BUSA 435 Chapter 1 notes
Organizational knowledge is composed of three basic strengths
Technical skills; functional knowledge, such as production and marketing; and managerial expertise. this knowledge leads to new areas in which the company can succeed and creates an entry barrier to new competitors. organizational knowledge becomes a competitive advantage that is difficult to understand and imitate
strategic flexibility
The ability to shift from one dominant strategy to another and requires long-term commitment to the development and nurturing of critical resources, learning, & organization
Central American Free Trade Agreement (CAFTA)
The agreement of the member states of the Central American Common Market joined by the Dominican Republic to trade freely with the United States.
program or a tactic
a statement of the activities or steps needed to support a strategy. the terms are interchangeable. a program is a collection of tactics where a tactic is the individual action taken by the organization as an element of the effort to accomplish a plan. makes a strategy action-oriented. may involve restructuring the corporation, changing the company's internal culture, or beginning a new research effort.
punctuated equilibrium
describe corporations as evolving through relatively long periods of stability (equilibrium periods) punctuated by relatively short burst of fundamental change (revolutionary periods)
Corporate strategy
describes a company's overall direction in terms of growth and the management of its various businesses. Generally fit within three main categories of stability, growth, and retrenchment
ASEAN Free Trade Area (AFTA)
Established in 1992 to reduce tariffs on trade between member countries of the Association of Southeast Asian Nations (ASEAN).
NAFTA (North American Free Trade Agreement)
Launched in 1994. Allows open trade between the US, Mexico, and Canada. goal is improved trade among the three member countries rather than complete economic integration.
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
Strategic management
a set of managerial decisions and actions that help determine the long-term performance of an organization. Includes environment scanning, strategy formulation, strategy implementation, evaluation and control
Logical incrementalism
a synthesis of the planning, adaptive, and, to a lesser extent, the entrepreneurial modes
organizational learning theory
an organization adjusts defensively to a changing environment and uses knowledge offensively to improve the fit between itself and its environment
SWOT approach
analysis of strengths, weaknesses, opportunities, and threats
procedures, sometimes termed Standard Operating Procedures (SOP)
are a system of sequential steps or techniques that describe in detail how a particular task or job is to be done. typically detail the various activities that must be carried out in order to complete the corporation's program
Objectives
are the end results of planned activity. They should be stated as action verbs and tell employees what is to be accomplished and when, with appropriate metrics. The achievement of corporate objectives should result in the fulfillment of a corporation's mission. In effect, this is what society gives back to the corporation when the corporation does a good job of fulfilling its mission.
Planning the strategy of large, multidivisional corporations can be complex and time consuming. it often takes slightly more than a year for a large company to move from situation assessment to a final decision agreement.
because of the relatively large number of people affected by a strategic decision in a large firm, a formalized, more sophisticated system is needed to ensure that strategic planning leads to successful performance. otherwise, top management becomes isolated from developments in the business unites, and lower-level managers lose sight of the corporate mission and objectives
hurdle rate
certain percentage return on investment before management will approve a new program.
Association of Southeast Asian Nations (ASEAN)
composed of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Phillippines, Singapore, Thailand and Vietnam - is in the process of linking its members into a borderless economic zone by 2020
internal environment
consists of variables (strengths and weaknesses) that are within the organization itself and are within the short-run control of top management. These variable form the context in which work is done. Include the corporation's structure, culture, capabilities and resources
strategic decisions
deal with the long-term future of an entire organization and have three characteristics: Rare Consequential Directive
Strategy formulation
developing long-range plance Mission: reason for existence Objectives: what results to accomplish by when strategies: plan to achieve the mission and objective policies: broad guidelines for decision making
Henry Mintzberg's Modes of Strategic Decision Making
entrepreneurial, adaptive and planning (a fourth mode, logical incrementalism, was added later by Quinn)
Union of South American Nations (UNASUR)
formed to unite the two existing free-trade areas with a secretariat in Ecuador and a parliament in Bolivia. 12 South American countries
Strategy of a business
forms a comprehensive master approach that states how the business will achieve its mission and objectives. it maximizes competitive advantage and minimizes competitive disadvantage. three types of strategy: corporate, business and functional
Strategic choice perspective
goes one step further by proposing that not only do organizations adapt to a changing environment but they also have the opportunity and power to reshape their environment. Decisions of the firm's management have at least as great an impact on firm performance as overall industry factors. is the dominant one taken in strategic management
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
budget
is a statement of a corporation's programs in terms of dollars. used in planning and control, a budget lists the detailed cost of each program. specifies through pro forma financial statements the expected impact on the firm's financial future
Henry Mintzberg concluded that strategy formulation
is not a regular, continuous process: "it is most often an irregular, discontinuous process, proceeding in fits and starts. there are periods of stability in strategy development, but also there are periods of flux, of groping, of piecemeal change, and of global change."
Evaluation and control
monitoring performance Performance: actual results
Goal
open-ended statement of what one wants to accomplish, with no quantification of what is to be achieved and not time criteria for completion.
European Union (EU)
is one of the most significant trade associations in the world. the goal of the EU is to complete economic integration of its 28 member countries so that goods made in one part of Europe can move freely without ever stopping for customs inspection. EU is less than half the size of the USAbut has 50% more people. One currency, the euro, is being used through the region (except United Kingdom) as members integrate their monetary systems.
Functional strategy
is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage.
Environmental scanning
is the monitoring , evaluating, and disseminating of information from the external and internal environments to key people within the corporation. its purpose is to identify strategic factors
Mission
is the purpose or reason for the organization's existence. it announces what the company is providing to society-either a service, a set of products, or a combination of the two. a well-conceived mission statement defines the fundamental, unique purpose that sets a company apart from other firms of its type. Mission describes what the organization is now; vision describes what the organization would like to become
General Electric - one of the pioneers of strategic planning
led the transition from strategic planning to strategic management during the 1980s. by the 1990s, most other corporations around the world had also begun the conversion to strategic management
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
performance
the end result of an activity includes the actual outcomes of the strategic management process. the practice of strategic management is justified in terms of its ability to improve an organization's performance, typically measured in terms of profits and return on investment.
Environmental scanning
the process of collecting information about forces in the marketing environment External: natural environment: resources and climate societal environment: general forces task environment: industry analysis Internal: structure: chain of commmand Culture: beliefs, expectations, values Resources: assets, skills, competency, knowledge
the term used to describe a business's sustainability is
triple bottom line
Business strategy
usually 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. May fit within the two overall categories: competitive and cooperative strategies.
strategic inflection point
what happens to a business when a major change takes place due to the introduction of new technologies, a different regulatory environment, a change in customers' values or a change in what the customer prefer
Triple bottom line first used by John Elkington in 1994 to suggest that companies prepare three different bottom lines in their annual report
-Traditional profit/loss -people account-the social responsibility of the organization -planet account-the environmental responsibility of the organization
Strategic management consists of four basic elements
-environmental scanning -strategy formlation -strategy implementation -evaluation and control
formal strategic planning processes improved overall satisfaction with strategy development. to be effective, it can begin with a few simple questions
-where is the organization now? -if no significant changes are made where will the organization be in one year? two years? five years? ten years? are the answers acceptable? -if the answers are not acceptable, what specific actions should management undertake? what are the risks and payoffs involved?
Institution Theory
proposes that organizations can and do adapt to changing conditions by imitating other successful organizations. The theory does not explain how or by whom successful new strategies are developed in the first place
Strategy Implementation
putting strategy into action Programs: activities needed to accomplish plan budgets: cost of the programs procedures: sequence of steps needed to do the job
Sustainability
refers to the use of business practices to manage the triple bottom line. that triple bottom line involves (1) the management of traditional profit/loss; (2) the management of the company's social responsibility; and (3) the management of its environmental responsibility
Triggering event
something that acts as a stimulus for a change in strategy examples: new CEO; external intervention; threat of a change in ownership; performance gap; strategic inflection point
2015 management tools and trends survey revealed
strategic planning was the number two tool used by decisions makers just behind customer relationship management. other highly ranked strategic management tools were mission and vision statements, change management programs and balanced scorecards
Entrepreneurial mode
strategy is made by one powerful individual
population ecology
suggests that once an organization is successfully established in a particular environmental niche, it is unable to adapt to changing conditions. Inertia prevents the organization from changing in any significant manner. the company is thus replaced (is bought out or goes bankrupt) by other organizations more suited to the new environment.
Globalization
the internalization of markets and corporations the integrated internalization of markets and corporations, has changed the way modern corporations do business
LEED certification
"Leadership in Energy and Environmental Design" certification system developed by the U.S. Green Building Council as a way of promoting and evaluating environmentally friendly construction projects
Phase 2: Forecast Based Planning
*) As annual budgets become less useful at stimulating long term planning, managers attempt to propose 5 years plan. *) They now consider projects that may take more than one year. In addition to internal information, managers gather any available environmental data and extrapolate current trends 5 years into the future. *) The time horizon is usually three to five years.
Phase 1: Basic Financial Planning
*) Managers initiate serious planning when they are requested to propose next years' budget. *) Projects are proposed on the basis of very little analysis, with most information coming from within the firm. *) The time horizon is usually one year.
Phase 4: Strategic Management
*) Top Management realized that the best strategic plans are worthless without the input and commitment of lower level managers *) Top managers forms planning groups of managers and key employees at many levels from various departments. *) They develop and integrate a series of strategic plans aiming at achieving the company primary objectives. *) Strategic plans now detail the implementation, evaluation and control issues. *) The sophisticated annual five years strategic plan is replaced with thinking at all levels of the organization through out the year. *) Although Top Management may still initiate the strategic planning process, the resulting strategies may come from anywhere of the Organization. *) Planning is typically interactive across levels and is no longer top down. *) People at all levels are now involved.*
Phase 3: Externally Oriented Planning
*) Top Management takes control of the planning process by initiating strategic planning. *) The company seeks to increase its responsiveness to changing markets and competition by thinking strategically. *) Planning is taken out of the hands of lower level managers and concentrated in a planning staff whose task is to develop strategic plans for the corporation.
8 Step Strategic Decision-Making Process
1. Evaluate current performance results 2. Review corporate governance 3. SW - scan and assess the external environment 4. OT - scan and assess the internal corporate environment 5. Analyze strategic factors 6. Generate, evaluate, and select the best alternative strategy 7. Implement selected strategies 8. Evaluate implemented strategies
the three most high rated benefits of strategic management
1. a clearer sense of strategic vision for the firm 2. a sharper focus on what is strategically important 3. an improved understanding of a rapidly changing environment
Learning organizations are skilled at four main activities
1. solving problems systematically 2. experimenting with new approaches 3. learning from heir own experiences and past history as well as from the experiences of others 4. transferring knowledge quickly and efficiently throughout the organization
Donald Hambrick and James Fredrickson propose that a good strategy has five elements
Arenas: where will we be active? Vehicles: how will we get there? Differentiators: how will we win in the marketplace? Staging: what will be our speed and sequence of moves? economic logic: how will we obtain our returns?
Paths of Learning
Alfred chandler proposes that high-technology industries are defined by "paths of learning" in which organizational strengths derive from learned capabilities. companies spring from an individuals entrepreneurs knowledge, which then evolves into organizational knowledge.
Strategy
Aligning the organization around those resources, capabilities, and actions that will differentiate it in the market Strategy requires a constant analysis of the environment, an ability to ensure that the basics of the company keep up with customer expectations, and the crafting of new competitive advantages
learning organization
An organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.Is a critical component of competitiveness in a dynamic environment.
ASEAN + 3
China, Japan, South Korea
External environment
Consists of variables (opportunities and threats) that are outside the organization and not typically within the short-run control of top management
Three-key areas Worldwide CEO saw Walmart had fallen behind the competition
Customer service the grocery business online shopping
Andean Community
Free trade alliance composed of Columbia, Ecuador, Peru, and Bolivia
Mercosur
Free trade organization that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela brings together a group that includes 295 million people and $3.5 trillion in combined GDP. as of 2015 Bolivia was in the final stages of accession
hierarchy of strategy
Grouping of strategy types by level in the organization. Hierarchy of strategy is a nesting of one strategy within another so that they complement and support one another.
Adaptive mode
Sometimes referred to as "muddling through," this decision-making mode is characterized by reactive solutions to existing problems, rather than a proactive search for new opportunities.
Strategic factors
Those external and internal elements that will assist in the analysis in deciding the strategic decisions of the corporation.
policy
a broad guideline for decision making that links the formulation of a strategy with its implementation. companies use policies to make sure that employees throughout the firm make decisions and take actions that support the corporation's mission, objectives, and strategies.
ISO 14001 designation
a framework of activities aimed at effective environmental management
strategy implementation
a process by which strategies and policies are put into action through the development of programs, budgets, and procedures. this process might involve changes within the overall culture, structure, and/or management system of the entire organization. typically conducted by middle-and lower-level managers, with review by top management sometimes referred to as operational planning. often involves day-to-day decisions in resource allocation
evaluation and control
a process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance managers at all levels use the resulting information to take corrective action and resolve problems. can also pinpoint weaknesses in previously implemented strategic plans and thus stimulates the entire process to begin again.