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WHAT IS SM? The art & science of Formulating, Implementing, & Evaluating cross-functional decisions that enable an organization to achieve its objectives. Term used synonymously with strategic planning. Stages of SM i. :

SM process consists of 3 stages. a) Strategy Formulation Developing Vision & Mission, Identify organizations External Opportunities & Threats, Determine Internal Strengths & Weaknesses, Establish long-term objectives, Generating alternative strategies, & Choosing particular strategies to pursue.

b) Strategy Implementation Requires a firm to establish : annual objectives, Devise policies, Motivate employees, & Allocate resources so that formulated strategies can be executed.

SI includes : Developing a strategy-supportive culture, Creating an effective organizational structure, Redirecting marketing efforts, Preparing budgets, Developing & Utilizing information systems, & Linking employee compensation to organizational performance.

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Strategy Evaluation The final stage in SM Managers desperately need to know when particular strategies are not working well. SE is the primary means for obtaining this information.

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3 fundamental strategy evaluation activities are provided as below. a) Reviewing External & Internal factors that are the base for current strategies b) Measuring performance c) Taking corrective action

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Strategy formulation, Implementation, & Evaluation activities occurs at 3 hierarchical levels in a large organization: Corporate, Divisional, & Functional. Smaller businesses may only have the Corporate & Functional levels.

Integrating Intuition & Analysis SM process can be described as an Objective, Logical, Systematic approach for making major decisions in an organization. Attempts to organize qualitative & quantitative info in a way that allows effective decisions to be made under conditions of uncertainty.

Adapting to Change SM process based on the belief that organizations should continually monitor Internal & External events, & trends so that timely changes can be made as needed. The rate & magnitude of changes that affect organizations are increasing dramatically. The need to adapt to change leads organizations to key SM questions, such as, What kind of business should we become? Are we in the right field? Should we reshape our business? What new competitors are entering our industry?

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KEY TERMS IN SM A. Competitive Advantage i) ii) Defined as - Anything that a firm does especially well compared to rival firms. Firms should seek a sustained CA by continually adapting to changes in External trends & Internal capabilities & Evaluating strategies that capitalize on those factors.

iii) Table 1-1 illustrates the overall decline in weekly circulation among the top ten newspapers in the U.S. Newspapers, as an industry, have failed to respond to changes in external trends.

B. Strategists i) ii) Individuals who are most responsible for the success or failure of an organization. Hold various job titles, such as chief executive officers, president, owner, chair of the board, executive director, chancellor, dean, or entrepreneur.

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Vision & Mission Statements i) ii) Vision statements answer the question: What do we want to become? Mission statements are Enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firms operations in product and market terms. It addresses the basic question that faces all strategists: What is our business? It should include the values and priorities of an organization.

D. External Opportunities & Threats i) EO & ET - Economic, Social, Cultural, Demographic, Environmental, Political, Legal, Governmental, Technological, & Competitive trends & Events that could significantly benefit or harm an organization in the future. O & T are largely beyond the control of a single organization, thus the term external.

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Internal Strengths & Weaknesses i) ii) IS & IW - Organizations controllable activities that are performed especially well or poorly. Identifying & Evaluating organizational S & W in the functional areas of a business is an essential SM activity.

iii) S & W - determined relative to competitors & may be determined by both performance & elements of being. F. Long-Term Objectives i) ii) Objectives - Specific results that an organization seeks to achieve in pursuing its basic mission. LT = > than 1 year.

G. Strategies i) By which LT objectives will be achieved. Bus.Strategies may include; Geo expansion, Diversification, Acquisition, Product dev., Market penetration, Retrenchment, Divestiture, Liquidation, & JV.

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Strategies currently being pursued by Walgreens, Outback Steakhouse, Nucor Corp., & Autodesk are described in Table 1-2.

H. Annual Objectives i) ii) ST milestones that organizations must achieve to reach LT objectives. Like LT objectives, Annual objectives should be Measurable, Quantitative, Challenging, Realistic, Consistent, & Prioritized.

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Policies i) By which Annual objectives will be achieved. Policies include Guidelines, Rules, & Procedures established to support efforts to achieve stated objectives. Most often stated in terms of Management, Marketing, Finance/Accounting, Production/Operations, R&D, & Computer info systems activities.

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THE SM MODEL Shown in Figure 1-1.(refer to pp slides for Chapter 1) i) The framework illustrated in Figure 1-1 is a widely accepted, comprehensive model of the SM process. This model does not guarantee success, but it does represent a clear & practical approach for formulating, implementing, & evaluating strategies. SM process is dynamic & continuous. A change in any 1 of the major components in the model can necessitate a change in any or all of the other components.

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4.

BENEFITS OF SM Communication is the key to success. The major aim of the communication process is to achieve understanding & commitment throughout the organization. It results in the great benefit of empowerment. A. Financial Benefits i) Research indicates that organizations using SM concepts are more profitable & successful than those that do not. High-performing firms tend to do systematic planning to prepare for future fluctuations in the external & internal environments. Firms with planning systems more closely resembling SM theory generally exhibit superior LT financial performance relative to their industry.

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B. Non-financial Benefits i) Besides helping firms avoid financial demise, SM offers other tangible benefits, such as; ii) An enhanced awareness of external threats, An improved understanding of competitors strengths, Increased employee productivity, Reduced resistance to change, & A clearer understanding of performance-reward relationships.

In addition to empowering managers & employees, SM often brings order & discipline to an otherwise floundering firm.

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WHY SOME FIRMS DO NOT HAVE STRATEGIC PLANNING Some reasons for poor or no strategic planning are as follows : Poor reward structures Fire fighting Waste of time Too expensive Laziness Content with success Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion

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PITFALLS IN STRATEGIC PLANNING Some pitfalls to watch for and avoid in strategic planning are provided below : Using strategic planning to gain control over decisions and resources Doing strategic planning only to satisfy accreditation or regulatory requirements Too hastily moving from mission development to strategy formulation Failing to communicate the plan to employees, who continue working in the dark Top managers making many intuitive decisions that conflict with the formal plan Top managers not actively supporting the strategic-planning process Failing to use plans as a standard for measuring performance Delegating planning to a planner rather than involving all managers Failing to involve key employees in all phases of planning Failing to create a collaborative climate supportive of change Viewing planning to be unnecessary or unimportant

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Becoming so engrossed in current problems that insufficient or no planning is done Being so formal in planning that flexibility and creativity are stifled

GUIDELINES FOR EFFECTIVE SM Failure to Follow Certain Guidelines in Planning Can Cause Problems : i) An integral part of strategy evaluation must be to evaluate the quality of the SM process. Issues such as Is SM in our firm a people process or a paper process? should be addressed. Strategic decisions require trade-offs such as long-range vs short-range considerations or maximizing profits vs increasing shareholders wealth. Subjective factors such as attitudes toward risk, concern for social responsibility, & organizational culture will always affect strategy-formulation decisions, but organizations must remain as objective as possible.

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8.

BUSINESS ETHICS & SM i) BE can be defined as; Principles of conduct within organizations that guide decision making & behavior. Good business ethics are a prerequisite for good SM; good ethics is just good business. A code of BE can provide a basis on which policies can be devised to guide daily behavior & decisions at the work site.

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COMPARING BUSINESS & MILITARY STRATEGY A Strong Military Heritage underlies the study of SM i) Terms such as; Objectives, Mission, Strengths, & Weaknesses were 1st formulated to address problems on the battlefield. A fundamental difference between military & business strategy is that - BS is formulated, implemented, & evaluated with the assumption of competition, while Military strategy is based on an assumption of conflict.

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10. THE NATURE OF GLOBAL COMPETITION A. International Firms or Multinational Corporations i) Organizations that conduct business operations across national borders are called International firms or MNC. The term Parent company refers to a firm investing in International operations; Host country is the country where that business is conducted.

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B. Advantages & Disadvantages of International Operations i) Advantages of IO Firms have numerous reasons to formulate & implement strategies that initiate, continue, or expand involvement in business operations across borders. Foreign operations can absorb excess capacity, Reduce unit costs, & Spread economic risks over a wider number of markets. Foreign operations can allow firms to establish low-cost production facilities in locations close to raw materials or cheap labor. Competitors in foreign markets may not exist, or competition may be less intense than in domestic markets. Foreign operations may result in - Reduced tariffs, Lower taxes, & Favorable political treatment in other countries. JV can enable firms to learn the technology, culture, & business practices of other people & to make contacts with potential customers, suppliers, creditors, & distributors in foreign countries. Many foreign governments & countries offer varied incentives to encourage foreign investment in specific locations. Economics of scale can be achieved from operation in global rather than solely domestic markets. Larger-scale production & better efficiencies allow higher sales volumes & lower price offerings.

Perhaps the greatest advantage is that firms can gain new customers for their products and services, thus increasing revenues.

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Disadvantages of IO There are also numerous potential disadvantages of initiating, continuing, or expanding business across national borders. Firms confront different social, cultural, demographic, environmental, political, governmental, legal, technological, economic, & competitive forces when doing business internationally. Weaknesses of competitors in foreign lands are often overestimated & strengths underestimated. Language, culture, & value systems differ among countries.

It is necessary to gain an understanding of regional organizations such as the European Economic Community & the Latin American Free Trade Area. Dealing with 2 or more monetary systems can complicate international business operations. The availability, depth, & reliability of economic & marketing information in different countries vary extensively, as do industrial structures, business practices, and nature of regional organizations.