Test Your Strategic Management Knowledge

Strategic management involves the formulation and implementation of major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Michael Porter identifies three principles underlying strategy. Strategic management is often described as involving two major processes: formulation and implementation of strategy, which are iterative. Formulation involves analyzing the environment in which the organization operates, then making a series of strategic decisions about how the organization will compete. Implementation involves decisions regarding how the organization's resources will be aligned and mobilized towards the objectives. SWOT analysis is a common framework used in strategic management. The experience curve and the growth-share matrix are other concepts used in strategic management. The concept of the corporation as a portfolio of business units was summarized in the growth-share matrix developed by the Boston Consulting Group. Prior to 1960, the term "strategy" was primarily used regarding war and politics, not business. The customer became the driving force behind all strategic business decisions, leading to a focus on marketing.Overview of Strategic Management

• Strategic management involves the process of formulating, implementing, and evaluating a company's strategy.

• Over-diversification led to the development of portfolio theory, which considers industry attractiveness and competitive position in building portfolios of businesses.

• Michael Porter's work on corporate strategy emphasized the importance of a company's level of diversification and the role of the corporate office in managing business units.

• Porter's five forces framework helps analyze industry profitability and structure, and how companies can obtain a competitive advantage.

• Porter's three generic strategies (cost leadership, differentiation, and focus) can be applied to any size or form of business, with the right level of targeting and competitive scope.

• The value chain refers to a chain of activities that an organization performs to deliver a valuable product or service for the market, and aligning these activities with the organization's strategy can create a competitive advantage.

• Interorganizational relationships are critical for companies to access resources or enter new markets, and governance mechanisms play a key role in their management.

• Core competencies are unique capabilities in which an organization excels and that the business should focus on, as they are difficult to duplicate.

• Strategic thinking involves generating and applying unique business insights to create a competitive advantage, challenging the assumptions underlying the organization's strategy and value proposition.

• Strategic planning is a means of administering the formulation and implementation of strategy, and includes environmental analysis, scenario planning, and measuring and controlling implementation.

• Evaluation is a key component to strategic management that is often overlooked, and there are many ways to evaluate whether or not strategic priorities and initiatives are successful.

• Peter Drucker's theory of the business emphasizes the importance of aligning a company's external environment, goals, and guidelines, and continuously analyzing the business theory to maintain competition.Overview of Strategic Management

• Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company's top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.

• Responsive evaluation is a naturalistic and humanistic approach to program evaluation that considers the program's background, conditions, and transactions among stakeholders.

• A critique of strategic management is that it can overly constrain managerial discretion in a dynamic environment, and that strategies must be able to adjust during implementation.

• Strategic themes that have arisen over the years include the trend towards self-service, globalization and the virtual firm, the internet and information availability, and sustainability.

• Sustainability has emerged as a crucial aspect of any strategy development, and "embedded sustainability" offers at least seven distinct opportunities for business value and competitive advantage creation.

• To fully utilize strategic management components, a firm’s mission, values, goals, resources, and capabilities need to be functioning in alignment with one another, which has led to improved firm performance.

• Learning organization theory involves gathering and analyzing information as a necessary requirement for business success in the information age, and five disciplines of a learning organization have been identified.

• Strategic windows are important to consider, as is the timing of any given strategy.

• Relentless change requires that businesses continuously reinvent themselves and stimulate a spirit of inquiry and healthy debate.

• Changes in the business environment are reflected in value migrations between industries, between companies, and within companies.

• Recognizing the patterns behind these value migrations is necessary if we wish to understand the world of chaotic change.

• Businesses should be in a state of strategic anticipation.A Comprehensive Overview of Business Strategy

• Clayton Christensen's thesis suggests that outstanding companies lose their market leadership when confronted with disruptive technology.

• Constantinos Markides reexamined the nature of strategic planning and described it as an ongoing, never-ending, integrated process requiring continuous reassessment and reformation.

• David Teece pioneered research on resource-based strategic management and the dynamic capabilities perspective.

• Gary Hamel discussed strategic decay, the notion that the value of every strategy decays over time.

• Quality improvement techniques such as total quality management (TQM), continuous improvement (kaizen), lean manufacturing, Six Sigma, and return on quality (ROQ) were suggested by W. Edwards Deming, Joseph M. Juran, Andrew Thomas Kearney, Philip Crosby, and Armand V. Feigenbaum.

• Fishbone diagramming, service charting, Total Customer Service (TCS), the service profit chain, service gaps analysis, the service encounter, strategic service vision, service mapping, and service teams were developed by James Heskett, Earl Sasser, William Davidow, Len Schlesinger, A. Paraurgman, Len Berry, Jane Kingman-Brundage, Christopher Hart, and Christopher Lovelock to address poor customer service.

• Process management techniques can be used as a basis for competitive advantage and to find inefficiencies to make the process more effective.

• Carl Sewell, Frederick F. Reichheld, C. Gronroos, and Earl Sasser observed that businesses were spending more on customer acquisition than on retention, and developed techniques for estimating customer lifetime value (CLV) for assessing long-term relationships.

• Michael Hammer and James Champy introduced a process called reengineering where a firm's assets are reorganized around whole processes rather than tasks.

• Positioning theory gained widespread acceptance in the 1980s, which involves creating a position in the mind of the collective consumer.

• The technology sector has provided some strategies directly, for example, agile software development provides a model for shared development processes.

• The long-term PIMS study attempted to understand the Profit Impact of Marketing Strategies (PIMS), particularly the effect of market share.

• Military strategy books such as The Art of War by Sun Tzu, On War by von Clausewitz, and The Red Book by Mao Zedong became business classics.