STRATEGIC MANAGEMENT

• Internal audit


  The nature of an internal audit
• Maytag


  • Known for excellent production and product design
• Procter & Gamble


  • Known for superb marketing
• Internal strengths/weaknesses and external opportunities/threats


  Provide the basis for establishing objectives and strategies
• Objectives and strategies


  Established with the intention of capitalizing upon internal strengths and overcoming weaknesses
• Distinctive competencies


  • A firm's strengths that cannot be easily matched or imitated by competitors
  • Building competitive advantages involves taking advantage of distinctive competencies
• Process of performing an internal audit


  1. Closely parallels the process of performing an external audit

  2. Representative managers and employees from throughout the firm need to be involved in determining a firm's strengths and weaknesses

  3. Requires gathering and assimilating information about the firm's management, marketing, finance/accounting, production/operations, research and development (R&D), and management information systems operations

  4. An excellent vehicle or forum for improving the process of communication in the organization
• Communication


  Perhaps the most important word in management
• Strategic management


  • A highly interactive process that requires effective coordination among management, marketing, finance/accounting, production/operations, R&D, and management information systems managers
  • A key to organizational success is effective coordination and understanding among managers from all functional business areas
• Financial ratio analysis


  Exemplifies the complexity of relationships among the functional areas of business
• Resource-Based View (RBV)


  Approach to competitive advantage contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage
• Categories of resources


  • Physical resources
  • Human resources
  • Organizational resources
• Physical resources


  Include all plant and equipment, location, technology, raw materials, machines
• Human resources


  Include all employees, training, experience, intelligence, knowledge, skills, abilities
• Organizational resources


  Include firm structure, planning processes, information systems, patents, trademarks, copyrights, databases, and so on
• For a resource to be valuable


  • Rare
  • Hard to imitate
  • Not easily substitutable
• Rare resources


  Resources that other competing firms do not possess
• Difficult to imitate


  If firms cannot easily gain the resources, they will lead to a competitive advantage more so than resources easily imitable
• Substitutability


  To the degree that there are no viable substitutes, a firm will be able to sustain its competitive advantage. However, even if a competing firm cannot perfectly imitate a firm's resource, it can still obtain a sustainable competitive advantage of its own by obtaining resource substitutes
• Organizational culture


  • A pattern of behavior that has been developed by an organization as it learns to cope with its problem of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel
  • It captures the subtle, elusive, and largely unconscious forces that shape a workplace
• Cultural products


  Include values, beliefs, rites, rituals, ceremonies, myths, stories, legends, sagas, language, metaphors, symbols, heroes, and heroines
• Culture


  An aspect of an organization that can no longer be taken for granted in performing an internal strategic-management audit because culture and strategy must work together
• Ways culture can inhibit strategic management


  • Managers frequently miss the significance of changing external conditions because they are blinded by strongly held beliefs
  • When a particular culture has been effective in the past, the natural response is to stick with it in the future, even during times of major strategic change
• Functions of management


  • Planning
  • Organizing
  • Motivating
  • Staffing
  • Controlling
• Planning


  Consists of all those managerial activities related to preparing for the future. Specific tasks include forecasting, establishing objectives, devising strategies, developing policies, and setting goals
• Organizing


  Includes all those managerial activities that result in a structure of task and authority relationships. Specific areas include organizational design, job specialization, job descriptions, job specifications, span of control, unity of command, coordination, job design, and job analysis
• Motivating


  Involves efforts directed toward shaping human behaviour. Specific topics include leadership, communication, work groups, behavior modification
• Staffing


  Activities are centered on personnel or human resource management. Included are wage and salary administration, employee benefits, interviewing, hiring, firing
• Controlling


  Refers to all those managerial activities directed towards ensuring that actual results are consistent with planned results. Key areas of concern include quality control, financial control, sales control, inventory control
• The only thing certain about the future of any organisation is change
• Planning


  • The essential bridge between the present and the future that increases the likelihood of achieving desired results
  • The process by which one determines whether to attempt a task, works out the most effective way of reaching desired objectives, and prepares to overcome unexpected difficulties with adequate resources
• Planning is the cornerstone of effective strategy formulation
• Synergy


  Exists when everyone pulls together as a team that knows what it wants to achieve; synergy is the 2 + 2 = 5 effect
• Strategic management


  Can be viewed as a formal planning process that allows an organization to pursue proactive rather than reactive strategies
• Organizing


  • The purpose is to achieve coordinated effort by defining task and authority relationships
  • Determining who does what and who reports to whom
  • Consists of three sequential activities: breaking down tasks into jobs, combining jobs to form departments, and delegating authority
• Motivating


  • The process of influencing people to accomplish specific objectives
  • Includes at least four major components: leadership, group dynamics, communication, and organizational change
• Leadership


  • Includes developing a vision of the firm's future and inspiring people to work hard to achieve that vision
  • Certain traits also characterize effective leaders: knowledge of the business, cognitive ability, self-confidence, honesty, integrity, and drive
• Group dynamics


  Play a major role in employee morale and satisfaction
• Communication


  Perhaps the most important word in management, is a major component in motivation
• Staffing


  • Also called personnel management or human resource management
  • Includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations