Chapter 1 Flashcards
Nature of Strategic Management
is defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.
Strategic Management
It focuses on integrating management, marketing, finance and accounting, production and operations, research and development (R&D), and information systems to achieve organizational success.
Strategic Management
It is the company’s game plan.
Strategic Management
used synonymously with the term strategic planning.
Strategic Management
Sometimes the term ______________ is used to refer to strategy formulation, implementation, and evaluation, with ___________ referring only to strategy formulation.
Strategic Management; Strategic Planning
-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, and
-choosing particular strategies to pursue.
Strategy Formulation
The purpose of strategic management is to
exploit and create new and different opportunities for tomorrow.
The strategic-management process consists of three stages:
- strategy formulation,
- strategy implementation, and
- strategy evaluation.
decisions commit an organization to specific products, markets, resources, and technologies over an extended period of time.
Strategy Formulation
involves many types of decisions including:
-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.
Strategy Formulation
-establish annual objectives,
-devise policies,
-motivate employees, and
-allocate resources so that formulated strategies can be executed
Strategy Implementation
It is often called the action stage.
Strategy Implementation
It includes:
-developing a strategy-supportive culture,
-creating an effective organizational structure,
-redirecting marketing efforts,
-preparing budgets,
-developing and using information systems, and
-linking employee compensation to organizational performance.
Strategy Implementation
is the final stage in strategic management.
Strategy evaluation
Managers desperately need to know when particular strategies are not working well; __________ is the primary means for obtaining this information. All strategies are subject to future modification because external and internal factors constantly change. Determining which strategies are not working well.
Strategy evaluation
Three Fundamental Activities of Strategic Evaluation:
-Reviewing external and internal factors that are the bases for current strategies
-Measuring performance
-Taking corrective actions
Key Terms in Strategic Management
-competitive advantage
-strategic management
-strategists
-vision and mission statements
-external opportunities and threats
-internal strengths and weaknesses
-objectives
-strategis
-annual objectives
-long-term objectives
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 -
is all about gaining and maintaining competitive advantage. This term can be defined as any activity a firm does especially well compared to activities done by rival firms, or any resource a firm possesses that rival firms desire.
Strategic management
A firm must strive to achieve sustained competitive advantage by
(1) continually adapting to changes in external trends and events and internal capabilities, competencies, and resources; and
(2) effectively formulating, implementing, and evaluating strategies that capitalize on those factors.
Individuals most responsible for the success or failure of an organization. Help an organization gather, analyze, and organize information
Strategists
They have various job titles, such as chief executive officer, president, owner, chair of the board, executive director, chancellor, dean, and entrepreneur.
Strategists
A __________ statement answers the question “What do we want to become?” A _________ statement answers the question “What is our business?”
Vision and Mission Statements -
is often considered the first step in strategic planning, preceding even development of a mission statement. __________ are “enduring statements of purpose that distinguish one business from other similar firms. A __________ identifies the scope of a firm’s operations in product and market terms.”
Developing a vision statement; Mission statements
economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization
External Opportunities and Threats
are largely beyond the control of a single organization—thus the word external.
External opportunities and threats
Some Opportunities and Threats
-Availability of capital can no longer be taken for granted.
-Consumers expect green operations and products.
-Marketing is moving rapidly to the Internet.
-Commodity food prices are increasing.
-An oversupply of oil is driving oil and gas prices down.
an organization’s controllable activities that are performed especially well or poorly and are determined relative to competitors.
Internal Strengths and Internal Weaknesses
specific results that an organization seeks to achieve in pursuing its basic mission; ________ means more than one year should be challenging, measurable, consistent, reasonable, and clear
Long-Term Objectives
are essential for organizational success because they provide direction; aid in evaluation; create synergy; reveal priorities; focus coordination; and provide a basis for effective planning, organizing, motivating, and controlling activities.
Objectives
the means by which long-term objectives will be achieved may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures
Strategies
are potential actions that require top-management decisions and large amounts of the firm’s resources.
Strategies
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
Annual objectives
is needed for each long-term objective. These objectives are especially important in strategy implementation, whereas long-term objectives are particularly important in strategy formulation.
A set of annual objectives
the means by which annual objectives will be achieved.
Policies
include guidelines, rules, and procedures established to support efforts to achieve stated objectives.
Policies
The Strategic Management Model
There are three important questions to answer in developing a strategic plan:
-Where are we now?
-Where do we want to go?
-How are we going to get there?
The framework illustrated in Figure 1-1 is a widely accepted, ___________________________________. This model does not guarantee success, but it does represent a clear and practical approach for formulating, implementing, and evaluating strategies.
COMPREHENSIVE STRATEGIC MODEL; comprehensive model of the strategic-management process
STRATEGIC MANAGEMENT BENEFITS
-allows an organization to be more proactive than reactive in shaping its own future;
-allows an organization to initiate and influence (rather than just respond to) activities—and thus to exert control over its own destiny.
-help organizations formulate better strategies through the use of a more systematic, logical, and rational approach for decision making.
BENEFITS TO A FIRM THAT DOES STRATEGIC PLANNING
is a key to successful strategic management. It may be the most important word in management.
Communication
FINANCIAL BENEFITS
- 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.
- High-performing firms seem to make more informed decisions with good anticipation of both short- and long-term consequences.
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
enhances the problem-prevention capabilities of organizations because it promotes interaction among managers.
Strategic management
Besides helping firms avoid financial demise, strategic management offers other tangible benefits, such as:
-enhanced awareness of external threats,
-improved understanding of competitors’ strategies,
-increased employee productivity,
-reduced resistance to change, and
-a clearer understanding of performance–reward relationships.
WHY SOME FIRMS DO NOT STRATEGIC PLANNING?
Ten reasons (excuses) often given for poor or no strategic planning in a firm are as follows:
-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
-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; even Apple Inc. is an example
-Overconfident
-Prior bad experience with strategic planning done sometime/somewhere
PITFALLS IN STRATEGIC PLANNING
Being aware of potential pitfalls and being prepared to address them is essential to success. Here are some pitfalls to watch for and avoid in strategic planning:
-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
-Failing to communicate 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
-Failing to use plans as a standard for measuring performance
-Delegating planning to a “planner” rather than involving all managers
-Failing to involve key employees in all phases of planning
-Failing to create a collaborative climate supportive of change
-Viewing planning as unnecessary or unimportant
-Becoming so engrossed in current problems that insufficient or no planning is done
-Being so formal in planning that flexibility and creativity are stifled
HOW TO GAIN AND SUSTAIN COMPETITIVE ADVANTAGE
Figure 1-3 reveals that to gain and sustain competitive advantages, a firm must create and nurture a clear vision and mission, and then systematically formulate, implement, and evaluate strategies.
COMPARING BUSINESS AND MILITARY STRATEGY
A fundamental difference between military and business strategy is that __________ is formulated, implemented, and evaluated with an assumption of competition, whereas __________ is based on an assumption of conflict.
business strategy; military strategy
Both business and military organizations must adapt to change and constantly improve to be successful
A strong business heritage underlies the study of strategic management. Terms such as objectives, mission, strengths, and weaknesses were first formulated to address problems on the battlefield.
TRUE OR FALSE
FALSE; a strong MILITARY heritage
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.
War
What to do according to Sun Tzu’s: The Art of War Writing
-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 counter-movement
has been applied to many fields well outside of the military. Much of the text is about how to fight wars without actually having to do battle: It gives tips on how to outsmart one’s opponent so that physical battle is not necessary.
Table 1-4 provides several excerpts.
Sun Tzu’s The Art of War
