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Questions and Answers
Define strategic management.
Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.
Which of the following are stages of the strategic management process? (Select all that apply)
External opportunities and threats are analyzed in strategy evaluation. Is this statement true or false?
False
Match the following components of strategy formulation with their descriptions:
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Annual objectives are _______________ that firms must achieve to reach long-term objectives.
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What is the difference between a vision and a mission statement?
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Which of the following are components of a mission statement?
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A clear mission statement is not required before developing alternative strategies.
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Vision and mission statements are crucial for _________ effectively establishing objectives and formulating strategies.
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What is the purpose of an effective mission statement?
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Proactive environmental policies can be cost-effective.
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What is one potential benefit of firms having formal mission statements?
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An effective mission statement distinguishes a firm from ________ others.
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Study Notes
Strategic Management Defined
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Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. It involves a comprehensive approach to planning, analyzing, and coordinating the organization's resources and activities to achieve its goals.
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It is a company's game plan.
Stages of Strategic Management Process
- Strategy formulation
- Strategy implementation
- Strategy evaluation
Strategy Formulation
- Vision and mission statements
- External opportunities and threats analysis
- Internal strengths and weaknesses analysis
- Long-term objectives
- Alternative strategies
- Strategy selection
Strategy Implementation
- Annual objectives
- Policies
- Employee motivation
- Resource allocation
Strategy Evaluation
- Internal review
- External review
- Performance measurement
- Corrective action
Key Terms in Strategic Management
- Competitive advantage
- Strategists
- Vision and mission statements
- External opportunities and threats
- Internal strengths and weaknesses
- Long-term objectives
- Strategies
- Annual objectives
- Policies
Strategic Management as Competitive Advantage
- Gaining and maintaining competitive advantage
- Anything that a firm does especially well compared to rival firms
Strategists
- Gather information
- Analyze information
- Organize information
Vision and Mission Statements
- Vision statement: what do we want to become?
- Mission statement: what is our business?
External Opportunities and Threats
- Analysis of trends: economic, social, cultural, demographic, environmental, political, legal, governmental, technological, competitors
- Basic tenet of strategic management: take advantage of external opportunities and avoid/minimize impact of external threats
Internal Strengths and Weaknesses
- Controllable activities performed especially well or poorly
- Determined relative to competitors
- Typically located in functional areas of the firm: management, marketing, finance, production, research, management information systems
- Assessing the internal environment: financial ratios, performance measures, internal factors, industry averages, survey data
Long-Term Objectives
- Specific results that an organization seeks to achieve in pursuing its basic mission
- Long-term means more than one year
- Essential for ensuring the firm's success: provide direction, aid in evaluation, create synergy, reveal priorities, focus coordination, provide basis for planning, organizing, motivating, and controlling
Strategies
- Means by which long-term objectives are achieved
- Examples: geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, joint venture
Annual Objectives
- Short-term milestones that firms must achieve to reach long-term objectives
Policies
- Means by which annual objectives will be achieved
Strategic Management Model
- Strategic management process is dynamic and continuous
- More formal in larger organizations
Communication in Strategic Management
- Communication is a key to successful strategic management
Benefits of Strategic Management
- Nonfinancial benefits: enhanced awareness of threats, improved understanding of competitors' 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
- Lack of knowledge of strategic planning
- 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
The Business Vision and Mission
- A business vision is a statement that defines what the organization wants to become in the long run.
- A mission statement is a statement that defines the organization's purpose, what it does, and for whom it does it.
- Both vision and mission statements are essential for the success of an organization.
Characteristics of a Mission Statement
- A mission statement should be enduring, yet capable of change when necessary.
- It should distinguish the organization from others and provide a sense of direction.
- A good mission statement should be concise, yet meaningful.
- It should be communicated to all stakeholders, including employees, customers, and investors.
Components of a Mission Statement
- Customers: Who are the organization's customers?
- Products or Services: What products or services does the organization offer?
- Markets: What markets does the organization operate in?
- Technology: What technologies does the organization use?
- Concern for Survival, Growth, and Profitability: How does the organization ensure its survival, growth, and profitability?
- Philosophy: What values and principles guide the organization's decision-making?
- Self-Concept: What is the organization's sense of identity and purpose?
- Concern for Public Image: How does the organization want to be perceived by the public?
- Concern for Employees: What is the organization's commitment to its employees?
Writing and Evaluating Mission Statements
- A good mission statement should be specific, yet flexible enough to accommodate change.
- It should be inspiring and motivating for employees.
- It should provide a clear sense of direction and purpose.
- It should be communicated effectively to all stakeholders.
Examples of Mission Statements
- Tyson Foods: "To be the world's first choice for protein solutions while maximizing shareholder value."
- General Motors: "To be the world leader in transportation products and related services."
- PepsiCo: "To continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today."
- Dell: "To create a company culture where environmental excellence is second nature."
Importance of Vision and Mission
- A clear vision and mission statement can help guide the organization's decision-making and strategy.
- It can help to motivate employees and provide a sense of direction.
- It can help to establish the organization's identity and purpose.
- It can help to differentiate the organization from its competitors.
Developing Vision and Mission
- A clear vision and mission statement should be developed through a collaborative process involving all stakeholders.
- It should be based on a thorough analysis of the organization's strengths, weaknesses, opportunities, and threats.
- It should be communicated effectively to all stakeholders.
- It should be reviewed and updated regularly to ensure it remains relevant and effective.
Effective Mission Statements
- A good mission statement should be concise, yet meaningful.
- It should be specific, yet flexible enough to accommodate change.
- It should be inspiring and motivating for employees.
- It should provide a clear sense of direction and purpose.
- It should be communicated effectively to all stakeholders.
Social Policy and Mission
- A social policy is a statement that outlines the organization's commitment to social responsibility.
- It should be integrated into the organization's mission and vision.
- It should be communicated effectively to all stakeholders.
- A good social policy can help to enhance the organization's reputation and improve its relationships with stakeholders.
Mission Statement Evaluation Matrix
- This is a tool used to evaluate the effectiveness of a mission statement.
- It assesses the mission statement against various criteria, such as concern for customers, concern for employees, and concern for public image.
- It provides a comprehensive evaluation of the mission statement's effectiveness.
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Description
This quiz covers the definition and concepts of strategic management, including formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives.
