Strategy - comes from the Greek "strategos", which refers to a Strategy-formulation decisions - commit an organization to

military general and combines 'stratos' (the army) and 'ago' specific products, markets, resources, and technologies over
(to lead). an extended period of time.

To gain competitive advantage Strategies - determine long-term competitive advantages

A key aim of both business and military strategy
Top managers - have the best perspective to understand fully
Strategic Management - the art and science of formulating, the ramifications of strategy-formulation decisions
implementing, and evaluating cross-functional decisions that - they have the authority to commit the resources
enable an organization to achieve its objectives necessary for implementation.
-used synonymously with the term strategic planning
- focuses on: Strategy implementation - action stage of strategic
integrating management, management
marketing, - most difficult stage in strategic management
finance/accounting, - requires personal discipline, commitment, and sacrifice
production/operations, - requires a firm to establish
research and development, and annual objectives,
information systems policies,
employee motivation, and
Strategic Management Strategic Planning resource allocation
academia business world
refer to strategy formulation, only to strategy formulation developing a strategy-supportive culture,
implementation, and creating an effective organizational structure,
evaluation redirecting marketing efforts,
preparing budgets,
A strategic plan is a companys game plan. developing and utilizing information systems, and
linking employee compensation to organizational
Long range planning - tries to optimize for tomorrow the performance.
trends for today
The challenge of implementation is to stimulate managers
The strategic management process - can be described as an and employees throughout an organization to work with pride
objective, logical, systematic approach for making major and enthusiasm toward achieving stated objectives.
decisions in an organization.
- It attempts to organize qualitative and quantitative Interpersonal skills - are especially critical for successful
information in a way that allows effective decisions to be strategy implementation
made under conditions of uncertainty
Strategy evaluation - is the final stage in strategic
Stages of Strategic Management (Process) management
1. Strategy formulation - needed because success today is no
2. Strategy implementation guarantee of success of tomorrow
3. Strategy evaluation
internal review
Strategy formulation includes: external review
vision and mission performance measurement
external opportunities and threats corrective action
internal strengths and weaknesses
establishing long-term objectives, Fundamental strategy-evaluation activities
alternative strategies reviewing external and internal factors that are the
strategy selection bases for current strategies,
measuring performance, and
what new businesses to enter, taking corrective actions
what businesses to abandon,
how to allocate resources, Intuition - is essential to making good strategic decisions.
whether to expand operations or diversify, - particularly useful for making decisions in situations
whether to enter international markets, of great uncertainty or little precedent.
whether to merge or form a joint venture, and
how to avoid a hostile takeover.
Key Terms in Strategic Management
Competitive advantage - anything that a firm does
especially well compared to rival firms
o Sustained competitive advantage
1. continually adapting to changes in
external trends and events and internal
capabilities, competencies, and
resources
2. effectively formulating, implementing,
and evaluating strategies that capitalize
upon those factors
Strategists - are the individuals who are most
responsible for the success or failure of an
organization
- help an organization gather, analyze, and
organize information
Strategic planners - usually serve in a support or staff role.
- Usually found in higher levels of
management, they typically have considerable authority for
decision making in the firm
CEO - is the most visible and critical strategic manager.
Any manager who has responsibility for a unit or division,
responsibility for profit and loss outcomes, or direct authority
over a major piece of the business is a strategic manager
(strategist)
Vision statement Mission statement
What do we want to What is our business?
become?
first step in strategic enduring statements of purpose
planning that distinguish one business from
other similar firms
identifies the scope of a firms
operations in product and market
terms.
broadly charts the future direction
of an organization
describes the values and priorities
of an organization
External opportunities and external threats refer to
economic, social, cultural, demographic, environmental,
political, legal, governmental, technological, and competitive
trends and events that could significantly benefit or harm an
organization in the future.
Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
A basic tenet of strategic management is that firms need to
formulate strategies to take advantage of external
opportunities and to avoid or reduce the impact of external
threats.
Environmental scanning or Industry analysis - process of
conducting research and gathering and assimilating external
information
Lobbying is one activity that some organizations utilize to
influence external opportunities and threats
Strengths and weaknesses - are determined relative to
competitors
- can be determined by elements of being rather
than performance
Internal strengths and internal weaknesses are an
organizations controllable activities that are performed
especially well or poorly.
Typically located in functional areas of the firm
management,
marketing,
finance/accounting,
production/operations,
research and development, and
management information systems activities of a
business.
Internal factors
Financial Ratios
Performance Measures
Industry Averages
Survey Data
Relative deficiency or superiority is important information.
Objectives - can be defined as specific results that an
organization seeks to achieve in pursuing its basic mission.
Essential for ensuring the firms success
Provide direction
Aid in evaluation
Create synergy
Reveal priorities
Focus coordination
Provide basis for planning, organizing,
motivating, and controlling
Objectives should be: challenging, consistent, clear,
measurable and reasonable
Strategies - are the means by which long-term objectives will
be achieved.
- are potential actions that require top management
decisions and large amounts of the firms resources
- have multifunctional or multidivisional
consequences and require consideration of both the external
and internal factors facing the firm.
 Business strategies -may include Lack of knowledge of strategic planning no
geographic expansion, training in strategic planning
diversification, Poor reward structures - when an organization
acquisition, assumes success, it often fails to reward success.
product development, when failure occurs, then the firm may punish
market penetration, Firefighting - an organization can be so deeply
retrenchment, embroiled in resolving crises and firefighting that it
divestiture, reserves no time for planning
liquidation, and Waste of time - some firms see planning as a waste
joint ventures. of time because no marketable product is produced.
time spent on planning is an investment
Annual objectives - are short-term milestones that Too expensive - some organizations see planning as
organizations must achieve to reach long term objectives too expensive in time and money
- A set of annual objectives is needed for each long- Laziness - people may not want to put forth the
term objective effort needed to formulate a plan
- are especially important in strategy Content with success - particularly if a firm is
implementation, whereas long-term objectives are successful, individuals may feel there is no need to
particularly important in strategy formulation plan because things are fine as they stand. but
- represent the basis for allocating resources. success today does not guarantee success tomorrow

Policies - are the means by which annual objectives will be Fear of failure - by not taking action, there is little
achieved. risk of failure unless a problem is urgent and
- include guidelines, rules, and procedures pressing. Whenever something worthwhile is
established to support efforts to achieve stated objectives. attempted, there is some risk of failure
- are guides to decision making and address Overconfidence - as managers amass experience,
repetitive or recurring situations they may rely less on formalized planning. Rarely,
- can be established at the corporate level and apply however, is this appropriate. Being overconfident or
to an entire organization at the divisional level and apply to a overestimating experience can bring demise.
single division, or at the functional level and apply to forethought is rarely wasted and is often the mark of
particular operational activities or departments. professionalism
Prior bad experience - people may have had a
Communication is a key to successful strategic management previous bad experience with planning, that is, cases
in which plans have been long, cumbersome,
Retreats - formal meetings to discuss and update the firm's impractical, or inflexible. planning, like anything else,
vision/mission, opportunities/threats, strengths/weaknesses, can be done badly
strategies, objectives, policies, and performance, that are Self-interest - when someone has achieved status,
commonly held off-premises privilege, or self-esteem through effectively using an
old system, he or she often sees a new plan as a
Benefits of Strategic Management threat
Fear of the unknown - people may be uncertain of
Enhanced Deeper/Improve Greater Result their abilities to learn new skills, of their aptitude
communication d understanding Commitment with new systems, or of their ability to take on new
Dialogue Of others views To achieve All managers roles
objectives and employees Honest difference of opinion - different people in
Participation Of what the firm To implement on a mission to different jobs have different perceptions of a
is doing/planning strategies help the firm situation
and why To work hard succeed Suspicion - employees may not trust management

Empowerment - the act of strengthening employees' sense of

Nonfinancial Benefits effectiveness by encouraging them to participate in decision
Enhanced awareness of threats making and to exercise initiative and imagination, and
Improved understanding of competitors rewarding them for doing so
strategies
Increased employee productivity
Reduced resistance to change
Clearer understanding of performance-
reward relationship
Enhanced problem-prevention capabilities
Why Some Firms Do No Strategic Planning