CBME 21: Strategic Management PDF

CBME 21: STRATEGIC MANAGEMENT administration. This course integrates material from all business courses. Strategy Is a comprehensive plan or approach Stages of Strategic Management...

CBME 21: STRATEGIC MANAGEMENT administration. This course integrates material from all business courses. Strategy Is a comprehensive plan or approach Stages of Strategic Management designed to achieve specific goals or The strategic management process consists objectives. It involves making choices about of three stages: strategy formulation, how to allocate resources and navigate strategy implementation, and strategy challenges to gain a competitive advantage evaluation. or accomplish a mission. 1. Strategy Formulation Strategic Management - Includes developing a vision and Can be defined as the art and science of mission, identifying an organization’s formulating, implementing, and evaluating external opportunities and threats, cross-functional decisions that enable an determining internal strengths and organization to achieve its objectives. weaknesses, establishing long-term As this definition implies, strategic objectives, generating alternative management focuses on integrating strategies, and choosing particular management, marketing, strategies to pursue. finance/accounting, production/operations, - Strategy-formulation issues include research and development, and information deciding what new businesses to systems to achieve organizational success. enter, what businesses to abandon, The term strategic management in this text how to allocate resources, whether is used synonymously with the term to expand operations or diversify, strategic planning. whether to enter international Sometimes the term strategic management markets, whether to merge or form a is used to refer to strategy formulation, joint venture, and how to avoid a implementation, and evaluation, with hostile takeover strategic planning referring only to strategy formulation. 2. Strategy Implementation The purpose of strategic management is to - Requires a firm to establish annual exploit and create new and different objectives, devise policies, motivate opportunities for tomorrow; long-range employees, and allocate resources planning, in contrast, tries to optimize for so that formulated strategies can be tomorrow the trends of today. executed The term strategic planning originated in the - Strategy implementation includes 1950s and was very popular between the developing a strategy-supportive mid-1960s and the mid-1970s. During these culture, creating an effective years, strategic planning was widely organizational structure, redirecting believed to be the answer for all problems. marketing efforts, preparing At the time, much of corporate America was budgets, developing and utilizing “obsessed” with strategic planning. information systems, and linking A strategic plan is, in essence, a company’s employee compensation to game plan. Just as a football team needs a organizational performance. good game plan to have a chance for - Strategy implementation often is success, a company must have a good called the “action stage” of strategic plan to compete successfully. strategic management. Profit margins among firms in most Implementing strategy means industries have been so reduced by the mobilizing employees and managers global economic recession that there is little to put formulated strategies into room for error in the overall strategic plan. action. Often considered to be the The term strategic management is used at most difficult stage in strategic many colleges and universities as the management, strategy subtitle for the capstone course in business implementation requires personal discipline, commitment, and sacrifice  3. Strategy Evaluation Competitive Advantage - Is the final stage in strategic This term can be defined as “anything that a management. Managers desperately firm does especially well compared to rival need to know when particular firms.” When a firm can do something that strategies are not working well; rival firms cannot do, or owns something strategy evaluation is the primary that rival firms desire, that can represent a means for obtaining this information competitive advantage Three Fundamental Strategy Evaluation Strategists Activities Strategists are the individuals who are most 1. reviewing external and internal factors that responsible for the success or failure of an are the basis for current strategies, organization. Strategists have various job 2. measuring performance, and titles, such as chief executive officer, 3. taking corrective actions. president, owner, chair of the board, executive director, chancellor, dean, or Integrating Intuition and Analysis entrepreneur Edward Deming once said, “In God we trust. All others bring data.” The strategic Vision Statements management process can be described as Is a concise, inspirational declaration of an an objective, logical, systematic approach to organization's long-term goals and making major decisions in an organization. aspirations. It outlines what the organization Based on past experiences, judgment, and aims to become or achieve in the future, feelings, most people recognize that providing a sense of direction and purpose. intuition is essential to making good Many organizations today develop a vision strategic decisions. Intuition is particularly statement that answers the question “What useful for making decisions in situations of do we want to become?” Developing a great uncertainty or little precedent vision statement is often considered the first step in strategic planning Adapting to Change The strategic-management process is Mission Statements based on the belief that organizations is a concise declaration of an organization’s should continually monitor internal and core purpose and focus. It describes why external events and trends so that timely the organization exists, what it does, and for changes can be made as needed. whom. The rate and magnitude of changes that Unlike a vision statement, which is affect organizations are increasing future-oriented and aspirational, a mission dramatically as evidenced how the global statement is more about the economic recession has caught so many present—defining the organization's current firms by surprise. Firms, like organisms, objectives and its role in the world. must be “adept at adapting” or they will not Mission statements are “enduring survive. statements of purpose that distinguish one business from other similar firms. A mission Key Terms in Strategic Management statement identifies the scope of a firm’s competitive advantage operations in product and market terms.” strategists vision statements External Opportunities and Threats mission statements refer to economic, social, cultural, external opportunities and threats, internal demographic, environmental, political, legal, strengths and weaknesses governmental, technological, and long-term objectives competitive trends and events that could strategies significantly benefit or harm an organization annual objectives in the future. policies  Opportunities and threats are largely They should be established at the beyond the control of a single corporate, divisional, and functional levels in organization—thus the word external. a large organization. In a global economic recession, a few Annual objectives should be stated in terms opportunities and threats that face many of management, marketing, firms are listed here: finance/accounting, production/operations, Availability of capital can no longer be taken research and development, and for granted. ECONOMIC management information systems (MIS) Consumers expect green operations and accomplishments. products. SOCIAL/ENVIRONMENTAL Marketing has moving rapidly to the Policies Internet. TECHNOLOGICAL, COMPETITIVE TRENDS AND EVENTS Are the means by which annual objectives Consumers must see value in all that they will be achieved. Policies include guidelines, consume. ECONOMIC rules, and procedures established to Global markets offer the highest growth in support efforts to achieve stated objectives. revenues ECONOMIC Policies are guides to decision making and address repetitive or recurring situations. Internal Strengths and Internal Weaknesses Policies are most often stated in terms of Are an organization’s controllable activities management, marketing, that are performed especially well or poorly. finance/accounting, production/operations, They arise in the management, marketing, research and development, and computer finance/accounting, production/operations, information systems activities. research and development, and management information systems activities The Strategic Management Model of a business. Long Term Objectives Objectives can be defined as specific results that an organization seeks to achieve in pursuing its basic mission. Long-term means more than one year. Objectives are essential for organizational success because they state direction; aid in evaluation; create synergy; reveal priorities; focus coordination; and provide a basis for effective planning, organizing, motivating, and controlling activities Strategic management models are Strategies frameworks that help organizations analyze Are how long-term objectives will be their environment, make decisions, and achieved. Business strategies may include guide their strategies to achieve long-term geographic expansion, diversification, objectives. These models provide structured acquisition, product development, market approaches for assessing internal and penetration, retrenchment, divestiture, external factors, setting goals, and liquidation, and joint ventures. implementing strategies. Annual Objectives Are short-term milestones that organizations must achieve to reach long-term objectives. Like long-term objectives, annual objectives should be measurable, quantitative, challenging, realistic, consistent, and prioritized. Few Key Models Commonly Used in Strategic Managements SWOT Analysis: This model helps organizations identify their internal Strengths and Weaknesses, and external Opportunities and Threats. It’s a foundational tool for understanding the current situation and developing strategic plans. Value Chain Analysis: Also introduced by Michael Porter, this model looks at the internal activities of an organization to identify sources of competitive advantage. It breaks down the primary and support activities to understand how they add value and where improvements can be made. PESTEL Analysis: This model examines external factors affecting an organization: Political, Economic, Social, Technological, Environmental, and Legal. It’s useful for understanding broader macro-environmental influences. BCG Matrix: The Boston Consulting Group Matrix categorizes business units or products into four categories based on market growth and market share: Stars, Cash Cows, Question Marks, and Dogs. It helps organizations allocate resources and prioritize investments. Porter’s Five Forces: Developed by Michael Porter, this model analyzes five competitive forces that shape industry dynamics: the threat of new entrants, bargaining power of suppliers, bargaining Balanced Scorecard: Developed by power of buyers, threat of substitute Kaplan and Norton, this model uses multiple products, and industry rivalry. It helps perspectives (financial, customer, internal organizations assess their competitive processes, and learning & growth) to track environment. performance and align business activities with the organization's strategic goals.  Strategic Vision: Establishes a clear vision and mission, providing direction and purpose for the organization. Enhanced Organizational Performance Efficiency: Strategic management helps streamline processes and optimize resource allocation, leading to better operational efficiency. Competitiveness: Identifies and leverages competitive advantages, enhancing the organization’s position in the market. Ansoff Matrix: This model helps organizations decide on growth strategies Risk Management by examining four options: Market Anticipation of Risks: Strategic Penetration, Market Development, Product management involves identifying potential Development, and Diversification. It’s useful risks and developing plans to mitigate them. for identifying growth opportunities. Adaptability: Enables organizations to respond more effectively to changes in the external environment and market conditions. Better Resource Utilization Optimal Allocation: Helps allocate resources (financial, human, and technological) more effectively based on strategic priorities. Investment Decisions: Guides investment in projects and initiatives that align with long-term goals and offer the best returns. Benefits of Engaging in Strategic Management Engaging in strategic management offers Increased Organizational Cohesion numerous benefits to organizations, contributing to Alignment: Ensures that different their overall success and sustainability. Here are departments and teams are working some key advantages: towards common goals, fostering unity and collaboration. Improved Decision-Making Motivation: Provides a sense of purpose Informed Choices: Strategic management and direction, motivating employees and provides a structured framework for improving morale. analyzing internal and external factors, leading to more informed and data-driven Enhanced Customer Focus decisions. Market Understanding: Strategic Future Orientation: By focusing on management involves analyzing customer long-term goals and trends, strategic needs and market trends, leading to better management helps anticipate and prepare product and service offerings. for future challenges and opportunities. Customer Satisfaction: Helps in developing strategies that improve Clear Direction and Objectives customer experience and satisfaction, Goal Alignment: It helps define clear leading to increased loyalty and retention. objectives and align the organization’s resources and efforts toward achieving Competitive Advantage them. Strategic Positioning: Helps identify and build on strengths that differentiate the organization from competitors.  Innovation: Encourages innovation and adaptation to maintain or gain a competitive edge in the market. Financial Performance Profitability: By aligning strategies with market opportunities and operational efficiencies, organizations can improve their financial performance and profitability. Long-Term Value: Focuses on creating long-term value rather than short-term gains, contributing to sustained financial health. Strategic Flexibility Scenario Planning: Engaging in strategic management includes scenario planning, which helps organizations adapt to various possible futures. Continuous Improvement: Facilitates ongoing evaluation and adjustment of strategies based on performance and changes in the environment. Long-Term Sustainability Sustainable Practices: Encourages the incorporation of sustainable practices into strategic planning, contributing to long-term viability and corporate responsibility. Future-Proofing: Prepares organizations for future challenges and opportunities, enhancing their ability to thrive in changing conditions.