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• The foundation of strategic management is for an organization to answer three questions: Where are we? Where are we going? How are we going to get there?
• Organizations answer the first question by assessing their organization, often by looking at financial data, historical trends, comparing financial performance to benchmarks like industry averages or competitors' performance
• Financial indicators are not the only assessment measures used to determine a company's position in the marketplace; other organizational performance indicators like quality measures, productivity measures, human resource indicators, and customer satisfaction and retention are also reviewed
• Organizational leadership sets the vision for the firm, which is what the organization aspires to be, developed within the organization's mission and aligned with its core values
• An organization develops strategies to work towards achieving its vision after performing assessments to determine the best road map to advance in the marketplace
• A vision is a key tool available to executives to inspire the people in an organization, describing what the organization hopes to become in the future and guiding its strategies
• A mission outlines the reasons for the organization's existence, explains its role in society, captures the organization's identity, and helps answer the fundamental question of "Who are we?"
• Executives can face trouble if their organization's vision and mission are divided by emphasizing different domains; alignment between vision and mission is crucial for organizational effectiveness
• The period after reaching an important goal is critical, providing an opportunity for strategic decisions on whether to rest on achievements or take on new challenges
• The US space program serves as an illustrative example of strategic decision-making, with the opportunity to rest on laurels or take on new challenges
• Wernher von Braun, leader of the team that built the moon rockets, suggested in 1969 that Americans could land on Mars as early as 1982
• President Barack Obama set a goal in 2010 to create a new space vehicle capable of taking humans beyond the moon and into deep space by 2025, with a Mars landing in the mid-2030s as a prelude
• Corporate value statements are explicit principles that a company endorses and lives by, such as integrity, diversity, customer service, innovation, sustainability, or ecology
• Employees who do not uphold corporate values may see their employment short-lived at the company
• Values also communicate to customers and potential customers what the firm stands for
• Organizations should seriously consider their values statement when developing strategies and goals, ensuring alignment to move the organization forward
• Strategic leaders need to ensure their organizations have four types of aims: vision, mission, goals, and corporate values
• The best goals are SMART: specific, measurable, attainable, realistic, and time-bound
• Assessing organizational performance refers to how well an organization is doing to reach its vision, mission, and goals, a vital aspect of strategic management
• Performance measures, such as profits, stock price, and sales, help executives gauge how well their organizations are competing in the market
• A performance benchmark is used to make sense of an organization's standing compared to its own or a competitor's financial measures and/or performance indicators
• The parable of the blind men and the elephant illustrates the complexity associated with measuring organizational performance, emphasizing the need for a comprehensive approach
• The story of the blind men and the elephant provides a metaphor for understanding the complexities of measuring organizational performance
• If the men failed to communicate their different impressions, they would have all been partially right but wrong about what ultimately mattered
• An organization must consider organizational performance from various and multiple perspectives to achieve an accurate assessment
• This story parallels the challenge involved in understanding the multidimensional nature of organizational performance because different measures and referents may tell a different story about an organization’s performance
• The Balanced Scorecard is a tool developed by Professors Robert Kaplan and David Norton of Harvard University
• The Balanced Scorecard helps managers resist fixating on financial measures and instead monitor a diverse set of important measures
• The framework of the Balanced Scorecard provides a “balance” between financial measures and other important measures for understanding organizational activities that lead to sustained, long-term performance
• The Balanced Scorecard encourages managers to monitor how well the organization is serving customers, managing internal activities, and setting the stage for future improvements
• Financial measures relate to organizational effectiveness and profits
• Financial measures include financial ratios such as return on assets, return on equity, and return on investment
• Financial measures help answer the key question, “How do we look to shareholders?”
• Financial measures should be objective, coupled with meaningful referents such as the firm’s past performance
• There are three approaches that organizations use to perform quantitative analysis: financial, market-based, and general
• Financial Analysis involves ratio analysis for making comparisons between firms or annual trends that account for variable volumes, sales, expenses, and profits
• Market-Based Analysis helps determine how the firm compares to its competitors in the market
• Market-Based Analysis includes Market Share and Price-Earnings (PE) Ratio
• The Price-Earnings Ratio determines how much it costs to invest in the company to receive $1.00 in earnings
• General Quantitative Analysis involves using different types of data sets to provide useful information for making predictions