THE NATURE OF STRATEGIC MANAGEMENT

Strategic Management - art & science of  Internal Review

formulating, implementing, and evaluating,  External Review
cross-functional decisions that enable an  Performance Metrics
organization to achieve its objectives.  Corrective Actions
Issues:
In essence, the strategic plan is a company’s
 Subject to future
game plan.
modification
Strategic Management achieves a firm’s success  Today’s success no
through integration of the following: guarantee of future success
 New & different problems
1. Management  Complacency leads to
2. Marketing demise
3. Finance/Accounting
4. Production/Operations
5. Research & Development
Prime Task of Strategic Management
6. Management Information System (MIS)
Peter Drucker: Think though the overall mission
STAGES OF STRATEGIC MANAGEMENT
of a business. Ask the key question: “What is
1. Strategy Formulation
our Business?”
 Vision & Mission
 External Opportunities &Threats The strategic management process attempts to
 Internal Strengths & Weaknesses organize quantitative and qualitative information
 Long-term Objectives under conditions of uncertainty integrating:
 Alternative Strategies
Intuition and Analysis
 Strategy Selection
Intuition is based on:
Issues:
Past experiences
 New business opportunity
Judgment
 Businesses to abandon
Feelings
 Allocation of Resources
Intuition is useful for decision making in:
 Expansion or Diversification
Conditions of great uncertainty
 International markets
Conditions with little precedent
 Mergers or joint venture
 Avoidance of hostile takeover
Adapting to Change
2. Strategy Implementation
Organizations must monitor events:
 Annual Objectives
 On-going process
 Policies
 Internal and external events
 Employee Evaluation
 Timely changes
 Resource Allocation
Issues
Strategic Management is:
 Most Difficult stage
Gaining and Maintaining Competitive
 Mobilization of employees &
Advantage
managers
“Anything that a firm does especially well
 Interpersonal skills critical
compared to rival firms”
 Consensus on goal pursuit
Achieving Sustained Competitive Advantage
3. Strategy Evaluation
 1. Adapting to change in external trends,  Competitors
internal capabilities and resources
2. Effectively formulating, implementing Environmental Scanning (Industry Analysis)
& evaluating strategies - Process of conducting research and
gathering and assimilating external
Adapting to Change information
Rate & magnitude of change increasing
dramatically (E-commerce, Demographics, Basic Tenet of Strategic Management
Technology)

Effective Adaptation – requires long-term

focus

Adapting to Change – Key Strategic

Management Questions
 What kind of business should we
become? Strengths & Weaknesses (Internal)
 Are we in the right fields - Controllable activities performed
 Are there new competitors? especially well or poorly
 What strategies should we pursue?
 How are our customers changing? Typically located in functional areas of the
firm
Key Terms - Management
Strategists- Firm’s success/ failure - Marketing
- Finance/Accounting
Various Job Titles: - Production/Operations
 Chief Executive Officer - Research & Development
 Chief Strategy Officer - Computer Information Systems
 President
 Owner Assessing the Internal Environment
 Board Chair Internal Factors
 Executive Director  Financial Ratios
 Performance Metrics
Vision Statement – What do we want to  Industry Averages
become?  Survey Data
Mission Statement – What is our business?
Long-Term Objectives
Opportunities and Threats (External) - Mission-driven pursuit of specified
- Largely beyond the control of a single results more than one year out
organization Essential for ensuring the form’s success
Analysis of Trends:  Provide direction
 Economic  Aid in evaluation
 Social  Create synergy
 Cultural  Focus coordination
 Demographic/Environmental  Basis for planning, motivating, and
 Political, Legal, Governmental controlling
 Technological
Strategies • Enhanced awareness of threats
- Means by which long-term • Reduced resistance to change
objectives are achieved • Enhanced problem-prevention
Some Examples: capabilities
 Geographic expansion
 Diversification Benefits of Strategic Management (Greenley)
 Acquisition 1. Identification of Opportunities
 Market penetration 2. Objective view of management problems
 Retrenchment 3. Improved coordination & control
 Liquidation 4. Minimizes adverse conditions & changes
 Joint venture 5. Decisions that better support objectives
6. Effective allocation of time & resources
Annual Objectives 7. Internal communication among personnel
- Short-term milestones that firms 8. Integration of individual behaviors
must achieve to attain long-term 9. Clarify individual responsibilities
objectives 10. Encourage forward thinking
Policies 11. Encourages favorable attitude toward
- Means by which annual objectives change
will be achieved 12. Provides discipline and formality to the
management of the business
Strategic Management Process
- Dynamic & Continuous Why Some Firms Do NO Strategic Planning
- More formal in larger organizations • Poor reward structures
• Fire-fighting
Strategic Management Model • Waste of time
1. Identifying Existing – VMOS • Too expensive
2. Audit external environment • Laziness
3. Audit internal environment • Content with success
4. Establish long-term objectives • Fear of failure
5. Generate, evaluate & select strategies • Overconfidence
6. Implement selected strategies • Prior bad experience
7. Measure & evaluate performance • Self-interest
• Fear of the unknown
Benefits of Strategic Management • Suspicion
• Proactive in shaping firm’s future
• Initiate and influence firm’s activities Business Ethics & Strategic Management
• Formulate better strategies (Systematic,
logical, rational) Business Ethics defined – Principles of conduct
within organizations that guide decision making
Financial Benefits and behavior
• Improvement in sales
• Improvement in profitability Good business ethics – Prerequisite for good
• Productivity improvement strategic management

Non-Financial Benefits Code of business ethics – Provides basis on

• Improved understanding of competitors which policies can be devised to guide daily
strategies behavior and decisions in the workplace
 4. A request for modifications, additions, and
Business practices considered unethical: deletions is needed next, along with a
• Misleading advertising meeting to revise the document.
• Misleading labeling
• Harm to the environment Importance of Vision and Mission
• Insider trading - To make sure all employees/managers
• Dumping flawed products on foreign understand the firm’s purpose or reason for
markets being.
• Poor product or service safety - To provide a basis for prioritization of key
• Padding expense accounts internal and external factors utilized to
formulate feasible strategies.
THE VISION AND MISSION - To provide a basis for the allocation of
resources.
Vision - To facilitate the translation of objectives
- As many managers as possible should into a work structure involving the
have input into developing the statement. assignment of task to responsible elements
- Should reveal the type of business the firm within the organization.
engages.
- Should reveal how the firm’s Characteristics of Mission Statement
product/service benefits people. - Broad in scope; do not include monetary
- Should not be vague. amounts, numbers, percentages, ratios, or
- Future/forward POV. objectives.
- Less than 250 words in length.
Mission - Inspiring.
- Essential for effectively establishing - Identify the utility of s firm’s products.
objectives and formulating strategies - Reveal that the firm is socially responsible.
- Reveals what an organization wants to be - Reveal that the firm is environmentally
and whom it wants to serve responsible.
- It’s a creed statement, statement of - Include nine components. customers,
purpose, statement of philosophy, products or services, markets, technology,
statement of beliefs, and concern for survival/growth/profits,
- statement of business principles philosophy, self-concept, concern for public
- Present POV image, concern for employees.
- Reconciliatory.
Process of Developing Vision and Mission - Enduring.
1. Select several articles about these
statements and ask all managers to read Mission statement components
these as background information. 1. Customers
2. Ask managers themselves to prepare a 2. Product or Services
vision and mission statement for the 3. Markets
organization. 4. Technology
3. A facilitator or committee of top managers 5. Concern for survival, growth, and
should then merge these statements into a profitability
single document and distribute the draft 6. Philosophy
statement to all managers. 7. Self-concept
8. Concern for public image
9. Concern for employees
Evaluating and writing vision statement
- A vision statement helps to define what
organization’s purpose is. That is similar to
the mission statement but instead of
directing the statement towards the
company’s bottom line, the statement is
sculpted employee’s direction on how they
are expected to behave and perform, and it
is also gives customers an understanding of
why they should work in the company.
- There is no one best mission statement for
a particular organization so good
judgement is required in evaluating mission
statements. Ideally the statement will
provide more than simply conclusion of a
single word such as product or employees
regarding a perspective component.

Advantages of mission statement

In fact, mission statements bring many
unquestionable benefits to the business. Some of
the arguments used in favor include:
1. Define the organization.
2. Provide an overall sense of purpose.
3. Distinguish the business organization
from other.
4. Motivate employees.
5. Guide employee’s behavior.
6. Help with promotion.

Disadvantages of mission statement

Despite the advantages of mission statements,
there are some limitations. Some of the
arguments used against include:
1. Too vague and too general.
2. Impossible disagree with.
3. Need to be constantly communicated.
4. A Public Relations (PR) stunt.
5. Not supported by all stakeholders.
6. Time consuming.