Strategic Management Overview

Strategic Management

• The art and science of formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives.
• It involves understanding the current situation, defining the desired future state, and developing a plan to bridge the gap.

Strategic Management Model

• Where are we now? Assessing the current state of the organization.
• Where do we want to go? Defining the desired future state and goals.
• How are we going to get there? Developing strategies and action plans to achieve the desired future state.

Stages of Strategic Management

• Strategy Formulation: Creating a vision and mission; identifying opportunities and threats; assessing internal strengths and weaknesses; setting long-term objectives; generating alternative strategies; and choosing the best strategy to pursue.
  • Strategy Formulation Decisions:
    • Entering new markets
    • Abandoning existing markets
    • Expanding operations
    • Diversifying
    • Entering international markets
    • Merging or forming a joint venture
    • Avoiding hostile takeovers
• Strategy Implementation: Putting the chosen strategy into action; developing policies and procedures; allocating resources; and motivating employees.
• Strategy Evaluation: Reviewing progress toward achieving the desired future state; identifying challenges, and making necessary adjustments.

Competitive Advantage

• Any activity a firm does especially well compared to rivals, or any resource a firm possesses that rivals desire.
• Achieving and sustaining competitive advantage is essential for organizational success.

The Strategic Management Process

• Vision and Mission Statements:
  • Vision: What the organization wants to become.
  • Mission: What the organization does and how it does it.
• External Opportunities and Threats: Factors outside the organization's control, such as economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could benefit or harm the organization.
• Internal Strengths and Weaknesses: Factors within the organization's control, such as resources, skills, capabilities, and processes.
  • Strengths: Activities performed especially well.
  • Weaknesses: Activities performed poorly.
• Long-Term Objectives: Specific results the organization seeks to achieve in pursuing its mission.
• Strategies: The means by which long-term objectives will be achieved.
• Annual Objectives: Short-term milestones that must be achieved to reach long-term objectives.
• Policies: Guidelines for achieving annual objectives.

Benefits of Strategic Management

• Financial Benefits: Improved sales, profitability, and productivity.
• Nonfinancial Benefits: Enhanced awareness of external threats, improved understanding of competitors, increased employee productivity, reduced resistance to change, and clearer understanding of performance-reward relationships.

Why Some Firms Don't Engage in Strategic Planning

• Lack of training in strategic management.
• Lack of understanding or appreciation for the benefits of planning.
• Lack of monetary rewards for planning.
• Lack of punishment for not planning.
• Too busy dealing with immediate problems to plan for the future.
• Resistance to change.
• Overconfidence in current success.
• Prior bad experiences with planning.

Pitfalls in Strategic Planning

• Using strategic planning to gain control over decisions and resources.
• Doing strategic planning only to satisfy accreditation or regulatory requirements.
• Not communicating the plan to employees.
• Top managers making intuitive decisions that conflict with the formal plan.
• Top managers not actively supporting the planning process.
• Not using plans as a standard for measuring performance.
• Delegating planning to a "planner" rather than involving all managers.
• Not involving key employees in all phases of planning.
• Not creating a collaborative workplace culture that supports change.
• Viewing planning as unnecessary or unimportant.
• Becoming too formal in planning.

Comparing Business and Military Strategy

• Business Strategy: Based on competition, with the goal of achieving sustainable competitive advantage.
• Military Strategy: Based on conflict, with the goal of achieving victory.
• Commonalities: Both must adapt to change and continuously improve.