CHP 1: The Nature of Strategic Management

sustained competitive advantage

(1) continually adapting to changes in external trends and events and internal capabilities, competencies, and resources; and (2) effectively formulating, implementing, and evaluating strategies that capitalize on those factors.

continuous circular process*

*strategic management is a

first step

Developing a vision statement is often considered the ____ in strategic planning, preceding even development of a mission statement. -single sentence

larger and well established firms firms that compete in complex, rapidly changing environments firms that have many divisions, products, markets, and technologies

Firms that tend to be more formal in this process are

corporate, divisional or strategic business unit, and functional

Formulation, implementation, and evaluation of strategy activities occur at three hierarchical levels in a large organization: .

retreats

Many organizations conduct formal meetings semiannually to discuss and update the firm's vision, mission, opportunities, threats, strengths, weaknesses, strategies, objectives, policies, and performance. these meetings are commonly held off-premises

long-term objectives

Objectives are essential for organizational success because they provide direction; aid in evaluation; create synergy; reveal priorities; focus coordination; and provide a basis for effective planning, organizing, motivating, and controlling activities. Objectives should be challenging, measurable, consistent, reasonable, and clear. -more than one year

• 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 • failing to communicate 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 • 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 unnecessary or unimportant • Becoming so engrossed in current problems that insufficient or no planning is done • Being so formal in planning that flexibility and creativity are stifled17

PITFALLS IN STRATEGIC PLANNING

science

SM is not

increased discipline, improved coordination, enhanced communication, reduced resistance to change, increased forward thinking, improved decision making, increased synergy, and more effective allocation of time and resources.

Some nonfinancial benefits of a firm utilizing strategic management, according to greenley, are

1 develop vision and mission statements 2 perform external and internal audits 3 establish long-term objectives 4 Generate, evaluate, and select strategies 5 implement strategies - management issues 6 implement strategies - marketing, finance, accounting, R&D, and MIS issues 7 measure and evaluate performance All while business ethics/social responsibility/environmental sustainability issues and global/international issues impact the process

Strategic management Model steps

proactive than reactive

Strategic management allows an organization to be more _____ 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.

1950s and was popular between the mid 60s to 70s

Strategic planning originated in the

(1) reviewing external and internal factors that are the bases for current strategies, (2) measuring performance, and (3) taking corrective actions.

Three fundamental strategy evaluation activities are

over the long run.

To survive, all organizations must astutely identify and adapt to change. the strategic-management process is aimed at allowing organizations to adapt effectively to change

1. no formal training in strategic management 2. no understanding of or appreciation for the benefits of planning 3. no monetary rewards for doing planning 4. no punishment for not planning 5. too busy "firefighting" (resolving internal crises) to plan ahead 6. view planning as a waste of time, since no product/service is made 7. Laziness; effective planning takes time and effort; time is money 8. content with current success; failure to realize that success today is no guarantee for success tomorrow; even apple inc. is an example 9. Overconfident 10. Prior bad experience with strategic planning done sometime/somewhere

WHY SOME FIRMS DO NO STRATEGIC PLANNING

discipline and analytical thinking

You must combine intuition with

external opportunities and avoid or reduce the impact of external threats.

a basic tenet of strategic management is that firms need to formulate strategies to take advantage of

internal strengths and internal weaknesses

an organization's controllable activities that are performed especially well or poorly determined relative to competitors they arise in the management, marketing, finance/ accounting, production/operations, research and development, and management information systems (MiS) activities of a business.

vision statement

answers the question "what do we want to become?"

external opportunities and external threats

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.

mission statements

enduring statements of purpose that distinguish one business from other similar firms identifies the scope of a firm's operations in product and market terms."11 it addresses the basic question that faces all strategists: "what is our business?" describes the values and priorities of an organization.

developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and using information systems, and linking employee compensation to organizational performance.

ex of strategy implementation

include deciding 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, and how to avoid a hostile takeover

exs of strategy formulation

Communication

is a key to successful strategic management. communication may be the most important word in management.

strategic management

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

Understanding

may be the most important benefit of strategic management, followed by commitment.

strategy implementation

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

annual objectives

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

management focuses on integrating management, marketing, finance and accounting, production and operations, research and development (r&D), and information systems to achieve organizational success.

strategic management focuses on

strategic planning

strategic management is the same as

enhanced awareness of external threats, improved understanding of competitors' strategies, increased employee productivity, reduced resistance to change, and a clearer understanding of performance-reward relationships.

strategic management offers other tangible benefits, such as

empowerment

the act of strengthening employees' sense of effectiveness by encouraging them to particpate in decision making and to exercise initiative and imagination, and rewarding them for doing so

stimulate managers and employees throughout an organization to work with pride and enthusiasm toward achieving stated objectives.

the challenge of implementation is to

strategy evaluation

the final stage in strategic management. management. Managers desperately need to know when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information.

strategists

the individuals who are most responsible for the success or failure of an organization - chief executive officer, president, owner, chair of the board, executive director, chancellor, dean, and entrepreneur.

policies

the means by which annual objectives will be achieved - include guidelines, rules, and procedures established to support efforts to achieve stated objectives. - are guides to decision making and address repetitive or recurring situations.

strategies

the means by which long-term objectives will be achieved (5 years) -ex include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures.

objective, logical, systematic approach

the strategic-management process can be described as an _______ for making major decisions in an organization.

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

three important questions to answer in developing a strategic plan are as follows

strategy formulation

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

longe-range planning

tries to optimize for tomorrow the trends of today

intuition

useful for making decisions in situations of great uncertainty or little precedent. it is also helpful when highly interrelated variables exist or when it is necessary to choose from several plausible alternatives.

"Being divisional"

will enable strategies to be more effectively formulated because in strategic planning, firms must allocate resources among divisions (segments) of the firm (that is, by product, region, customer, or whatever the various units of the firm are),

strategic management model

A framework or illustration of the strategic-management process; a clear and practical approach for formulating, implementing, and evaluating strategies.

enhanced communication -dialogue -participation deeper/improved understanding of others' views and of what the firm is doing/planning and why greater commitment to achieve objectives, to implement strategies, and to work hard the result? All managers and employees on a mission to help the firm succeed

Benefits of Strategic Planning

gather, analyze, and organize

Strategists help an organization _____ information. they track industry and competitive trends, develop forecasting models and scenario analyses, evaluate corporate and divisional performance, spot emerging market opportunities, identify business threats, and develop creative action plans.

relative to competitors

Strengths and weaknesses are determined.

competitive advantage

any activity a firm does especially well compared to activities done by rival firms, or any resource a firm possesses that rival firms desire

environmental scanning

collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan

Specificity

is important because strategies will be formulated and resources allocated based on this information. The more specific the underlying external and internal factors, the more effectively strategies can be formulated and resources allocated.

Relative deficiency or superiority

is important information. also, strengths and weaknesses can be determined by elements of being rather than performance.

strategic-management process

strategy formulation strategy implementation strategy evaluation