Strategic Management Chapter 1-2 PDF

Strategic Management Issues in Strategic Formulation Chapter 1: The Nature of Strategic Businesses to enter Management Businesses to abandon Allocation of resources Str...

Strategic Management Issues in Strategic Formulation Chapter 1: The Nature of Strategic Businesses to enter Management Businesses to abandon Allocation of resources Strategic Management - Defined Expansion or diversification Art & Science of formulating, Mergers or joint ventures implementing, and evaluating, Avoidance of hostile takeover cross-functional decisions that enable an organization to achieve its objectives. Strategy Implementation Strategic Marketing Identification of one or sustainable competitive advantages a firm has in the markets it serves (or intends to serve), and allocation of resources to exploit them. Purpose of Strategic Management To exploit and create new and Strategy Implementation Steps different opportunities for tomorrow. Developing a strategy-supportive culture In essence, the strategic plan is a Creating an effective organizational company’s game plan. structure Redirecting marketing efforts 3 Stages of the Strategic Management Preparing Budgets Process Developing and utilizing information Strategy formulation systems Strategy implementation Linking employee compensation to Strategy evaluation organizational performance Issues in Strategy Implementation Mobilization of employees & managers Most difficult stage Interpersonal skills critical Strategy Evaluation Adapting to Change Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed. Key Terms in Strategic Management Competitive advantage Strategists Vision and mission statements Prime Task of Strategic Management External opportunities and threats Peter Drucker: Think through the Internal Strength and weaknesses overall mission of a business. Ask the key Long-term objectives question: What is our Business?” Strategies Annual objectives Integration Intuition & Analysis Policies The strategic management process attempts to organize quantitative and Strategic Management is Gaining and qualitative information under conditions of Maintaining Competitive Advantage uncertainty Anything that a firm does especially well compared to rival firms Intuition is based on: Past experiences Achieving Sustained Competitive Judgment Advantage Feelings 1. Continually adapting to changes in external trends and events and Intuition is useful for decision making in internal capabilities, competencies, conditions of: and resources Great uncertainty 2. Effectively formulating, Little precedent implementing, and evaluating Highly interrelated variables strategies that capitalize on those Several plausible alternatives factors 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 Long-Term Objectives Cultural Specific results that an organization Demographic/Environmental seeks to achieve in pursuing its basic Political, Legal, Governmental mission Technological Long-term means more than one Competitors year Essential for ensuring the firm’s success Basic Tenet of Strategic Provide direction Management Aid in evaluation Crate synergy Reveal priorities Focus coordination Provide basis for planning. organizing, motivating, and controlling Internal Strengths and Weaknesses Strategies Controllable activities performed Means by which long-term especially well or poorly objectives are achieved Determined relative to competitors Examples: Geographic expansion Typically located in functional areas of Diversification the firm Acquisition Management Product development Marketing Market penetration Finance/Accounting Retrenchment Production/Operations Divestiture Research & Development Liquidation Management Information Systems Joint venture Annual Objectives Fire fighting Short-term milestones that firms Waste of time must achieve to reach long-term objectives Too expensive Laziness Policies Content with success Means by which annual objectives Fear of failure will be achieved Overconfidence Prior bad experience Strategic Management Model Self-interest Strategic Management Process Fear of the unknown Dynamic & Continuous Honest difference of opinion More formal in larger organizations Suspicion Strategic Management Pitfalls in Strategic Planning Communication is a key to Strategic planning is an involved, successful strategic management intricate, and complex process that takes an organization into uncharted territory Benefits of Strategic Management Effective Strategic Planning is: A people process more than a paper process A learning process Words supported by numbers Simple Nonfinancial Benefits and nonroutine Enhanced awareness of threats Varying assignments, team Improved understanding of membership, meeting formats, and competitors’ strategies planning calendars Increased employee productivity Challenging assumptions underlying Reduced resistance to change corporate strategy Clearer understanding of Welcome bad news performance-reward relationship Required open-mindedness and a Enhanced problem-prevention spirit of inquiry capabilities Is not a bureaucratic mechanism Is not ritualistic or stilted Why Some Firms do NO Strategic Is not too formal, predictable, or Planning rigid Lack of knowledge of strategic Does not contain jargon or arcane planning language Poor reward structures Is not a formal system for control  Does not disregard qualitative Agreement on the basic vision for information which the firm strives to achieve in Does not pursue too many strategies the long term is especially important at once “What do we want to become?” Continually strengthen the “good Vision Statement Examples ethics is good business” policy Tyson Foods’ vision is to be the world’s first choice for protein Comparing Business and Military solutions while maximizing Strategy shareholder value Strategic planning started in the General Motors’ vision is to be the military world leader in transportation Similarity products and related services - Both business and military PepsiCo’s responsibility is to organizations must adapt to continually improve all aspects of change and constantly the world in which we operate - improve environment, social, economic – Difference creating a better tomorrow than - Business strategy assumes today competition Dell’s vision is to create a company - Military strategy assumes culture where environmental conflict excellence is second nature Chapter 2: The Business Vision & Mission Vision “The last thing IBM needs right now is a vision” (July 1993) Mission Statement “What IBM needs most right now is a Answer the question: What is our vision” (March 1996) business? - Louis V. Gerstner, Jr., CEO, IBM Reveals: Corporation - what the organization wants to be Vision - Whom we want to serve  An enduring statement of purpose creation, allowing our people, our that distinguishes one organization shareholders, and the communities in from other similar enterprises which we live and work to prosper. A declaration of an organization’s “reason for being” At L’Oreal, we believe that lasting business success is built upon ethical Mission Statements are also called standards which guide growth and on creed statement a genuine sense of responsibility to statement of purpose our employees, our consumers, our Statement of philosophy environment and to the communities Statement of beliefs in which we operate. Statement of business principles A statement “defining our business” Vision & Mission Mission Statement Examples Fleetwood Enterprises will lead the Great benefits can be achieved if recreational vehicle and an organization manufactured housing industries in - Systematically revisits their providing quality products with a vision and mission statement passion for customer-driven - Treats them as living innovation. We will emphasize documents training, embrace diversity and - Considers them to be an provide growth opportunities for our integral part of the firm’s associates and our dealers. WE will culture lead our industry in the application of appropriate technologies. We will Vision & Mission operate at the highest levels of ethics Profit & vision are necessary to and compliance with a focus on effectively motivate a workforce exemplary corporate governance. We Shared vision creates a community will deliver value to our of interests shareholders, positive operating A clear mission is needed before results and industry-leading earnings. alternative strategies can be Proctor & Gamble will provide formulated and implemented branded products and services of superior quality and value that Developing Vision & Mission improve the lives of the world’s - Participation by as many managers consumers. As a result, consumers as possible is important in will reward us with industry developing the mission because leadership in sales, profit, and value  through involvement people become Resolution of Divergent Views committed to organization A genuine decision must be based on divergent views to have a chance to Steps to Developing Vision & Mission be a right and effective decision Statements 1. Have managers read related articles Considerable disagreement over 2. Have managers prepare a vision and vision and mission statements can mission statement for the cause trouble if not resolved organization 3. Merge the documents into one and Vision & Mission Statements distribute Provide unity of direction 4. Gather feedback from managers Promote shared expectations 5. Meet to revise the final document Consolidate values Project a sense of worth and intent Affirm the company’s commitment to responsible action Benefits of Mission Statements Better financial results Unanimity of purpose Resource allocation Declaration of Attitude Establishment of culture Broad in scope Focal point for individuals Generate strategic alternatives Establishment of work structure Not overly specific Basis of assessment and control Reconciles interests among diverse Resolution of divergent views stakeholders Finely balanced between specificity & generality Arouse positive feelings and emotion Motivate readers to action Generate favorable impression of the firm Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Dynamic in nature Mission & Customer Orientation - Vern McGinnis  Do not offer me tools. Offer me the Define what the organization is benefits and the pleasure that come Define what it aspires to be from making beautiful things. Limited to exclude some ventures Do not offer me furniture. Offer me Broad enough to allow for growth comfort and the quietness of a cozy Distinguishes firm from all others place. Framework for evaluating activities Do not offer me things. Offer me Stated clearly – understood by all ideas, emotions, ambience, feelings, and benefits. Mission & Customer Orientation Please, do not offer me THINGS. An effective mission statement: Anticipates customer needs Identifies customer needs Provides product/service to satisfy needs Identifies the utility of a firm’s products to its customers Utility of Firm’s Products to Customers Do not offer me things. Do not offer me clothes. Offer me attractive looks. Do not offer me shoes. Offer me comfort for my feet and the pleasure of walking. Do not offer me a house. Offer me security, comfort, and a place that is clean and happy. Do not offer me books. Offer me hours of pleasure and the benefit of knowledge. Utility of Firm’s Products to Customers Do not offer me CDs. Offer me leisure and the sound of music.