Strategic Management Concepts: A Competitive Advantage Approach, Concepts and Cases PDF

**Strategic Management Concepts: A** **Competitive Advantage Approach, Concepts and Cases** Seventeenth Edition, Global Edition Chapter 1 ========= The Nature of Strategic Management **Learning Objectives (1 of 2)** **1.1** Describe the strategic-management process. **1.2** Discuss the three...

**Strategic Management Concepts: A** **Competitive Advantage Approach, Concepts and Cases** Seventeenth Edition, Global Edition Chapter 1 ========= The Nature of Strategic Management **Learning Objectives (1 of 2)** **1.1** Describe the strategic-management process. **1.2** Discuss the three stages of strategy formulation, implementation, and evaluation activities. **1.3** Explain the need for integrating analysis and intuition in strategic management. **1.4** Define and give examples of key terms in strategic management. **Learning Objectives (2 of 2)** **1.5** Describe the benefits of engaging in strategic management. **1.6** Explain why some firms do not engage in strategic planning. **1.7** Describe the pitfalls in doing strategic planning. **1.8** Discuss the connection between business and military strategy. **1.9** Explain how this course can enhance a student's employability. **Strategic Management** - The art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives - **Strategic management** is used synonymously with the term **strategic planning** in this course. - Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. - A strategic plan is a company's game plan. - A strategic plan results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations. **Figure 1.1** The Strategic Management Model *Source:* Fred R. David, "How Companies Define Their Mission," *Long Range Planning* 22, n o. 1 (February 1989): 91. See also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, "Balance Scorecard of David's Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia," *Journal of Mathematics and Technology*, n o. 4 (October 2010): 20. **The Strategic-Management Model** - Where are we now? - Where do we want to go? - How are we going to get there? **Stages of Strategic Management** (1 of 4) -------- - Strategy formulation - Strategy implementation - Strategy evaluation **Stages of Strategic Management** (2 of 4) -------- - **Strategy Formulation** - developing a vision and mission - identifying an organization's external opportunities and threats - determining internal strengths and weaknesses - establishing long-term objectives - generating alternative strategies - choosing particular strategies to pursue **Strategy Formulation Decisions** - What new businesses to enter - What businesses to abandon - Whether to expand operations or diversify - Whether to enter international markets - Whether to merge or form a joint venture - How to avoid a hostile takeover **Stages of Strategic Management** (3 of 4) -------- **Strategy Implementation** - requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed - often called the action stage **Stages of Strategic Management** (4 of 4) -------- - **Strategy Evaluation** - Determining which strategies are not working well -- Three fundamental activities: **Competitive Advantage** - any activity a firm does especially well compared to activities done by rival firms, or - any resource a firm possesses that rival firms desire. - A firm must strive to achieve sustained competitive advantage - **Strategists** - Individuals most responsible for the success or failure of an organization - Help an organization gather, analyze, and organize information - **Vision and Mission Statements** - A vision statement answers the question "What do we want to become?" - A mission statement answers the question "What is our business?" - **External Opportunities and Threats** - economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization - **Internal Strengths and Internal Weaknesses** -- an organization's controllable activities that are performed especially well or poorly - determined relative to competitors **Some Opportunities and Threats** - Consumers\' expectation for green operations and products is rising 8 percent annually in Western Europe. - Internet marketing is growing 11 percent annually in the United States. - Commodity food prices rose 6 percent the prior year. - Oil and gas prices declined 18 percent in the last twelve months. - Computer hacker problems are increasing 14 percent annually. **Key Terms in Strategic Management** (4 of 6) -------- **Long-Term Objectives** - specific results that an organization seeks to achieve in pursuing its basic mission - long-term means more than one year - should be challenging, measurable, consistent, reasonable, and clear **Key Terms in Strategic Management** (5 of 6) -------- **Strategies** - the means by which long-term objectives will be achieved - may include geographic expansion, diversification, acquisition*(the process getting something permanently)*, product development, market penetration, retrenchment *(**the act of spending less or reducing costs)***, divestiture *(act of selling something, especially a business or part of a business, or of no longer investing money in something)*, liquidation, and joint ventures *(a business arrangement in which two or more parties agree to pool their resources)* **Figure 1.2** The Basic S W O T Matrix **Key Terms in Strategic Management** (6 of 6) -------- - **Annual objectives** - short-term milestones that organizations must achieve to reach long-term objectives - should be measurable, quantitative, challenging, realistic, consistent, and prioritized - should be established at the corporate, divisional, and functional levels in a large organization - **Policies** - the means by which annual objectives will be achieved **Benefits of Strategic Management** - Strategic management allows an organization to be more proactive than reactive in shaping its own future; - It allows an organization to initiate and influence (rather than just respond to) activities-and thus to exert control over its own destiny. **Figure 1.3** Benefits to a Firm That Does Strategic Planning **Financial Benefits** - Organizations using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities - High-performing firms tend to do systematic planning to prepare for future fluctuations in their external and internal environments **Nonfinancial Benefits** - Enhanced awareness of external threats - Improved understanding of competitors' strategies - Increased employee productivity - Reduced resistance to change - Clearer understanding of performance-reward relationships **Why Some Firms Do No Strategic** **Planning (1 of 2)** - No formal training in strategic management - No understanding of or appreciation for the benefits of planning - No monetary rewards for doing planning - No punishment for not planning - Too busy "firefighting" (resolving internal crises) to plan ahead - View planning as a waste of time, since no product/service is made **Why Some Firms Do No Strategic** **Planning (2 of 2)** - Laziness; effective planning takes time and effort; time is money - Content with current success; failure to realize that success today is no guarantee for success tomorrow - Overconfidence - Prior bad experience with strategic planning done sometime/somewhere **Pitfalls in Strategic Planning (1 of 2)** - Using strategic planning to gain control over decisions and resources - Doing strategic planning only to satisfy accreditation or regulatory requirements - Too hastily moving from mission development to strategy formulation - Not communicating the plan to employees, who continue working in the dark - Top managers making many intuitive decisions that conflict with the formal plan - Top managers not actively supporting the strategic-planning process - Not using plans as a standard for measuring performance **Pitfalls in Strategic Planning (2 of 2)** - Delegating planning to a "planner" rather than involving all managers - Not involving key employees in all phases of planning - Not creating a collaborative climate *(a workplace culture that values teamwork, open communication, and collective problem-solving)* supportive of change - Viewing planning as unnecessary or unimportant - Viewing planning activities as silos *(Isolated)* comprised of independent parts - Becoming so engrossed in current problems that insufficient or no planning is done - Being so formal in planning that flexibility and creativity are stifled **Comparing Business and Military Strategy** - A fundamental difference between military and business strategy is that business strategy is formulated, implemented, and evaluated with an assumption of **competition**, whereas military strategy is based on an assumption of **conflict** - Both business and military organizations must adapt to change and constantly improve to be successful **Excerpts** *(to take a portion out)* **from Sun Tzu's *The Art of War* Writings** - Strategic planning is a matter of vital importance to the state: a matter of life or death, the road either to survival or ruin. Hence, it is imperative that it be studied thoroughly - Know your enemy and know yourself, and in a hundred battles you will never be defeated - Skillful leaders do not let a strategy inhibit creative countermovement **Examples of Employability Skills** *(the skills and abilities that allow you to be employed)* **From Using Text** - Critical thinking - Collaboration *(the act of working together with other people or organizations to create or achieve something)* - Knowledge application and analysis - Business ethics and social responsibility - Information technology - Data literacy **Figure 1.4** How to Gain and Sustain Competitive Advantage