Strategic Management Chapter 1

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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)

Strategy execution (correct)

Strategy formulation (correct)

Strategy evaluation (correct)

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:

Vision & Mission = Definition of what the company wants to achieve External Opportunities & Threats = Analysis of external business environment Internal Strengths & Weaknesses = Assessment of controllable activities Long-Term Objectives = Specific results for pursuing the mission Alternative Strategies = Different ways to achieve long-term objectives Signup and view all the answers

Annual objectives are _______________ that firms must achieve to reach long-term objectives.

short-term milestones Signup and view all the answers

What is the difference between a vision and a mission statement?

Vision is about what a company wants to become in the future, while a mission statement defines the company's purpose and reason for existence. Signup and view all the answers

Which of the following are components of a mission statement?

Declaring the firm's reason for being Signup and view all the answers

A clear mission statement is not required before developing alternative strategies.

False Signup and view all the answers

Vision and mission statements are crucial for _________ effectively establishing objectives and formulating strategies.

effectively Signup and view all the answers

What is the purpose of an effective mission statement?

All of the above Signup and view all the answers

Proactive environmental policies can be cost-effective.

False Signup and view all the answers

What is one potential benefit of firms having formal mission statements?

Higher return on shareholders' equity Signup and view all the answers

An effective mission statement distinguishes a firm from ________ others.

all Signup and view all the answers

Study Notes

Strategic Management Defined

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.
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.

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.