Strama

• Strategic Management


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


  The company's game plan
• Strategic management is used synonymously with the term strategic planning in this course
• Sometimes the term strategic management refers to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation
• Strategy Formulation

  1. Developing a vision and mission

  2. Identifying an organization's external opportunities and threats

  3. Determining internal strengths and weaknesses

  4. Establishing long-term objectives

  5. Generating alternative strategies

  6. Choosing particular strategies to pursue
• Strategy Formulation Decisions


  • 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
  • How to avoid a hostile takeover
• Strategy Implementation


  Requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed
• Strategy Evaluation


  1. Determining which strategies are not working well

  2. Reviewing external and internal factors that are the bases for current strategies

  3. Measuring performance

  4. Taking corrective actions
• 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
• A firm must strive to achieve sustained competitive advantage
• Strategists


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


  Answers the question "What do we want to become?"
• Mission Statement


  Answers the question "What is our business?"
• 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
• Internal Strengths and Internal Weaknesses


  An organization's controllable activities that are performed especially well or poorly, determined relative to competitors
• Some Opportunities and Threats


  • Availability of capital can no longer be taken for granted
  • Consumers expect green operations and products
  • Marketing is moving rapidly to the Internet
  • Commodity food prices are increasing
  • An oversupply of oil is driving oil and gas prices down
• Long-Term Objectives


  Specific results that an organization seeks to achieve in pursuing its basic mission, more than one year
• 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
• Annual Objectives


  Short-term milestones that organizations must achieve to reach long-term objectives, should be measurable, quantitative, challenging, realistic, consistent, and prioritized
• Policies


  The means by which annual objectives will be achieved
• Strategic management allows an organization to be more proactive than reactive in shaping its own future
• Businesses using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities
• Financial Benefits of Strategic Management

  • Enhanced awareness of external threats
  • Improved understanding of competitors' strategies
  • Increased employee productivity
  • Reduced resistance to change
  • Clearer understanding of performance–reward relationships
• Nonfinancial Benefits of Strategic Management


  • 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
• Why Some Firms Do No Strategic Planning

  • 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; even Apple Inc. is an example
  • Overconfident
  • Prior bad experience with strategic planning done sometime/somewhere
• 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
  • 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
  • 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 stifled
• 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
• Military strategy


  Based on an assumption of conflict
• Business strategy


  Formulated, implemented, and evaluated with an assumption of competition
• Fundamental difference between military and business strategy

  • Business strategy is formulated, implemented, and evaluated with an assumption of competition, whereas military strategy is based on an assumption of conflict
• Business and military organizations


  • Must adapt to change and constantly improve to be successful