Strategic Management Concepts: A Competitive Advantage Approach, Concepts and Cases Current 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. b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.Defining Strategic Management (1 of 3) Strategic Management * The art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectivesDefining Strategic Management (2 of 3) + 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.Defining Strategic Management (3 of 3) + Astrategic plan is a company’s game plan. Astrategic 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, no. 1 (February 1989): 91. See also Anik Ratnaningsih, Nadjadii Anwar, Patdono Suwignio, 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, no. 4 (October 2010):* 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: = reviewing external and internal factors that are the bases for current strategies = measuring performance = taking corrective actionsKey Terms in Strategic Management (1 of 6) 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. ¢ Afirm must strive to achieve sustained competitive advantage\eury * Strategists — Individuals most responsible for the success or failure of an organization — Help an organization gather, analyze, and organize information * Vision and Mission Statements — Avision statement answers the question “What do we want to become?” — Amission statement answers the question “What is our business?”\woury « 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, product development, market penetration, retrenchment, divestiture, liquidation, and joint venturesFigure 1.2 The Basic SWOT Matrix Format(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* 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.Benefits to a Firm That Does Strategic Planning eae =* 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 %Financial Benefits * Organizations using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities I * 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 I * No monetary rewards for doing planning * No punishment for not planning * Too busy “firefighting” (resolving internal crises) to plan ahead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 1 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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 supportive of change Viewing planning as unnecessary or unimportant Viewing planning activities as silos comprised of independent parts Becoming so engrossed in current problems that insufficient or no planning is doneComparing Business and Military Strategy + Afundamental 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 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 counter- movementExamples of Employability Skills From Using Text * Critical thinking * Collaboration + Knowledge application and analysis * Business ethics and social responsibility * Information technology * Data literacyHow to Gain and Sustain Competitive Advantage