Strategic Management and Planning

Strategic Management Defined

• It is the art and science of formulating, implementing, and evaluating cross-functional decisions.
• Enables an organization to achieve its objectives.
• Focuses on integrating management, marketing, finance, accounting, production, operations, research, and development.
• Leads to organizational success.

Strategy Defined

• A set of goal-directed, integrated actions a firm takes to gain and sustain superior performance.
• Performance is relative to competitors.
• Strategy is the outcome of the strategic management process.

Strategic Plan

• A company’s game plan, essential for competing successfully.
• Requires tough managerial choices and commitment.
• Directs markets, policies, procedures, and operations.

Origin of Strategic Planning

• Originated in the 1950s.
• Became popular between the mid-1960s and mid-1970s.
• Widely believed to be the answer to all problems during its peak.
• Strategic planning was cast aside in the 1980s due to planning models failing to yield higher returns.
• The 1990s saw a revival in strategic planning.

Stages of Strategic Management

• Strategy Formulation: Developing a vision and mission, identifying opportunities and threats
• Defining internal strengths and weaknesses, setting long-term objectives.
• Generating alternative strategies, and choosing strategies to pursue
• Strategy Implementation: Establishing annual objectives.
• Devising policies.
• Motivating employees, and allocating resources to execute strategies
• Strategy Evaluation: Reviewing external and internal factors, measuring performance.
• Taking corrective actions, strategy evaluation is the final stage.

Strategy Formulation

• 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.
• Choosing particular strategies to pursue.
• Key issues includes deciding new businesses to enter, what to abandon.
• Deciding whether to expand operations, diversify, enter international markets, merge, form a joint venture, or avoid a hostile takeover

Strategy Implementation

• Requires establishing annual objectives.
• Requires devising policies to achieve set objectives.
• Involves motivating employees.
• Requires allocating resources to execute strategies.
• Includes developing a strategy-supportive culture.
• Includes creating an effective organizational structure.
• Includes redirecting marketing efforts.
• Includes preparing budgets and using information systems.
• Includes linking employee compensation to organizational performance.

Strategy Implementation Skills

• Interpersonal skills are critical for successful strategy implementation.
• Affects all employees and managers, requiring divisions and departments to implement their part.
• The challenge is to stimulate enthusiasm and pride in achieving stated objectives.

Strategy Evaluation Activities

• Review current strategies' bases by reviewing external and internal factors.
• Measure performance
• Take corrective actions.
• Strategy evaluation is the final stage in strategic management.
• All strategies are subject to future modification.
• External and internal factors are constantly changing.

Integrating Intuition and Analysis

• Combines objective, logical approach with past experiences, judgment, and feelings.
• Enables effective decisions under conditions of uncertainty.
• Is not a pure science, but invaluable for making good strategic decisions.
• Addresses great uncertainty or little precedent and use of alternatives.

Adapting to Change

• Organizations should continually monitor internal and external events and trends.
• Timely changes should be made as needed.
• All organizations must astutely identify and adapt to change.
• The strategic management process is aimed at effectively adapting to change over the long run.

Key Terms in Strategic Management

• Competitive advantage: Anything a firm does especially well compared to rival firms
• Strategists: Individuals most responsible for an organization’s success or failure, holding titles such as CEO, president, owner, entrepreneur, etc.
• Vision statement: Answers "What do we want to become?", often considered the first step in strategic planning
• Mission Statement: Describes the values and priorities of an organization, addresses, "What is our business?"
• External opportunities and threats: Refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends or events benefit or harm an organization in the future.
• Internal strengths and weaknesses: Activities within an organization that are performed especially well or poorly
• Objectives: Specific results an organization seeks to achieve in pursuing its basic mission
• Policies: Means by which annual objectives will be achieved, include guidelines, rules, and procedures

Strategists

• Responsible for the success or failure of an organization.
• Chief learning officers.
• Models of highly adaptive leadership are important.

Vision Statements

• Developed by many organizations.
• Answers the question “What do we want to become?”.
• Often considered the first step in strategic planning.
• Usually a single sentence.

Mission Statements

• Statements of purpose that distinct one business from other similar firms.
• Identifies the scope of a firm’s operations in product and market terms.
• Clear mission statements describe the values and priorities of an organization.

External Opportunities and Threats

• Concerns economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events.
• Significance on benefit or harm an organization in the future.
• Largely beyond the control of a single organization—thus the word external

Internal Strengths and Weaknesses

• Concerns an organization's controllable activities.
• They arise in management, marketing, finance and accounting, production and operations.
• Also include research and development (R&D), and management information systems (MIS) activities of a business

Objectives

• Defined as specific results that an organization seeks to achieve in pursuing its basic mission.
• Long-term spans more than one year.
• Essential for organizational success.
• Provide direction.
• Aid in evaluation and create synergy
• Reveal priorities.
• Focus coordination.
• Provide a basis for planning, organizing, motivating, and controlling activities

Policies

• Means by which annual objectives will be achieved.
• Include include guidelines, rules, and procedures established to support efforts to achieve stated objectives.
• Guides to decision making and address repetitive or recurring situations.

Benefits of Strategic Management

• Allows an organization to be more proactive than reactive in shaping its own future.
• Allows an organization to initiate and influence activities.
• Allows an organization to exert control over one's own destiny.
• Small business owners, chief executive officers, presidents, and managers of many organizations have recognized and realized the benefits of strategic management.
• Enhanced communication achieved through dialouge and participation
• Deeper and improved understanding achieved through others views' and the company action's purpose
• Greater commitment is given to achieve objectives, to implement strategies and to work hard
• The result is all managers and employees on a mission to help the firm succeed

Competitive advantage examples

• Apple: Cutting-edge technology, premium brand image, strong ecosystem and customer loyalty.
• Amazon: Efficient supply chain, vast product selection, fast delivery and AI-driven recommendations.
• Tesla: Pioneering electric vehicles (EVs), advanced battery technology, strong brand presence, and direct-to-consumer sales.
• Google: Market leader in search, advertising , AI and data analytics.
• Microsoft: Market leader in enterprise software, cloud computing , and AI innovation.
• Coca-Cola: Strong global brand recognition, secret formula, widespread distribution, and emotional marketing.
• Nike: Strong brand loyalty, celebrity endorsements, product innovation, and effective marketing campaigns.
• McDonald's: Fast service, strong brand recognition, economies of scale, and standardized processes.

Core Competencies

• Company strengths.
• Allow to give a firm opportunity to differentiate its products and services
• Creates higher value for the customer or offering products and services of comparable value at lower cost.
• Competitive advantage driven by core competencies.

Resources

• Refers to any assets such as cash, buildings, machinery, or intellectual property.
• Can be either tangible or intangible

Resource Based View

• Resources are key to superior firm performance.
• Better understanding on how the interplay between resources and capabilities creates core competencies
• Resources and capabilities drive firm activities leading to competitive advantage

Resource Based View: Critical Assumptions

• Concerns resource heterogeneity and resource immobility to secure competitive advantage

VRIO Framework

• Used to evaluate a firm’s resource.
• Framework for a resource to be the bias of competitive advantage.
• A resource has to be valuable, rare, inimitable, and organized.

Capabilities

• Organizational and managerial skills driving strategic output
• Capacities deploy resources strategically.
• By nature, capabilities are intangible
• Structured routines and culture are expressions capabilities

Activities

• Distinct and fine-grained business processes.
• Each distinct activity enables firms to add incremental value.
• Each are transforming inputs into goods and services.