Lecture 1: Strategic Management Essentials (Chap 1) Flashcards
What is Strategic Management?
It is the art & science of formulating, implementing & evaluating cross-functional decisions that enable an org. to achieve its objectives.
What is another term for Strategic Management?
It is called Strategic Planning
What’s the difference between strategic management and strategic planning then?
Strategic management refers to strategy formulation, implementation & evaluation. Whereas, strategy planning only refers to strategy formulation.
What actually is strategic planning?
It’s a co. game plan, which results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, procedures and operations.
What are the stages or process of strategic management?
Stage 1: Strategy formulation
Stage 2: Strategy implementation
Step 3: Strategy evaluation
Step 1: Strategy Formulation
1) Develop a vision & mission
2) SWOT (identifying org. internal strengths & weaknesses and external opportunities & threats)
3) Establish long-term objectives
4) Generate alternative strategies
5) Choosing a strategy to pursue
Step 2: Strategy Implementation
1) Establish annual objectives
2) Devise policies
3) motivate employees
4) Allocate resources so that those formulated strategies in step 1 can be implemented
What is step 2: strategy implementation also known as?
It is known as the “action stage” and is the most diff stage in strategic management.
What is the challenge of strategy implementation?
It is to stimulate managers & employees throughout an org. to work w/ pride & enthusiasm towards achieving the stated objectives.
Step 3: Strategy evaluation
1) It is the final stage of strategic management
2) Primary means for determining when particular strategies are not working well
3) All strategies are subject to future modification as external & internal factors change constantly
What are the 3 fundamental strategy-evaluation activities?
1) review external & internal factors that are the bases for current strategies
2) measure performance
3) take corrective measures to correct those strategies that aren’t suitable
What is the aim of Strategic Management?
It aims to organize qualitative & quantitative info in a way that allows effective decisions to be made under conditions of uncertainty.
What is the aim of Strategic Management Process?
It is aimed at allowing org. to adapt effectively to change over the long run.
What are the 9 key terms in Strategic Management?
- Competitive advantage
- Strategists
- Vision & mission statements
- External opportunities & threats
- Internal strengths & weaknesses
- Long-term objectives
- Strategies
- Annual objectives
- Policies
Key term 1: Competitive advantage
An activity a firm does especially well compared to activities done by rival firms or any resources a firm possesses that rival firms desire.
How can a firm sustain competitive advantage?
1) Continually adapting to changes in external trends & events and internal capabilities, competencies and resources
2) Effectively formulating, implementing & evaluating strategies that capitalize on those factors
Key term 2: Strategists
Individuals who are most responsible for the success or failure of an org.
What are the roles of a strategists?
1) Gather, analyze and organize info for an org.
2) Track industry & competitive trends
3) Develop forecasting models & scenario analyses
4) Evaluate corporate & divisional performance
5) Spot emerging market opportunities
6) Identify business threats & develop creative action plans
Key term 3: Vision and Mission statement
Vision statement: 1st step in strategic planning, even before a mission statement.
Mission statement: enduring statement of purpose that distinguish one business from other similar firms.
Key term 3: Vision and Mission statement
Vision statement: 1st step in strategic planning, even before a mission statement.
Mission statement: enduring statement of purpose that distinguish one business from other similar firms.
What is the main aim of a mission statement?
To serve as a constant reminder to its employees of why the org. exists & what the founders envisioned when they put their fame & fortune at risk. (the scope of a firm’s operation in product and market terms)
Key term 4: External Opportunities and Threats
Economic, social, cultural, demographic, environmental, political, legal, governmental, technological & competitive trends (external) and events that could significantly benefit or harm an org.
What is the basic principle of Strategic Management?
need to formulate strategies to take advantage of external opportunities & avoid or reduce the impact of external threats.
What is environmental scanning or industry analysis?
It is the research & gathering of external info to identify what are the opportunities to undertake and threats to avoid.
Key term 5: Internal Strengths & Weaknesses
An org. controllable activities that are performed especially well or poorly.
How are internal strengths & weaknesses determined?
They’re determined relative to competitors. Org. strive to pursue strategies that capitalize on internal strengths and eliminate internal weaknesses.
How are strategies formulated & resources allocated?
It is based on the specificity of underlying external and internal factors.
Key term 6: Long-term objectives
Objectives are specific results that an org. seeks to achieve in pursuing its basic mission.
Why are objectives essential to a co.?
1) It provides a direction for the co.
2) Aid in evaluation
3) Creates synergy
4) Reveal priorities
5) Focus coordination
6) Provide a basis for effective planning, organizing, motivating & controlling activities
Key term 7: Strategies
The means by which long-term objectives will be achieved. Potential actions that require top-management decisions & large amount of the firm’s resources.
Key term 8: Annual objectives
Short-term milestones that org. must achieve to reach long-term objectives. A set of annual objectives is needed for each long-term objective. These objectives are important in strategy implementation. Whereas long-term objectives are important in strategy formulation. Annual objectives also provide the basis for allocating resources.
Key term 9: Policies
The means by which annual objectives will be achieved. It includes guidelines, rules and procedures established to support efforts to achieve the stated objectives. Acts as a guide / outline an org. expectation of its employees and managers and to make decision.
Benefit of Strategic Management
It allows an org. to be more proactive in shaping its own future and initiate and influence rather than just respond.
Benefits to a firm that does strategic planning
1) Enhanced communication between managers and employees
2) Deeper/improved understanding about a certain goal or objective of an org.
3) Greater commitment from employees due to rewarding system provided by the org.
4) All managers & employees are on the same mission to help the firm succeed & achieve its goals.
What are the financial benefits of implementing strategic management/ systematic planning?
1) They tend to show significant improvement in sales, profitability and productivity compared to firms w/o systematic planning
2) High-performing firms tend to do systematic planning to prepare for any future fluctuations in their external & internal environments.
What are the non-financial benefits from implementing strategic management?
1) Enhanced awareness of external threats
2) improved understanding of competitors’ strategies
3) Reduced resistance to change
4) Clearer understanding of performance-reward relationships
5) Promotes interaction/ communication among managers at all divisional & functional levels.
6) view change as an opportunity instead of a threat.
What are some of the reasons why firms do no strategic planning?
1) No formal training in strategic management
2) No understanding/ appreciation for the benefits of strategic planning
3) No monetary rewards for planning; no punishment for not planning
4) Too busy “firefighting” (resolve internal conflicts)
5) View planning as a waste of time
6) content w/ current success (success today doesn’t guarantee success tmr)
7) Overconfident
8) Prior bad experience w/ strategic planning
What are some of the pitfalls in strategic planning?
1) To gain control over decisions & resources
2) Merely to satisfy accreditation or regulatory req.
3) Failing to communicate the plan to employees, who continue working in the dark
4) Top managers make intuitive decisions that conflict w/ the formal plan
5) Failing to use plan as a standard for measuring performance
6) Top managers not actively supporting the strategic-planning process
What is the difference between business strategy and military strategy?
Business strategy is formulated, implemented & evaluated w/ an assumption of competition. Whereas, military strategy is based on the assumption of conflict.
What is the cycle of Strategic Management: To gain and sustain competitive advantage
- Establish a clear vision and mission.
- Formulate strategies: collect, analyze & establish a clear strategic plan
- Implement strategies: establish structure, allocate resources, motivate & reward
- Evaluate & monitor results: take corrective measures, adapt to changes
