Chapter 1 Strategic Management

Vision and Mission Statements

- A VISION statement answers the question "What do we want to become?" - A MISSION statement answers the question "What is our business?"

Strategic Evaluation Stage 3

- Determining which strategies are not working well - Three fundamental activities: 1-reviewing external and internal factors that are the bases for current strategies 2- measuring performance 3• taking corrective actions

BENEFITS TO A FIRMS THAT DOES STRATEGIC MANAGEMENT

- Enhanced communication - Dialoge and participation - Deeper/Improved understanding - other's views - firm doing, planning and why? - Greater Commitment - achieve objectives - implement strategies - work hard - The Result - firm will succeed

Strategists

- Individuals most responsible for the success or failure of an organization - Help an organization gather, analyze, and organize information

Internal Strengths and Internal Weaknesses

- an organization's controllable activities that are performed especially well or poorly - determined relative to competitors

Strategy Formulation Stage 1

- developing a vision and mission - identifying an organization's external opportunities and threats - determining internal strengths and weaknesses - establishing long - term objectives - generating alternative strategies - choosing particular strategies to pursue

External Opportunities and Threats

- economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization

Strategy implementation Stage 2

- requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed - Often called the action stage

Annual objectives

- short-term milestones that organizations must achieve to reach long-term objectives - should be measurable, quantitative, challenging, realistic, consistent, and prioritized - should be established at the corporate, divisional, and functional levels in a large organization •

Long-Term Objectives

- specific results that an organization seeks to achieve in pursuing its basic mission - long-term means more than one year - should be challenging, measurable, consistent, reasonable, and clear

Policies

- the means by which annual objectives will be achieved

Strategies

- the means by which long-term objectives will be achieved - may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures

How to gain and sustain competitive advantage

1 - Establish a clear vision and mission 2 - Formulate Strategies - Collect, analyze, & prioritize data using matrices; Establish a clear strategic plan 3 - Implement Strategies - Establish structure, Allocate resources, Motivate and Reward, Attract Customers, Manage finances

Stages of Strategic Management

1-Strategy formulation 2-Strategy implementation 3-Strategy evaluation

To gain , firms need to provide unique products and services . O export orders O governmental O a sustainable competitive advantage competitors a bank loan

A sustainable competitive advantage

Which of the following is often considered to be the first step in strategic planning ? Establishing goals and objectives Making a profit Developing a mission statement ****not the answer Developing a vision statement Determining opportunities and threats

Developing a vision statement

Because the position of Chief Executive Officer ( CEO ) has assumed much responsibility for strategic management in the last five years , the number of firms with the position of Chief Strategy Officer ( CSO ) has diminished drastically during this period .

False

Management by intuition can be defined as operating from the " I've - already - made - up - my - mind - don't - bother - me - with - the - facts mode

False

There is a dramatic shift in mass retailing to O " trading up " and taking customers from more exclusive stores . Ooperating stores with less square footage . O opening dramatically larger supercenters . Oselling only the most expensive merchandise . Ocutting back on their online presence .

Ooperating stores with less square footage .

What can be defined as the art and science of formulating , implementing and evaluating cross - functional decisions that enable an organization to achieve its objectives ? O Strategy formulation O Strategy evaluation Strategic management Strategic leading Strategy implementation

Strategic management

Benefits of Strategic Management

Strategic management allows an organization to be more proactive than reactive in shaping its own future; • It allows an organization to initiate and influence (rather than just respond to) activities-and thus to exert control over its own destiny.

Key Terms in Strategic Management

Strategists Vision and Mission Statements External Opportunities and Threaths Internal Strenghts and Internal weaknesses

Strategic Management

The art and science of formulating , implementing , and evaluating cross-functional decisions that enable an organization to achieve its objectives

Low - performing firms typically underestimate their competitor's strengths and overestimate their own strengths .

True

Strategic management focuses on integrating management , marketing , finance and accounting , production and operations , research and development , and information systems to achieve organizational success .

True

To be effective strategic management must be a process that familiarizes managers and employees with the key strategic issues facing organization and the feasible alternatives for resolving those issues .

True

The Strategic - Management Model

Where are we now ? Where do we want to go ? How are we going to get there ?

The strategic - management process occurs once year . is a continuous process . O is a semiannual process . applies mostly to companies with sales greater than $ 100 million . applies mostly to small businesses .

a continuous process .

The goal of strategic management is to: eliminate competitive advantage. eliminate and abolish competitive advantage. achieve and maintain competitive advantage. maintain competitive advantage achieve competitive advantage.

achieve and maintain competitive advantage .

The strategic - management process is becoming more widely used by

all types of organizations .

A strategic plan results

from tough managerial choices among numerous good alternatives , and it signals commitment specific markets , policies , procedures , and operations .

A strategic plan is a company's

game plan

The fact that Apple has no manufacturing facilities of its own O illustrates that having more fixed assets than rival firms , can provide major competitive advantages in a global recession . Ohas caused it to build up massive debt on its balance has been problematic for Apple in terms of debt . has enabled it to remain financially lean . means that it is in the same position as Sony .

has enabled it to remain financially lean .

Strategy evaluation is necessary because O internal and external factors are constantly changing . the IRS requires strategy evaluation . firms have limited resources . success today is a guarantee of success tomorrow . the SEC requires strategy evaluation .

internal and external factors are constantly changing .

Specific results an organization seeks to achieve in pursuing its basic mission are

objectives

Business or military success is

the product of both attention to changing external and internal conditions and the insightful adaptations to those conditions .

Sometimes the term strategic management is used to refer

to strategy formulation , implementation , and evaluation with strategic planning referring only to strategy formulation.

"Strategic management" is used synonymously

with the term "strategic planning" in this course

Comparing Business and Military Strategy

• A fundamental difference between military and business strategy is that business strategy is formulated, implemented, and evaluated with an assumption of competition, whereas military strategy is based on an assumption of conflict • Both business and military organizations must adapt to change and constantly improve to be successful

Some Opportunities and Threats

• Consumers' expectation for green operations and products is rising 8 percent annually in Western Europe. • Internet marketing is growing 11 percent annually in the United States. • Commodity food prices rose 6 percent the prior year. • Oil and gas prices declined 18 percent in the last twelve months. • Computer hacker problems are increasing 14 percent annually.

Examples of Employability Skills From Using Text

• Critical thinking • Collaboration • Knowledge application and analysis • Business ethics and social responsibility • Information technology • Data literacy

Nonfinancial Benefits

• Enhanced awareness of external threats • Improved understanding of competitors' strategies • Increased employee productivity • Reduced resistance to change • Clearer understanding of performance-reward relationships

Why Some Firms Do No Strategic Planning

• 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 and effort; time is money • Content with current success; failure to realize that success today is no guarantee for success tomorrow • Overconfidence • Prior bad experience with strategic planning done sometime/somewhere

Financial Benefits

• Organizations using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities • High-performing firms tend to do systematic planning to prepare for future fluctuations in their external and internal environments

Excerpts from Sun Tzu's The Art of War Writings

• Strategic planning is a matter of vital importance to the state: a matter of life or death, the road either to survival or ruin. Hence, it is imperative that it be studied thoroughly • Know your enemy and know yourself, and in a hundred battles you will never be defeated • Skillful leaders do not let a strategy inhibit creative counter-movement

Pitfalls in Strategic Planning

• Using strategic planning to gain control over decisions and resources • Doing strategic planning only to satisfy accreditation or regulatory requirements • Too hastily moving from mission development to strategy formulation • Not communicating the plan to employees, who continue working in the dark • Top managers making many intuitive decisions that conflict with the formal plan • Top managers not actively supporting the strategic-planning process • Not using plans as a standard for measuring performance • Delegating planning to a "planner" rather than involving all managers • Not involving key employees in all phases of planning • Not creating a collaborative climate supportive of change • Viewing planning as unnecessary or unimportant • Viewing planning activities as silos comprised of independent parts • Becoming so engrossed in current problems that insufficient or no planning is done • Being so formal in planning that flexibility and creativity are stifled

Strategy Formulation "Decisions" - Stage 1

• What new businesses to enter • What businesses to abandon ● Whether to expand operations or diversify ● Whether to enter international markets ● Whether to merge or form a joint venture ● a hostile takeover