Organizing Themes

Chapter No. 1

► Global considerations impact virtually all

The Nature of strategic decisions.
Strategic ► E-commerce has become a vital strategic
Management management tool.
► The natural environment has become an
important strategic issue.

Strategic Management Defined

Terminology
“Strategic Management”
Synonymous with
Art and science of formulating, “Strategic Planning”
implementing, and evaluating cross-
functional decisions that enable an • Strategic management
organization to achieve its objectives.  Used more often in academia

• Strategic planning
 Used more often in the business world

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 Terminology Brief History
► Strategic management ► 1950s
Refers to:  Term strategic planning originates
 Strategy formulation
 Strategy implementation
 Strategy evaluation

1960s – 1970s
► Strategic planning  Strategic planning very popular
Refers to:  Widely viewed as panacea for problems
 Strategy formulation

Brief History Strategic-Management Process

Three Stages
► 1980s
 Strategic planning cast aside
 Planning models did not yield higher returns Strategy Formulation

► 1990s–2000
Strategy Implementation
 Revival of strategic planning
 Widely practiced in business world

Strategy Evaluation

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Strategy Formulation Strategy Implementation

Vision & Mission

Annual Objectives
Opportunities & Threats

Strengths & Weaknesses Policies

Long-Term Objectives
Motivate Employees
Alternative Strategies

Resource Allocation
Strategy Selection

Strategy Evaluation Key Strategic Management Terms

(Cont’d)
Review
External & Internal 1. Strategists
2. Vision statements
Measure Performance 3. Mission statements
4. External opportunities and threats
Corrective Action
5. Internal strengths and weaknesses

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Key Strategic Management Terms Strategic Management Terms
(Cont’d) (Cont’d)
Strategists
• Usually found in high levels of management
(CEO)
6. Long-term objectives
 Help organization gather, analyze, and
7. Strategies organize information
8. Annual objectives  Track industry and competitive trends
9. Policies  Develop forecasting model

 Evaluate corporate and divisional performance

Strategic Management Terms Strategic Management Terms

(Cont’d) (Cont’d)
Vision Statements External Opportunities & Threats
• Answers the question: “What do we want to • Largely beyond the control of a single organization
become?”
Economic
 First step in strategic planning Social
Cultural
 Oftentimes a single sentence
Demographic
“Our vision is to take care of your vision.” Environmental
(Stokes Eye Clinic, Florence, South Carolina)

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 Strategic Management Terms Strategic Management Terms
(Cont’d) (Cont’d)
External Opportunities & Threats (cont’d) Internal Strengths & Weaknesses
• Controllable activities that are performed
Political well or poorly relative to competitors
Governmental
 Based on functional analysis of activities in
Technological
the firm’s:
Competitive trends & events  Management
 Marketing
 Finance/accounting

Strategic Management Terms Strategic Management Terms

(Cont’d) (Cont’d)
Internal Strengths & Weaknesses Long-Term Objectives
• Results to be achieved in pursuing the
(Cont’d) organization’s mission. Time frame is beyond one
• Based on functional analysis of activities in year.
the firm’s:  State direction
Production/operations  Aidin evaluation
Research and development
 Create synergy
Computer information systems
 Reveal priorities
• Organizations strive to pursue strategies  Focus coordination
that capitalize on strengths and improve
 Provide basis for effective management
weaknesses

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 Strategic Management Terms Strategic Management Terms
(Cont’d) (Cont’d)
Strategies Strategies (cont’d)
• Potential actions that require top
management decisions and large amounts
of firm’s resources • Mechanisms by which long-term objectives are
Mechanisms by which long-term objectives are realized
realized  Market penetration
 Geographic expansion  Retrenchment
 Diversification  Divestiture
 Acquisition  Liquidation
 Product development
 Joint venture

Strategic Management Terms Strategic Management Terms

(Cont’d) (Cont’d)
Annual Objectives Annual Objectives (cont’d)
• Short-term milestones necessary to
achieve long-term objectives. ►Stated in terms of accomplishments for:
management
 Represent the basis for allocating resources  marketing
 finance/accounting
 Established at corporate, divisional, and  production/operations
functional levels  research and development
 information systems accomplishments

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 Comprehensive Strategic Management Model
Strategic Management Terms
(Cont’d) External
Audit

Policies Chapter 3
• Important in strategy implementation as the
means by which annual objectives will be achieved Long-Term
Objectives
Generate, Implement
Strategies:
Implement Measure &
Evaluate
Evaluate, Strategies:
Vision Select Mgmt Issues Marketing, Performance
& Strategies Fin/Acct,
 Guide to decision making and address repetitive Mission
Statements Chapter 6 Chapter 7
R&D, CIS
Chapter 8
Chapter 5 Chapter 9
situations
Chapter 2
 Established at corporate, divisional, or functional levels
Internal
 Allow consistency & coordination within and between Audit

organizational departments
Chapter 4

Benefits of Strategic Benefits of Strategic

Management Management (Cont’d)
► Proactive vs. Reactive ► Financial Benefits
Initiate and influence activities More profitable and successful
 Helps shape firm’s own future
► Principal Benefit Improvements in sales, profitability, and
Formulate better strategies productivity
 Systematic, logical, and rational approach
► Communication High-Performing Firms
Key to successful strategic management  Systematic planning
Fluctuations in external and internal environments

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 Benefits of Strategic Why Some Firms Do No
Management (Cont’d) Strategic Planning
► Nonfinancial Benefits ► Poor reward structures
Enhanced awareness of external threats ► Fire-fighting
Understanding of competitors’ strategies ► Waste of time
Increased employee productivity ► Too expensive
Reduced resistance to change ► Laziness
Clear performance-reward relationships
► Content with success
Order and discipline to the firm
View change as opportunity

Why Some Firms Do No Pitfalls to Avoid in Strategic

Strategic Planning (Cont’d) Planning
► Fear of failure ► Using to gain control over decisions &
► Overconfidence resources
► Prior bad experience ► Doing only to satisfy regulatory requirements

► Self-interest ► Moving hastily from mission to strategy

formulation
► Fear of the unknown
► Failing to communicate to employees
► Suspicion
► Intuitive decisions that conflict with formal
plan
► Top management not supportive of process

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 Pitfalls to Avoid in Strategic
Planning (Cont’d)
► Failing to use as standard for performance
measurement
► Delegating to a “planner” vs. involvement of
managers
► Failing to involve key personnel
► Failing to create collaborative environment
► Formality that stifles creativity and flexibility
Business Ethics & Strategic
Planning (Cont’d)
► Strategists responsible for high ethical
principles
► All strategic processes have ethical
ramifications
► Formal codes of ethics are in place for
many businesses
► Internet privacy emerging as ethical
issue of immense proportions
Business Ethics & Strategic
Planning
Defined:
Principles of conduct within organizations
that guide decision making and behavior
► Good business ethics is a prerequisite
for good strategic management
► Good ethics is just good business!
Business Ethics & Strategic
Planning (Cont’d)
Business actions always unethical include:
• Misleading advertising
• Misleading labeling
• Environmental harm
• Poor product or service safety
• Padding expense accounts
• Insider trading
• Dumping flawed products on foreign markets
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 Nature of Global Competition
► Companies conduct business across borders
International or multinational corporations
 Parent company
 Host country
► Strategy implementation more difficult
Cultural differences
 Norms, values, work ethics
Advantages of International
Operations (Cont’d)
► Reduced tariffs, lower taxes
► Favorable political climate
► Economies of scale
Advantages of International
Operations
► Absorb excess capacity
► Reduce unit costs
► Low-cost production facilities
► Lower labor costs
► Competition less intense
Disadvantages of International
Operations
Communication difficulties between parent and
subsidiaries
• Based on cultural, political, social, language,
demographic, and competitive forces
Foreign-based competitors
• Strengths underestimated
• Weaknesses overestimated
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 Key Terms & Concepts Key Terms & Concepts (Cont’d)
► Annual objectives ► Internal strengths ► Strategic-management ► Vision statement
► Business ethics ► Internal weaknesses process ► Vision
► Code of ethics ► Intuition ► Strategies ► Host country
► E-commerce ► Long-term objectives ► Strategists ► International firms
► Empowerment ► Mission statements ► Strategy evaluation ► Long-range planning
► Environmental scanning ► Policies ► Strategy formulation ► Multinational
► External opportunities ► Strategic management ► Strategy corporation
► External threats ► Strategic-management implementation
model ► Lobbying

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