ME - STRATEGIC MANAGEMENT

• the art and science of formulating, implementing, and evaluating cross- functional decisions that enable an organization to achieve its objectives

• is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation.

STRATEGIC MANAGEMENT

Strategic management is used synonymously with the term

STRATEGIC PLANNING

• is a company’s game plan.

• results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations.

STRATEGIC PLAN

3 STAGES OF STRATEGIC MANAGEMENT

• STRATEGY FORMULATION

• STRATEGY IMPLEMENTATION

• STRATEGY EVALUATION

• developing a vision and mission

• dentifying an organization’s external

• opportunities and threats

• determining internal strengths and weaknesses

• establishing long-term objectives

• generating alternative strategies

• choosing particular strategies to pursue

WHAT NEW BUSINESS TO ENTER

STRATEGY FORMULATION

requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed

STRATEGY IMPLEMETATION

Strategy implementation is often called as

ACTION STAGE

Determining which strategies are not working well

Three fundamental activities:

• reviewing external and internal factors that are the bases for current strategies

• measuring performance

• taking corrective actions

STRATEGY EVALUATION

• any activity a firm does especially well compared to activities done by rival firms, OR

• any resource a firm possesses that rival firms desire.

• a firm must strive to achieve sustained

COMPETITIVE ADVANTAGE

• Individuals most responsible for the success or failure of an organization

• Help an organization gather, analyze, and organize information

STRATEGIST

answers the question “What do we want to become?”

VISION STATEMENT

answers the question “What is our business?”

MISSION STATEMENT

economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization

EXTERNAL OPPORTUNITIES AND THREATS

• an organization’s controllable activities that are performed especially well or poorly

• determined relative to competitors

INTERNAL STRENGTHS AND INTERNAL WEAKNESSES

• 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

LONG-TERM OBJECTIVES

• 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

STRATEGIES

• 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

ANNUAL OBJECTIVES

the means by which annual objectives will be achieved

POLICIES

THE STRATEGIC-MANAGEMENT MODEL

• WHERE ARE WE NOW?

• WHERE DO WE WANT TO GO?

• HOW ARE WE GOING THERE?

• Businesses using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities

• High-performing firms tend to do systematic planning to prepare for future fluctuations in their external and internal environments

FINANCIAL BENEFITS

• Enhanced awareness of external threats

• Improved understanding of competitors’ strategies

• Increased employee productivity

• Reduced resistance to change

• Clearer understanding of performance–reward relationships

NONFINANCIAL BENEFITS

RESOLVING INTERNAL CRISES

FIREFIGHTING

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

• should be short, preferably one sentence, and as many managers as possible should have input Into developing the statement.

• should reveal the type of business the firm engages.

VISION STATEMENT

• A declaration of an organization's “reason for being.”

• It answers the pivotal question “What is our business?”

• It is essential for effectively establishing objectives and formulating strategies.

MISSION STATEMENT

MISSION STATEMENT is also called statement of purpose, a statement of philosophy, a statement of beliefs, and a statement of business principles OR??

CREED STATEMENT

include employees, managers, stockholders, boards of directors, customers, suppliers, distributors, creditors, governments (local, state, federal, and foreign), unions, competitors, environmental groups, and the general public.

STAKEHOLDERS

Who are the firm’s customers?

CUSTOMERS (1)

What are the firm’s major products or services?

PRODUCTS OR SERVICES (2)

Geographically, where does the firm compete?

MARKETS (3)

Is the firm technologically current?

TECHNOLOGY (4)

Is the firm committed to growth and financial soundness?

SURVIVAL, GROWTH, AND PROFITABILITY (5)

What are the basic beliefs, values, aspirations, and ethical priorities of the firm?

PHILOSOPHY (6)

What is the firm’s major competitive advantage?

SELF-CONCEPT (DISTINCTIVE COMPETENCE) (7)

Is the firm responsive to social, community, and environmental concerns?

PUBLIC IMAGE (8)

Are employees a valuable asset of the firm?

EMPLOYEES (9)

A firm's strengths that cannot be easily matched or imitated by competitors

DISTINCTIVE COMPETENCIES

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

• Provides more opportunity for participants to understand how their jobs, departments, and divisions fit into the whole firm

THE INTERNAL AUDIT

contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage

RESOURCE-BASED VIEW (RBV)

THREE ENCOMPASSING CATEGORIES OF RBV

• PHYSICAL RESOURCES

• HUMAN RESOURCES

• ORGANIZATIONAL RESOURCES

For a resource to be valuable, it must be either

• RARE

• HARD TO IMITATE

• NOT EASILY SUBSTITUTABLE

These three characteristics of resources (RHN) are called

EMPIRICAL INDICATORS

is “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.”

ORGANIZATIONAL CULTURE

FIVE BASIC FUNCTIONS OF MANAGEMENT

• PLANNING

• ORGANIZING

• MOTIVATING

• STAFFING

• CONTROLLING

forecasting, establishing objectives, devising strategies, and developing policies

PLANNING

organizational design, job specialization, job descriptions, span of control, coordination, job design, and job analysis

ORGANIZING

leadership, communication, work groups, behavior modification, delegation of authority, job enrichment, job satisfaction, needs fulfillment, organizational change, employee morale, and managerial morale

MOTIVATING

wage and salary administration, employee benefits, interviewing, hiring, firing, training, management development, employee safety, equal employment opportunity, and union relations

STAFFING

quality control, financial control, sales control, inventory control, expense control, analysis of variances, rewards, and sanctions

CONTROLLING

the process of defining, anticipating, creating, and fulfilling customers’ needs and wants for products and services

MARKETING

• the examination and evaluation of consumer needs, desires, and wants

• involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies

CUSTOMER ANALYSIS

includes many marketing activities, such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations

SELLING

• includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products; and providing for customer service

• Important when a company is pursuing product development or diversification

PRODUCT & SERVICE PLANNING

• Five major stakeholders affect pricing decisions: consumers, governments, suppliers, distributors, and competitors

• Sometimes an organization will pursue a forward integration strategy primarily to gain better control over prices charged to consumers

PRICING

• includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing

• especially important when a firm is striving to implement a market development or forward integration strategy

DISTRIBUTION

• the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services

• can uncover critical strengths and weaknesses

MARKETING RESEARCH

Three steps are required:

1. compute the total costs associated with a decision

2. estimate the total benefits from the decision

3. compare the total costs with the total benefits

COST/BENEFIT ANALYSIS

3 FUNCTIONS OF FINANCE/ACCOUNTING DECISIONS

• INVESTMENT DECISION

• FINANCING DECISION

• DIVIDEND DECISION

the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization

INVESTMENT DECISION (CAPITAL BUDGETING)

determines the best capital structure for the firm and includes examining various methods by which the firm can raise capital

FINANCING DECISION

• concern issues such as the percentage of earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock

• determine the amount of funds that are retained in a firm compared to the amount paid out to stockholders

DIVIDEND DECISIONS

• consists of all those activities that transform inputs into goods and services

• deals with inputs, transformations, and outputs that vary across industries and markets.

PRODUCTION/OPERATIONS FUNCTION

• Receives raw material from both external and internal evaluation of an organization

• Improves the performance of an enterprise by improving the quality of managerial decisions

• Collects, codes, stores, synthesizes, and presents information in such a manner that it answers important operating and strategic questions

MANAGEMENT INFORMATION SYSTEM

• refers to the process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products

• aims to identify where low-cost advantages or disadvantages exist anywhere along the value chain from raw material to customer service activities

VALUE CHAIN ANALYSIS (VCA)

• an analytical tool used to determine whether a firm's value chain activities are competitive compared to rivals and thus conducive to winning in the marketplace

• entails measuring costs of value chain activities across an industry to determine “best practices”

BENCHMARKING

• 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

EXTERNAL AUDIT

The external audit is aimed at identifying __________ that offer actionable responses

KEY VARIABLES

Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take __________ of external opportunities or that ___________ the impact of potential threats

ADVANTAGE ; MINIMIZES

can be divided into five broad categories:

1. economic forces

2. social, cultural, demographic, and natural environment forces

3. political, governmental, and legal forces

4. technological forces

5. competitive forces

EXTERNAL FORCES

First, gather ____________________ and information about economic, social, cultural, demographic, environmental, political, governmental, legal, and technological trends.

COMPETITIVE INTELLIGENCE

approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm for gaining and sustaining competitive advantage.

INDUSTRIAL ORGANIZATION VIEW (I/O)

The increasing global interdependence among economies, markets, governments, and organizations makes it imperative that firms consider the possible impact of political variables on the formulation and implementation of competitive strategies.

POLITICAL, GOVERNMENT, AND LEGAL FORCES

Many firms now have a Chief Information Officer (CIO) and a Chief Technology Officer (CTO) who work together to ensure that information needed to formulate, implement, and evaluate strategies is available where and when it is needed

TECHNOLOGICAL FORCES

An important part of an external audit is identifying rival firms and determining their strengths, weaknesses, capabilities, opportunities, threats, objectives, and strategies

COMPETITIVE FORCES