Ch 1 Vocab

Strategic Management

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

• can also be defined as the executive-level activity of distributing resources across products and regions to gain a sustainable competitive advantage over rivals

• sometimes is used to refer to strategy formulation, implementation, and evaluation

Strategic Planning

• referring only to strategy formulation

• purpose is to exploit and create new and different opportunities for tomorrow

• a strategic plan is a company’s game plan - results from tough managerial choices about numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations in lieu of other, less desirable courses of action

Long-range planning

tries to optimize the trends of today for tomorrow

Strategic management model

• is a widely accepted, comprehensive depiction of the strategic management process

• the process conveyed does not guarantee success, but does represent a clear and practical approach for formulating, implementing, and evaluating strategies

Retreats

• To develop a strategic plan, many organizations conduct formal meetings semiannually to discuss and update the firm’s vision, mission, opportunities, threats, strengths, weaknesses, strategies, objectives, policies and performance

• these meetings are commonly held off premises and are called retreats

Strategic management process

consists of three stages: strategy formulation, strategy implementation, and strategy evaluation

Strategy formulation

includes developing a vision and mission, identifying an organization’s external opportunities and threats, determining strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue

Strategy Implementation

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

• includes developing a culture supportive of the strategy, creating an organizational structure, redirecting marketing efforts, preparing budgets, developing and using information systems, devising tactics, and linking employee compensation to organizational performance

• is called the action stage of strategic management

• means mobilizing employees and managers to put formulated strategies into action

Tactics

are actions that bring to life or execute the formulated strategies

Strategy Evaluation

• is the final stage in strategic management

• Three fundamental strategy-evaluation activities are (1) reviewing external and internal factors that are the bases for current strategies (2) measuring performance (3) taking corrective actions

• is needed because success today is no guarantee of success tomorrow

Competitive Advantage

• strategic management is all about gaining and maintaining competitive advantage

• can be defined as any activity a firm does especially well compared with activities done by rival firms or any resource a firm possesses that rival firms desire

Sustained Competitive Advantage

A firm must strive to achieve sustained competitive advantage by continually adapting to changes in external trends and events, internal capabilities, competencies, and resources

Strategists

are individuals most responsible for the success or failure of an organization

Vision Statement

• answers the question “What do we want to become?” (usually one sentence)

• developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement

Mission Statement

• is an enduring statement of purpose that distinguishes one business from other firms

• A mission statement identifies the scope of a firm’s operations in product and market terms

• addresses the basic question that faces all strategists: What is our business

• a clear mission statement describes the values and priorities of an organization

• broadly charts the future direction of an organization and serves as a constant reminder to its employees of why the organization exists and what the founders envisioned when they put their fame and fortune (and names) at risk to breathe life into their dreams

Policies

• are the means by which annual objectives will be achieved

• include guidelines, rules, and procedures established to support efforts to achieve stated objectives

• are guides to decision-making and address repetitive or recurring situations

• they may established at the corporate level and apply to an entire organization, at the divisional level and apply to a single division, or they may be established at the functional level and apply to particular operational activities or departments

Empowerment

is the act of strengthening employees’ sense of effectiveness by encouraging them to participate in decision-making and exercise initiative and imagination, while rewarding them for doing so

Employability

employability skills include include tools, techniques, and concepts being used by businesses and learned by students using this text

External opportunities and external threats

• refer to political, economic, sociocultural, technological, environmental, legal (PESTEL), and competitive trends and events that could be significantly benefit or harm an organization in the future

Environmental Scanning

• identifying, monitoring\, and evaluating external opportunities and threats is essential for success

• this process of conducting research and gathering and assimilating external information is sometimes called environmental scanning or industry analysis

Internal strengths and internal weaknesses

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

• they arise in the activities of management, marketing, finance/accounting, production, and information systems of a business

• determined relative to competitors

• can be determined by elements of being rather than performance

• may be determined relative to a firm’s own objectives

• internal factors can be determined in a number of ways, including computing ratios, measuring performance, and making comparisons to past periods and industry averages also surveys

Strategies

• are the means by which long-term objectives will be achieved

• are potential actions that require top management decisions and significant amounts of the firm’s resources

• affect an organization’s long-term prosperity, typically for at least 5 years and, thus, are future oriented

• have multifunctional and multidivisional consequences and require consideration of both the external and internal facing the firm

SWOT Analysis

• Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis is an important matching tool that helps managers develop four types of strategies: SO (strengths-opportunities) strategies, WO (weaknesses-opportunities) strategies, ST (strengths-threats) strategies, and WT (weaknesses-threats) strategies

• Matching key external and internal factors is a critically important activity in strategic planning

Annual Objectives

• are short-term milestones that organizations must achieve to reach long-term objectives

• like long-term objectives, annual objectives should be measurable, quantitative, challenging, realistic, consistent, and prioritized

• must be established at the corporate, divisional, and functional levels in a large organization

• especially important in strategy implementation, whereas long-term objectives are particularly important in strategy formulation