Strategic Management PDF

CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT **BASIC CONCEPT OF STRATEGY** Strategy is the quest to gain and sustain competitive advantage. It is the managers\' theories about how to gain and sustain competitive advantage. It is about being different from your rivals. It is about creatin...

CHAPTER 1 WHAT IS STRATEGY AND WHY IS IT IMPORTANT **BASIC CONCEPT OF STRATEGY** Strategy is the quest to gain and sustain competitive advantage. It is the managers\' theories about how to gain and sustain competitive advantage. It is about being different from your rivals. It is about creating value while containing cost. It is deciding what to do, and what not to do. It combines a set of activities to stake out a unique position. It requires long-term commitments that are not easily reversible. **WHAT IS A STRATEGY** Strategy describes the goal-directed actions a firm intends to take in its quest to gain and sustain competitive advantage. The firm that possesses competitive advantage provides superior value to customers at a competitive price or acceptable value at a lower price. Profitability and market share are the consequences of superior value creation. A Strategy is an overarching approach taken to meet or exceed one\'s goals and the actions taken relative to the original and overall goal set by higher authority. whether in a private enterprise or public organizations. Strategy is about understanding where you are now, where you are heading and how you will get there. Effective strategic decision-making is vital not just for the Executive Officer or Board deciding a company\'s overall direction but for the managers at all levels of the organization who will determine how that vision can be transformed into action. The important point here is that strategy is about creating superior value, while containing or controlling the cost to create It has been observed that the greater the difference between value creation and cost, the greater the economic contribution the firm makes, and thus the greater the likelihood for competitive advantage. To a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of the competitors, or goods or services similar to the competitors\' but at a lower price. Making money to most businessmen was the consequence of providing a product or service consumers wanted. The essence of strategy, therefore, is being different from rivals. Managers accomplish this difference through strategic positioning, staking out a unique position in an industry that allows the firm to provide value to customers, while controlling costs. Strategy on how to compete provides managers with a roadmap to navigate the competitive territory. The more accurate the map, the better strategic decisions managers can make. In the competitive world, managers test their theories and assumptions in the marketplace. Positive feedback validates managers\' strategic assumptions while negative feedback allows managers to adjust their assumptions. A firm\'s relative performance in the competitive marketplace provides managers with the necessary feedback to assess how well their strategy works in their quest for competitive advantage. The strategic management process, therefore, is a never-ending cycle of analysis, formulation, implementation and feedback. **WHAT STRATEGY IS NOT** Although it is important to know what strategy is and why it is important, it is also useful to appreciate what strategy is not. There is much confusion about the nature of strategy. Strategy is not: A vision or mission statement such as \"Our strategy is to be a leading-edge provider/employer\". This explains neither where the firm is going nor how it will make progress. Consequently, it is not a strategy. A goal, budget or business plan. Strategy is not a goal such as \"We aim to be the best or number one\". This is, at best, an aspiration. Also, strategy is neither a budget nor a business plan, although elements of these may contribute to how a strategy is implemented. Data analysis. Too often, data analysis leads to strategy, when what should happen is that strategic choices are made first and then refined and explored further using data analysis. Strategy is not a zero-sum game, it is not always the case that one party wins while all others lose. Many strategic successes are accomplished when firms and individuals cooperate with one another. Even direct competitors cooperate occasionally to create win-win scenarios. When competitors cooperate with one another to achieve strategic objectives, it is called co-opetition. Many people today refer to a host of different plans and activities such as pricing strategy, alliance strategy, operations strategy, marketing strategy and so on. While all these elements may be part of a firm\'s functional strategy to support its business model, the term strategy should be reserved for describing the firm\'s overall efforts to gain and sustain competitive advantage. Competitive benchmarking is not \"strategy\". Best-in-class practices such as just- in-time inventory system, enterprise resource planning system and so on, all fall under the \"tools\" for operational effectiveness. Being best-in-class is sufficient but not a necessary condition for competitive advantage. Operational effectiveness, marketing skills and other functional expertise, along with best practices, contribute to a unique strategic position but by themselves, they are not a substitute for Strategy. **WHAT CAN STRATEGY ACHIEVE** The following are some of the significant benefits of applying Strategy. An inspired and considered strategy provides an impetus for commercial success. A clear and effectively communicated strategy is crucial in developing a successful business. A focus on strategy will highlight where a unit or group of businesses can be more successful as well as those areas where it is weak, vulnerable, or failing. It will show in detail where the business is making its money and why. The process of developing and implementing strategy enables managers to understand their customers and competitors. The company is able to develop its products and approach in line with its customers\' changing preferences. Developing and implementing strategy strengthens a business by making sure that resources are devoted to the most important customers in order to retain their loyalty and get them to buy even more of the company\'s products or services. A clear strategy shows managers where business skills need to be added or strengthened. It also highlights where productivity can be improved and why particular initiatives and activities have succeeded or failed. A strategy that employees understand provides a guiding view of the future that influences employees\' decisions, priorities and way of working. For owners or stakeholders, strategy provides a way of measuring their businesses\' progress. A successful strategy benefits customers. The crucial component of strategy is how it will result in greater appeal to customers and how they can achieve their goals. **STRATEGY VS OBJECTIVE** **WHAT IS A STRATEGY?** A strategy is an overarching approach taken to meet or exceed your goals, and the actions taken must relate to the original goal set by management. For example, a marketing company\'s strategy can be to increase the amount of written content on a company\'s website; the execution of the strategy includes hiring writers to streamline the process. **WHAT IS AN OBJECTIVE?** An objective is a measurable action taken to execute the strategy on by management and the rest of the organization. An objective follows the paradigm of the SMART formula (Specific, Measurable, Actionable, Relevant and Time- based). Thus, a series of objectives must be assigned and completed in order to complete the strategy and meet the company\'s primary goal. How the SMART formula can be used in pursuing an objective: **Specific** This step details what you want to achieve. In fact, the formulation of your goals and strategy should meet the requirements of this step to proceed. Double-check and ensure that this is the direction you want to go and whether the steps in the strategy can be easily understood. The more clarity you have, the more likely it is to produce successful results. **Measurable** Stating your evidence is crucial in finding out how you are measuring your goal. Setting up milestones can assist you inbreaking down a timeline to reach the desired steps of your objectives. If you are applying for a job, you can use this step as a benchmark to see the number of positions you\'ve applied to and amount of interviews you landed. You can plan and adjust in case you run into any disruptions and establish a rewards system when you reach a milestone, too. **Achievable** Ensure that the objective is one you can achieve and is aligned with your strategy. Identifying your motivations in meeting your objectives helps you keep your focus on current tasks. Also, it can outline the effort and resources needed to achieve your objective and move onto the next one. **Relevant** Make sure that objectives are aligned with your core values and with your long-term aspirations. Rethink your objective if you continue to express doubts about it representing your core values. **Time-based** Decide on the appropriate timeline to complete this objective and review if that pursuit is dependent on the completion of other objectives. You want to ensure that you can move forward after an objective\'s conclusion. There are times where you will need to consider variables that may affect the timeline of certain tasks. **STRATEGY VS. OBJECTIVE: KEY DIFFERENCES** A strategy helps you create a plan for how you want to achieve a goal, whereas an objective is a list of documented steps that assist you in fulfilling the goals of the strategy. The differences between a strategy and an objective also include: **Purpose** A strategy is meant to solve problems and determine a pathway towards a goal. An objective has measured elements that relate to the execution of the strategy and when it should be finalized. **Execution** To build a strategy, you need to have an overview of your core values and the motivations for why you are coming up with a strategy. Consistent motivation is the driver of diligence in the workplace. A robust strategy can maximize the output of a team if it fully buys into the mission of the organization. Preparing objectives occurs once you have a finalized set of core values and motivations. Objectives also assess how you\'ll apply your core values and motivations to perform tasks and find out how you can improve in the process. **ILLUSTRATION OF HOW STRATEGY RELATES TO OBJECTIVE** Here is an example of a strategy to increase a company\'s client base and the objectives that follow: **Strategy** A strategy is designed to measure a goal. For example, a goal may be for a company to increase the client base of Stevie\'s Marketing from five clients to 10 by the end of the year. To accomplish this goal, the company needs to do the following: Increase the size of sales staff. Clean up the lead generation software and have management inspect for execution. Schedule proposal meetings and dates for the sales manager to close sales. Hold weekly meetings on progress. **Objectives** Here are objectives that can lead to the success of the strategy: Human resources will hire five new members of the sales team by the end of September. Three members of the sales team will work on inserting the right data into the lead generation software and complete it by the end of November. The sales manager will be on proposal calls in order to secure five in-person meetings with prospects by Thanksgiving and will meet with the prospects to close five deals to bring them onboard. Sales team meetings are held on Monday afternoon to report on the progress of these meetings. Jan from human resources will take notes on progress and action items for the team to work on during the week. The CEO is continually monitoring the progress to ensure the completion of all objectives by the end of the year. **CHAPTER 2** **THE DIFFERENT VIEWS OF STRATEGY** **UNDERSTANDING THE DIFFERENT VIEWS OF STRATEGY** In business, strategic thinking requires learning from discoveries and insight of others. Anyone can set up a business but there are more uncertainties in running one. The more observable approaches are presented in this chapter, The different approaches to strategic decision-making and what will be most effective for an organization will depend on circumstances such as the issues faced by an organization as well as the style and preferences of its leaders. In a complex world, a mix of approaches and styles is needed. The precise mix will depend on the personalities of those making the decisions and a good understanding of the strengths and weaknesses of the organization, its environment and current position in order to establish, sustain and acquire the competencies that are required, and to adopt the most appropriate leadership style to see the overall strategy realized. But whatever approach is adopted, the following management themes from earlier ideas should be included: The need for leadership and sound decision-making to be present at every level. The need to manage uncertainty and get the best from new situations problems as well as opportunities (the challenge of \"leading change\"). The need to manage in adversity, such as a market collapse or the failure of a product. An organization\'s structure and its cultures and control systems must be flexible enough to enable swift decision-making and action to get matters back on course. **THE DIFFERENT VIEWS/APPROACHES OF STRATEGY** A. Classical Administrator In the classical school of management, a set of common activities and principles are developed. These include planning, organizing, commanding coordinating and controlling. These fine sections are described below. *Planning* involves considering the future, deciding the aims of the organization and developing a plan of action. *Organizing* involves marshalling the resources necessary to achieve these aims and structuring the organization to complete its activities. Both roles remain crucial. *Commanding* may be a term that is out of fashion in the egalitarian, politically correct and empowered world of many Western organizations, but the concept remains significant. It is important to achieve the optimum return from people, frequently the most expensive component of a business. Co-ordinating involves focusing and, in particular, unifying people\'s efforts to ensure success. *Controlling* involves monitoring that everything works as planned, making adjustments where necessary and feeding this information back so that it can of value in the future. This classical-administrator approach to decision-making is largely concerned with measuring and improving skills and processes within organizations. It is characterized by hierarchy, usually in the form of top-down planning and control, formal target setting and performance measurement, structured programmes for functional improvements through \"scientific\" engineering and a formal organization structure.. B. Design Planner The design planning approach emphasized that the principal role of a leader is to the development of an organization beyond the short term. This heralded the arrival of strategic thinking in organizations, as distinct firm of focusing on continuing management activities. In this approach, strategy results from a controlled and conscious thought process, achieving long-term competitive advantage and success through answering questions such as: Where are we now? Where do we want to be? How are we going to get there? Design planning requires expertise in two areas: Anticipating the future environment, with the help of analytical techniques and models, Devising appropriate strategies matching the external opportunities and threats to the organization\'s resources, internal strengths and weaknesses. Once the strategy s planned, it is simply a matter of using the techniques of the classical administrator to plan its implementation by, for example, having a master plan that schedules key tasks and budget-controlled activities. The result was that strategic decision-making had been given a separate focus. Decision types were identified, covering strategy, policy, programmes and standard operating procedures. These decisions are: Strategic, focusing on the dynamic issues of products and markets, Administrative, concerned with structure and resource allocation, Operating, focusing on supervision and control, C. Role Player The role-player approach views the job of the strategic decision-maker as more than that of a reflective and analyzing planner and controller. In this approach, vision, communication and negotiation, as well as the need to be able to react quickly to disturbances and to tactics at short notice, are of greatest importance. decision-maker\'s role becomes one of learning, supporting and positively enabling rather than directing. The long-term result is incremental progress rather than a big bang, but it is no less real and over the long term may be more valuable. D. The Competitive Positioner The competitive positioner understands the power of the external environment and focuses almost exclusively on achieving competitive advantage. The underlying premise is the belief that market power produces above-average profits in a marketplace where competition is the defining characteristic. The competitive positioner\'s main tasks are to understand and decide where the organization is competing and then align it so that it is able to gain advantage over its competitors. Competitive forces include: \(a) customers and suppliers. \(b) substitute products (which are increasing in significance because of the flexibility and choice provided by the online marketplace), and \(c) present and potential competitors. Future competitors may not be those that we recognize today, and new competitors may well enter the market by changing the rules of competition. To compete successfully against all this, the positioner may need to do any combination of the following: \(1) erect barriers to entry to its market; \(2) attract price premiums for its products: \(3) reduce operating costs below those of its competitors. Lastly, this approach emphasizes market differentiation and the need to make decisions that build customer loyalty as well as delivering higher quality and productivity. E. The Visionary Transformer The success of a visionary approach depends ultimately on pragmatism: the ability to achieve a vision by listening, acting and learning rather than adopting plans or rigid approaches. In particular, it is essential that visions are achievable and that visionary transformers are able to make progress in achieving them. Scenario planners can help an organization keep in touch with reality, both internally and with the external competitive environment. F. The Self-Organizer In a complex and fast-moving business environment, there is an advantage in being a \"learning organization\" that adapts to change. Petere Senge, author of The Fifth Discipline, highlighted this in 2006. Self-organizing businesses need to be designed and led by people who can create an organization where its constituent parts and, above all, its people continually self-organize strategic issues, fluidly developing. In this way, accepted formulas and perspective are constantly challenged and revised. To achieve this, organizations need the ability to develop learning communities (networks of people together without traditional top-down management improve effectiveness) to generate innovative solutions for commercial opportunities. Innovation and collaboration are crucial competencies for operating in environments that change rapidly and are difficult to control. G. The Turnaround Strategist This decision-making approach focuses on turning around the performance of an organization in decline, perhaps when a visionary leader has failed. It is autocratic, ruthless and swift, and it is more context-specific. Invariably, the requirement is to operate when an organization is in a state of crisis. To achieve turnaround success, it is important to implement new control systems quickly, and to focus on the reasons for decline and reverse them while going for the easiest route to immediate growth. Short-term issues are critical, and a dramatic change of overall perspective is required The turnaround strategist faces several significant challenges. Many can be classed as cultural challenges that focus on the need to change not only what is being done but, crucially, that way that employees operate and how they work. **CHOOSING THE RIGHT APPROACH** Typically, there are six situations those heading a business face, each of which presents its own challenges. Figure 2.1 presents these situations.  Choosing the right approach involves: Gathering the right information. Developing market awareness. Deciding what action needs to be taken. Assessing risk. Thinking critically. Taking into Account of Unexpected. **Gathering the Right Information** Ask the right questions and you will get the right information: What is the current situation? What has caused similar situations in the past? What, specifically, has caused this situation to arise? (It may result from a combination of factors.) If X is the cause, how does it explain all the facts? But be aware that too much information can create a fog and result in overanalysis. A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is a useful technique for gathering information. It can be completed either from the top or with each department or division conducting its own analysis, which is reviewed at a higher level. Some factors can be sources of both strength and weakness. **Developing Market Awareness** This means keeping up to date with what competitors are doing and how the company and they are perceived in the market and why. Relative to competitors, consider. Pricing policies, Brand reputation and recognition; Customers\' perceptions, Product quality, Service levels; Product portfolio, Organizational culture and loyalty; Customer loyalty; Financial structure and reserves. **Deciding What Action Needs to Be Taken** This is also essential. Major points in the data should be highlighted and the details required to make decisions identified. It is important to keep people informed about relevant issues and trends with weekly updates, reports and discussions. Building informal networks with colleagues and others outside the organization is useful. Mentors can clarify thinking when urgent discussions are needed. If there is concern that a decision may have the wrong effect, develop a worst-case scenario and prepare a contingency plan. **Assessing Risk** Assessing risk requires a solid understanding of the risks and benefits involved. This really comes down to market awareness and having the right information. Common problems include information paralysis the result of gathering too much data and overanalysis. Determine how much data is really needed initially. and then fine-tune implementation with data at a later. **Thinking Critically** Think critically by asking \"Why?\", \"What else?\" and \"What if?\" questions to probe issues and current thinking skills. It is also useful to: Challenge the thinking of others, even when they appear to be on firm ground; decisions; Identify and challenge the assumptions or rationale that underpin Get people to pinpoint the exact reasons for their views. Challenge and provoke-look for radical change; Play devil\'s advocate and go for the opposite of current practice; Avoid acceptance of the status quo. **Taking Account of the Unexpected** Although past approaches to strategic decision-making remain valuable one issue now dominates the way the businesses plan and prepare for the future: change. In the early years of the 21st century, as the world displays the means, motive and opportunity to change further and faster than ever before. However, this matters for businesses planning and organizing for the future. There are two things that can be said for certain about the future: it will be different, and it will surprise. Change is endemic and rapid and leads to huge uncertainties. We do not live in a fair, equal world, where we all have access to the same information and opportunities. Nor do we live in a world where we can rely on being the sole beneficiary of potentially lucrative information. We must anticipate the unlikely, the unexpected and the unfair. The only way forward, the only way to ensure our long-term survival, is to put in place the right processes, culture and leadership to equip us for the myriad changes that our companies will have to deal. Key Questions That a New Leadership Should Initially Ask in Deciding the Approach to Use Those taking a new leadership role should ask: How is your industry changing and, in particular, how are your customers expectations evolving? What are the global developments (for example, increased migration urbanization or proliferation of mobile communications) that could benefit, threaten or generally alter the way that you do business? What are the political, economic, social, technological, legislative or environmental trends that could affect your business? What situation best describes the challenges and opportunities faced by the business? Is this likely to be encountered? How can they be addressed? What are the major opportunities and what action is needed to realize them? Are there quick wins or low-hanging fruit that can be secured? What are the greatest risks, threats and potential pitfalls? How will these be avoided or overcome? What are the expectations of stakeholders? Are these expectations realistic- do they need adjusting? What should be the priorities? More generally, strategic decisions can be enhanced by considering the following questions at any time: Should a range of approaches (such as classical, visionary, competitive) be applied to strategic decision-making? Is the approach to decision-making versatile and appropriate in various circumstances? Are improvements needed in the ways that decisions re made or implemented, or both? What lessons can be learnt from the use of technology? In particular, how can technology be used to improve decision-making? How can increases and improvements be made in competitiveness, innovation and the way customers are served? **CHAPTER 3** **STRATEGIC MANAGEMENT: AN OVERVIEW** **STRATEGIC MANAGEMENT** Definition Strategic management is the ongoing planning, monitoring, analysis and assessment of all necessities an organization needs to meet its goals and objectives. Changes in business environments will require organizations to constantly assess their strategies for success. The strategic management process helps organizations take stock of their present situation, chalk out strategies, deploy them and analyze the effectiveness of the implemented management strategies. Strategic management strategies consist of three basic tasks and can differ in implementation depending on the surrounding environment. Strategic management applies both to on-premise and mobile platforms. **Benefits of Strategic Management** Strategic management is generally thought to have financial and non-financial benefits. A strategic management process helps an organization and its leadership to think about and plan for its future existence, fulfilling a chief responsibility of a board of directors. Strategic management sets a direction for the organization and its employees. Unlike once-and-done strategic plans, effective strategic management continuously plans, monitors and tests an organization\'s activities, resulting in greater operational efficiency, market share and profitability. In summary, strategic management offers many benefits to companies that use it including:. Competitive advantage: Strategic management gives businesses an advantage over competitors because its proactive nature means your company will always be aware of the changing market. Achieving goals: Strategic management helps keep goals achievable by using a clear and dynamic process for formulating steps and implementation. Sustainable growth: Strategic management has been shown to lead to more efficient organizational performance, which leads to manageable growth. Cohesive organization: Strategic management necessitates communication and goal implementation company wide. An organization that is working in unison towards a goal is more likely to achieve that goal. Increased managerial awareness: Strategic management means looking toward the company\'s future. If managers do this consistently, they will be more aware of industry trends and challenges. By implementing strategic planning and thinking, they will be better prepared to face future challenges. **Basic Strategic Management Concepts** Strategic management is based around an organization\'s clear understanding of its mission; its vision of where it wants to be in the future; and the values that will guide its actions. The process requires a commitment to strategic planning, a subset of business management that involves an organization\'s ability to set both short- and long-term goals. Strategic planning also includes the planning of strategic decisions, activities and resource allocation needed to achieve those goals. Having a defined process for managing an institution\'s strategies will help organizations make logical decisions and develop new goals quickly in order to keep pace with evolving technology, market and business conditions. Strategic management can, thus, help an organization gain competitive advantage, improve market share and plan for its future. Strategic management requires setting objectives for the company, analyzing the actions of competitors, reviewing the organization\'s internal structure, evaluating current strategies and confirming that strategies are implemented company wide. Strategic management can be either prescriptive or descriptive. Prescriptive strategic management means developing strategies in advance of an organizational issue. Descriptive strategic management means putting strategies into practice when needed. Both methods of strategic management employ management theory and practice. While upper management is responsible for implementing strategies, ideas, goals or organizational challenges can come from any member of the company. Many companies employ strategists whose job it is to think and plan strategically to improve company function, **TYPES OF STRATEGIC MANAGEMENT** The types of strategic management frameworks have changed over time. The modern discipline of strategic management traces its roots to the 1950s and 1960s. Prominent thinkers in the field include the Peter Drucker, sometimes referred to as the founding father of management studies. Among his contributions was the seminal idea that the purpose of a business is to create a customer, and what the customer wants determines what a business is. Management\'s main job is marshalling the resources and enabling employees to efficiently address customers\' evolving needs and preferences. **SWOT ANALYSIS** A SWOT analysis is one of the types of strategic management frameworks used by organizations to build and test their business strategies. A SWOT analysis identifies and compares the strengths and weaknesses of an organization with the external opportunities and threats of its environment. The SWOT analysis clarifies the internal, external and other factors that can have an impact on an organization\'s goals and objectives. The SWOT process helps leaders determine whether the organization\'s resources and abilities will be effective in the competitive environment within which it has to function and to refine the strategies required to remain successful in this environment. Figure 3.1. SWOT Analysis -------------------------------------------------------------- --------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------ STRENGTHS WEAKNESSES OPPORTUNITIES THREATS What does your organization do better than your competition? What does your organization need to improve upon? What market trends could lead to increased sales? What are the advantages competitors have over your organization? -------------------------------------------------------------- --------------------------------------------------- --------------------------------------------------- ------------------------------------------------------------------ Results from a SWOT Analysis A SWOT analysis is a comprehensive evaluation of all the strengths, weaknesses, opportunities and threats of the strategy you compose. There are internal (strengths and weaknesses) and external (opportunities and threats) factors you to consider when conducting a SWOT analysis to help evaluate what variables can and cannot be changed in your strategic planning **BALANCED SCORECARD IN STRATEGIC MANAGEMENT** The Balanced Scorecard is a strategic management system that translates the vision and strategy of an organization into operational objectives and measures. Objectives and measures are developed for each of four perspectives: the financial perspective, the customer perspective, the process perspective and the learning and growth perspective. The objectives and measures of the four perspectives are linked by a series of cause-and-effect hypotheses. This produces a testable strategy that provides strategic feedback to managers. The Balanced Scorecard is compatible with activity-based responsibility accounting because it focuses on processes and requires the use of activity-based information to implement many of its objectives and measures. The balance scorecard offers a measurement and management system that links strategic objectives to comprehensive performance indications. The balance scorecard translates an organization\'s mission and strategy into operational objectives and performance measures or four different perspectives: The financial perspective, the customer perspective, the internal business process perspective and the learning and growth (infrastructure) perspective. a\) The ***financial perspective*** describes the economic consequences of actions taken in the other three perspectives. b\) The ***customer perspective*** defines the customer and market segments in which the business unit will compete. c\) The ***internal business process perspective*** describes the internal processes needed to provide value for customers and owners. d\) The ***learning and growth (infrastructure) perspective*** defines the capabilities that an organization needs to create long-term growth and improvement. This last perspective is concerned with three major enabling factors: employee capabilities, information systems capabilities, and employee attitudes (motivation, empowerment and alignment). **Strategy Translation** Strategy, according to the creators of the Balance Scorecard framework, is defined as: \"\...choosing the market and customer segments the business unit intends to serve, identifying the critical internal and business processes that the unit must excel at to deliver the value propositions to customers in the targeted market segments, and selecting the individual and organizational capabilities required for the internal, customer, and financial objectives.\" Strategy, then, is specifying management\'s desired relationships among the four perspectives. Strategy translation, on the other hand, means specifying objectives, measures, targets, and initiatives for each perspective. The strategy-translation process is illustrated in Figure 3-2. Consider, for example, the financial perspective. For the financial perspective, a company may specify an objective of growing revenues by introducing new products. The performance measure may be the percentage of revenues from the sale of new products. The target or standard for the coming year for the measure may be 20 percent (that is, 20 percent of the total revenues for the coming year must be from the sale of new products). The initiative describes how this is to be accomplished. The \"how,\" of course, involves the other three perspectives. The company must now identify the customer segments, internal processes, and individual and organizational capabilities that will permit the realization of the revenue growth objective. This illustrates the fact that the financial objectives serve as the focus for the objectives, measures, and initiatives of the other three perspectives. **THE FOUR PERSPECTIVES AND PERFORMANCE MEASURES** a\. The Financial Perspective The financial perspective establishes the long- and short-term financial performance objectives. The financial perspective is concerned with the global financial consequences of the other three perspectives. Thus, the objectives and measures of the other perspectives must be linked to the financial objectives. The financial perspective has three strategic themes: revenue growth, cost reduction, and asset utilization. These themes serve as the building blocks for the development of specific operational objectives and measures. b\. Customer Perspective The customer perspective is the source of the revenue component for the financial objectives. This perspective defines and selects the customer and market segments in which the company chooses to compete. C. Process Perspective Processes are the means for creating customer and shareholder value. Thus, the process perspective entails the identification of the processes needed to achieve the customer and financial objectives. To provide the framework needed for this perspective, a process value chain is defined. The process value chain is made up of three processes: the innovation process, the operations process, and the post sales process. The innovation process anticipates the emerging and potential needs of customers and creates new products and services to satisfy those needs. It represents what is called the long-wave of value creation. The operations process produces and delivers existing products and services to customers. It begins with a customer order and ends with the delivery of the product or service. It is the short-wave of value creation. The post sales service process provides critical and responsive services to customers after the product or service has been delivered. d\. Learning and Growth (Infrastructure) Perspective The learning and growth perspective is the source of the capabilities that enable the accomplishment of the other three perspectives\' objectives. This perspective has three major objectives: increase employee capabilities; increase motivation, empowerment, and alignment; and increase information systems capabilities. **BASIC PRINCIPLES THAT CAN HELP STRATEGIC MANAGEMENT TO BE SUCCESSFUL** **Creating a Unique Strategic Position for the Proposition** Focus on who your customers are, the attractiveness of the offer (known as the value proposition), and how you can connect the two as efficiently as possible. The benefits of a unique strategic position are highlighted by the concept of value innovation. This is the concept of defying conventional logic to either redefine or create a market. **Consider the Availability or Potential Availability of Resources** Money and other resources are limited, even though the balance can be improved through alliances to bring in other kinds of resources such as knowledge and skills. Realistic decisions must be made about how to use them to the greatest benefit. For example, if a company wants to retain existing customers but expand the customer base, it must widen its product range and the range of value propositions. **Understand the Importance of Values and Incentives** Strategy must be based on reality about both the external and internal environments. The external forces shaping business strategy include regulatory developments, demographics, economic growth and political stability. Internal factors include skills, people\'s attitudes to their work, their commitment or \"engagement\", the way they operate and the overall culture of the business. If the aspects of employee\'s work in achieving a company\'s strategy are measured and incentives are given, they will respond accordingly and the strategy will progress. The converse is also true: if a company ignores the need to get people working in a way that is consistent with the strategy, progress will be haphazard at best. **Gain People\'s Emotional Commitment to the Strategy** Any strategy, however brilliant, will fail unless people understand it and are emotionally committed to its success. Therefore, it is crucial to explain why the strategy is important to the organization and the individual. **Be Open to Strategic Ideas Wherever They Originate** Although the top people must decide a company\'s strategy, there is a mistaken view that only they can develop strategic ideas. Ideas can come from anybody. anytime, anywhere. **Keep the Strategy Flexible** All ideas are good for a limited time, not forever. Continually question the answers to the \"who, what, how\" questions. Strategy should not be changed too often, but it will require adjusting to altered circumstances. Give employees the freedom to respond and to adjust without waiting for permission or instructions. Most major business recognize the need to empower their employees and focus on their customers.