Strategic Management

quote

Without a strategy, an organization is like a ship without a rudder, going around in circles. Its like a tramp; it has no place to go. Joel Ross and Michael Kami

definition

What is Strategic Management?

Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

purpose

Purpose of Strategic Management

To exploit and create new and different opportunities for tomorrow.

stages

Stages of Strategic Management

Strategy formulation Strategy implementation Strategy evaluation

formulation

Strategy Formulation
Includes Developing a vision and mission Identifying an organizations external opportunities and threats Determining internal strengths and weaknesses Establishing long-term objectives Generating alternative strategies Choosing particular strategy to pursue
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Issues of Strategy Formulation

Deciding what new business to enter and what business to abandon How to allocate resources Whether to expand operations or diversify Whether to enter international markets Whether to merge or form a joint venture How to avoid hostile takeover
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Strategy Implementation
It requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. It often is called the action stage of strategic management.

imple

Strategic implementation includes.. Developing a strategic supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to organizational performance
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Strategy Implementation
Often considered to be the most difficult stage, it requires personal discipline, commitment, and sacrifice. Interpersonal skills are especially critical for successful strategy implementation. The challenge is to stimulate managers and employees to work with pride and enthusiasm toward achieving stated objectives.
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Strategy Evaluation
It is the final stage in strategic management. Managers desperately need to know when particular strategies are not working well. Strategy evaluation is the primary means for obtaining this information. All strategies are subject to future modification because external and internal factors are constantly changing.
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Three fundamental strategy-evaluation activities are. 1. Reviewing external and internal factors that are bases for current strategies. 2. Measuring performance. 3. Taking corrective actions.

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Strategy Evaluation
Strategy evaluation is needed because success today is no guarantee of success tomorrow! Success always creates new and different problems; complacent organizations experience demise.

Levels of sm

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Levels of Strategic Management

Corporate level Divisional or strategic business unit level Functional level

Intuition & analysis

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Integrating Intuition and Analysis

The strategic-management process can be described as an objective, logical, systematic approach for making major decisions in an organization. It attempts to organize qualitative and quantitative information in a way that allows effective decisions to be made under conditions of uncertainty.
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Integrating Intuition and Analysis

Yet strategic management is not a pure science that lends itself to a nice, neat, onetwo-three approach. Intuition is essential for making good strategic decisions. It is particularly useful for making decisions in situations of great uncertianty or little precedent or when highly unrelated variables exist .
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 I believe in intuition and inspiration. At times I feel certain that I am right while not knowing the reason. Imagination is more important than knowledge, because knowledge is limited, whereas imagination embraces the world. Albert Einstein

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 Managers at all levels in an organization inject their intuition and judgment into strategicmanagement analyses. Analytical thinking and intuitive thinking complement each other.

Key terms

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Key Terms in Strategic Management

Competitive Advantage anything that a firm does especially well compared to rival firms. Strategists the individuals who are most responsible for the success or failure of an organization. Vision Statement answers the question What do we want to become?

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Mission Statement describes the values and priorities of an organization. External Opportunities and Threats external trends and events that could significantly benefit or harm an organization in future.

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Internal Strengths and Weaknesses are an organizational controllable activities that are performed especially well or poor. Long Term Objectives specific results that an organization seeks to achieve in pursuing its basic mission. Long term means more than one year.

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Annual Objectives are short-term milestones that organizations must achieve to reach long-term objectives. Strategies are the means by which long-term objectives are achieved. Policies are the means by which annual objectives are achieved.
Stages fig

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Perform External Audit Generate, Evaluate and Select Strategies Implement StrategiesManagement Issues Implement StrategiesMarketing, Finance, Accounting, R&D, and MIS Issues.

Develop Vision and Mission Statement

Establish Long Term Objectives

Measure and Evaluate Performance

Perform Internal Audit

The Strategic-Management Model

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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) activitiesand thus to exert control over its own destiny. Understanding may be the most important benefit of strategic management, followed by commitment and employee empowerment.
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