1 - Basic Concepts of Strategic Management

Strategy formulation includes

defining the competitive advantages of the business, crafting the corporate mission, specifying achievable objectives, and setting policy guidelines

Innovation

describes new products, services, methods, and organizational approaches that allow the business to achieve extraordinary returns

Mintzberg's Modes of Strategic Decision-making

Entrepreneurial mode Adaptive mode Planning mode Logical incrementalism

Strategic Decision-making Process

Evaluate current performance results. Review corporate governance. Scan and assess the external environment. Scan and assess the internal corporate environment. Analyze strategic factors. Generate, evaluate, and select the best alternative strategies. Implement selected strategies. Evaluate implemented strategies.

It is the implementation of potential innovations that truly drives businesses to be remarkable

Innovation

Strategic management includes:

Internal and external environmental scanning Strategy formulation Strategy implementation Evaluation and control

Population ecology

Once an organization is successfully established in a particular environmental niche, it is unable to adapt to changing conditions.

Institution theory

Organizations can and do adapt to changing conditions by imitating other successful organizations.

As managers attempt to better deal with their changing world, a firm generally evolves through the following four phases of strategic management

Phase 1: Basic financial planning Phase 2: Forecast-based planning Phase 3: Externally oriented strategic planning Phase 4: Strategic management

Theories of Organizational Adaptation

Population ecology Institution theory Strategic choice perspective

simple way to conduct environmental scanning

SWOT analysis

Strategic Management

a set of managerial decisions and actions that determines the long-run performance of a corporation

Logical incrementalism

a synthesis of the planning, adaptive, and, to a lesser extent, the entrepreneurial modes

Organizational learning theory

an organization adjusts defensively to changing environment and uses knowledge offensively to improve fit between itself and its environment

Learning organization

an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights Organizational learning is a critical component of competitiveness in a dynamic environment.

Adaptive mode

characterized by reactive solutions to existing problems, rather than a proactive search for new opportunities

Consequential strategic decisions

commit substantial resources and demand a great deal of commitment from people at all levels

Research indicates that the planning mode is not only more analytical and less political than are the other modes, but also more appropriate for

dealing with complex, changing environments

Vision

describes what the organization would like to become

Strategy

forms a comprehensive master approach that states how the corporation will achieve its mission and objectives maximizes competitive advantage and minimizes competitive disadvantage corporate, business, functional

The attainment of an appropriate match, or "fit," between an organization's environment and its strategy, structure, and processes

has positive effects on the organization's performance

Planning mode

involves the systematic gathering of appropriate information for situation analysis, the generation of feasible alternative strategies, and the rational selection of the most appropriate strategy

Strategic choice perspective

not only do organizations adapt to a changing environment, but also have the opportunity and power to reshape their environment

Business strategy

occurs at the business unit or product level, and it emphasizes improvement of the competitive position of a corporation's products or services in the specific industry or market segment served by that business unit

Strategy formulation

process of investigation, analysis, and decision-making that provides the company with the criteria for attaining a competitive advantage

Strategic audit

provides a checklist of questions, by area or issue, that enables a systematic analysis to be made of various corporate functions and activities

Strategic flexibility

the ability to shift from one dominant strategy to another demands long-term commitment to development and nurturing of critical resources also demands that the company become a learning organization

Functional strategy

the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity.

Sustainability

the use of business practices to manage the triple bottom line

Rare strategic decisions

unusual and typically have no precedent to follow

Strategy implementation

process by which strategies and policies are put into action through the development of programs, budgets, and procedures

Mission

purpose or reason for the organization's existence (what the organization is now)Corporate strategy

three characteristics Strategic decisions

rare consequential directive Mintzberg's Modes of Strategic Decision-making

Performance

result of activities includes actual outcomes of the strategic management process

Objectives

results of planned activity

Feedback/learning process

revise or correct decisions based on performance

Directive: Strategic decisions

set precedents for lesser decisions and future actions throughout an organization.

Initiation of Strategy: Triggering event

something that acts as a stimulus for a change in strategy and can include: new CEO external intervention threat of change of ownership performance gap strategic inflection point

Entrepreneurial mode

strategy is made by one powerful individual

Strategic planning becomes increasingly important as

the environment becomes more unstable.

Globalization

the integrated internationalization of markets and corporations has changed the way modern corporations do business

The triple bottom line involves:

the management of traditional profit/loss the management of the company's social responsibility the management of its environmental responsibility

Environmental Scanning

the monitoring, evaluating and disseminating of information from the external and internal environments to key people within the organization

Basic model of Strategic management - four basic elements:

Environmental scanning Strategy formulation Strategy implementation Evaluation and control

strategy formulation

(strategic or long-range planning)

Benefits of Strategic Management

Clearer sense of strategic vision for the firm Sharper focus on what is strategically important Improved understanding of a rapidly changing environment

Learning organizations are skilled at four main activities

Solving problems systematically Experimenting with new approaches Learning from the organization's own experiences and past history as well as from the experiences of others Transferring knowledge quickly and efficiently throughout the organization

Strategic Decision-making

Strategic decisions deal with the long-term future of an entire organization and havec: rare consequential directive

Policy

a broad guideline for decision-making that links formulation of a strategy with its implementation

Corporate strategy

a company's overall direction regarding its general attitude toward growth and the management of its various businesses and product lines

hierarchy of strategy

a grouping of strategy types by level in the organization. A nesting of strategies by level from corporate to business to functional, so that they complement and support one another

Evaluation and control

a process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance