STRAMA MIDTERMS

• 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
• Stages of strategic management

  • Strategy formulation
  • Strategy implementation
  • Strategy evaluation
• 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
• 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
  • Competitive trends and events that could significantly benefit or harm an organization
• Internal strengths and 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
  • Long-term means more than one year
  • Should be challenging, measurable, consistent, reasonable, and clear
• 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
  • Should be established at the corporate, divisional, and functional levels in a large organization
• Policies


  The means by which annual objectives will be achieved
• The strategic-management model


  • Where are we now?
  • Where do we want to go?
  • How are we going to get there?
• Benefits of strategic management

  • Allows an organization to be more proactive than reactive in shaping its own future
  • Allows an organization to initiate and influence (rather than just respond to) activities—and thus to exert control over its own destiny
• Benefits to a firm that does strategic planning


  • Enhanced communication (dialogue, participation)
  • Deeper/improved understanding (of others' views, of what the firm is doing/planning and why)
  • Greater commitment (to achieve objectives, to implement strategies, to work hard)
• Businesses using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities
• Nonfinancial 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
• Reasons why some firms do no strategic planning

  • 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
  • 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
  • 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
  • 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 stifled
• How to gain and sustain competitive advantage

  1. Establish a clear vision and mission

  2. Formulate strategies (collect, analyze and prioritize data using matrices, establish a clear strategic plan)

  3. Implement strategies (establish structure, allocate resources, motivate and reward, attract customers, manage finances)

  4. Evaluate and monitor results (take corrective actions, adapt to change)
• 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
• Sun Tzu: 'War is a matter of vital importance to the state: a matter of life or death, the road either to survival or ruin. Hence, it is imperative that it be studied thoroughly'
• Sun Tzu: 'Know your enemy and know yourself, and in a hundred battles you will never be defeated'
• Sun Tzu: 'Skillful leaders do not let a strategy inhibit creative counter-movement'
• Vision statement


  • Should be short enough, preferable one sentence
  • Big picture of what you want to achieve
  • Answers the basic question: "What do we want to become?"
  • Extends the mission to an ideal future state
• Five attributes of an effective vision statement


  • Future oriented
  • Inspiring and challenging
  • Motivating and memorable
  • Purpose-driven
  • Unique
• Mission statement


  • General statement of how you will achieve the vision
  • Declaration of an organization's business or "reason for being"
  • Defines the organization's purpose
• Six attributes of an effective mission statement


  • Define what the organization is and what the organization aspires to be
  • Broad in scope; does not include monetary amounts, numbers, percentages, ratios, or objectives
  • Fewer than 150 words in length
  • Purpose-driven
  • It should be clear
  • Realistic and achievable
• Mission statement components


  • Customers
  • Products or services
  • Markets
  • Technology
  • Survival, growth, and profitability
  • Philosophy
  • Self-concept (distinctive competence)
  • Public image
  • Employees
• Mission statement


  • What you do
  • How you do it
  • Why you do it
• External audit


  • Focuses on identifying and evaluating trends and events beyond the control of a single firm
  • Reveals key opportunities and threats confronting an organization so that managers can formulate strategies to take advantage of the opportunities and avoid or reduce the impact of threats
  • Aimed at identifying key variables that offer actionable responses
• Components of the general environment

  • Industry environment (demographic, economic, sociocultural)
  • Competitive environment (political/legal, technological, global)