Strategic management involves formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives. It includes developing a vision and mission, analyzing strengths/weaknesses and external opportunities/threats, setting long-term objectives, and generating strategies. Implementation requires setting annual objectives, allocating resources, and developing supportive company culture and structures. Evaluation assesses strategy effectiveness. Strategic management allows organizations to proactively shape their future through a systematic, rational approach to strategic decision making.
Strategic management involves formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives. It includes developing a vision and mission, analyzing strengths/weaknesses and external opportunities/threats, setting long-term objectives, and generating strategies. Implementation requires setting annual objectives, allocating resources, and developing supportive company culture and structures. Evaluation assesses strategy effectiveness. Strategic management allows organizations to proactively shape their future through a systematic, rational approach to strategic decision making.
Strategic management involves formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives. It includes developing a vision and mission, analyzing strengths/weaknesses and external opportunities/threats, setting long-term objectives, and generating strategies. Implementation requires setting annual objectives, allocating resources, and developing supportive company culture and structures. Evaluation assesses strategy effectiveness. Strategic management allows organizations to proactively shape their future through a systematic, rational approach to strategic decision making.
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CHAPTER # 1 THE NATURE OF STRATEGIC MANAGEMENT
Strategic management: the art and science of formulating, implementing and
evaluating cross-functional decisions that enable an organization to achieve objectives. *The term strategic management in this text is used synonymously with the term strategic planning. Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. The purpose of strategic management is to exploit and create new and different opportunities for tomorrow, long-range planning in contrast, tries to optimize for tomorrow the trends of today. The term strategic planning originated in the 1950s and was very popular between the mid-1960s and the mid-1970s. However in 1990s brought the revival of strategic planning and the process is widely practiced today in the business world. A strategic plan is, in essence a company’s game plan. The term strategic management is used at many colleges and universities as the title for the capstone course in business administration. Stages of strategic management The strategic management process consists of three stages: formulating, strategy implementation, and strategy evaluation. Strategy formulation includes developing a vision and a mission, identifying an organization external opportunities and threats, determining internal strengths and weakness, establishing long-term objectives, generating alternative strategies and choosing particular strategies to purse. Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees and allocate resources so that formulated strategies can be executed. Strategy implementation includes developing a strategy-supportive culture, creating an effective organization structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. Strategy implementation is often called the “action stage” Strategy implementation activities affect all employees and managers in an organization, every division and department must decide on answers to questions such as “what must we done to implement our part of the organization`s strategy? And how best can we get the job done? Keys terms in strategic management Nine keys terms: competitive advantage, strategies, vision and mission statements, external opportunities and threats, internal strengths and weakness, long term objectives, strategies , annual objectives, and policies. Competitive advantage Strategic management is all about gaining and maintaining competitive advantage. This term can be defined as “anything that a firm does especially well compared to rival firms”. Getting and keeping competitive advantage is essential for long term success in an organization. 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 by (2) effectively formulating, implementing and evaluating strategies that capitalize upon those factors. An increasing number of companies are gaining a competitive advantage by using the Internet for direct selling and for communication with suppliers, customers, creditors, partners, shareholders, clients and competitors who may be dispersed globally. Strategies Strategies are the individuals who are most responsible for the success or failure of an organization. Jay conger, professors of organizational behavior at the London business school and author of building leaders says, “All strategists have to be chief learning officers. We are in an extended period of change. If our leaders aren’t highly adaptive and great models during the period, then our companies won’t adapt either, because ultimately leadership is about being a role model.” Strategies help an organization gather, analyze and organize information. The CEO is the most visible and critical strategic manager. Strategies differ in their attitudes, values, ethics, willingness to take risks, concern for social responsibility, concern for profitability, concern for short run versus long run aims, and management style. Vision and mission statements Vision statement answer the question “What do we want to become?” Mission statement are “enduring statements of purpose that distinguish one business from similar firms. A mission statement identifies the scope of a firms operations in product and market terms”. “What is our business?” A clear mission statement describes the values and priorities of an organization. A mission statement broadly charts the future direction of an organization. External opportunities and threats External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental and competitive trends and events that could significantly benefit or harm an organization in the future. Environmental scanning or industry analysis is the process of conducting research and gathering and assimilating external information. Internal strengths and weakness Internal strengths and internal weakness are organizations controllable activities that are performed especially well or poorly. They arise in the management, marketing finance/accounting, production/operations, research and development, and management information systems activities of a business. Strengths and weakness are determined relative to competitors, relative deficiency or superiority is important information. (Reputation for quality) Internal factors can be determined in number of ways, including computing ratios, measuring performance and comparing to past periods and industry averages. 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 should be challenging, measurable, consistent, reasonable, and clear. Strategies Strategies are the means by which long-term objectives will be achieved. Business strategies 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. Annual objectives Annual objectives are short term milestones that organizations must achieve to reach long-term objectives. Annual objectives should be measurable, quantitative, challenging, realistic, consistent and prioritized. A set of annual objectives is needed for each long-term objective. Annual objectives are especially important in strategy implementation, whereas long- term objectives are particularly important in strategy formulation. Policies Policies are the means by which annual objectives will be achieved. The strategic management model These 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? Identifying organizations existing vision, mission, objectives, and strategies is the logical starting point for strategic management. The strategic management process is dynamic and continues. Strategic-management model that business ethics/social responsibility/environmental sustainability issues impact all activities in the model. Application of the strategic management process is typically more formal in larger and well established organizations. Formality refers to the extent that participants, responsibilities, authority, duties and approach are specified. Smaller business tend to be less formal. Firms that have many divisions, products, markets and technologies also tend to be formal in applying strategic management concepts. Benefits of strategic management Strategic management allows an organization to be more proactive than reactive in shaping its own future. Helps organizations formulate better strategies through the use of a more systematic logical and rational approach to strategic choice. Communication is a key to successful strategic management. Through involvement process, in others words, through dialogue and participation, managers and employees become committed to supporting the organization. Understanding may be the most important benefit of strategic management, followed by commitment. When managers and employees understand what the organization is doing and why, they often fell they are part of the firm and become committed to assisting. Empowerment is the act of strengthening employees sense of effectiveness by encouraging them to participate in decision making and to exercise initiative and imagination and rewarding them for doing so. The worst thing strategists can do is develop strategic plans themselves and then present them to operating managers to execute. Nonfinancial benefits Strategic management enhances the problem prevention capabilities of organizations because it promotes interaction among managers at all divisional and functional levels. In addition to empowering managers and employees, strategic management often brings order and discipline to an otherwise floundering firm. Why some firms do no strategic planning Some firms do not engage in strategic planning and some firms do strategic planning but receive no support from managers and employees. Ex: lack of knowledge or experience in strategic planning, poor reward structures, firefighting, waste of time. Guidelines for effective strategic management Strategic management must not become a self-perpetuating bureaucratic mechanism, rather, it must be a self-reflective learning process that familiarizes managers and employees in the organization with key strategic issues and feasible alternatives for resolving those issues. Keep the strategic management process as simple and nonroutine as possible, Remember strategic management is a process for foresting learning and action, not merely a formal system for control. An important guideline for effective strategic management is open-mindedness. Comparing business and military strategy The word strategy comes from the Greek strategos, which refers to a military general and combines stratos (the army) and ago (to lead). A key aim of both business and military strategy is “ to gain competitive advantage”. Both business and military organizations must adapt to change and constantly improve to be successful.