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Terms in strategic
management
Introduction
STRATEGIC MANAGEMENT
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Chapter Objectives Chapter Objectives
(cont.)
1. Describe the strategic-management process.
5. Describe the benefits of good strategic
2. Explain the need for integrating analysis and management.
intuition in strategic management.
6. Discuss how a firm may achieve sustained
3. Define and give examples of key terms in competitive advantage.
strategic management.
4. Discuss the nature of strategy formulation,
implementation, and evaluation activities.
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What is a strategy? Strategy
• A strategy is a business approach to a set of competitive
moves that are designed to generate a successful outcome
• A strategy is management’s game plan for
– Strengthening the organization’s competitive position
– Satisfying customers
– Achieving performance targets
• Three big questions involved in a strategy
– Where are we now?
– Where do we want to go?
– How will we get there?
– How do we know if we got there?
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Defining Strategic
Management Strategic planning
• Strategic management • Strategic planning has taken on new
– the art and science of formulating, importance in today’s world of
implementing, and evaluating cross- globalization, deregulation, advancing
functional decisions that enable an technology, and changing
organization to achieve its objectives demographics, and lifestyles
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Defining Strategic Defining Strategic
Management Management
• Strategic management is used • A strategic plan is a company’s game
synonymously with the term strategic plan.
planning. • A strategic plan results from tough
• Sometimes the term strategic managerial choices among numerous
management is used to refer to strategy good alternatives, and it signals
formulation, implementation, and commitment to specific markets,
evaluation, with strategic planning policies, procedures, and operations.
referring only to strategy formulation.
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Strategic management Strategic management
• Set of decisions and actions used to • Strategic Management
implement strategies that will – Definition
provide a competitively superior fit
– Components
between the organization and its
environment so as to achieve – Model of Strategic Management Process
organizational goals – Models of Strategy Formation
• Responsibility = top managers & • Managerial Tools to Implement
chief executive Strategic Plans
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Stages of Strategic
Strategic Management Management
Managers ask such questions as...
What changes and trends are
occurring? Strategy Strategy Strategy
Who are our customers? formulation implementation evaluation
What products or services should we
offer?
How can we offer these products or
services most efficiently?
1-13 Strategic management 1-14
Strategic management Tasks involved in
model strategic mgt
• Defining business and stating a
mission
• Setting measurable objectives
• Crafting a strategy to achieve
objectives
• Implementing a strategy
• Evaluating performance of the
strategy, reviewing new developments
1-15 and taking corrective action 1-16
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Strategic management
Stages of Strategic
process
Management
• Strategy formulation
– includes developing a vision and mission,
– identifying an organization’s external opportunities and
threats,
– determining internal strengths and weaknesses,
– establishing long-term objectives, generating alternative
strategies, and choosing particular strategies to pursue
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Strategy implementation
Strategy Formulation
• Deciding what new businesses to enter,
• What businesses 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 a hostile takeover.
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Stages of Strategic Stages of Strategic
Management Management
• Strategy implementation • Strategy evaluation
– requires a firm to establish annual – reviewing external and internal factors
objectives, devise policies, motivate that are the bases for current
employees, and allocate resources so strategies, measuring performance, and
that formulated strategies can be taking corrective actions
executed
– often called the action stage
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Stages of Strategic
Strategy evaluation Management
• Strategy formulation, implementation,
and evaluation activities occur at three
hierarchical levels in a large
organization: corporate, divisional or
strategic business unit, and functional
• Strategic management helps a firm
function as a competitive team
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Types of strategies Levels of strategy
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Attributes of strategy in Attributes of strategies
SM
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Role and function of Top
Role of board in SM MGT in SM
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Integrating Intuition and Adapting to Change
Analysis
• Most organizations can benefit from • The second-largest bookstore chain in the
strategic management, which is based United States, Borders Group, declared
upon integrating intuition and analysis bankruptcy in 2011 as the firm had not
adapted well to changes in book retailing
in decision making from traditional bookstore shopping to
• Intuition is particularly useful for customers buying online, preferring digital
making decisions in situations of books to hard copies
great uncertainty or little precedent • Borders was on the brink of financial
collapse before being acquired in July 2011
by Direct Brands
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Key Terms in Strategic
Key Terms in Strategic Management
Management
• Competitive • Strategists • Vision statement
advantage – the individuals who – answers the question “What do we want
– anything that a are most
to become?”
firm does especially responsible for the
well compared to success or failure – often considered the first step in
rival firms of an organization strategic planning
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Key Terms in Strategic
Key Terms in Strategic
Management
Management
• Mission statements • External opportunities and external
– enduring statements of purpose that threats
distinguish one business from other – refer to economic, social, cultural,
similar firms demographic, environmental, political,
– identifies the scope of a firm’s legal, governmental, technological, and
operations in product and market terms competitive trends and events that
– addresses the basic question that faces could significantly benefit or harm an
all strategists: “What is our business?” organization in the future
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Key Terms in Strategic
Some Opportunities and
Management
Threats
• Computer hacker problems are increasing. • Internal strengths and internal
• Intense price competition is plaguing most
firms. weaknesses
• Unemployment and underemployment rates – an organization’s controllable activities
remain high. that are performed especially well or
• Interest rates are rising. poorly
• Product life cycles are becoming shorter.
– determined relative to competitors
• State and local governments are financially
weak.
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Key Terms in Strategic
Key Terms in Strategic
Management
Management
• Objectives • Strategies
– specific results that an organization – the means by which long-term
seeks to achieve in pursuing its basic objectives will be achieved
mission – may include geographic expansion,
– long-term means more than one year diversification, acquisition, product
– should be challenging, measurable, development, market penetration,
consistent, reasonable, and clear retrenchment, divestiture, liquidation,
and joint ventures
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Key Terms in Strategic Sample Strategies in Action
in 2011
Management
• Annual objectives
– 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 1-41 1-42
Key Terms in Strategic The Strategic-
Management Management Model
• Policies
– the means by which annual objectives
Where are we now?
will be achieved
– include guidelines, rules, and procedures Where do we want to go?
established to support efforts to
achieve stated objectives How are we going to get
– guides to decision making and address
repetitive or recurring situations there?
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A Comprehensive
Strategic-Management Benefits of Strategic
Model Management
• Historically, the principal benefit of
strategic management has been to help
organizations formulate better
strategies through the use of a more
systematic, logical, and rational
approach to strategic choice
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Benefits of Strategic Benefits to a Firm That
Management Does Strategic Planning
• Communication is a key to successful
strategic management
• Through dialogue and participation,
managers and employees become
committed to supporting the
organization
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Nonfinancial Benefits
Financial Benefits
• Businesses using strategic-management • It allows for identification,
concepts show significant improvement in prioritization, and exploitation of
sales, profitability, and productivity opportunities.
compared to firms without systematic
• It provides an objective view of
planning activities
management problems.
• High-performing firms seem to make more
informed decisions with good anticipation • It represents a framework for
of both short- and long-term improved coordination and control of
consequences activities.
1-49 • It minimizes the effects of adverse 1-50
conditions and changes.
Attributes of Strategy
in business decisions
Nonfinancial Benefits
• It allows major decisions to better
support established objectives.
• It allows more effective allocation of
time and resources to identified
opportunities.
• It allows fewer resources and less time
to be devoted to correcting erroneous
or ad hoc decisions.
• It creates a framework for internal
communication among personnel. 1-51 1-52
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Why Some Firms Do No
Why Some Firms Do No
Strategic Planning
Strategic Planning
• Lack of knowledge in strategic • Fear of failure
planning • Overconfidence
• Poor reward structures • Prior bad experience
• Firefighting • Self-interest
• Waste of time • Fear of the unknown
• Too expensive • Honest difference of opinion
• Laziness • Suspicion
• Content with success 1-53 1-54
Pitfalls in Strategic
Pitfalls in Strategic
Planning
Planning
• Using strategic planning to gain control • Top managers not actively supporting the
over decisions and resources strategic-planning process
• Doing strategic planning only to satisfy • Failing to use plans as a standard for
accreditation or regulatory requirements measuring performance
• Too hastily moving from mission • Delegating planning to a “planner” rather
development to strategy formulation than involving all managers
• Failing to communicate the plan to • Failing to involve key employees in all
employees, who continue working in the phases of planning
dark • Failing to create a collaborative climate
• Top managers making many intuitive 1-55 supportive of change 1-56
decisions that conflict with the formal
plan
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Guidelines for Effective
Comparing Business and
Strategic Management
Military Strategy
• A fundamental difference between military
and 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
• Both business and military organizations
must adapt to change and constantly
improve to be successful
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Excerpts from Sun Tzu’s
The Art of War Writings
• War is a matter of vital importance to
the state: a matter of life or death, the
road either to survival or ruin. Hence, it
is imperative that it be studied
thoroughly
• Know your enemy and know yourself, and
in a hundred battles you will never be
defeated
• Skillful leaders do not let a strategy
inhibit creative counter-movement 1-59
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