CH 1: STRATEGIC MANAGEMENT ESSENTIALS

Strategy Formulation

It includes 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, and choosing particular strategies to pursue.

Three (3) important questions to answer in developing a strategic plan:

1.Where are we now? 2.Where do we want to go? 3.How are we going to get there?

How to develop a mission statement

Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities.

Non-financial Benefits

Enhanced awareness of external threats, an improved understanding of competitors' strategies, increased employee productivity, reduced resistance to change, and a clearer understanding of performance-reward relationships. Strategic management enhances the problem-prevention capabilities of organizations because it promotes interaction among managers at all divisional and functional levels.

Financial Benefits

Research indicates that organizations that use strategic-management concepts are more profitable and successful than those that do not. Businesses using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities.

How to determine "Strengths and Weaknesses"

Strengths and weaknesses are determined relative to competitors. Relative deficiency or superiority is important information. Also, strengths and weaknesses can be determined by elements of being rather than performance. For example, a strength may involve ownership of natural resources or a historic reputation for quality. Strengths and weaknesses may be determined relative to a firm's own objectives. For example, high levels of inventory turnover may not be a strength for a firm that seeks never to stock-out.

Competitive Advantage

This term can be defined as "anything that a firm does especially well compared to rival firms."

Mission Statement

are "enduring statements of purpose that distinguish one business from other similar firms.

Internal Strengths and Weaknesses

are an organization's controllable activities that are performed especially well or poorly.

Annual Objectives

are short-term milestones that organizations must achieve to reach long-term objectives. Like long-term objectives, it should be measurable, quantitative, challenging, realistic, consistent, and prioritized.

Strategists

are the individuals most responsible for the success or failure of an organization. have various job titles, such as chief executive officer, president, owner, chair of the board, executive director, chancellor, dean, or entrepreneur.

Policies

are the means by which annual objectives will be achieved. like annual objectives, are especially important in strategy implementation because they outline an organization's expectations of its employees and managers.

Objectives

can be defined as specific results that an organization seeks to achieve in pursuing its basic mission.

Strategic management

can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

The Strategic-Management Model

can best be studied and applied using a model. Every model represents some kind of process.

Strategy

comes from the Greek strategos, which refers to a military general and combines stratos (the army) and ago (to lead). The history of strategic planning began in the military.

Key terms in Strategic Management

competitive advantage, strategists, vision and mission statements, external opportunities and threats, internal strengths and weaknesses, long-term objectives, strategies, annual objectives, and policies

strategic-management process

is an attempt to duplicate what goes on in the mind of a brilliant, intuitive person who knows the business and assimilates and integrates that knowledge using analysis to formulate effective strategies.

Strategy Evaluation

is the final stage in strategic management.

CEO

is the most visible and critical strategic manager.

Strategic plan

is, in essence, a company's game plan. Just as a football team needs a good game plan to have a chance for success, a company must have a good strategic plan to compete successfully.

Business Strategies

may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures.

Long-term

means more than one year.

External Opportunities and Threats

refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future.

Formality

refers to the extent that participants, responsibilities, authority, duties, and approach are specified.

Strategy Implementation

requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. often is called the "action stage" of strategic management.

Peter Drucker

says the prime task of strategic management is thinking through the overall mission of a business.

Strategic planners

usually serve in a support or staff role. Usually found in higher levels of management, they typically have considerable authority for decision making in the firm.