation

  • Determine which strategies are NOT working
  • All strategies subject to future modification
  • Changes in external & internal factors
📌 3 Fundamental Activities:
  • Review internal & external factors (basis for current strategies)
  • Measure performance
  • Take corrective actions
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⚡ 1. Competitive Advantage

An activity a firm does especially well compared to rivals, OR a resource a firm possesses that rivals desire.
  • Usually sustained for a certain period
  • Rival firms will imitate & undermine the advantage
🌟 How to SUSTAIN it:
  • Continuously adapt to external trends & internal capabilities
  • Effectively formulate, implement & evaluate strategies
  • Offer unique products not easily copied
  • Accept tradeoffs — decide what NOT to do

👔 2. Strategists

  • Individuals most responsible for the success or failure of an organization
  • Gather, analyze, and organize information
  • Responsible for a unit/division, profit & loss outcomes, or direct authority
📌 Examples:
CEO President Owner Chairperson Exec. Director Chancellor Dean Entrepreneur Manager

🌈 3. Vision & Mission Statements

👁 VISION STATEMENT
"What do we want to become?"
→ The FIRST step in strategic planning
🎯 MISSION STATEMENT
"What is our business?"
  • "Enduring statements of purpose" that distinguish one business from similar firms
  • Identifies scope of operations in product & market terms
  • Describes the values & priorities of an organization
  • Shows future direction of an organization
  • A reminder of why the organization exists
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🌏 4. External Opportunities & Threats

Trends & events that could significantly benefit or harm an organization — beyond organizational control.

📡 Categories:
Economic Social Cultural Demographic Environmental Political Legal Governmental Technological Competitive
📌 Process Name:
Scanning for these factors is called:
→ Environmental Scanning
→ Industry Analysis

🏠 5. Internal Strengths & Weaknesses

  • Organization's controllable activities
  • Performed especially well or poorly
  • Determined relative to competitors
📌 Arises in these areas:
Management Marketing Finance/Accounting Production/Operations R&D MIS

🎯 6. Long-Term Objectives

Specific results that an organization seeks to achieve. Long-term = more than one year.

📌 What Objectives Do:
  • Provide direction
  • Aid in evaluation
  • Create synergy
  • Reveal priorities
  • Focus coordination
  • Support planning, organizing, motivating & controlling
✅ Objectives Must Be:
Challenging Measurable Consistent Reasonable Clear
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🗺️ 7. Strategies

The means by which long-term objectives will be achieved. Require top-management decisions & large amounts of resources.

📌 Types:
Geographic Expansion Diversification Acquisition Product Development Market Penetration Retrenchment Divestiture Liquidation Joint Ventures

📅 8. Annual Objectives

Short-term milestones organizations must achieve to reach long-term objectives.

✅ Must Be:
Measurable Quantitative Challenging Realistic Consistent Prioritized
📌 Established at:
  • Corporate level
  • Divisional level
  • Functional level
⚠️ Important: Basis for resource allocation

🔲 9. SWOT Analysis

A matching tool that helps develop four types of strategies. Matching key external & internal factors is a critically important activity.

S – Strengths

Internal positive

W – Weaknesses

Internal negative

O – Opportunities

External positive

T – Threats

External negative
SO Strategies WO Strategies ST Strategies WT Strategies

📜 10. Policies

The means by which annual objectives will be achieved.

  • Include guidelines, rules & procedures
  • Guides to decision making
  • Address repetitive/recurring situations
  • Allow consistency & coordination within/between departments
⚠️ Policies are important in strategy implementation
Guidelines Rules Procedures
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💡 4-Step Cycle — it loops continuously!
🌟 Establish
A Clear
Vision &
Mission
➡️
📊 Formulate
Strategies:
Collect, Analyze &
Prioritize Data;
Build Strategic Plan
⬇️
🏆 GAIN &
SUSTAIN
COMPETITIVE
ADVANTAGES
📈 Evaluate &
Monitor Results:
Take Corrective
Actions; Adapt
⬅️
⚙️ Implement
Strategies:
Structure; Resources;
Motivate; Customers;
Manage Finances
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💵 Financial Benefits

  • Improved sales
  • Improved profitability
  • Improved productivity
  • Better long-term financial performance
  • Better forecasting
  • Better informed decisions (short & long-term)

💡 Non-Financial Benefits

  • Enhanced awareness of external threats
  • Improved understanding of competitors' strategies
  • Increased employee productivity
  • Reduced resistance to change
  • Clearer understanding of performance–reward relationships
📊 Comparing Firm Performance

🏆 High-Performing Firms

  • Engage in systematic planning
  • Prepare for future changes
  • Long-term financial orientation
  • Make informed decisions
  • Consider both short & long-term outcomes

❌ Poorly-Performing Firms

  • Focus on short-term activities
  • Lack good forecasting
  • Prioritize internal issues & overlook competitive analysis
  • Blame external factors for weak performance
  • Fail to address internal shortcomings
🔄 The Communication-Commitment Chain
Enhanced Communication
a. Dialogue
b. Participation
→
Deeper Understanding
a. Of others' views
b. Of firm's plans & why
→
Greater Commitment
a. Achieve objectives
b. Implement strategies
c. Work hard
→
THE RESULT
All managers & employees on a mission to help the firm succeed
✨ Additional Benefits: Shapes future proactively • Better communication • Better participation • Stronger commitment • More creativity & innovation • Stronger support for mission & objectives • Allows organization to initiate & influence activities • Exerts control over its own destiny
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😬 "Oops! These are the excuses firms make… don't be like this!"
📚 No formal training in strategic management
🤷 No understanding of or appreciation for the benefits of planning
💸 No monetary rewards for doing planning
🚫 No punishment for not planning
🔥 Too busy "firefighting" (resolving internal crises) to plan ahead
🗑 View planning as a waste of time since no product/service is made
😴 Laziness — effective planning takes time & effort; time is money
😎 Content with current success — failure to realize success today is NO guarantee for tomorrow
🦚 Overconfident
😣 Prior bad experience with strategic planning done sometime/somewhere
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🚨 Watch out! Even firms THAT DO plan can fall into these traps!
🎮 Using strategic planning to gain control over decisions and resources
📋 Doing planning only to satisfy accreditation or regulatory requirements
⚡ Too hastily moving from mission development to strategy formulation
🤐 Failing to communicate the plan to employees (who continue working in the dark)
💭 Managers making intuitive decisions that conflict with the formal plan
👑 Top managers not actively supporting the strategic-planning process
📏 Failing to use plans as a standard for measuring performance
👤 Delegating planning to a "planner" rather than involving all managers
🙈 Failing to involve key employees in all phases of planning
🤝 Failing to create a collaborative climate supportive of change
😑 Viewing planning as unimportant
🕳 So engrossed in current problems that insufficient or no planning is done
🤖 Being so formal in planning that flexibility and creativity are stifled
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⭐ ULTIMATE REVISION CHEAT SHEET ⭐
Chapter 1: The Nature of Strategic Management

📖 Strategic Management

  • Art & science of FORMULATE → IMPLEMENT → EVALUATE
  • Cross-functional decisions → achieve objectives → competitive advantage
  • Integrates: Mgmt, Marketing, Finance, Accounting, Production, IS
  • Distribute resources for sustainable competitive advantage

📋 Strategic Planning

  • Define direction + allocate resources
  • 4 Qs: Now? → Go? → Get there? → Measure?
  • NOT predicting perfectly — PREPARING proactively
  • Company's game plan
  • Signals commitment to markets, policies, procedures & operations

🏆 3 Stages

  • ① Formulation – Vision, mission, SWOT, objectives, strategies
  • ② Implementation – Objectives, policies, motivate, allocate ⚡ ACTION STAGE
  • ③ Evaluation – Review, measure, correct

🔑 10 Key Terms (1–5)

  • ① Competitive Advantage – better activity / desired resource
  • ② Strategists – responsible for success/failure; gather info
  • ③ Vision ("become?") & Mission ("business?")
  • ④ External O&T – uncontrollable; environmental scanning
  • ⑤ Internal S&W – controllable; relative to competitors

🔑 10 Key Terms (6–10)

  • ⑥ Long-Term Objectives – specific results; >1 year; CMCRC
  • ⑦ Strategies – means to achieve LT objectives
  • ⑧ Annual Objectives – short-term milestones; basis for resource allocation
  • ⑨ SWOT – match internal+external; SO/WO/ST/WT
  • ⑩ Policies – means to achieve annual objectives; guidelines/rules/procedures

💰 Benefits

  • Financial: ↑sales ↑profit ↑productivity, better forecasting & decisions
  • Non-Financial: Threat awareness, competitor understanding, ↑employee productivity, ↓resistance to change, clearer reward-performance link
  • Proactive future shaping
  • Better communication → commitment → creativity

😬 Why Firms Don't Plan (10 reasons)

No training No benefit awareness No reward No punishment Firefighting Waste of time Lazy Too comfortable Overconfident Bad prior experience

⚠️ Pitfalls in Strategic Planning (13 pitfalls)

Control resources Compliance only Rush mission→strategy Poor communication Intuition vs plan No top mgmt support Don't measure w/ plan Delegate to 1 planner Exclude employees No collaborative climate View planning unimportant Focused on current problems Too formal → kills creativity
🌸 Good luck in your exams! You've got this! 💫🌟
ATP30303 Strategic Management • Chapter 1 • Based on David, David & David (17th Ed.)