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Chapter 01 - Strategic Management
1-1
whole or part.
D. Benefits of Strategic Management
1. Using the strategic management approach, managers at all levels of the firm interact
in planning and implementing.
a) The behavioral consequences of strategic management are similar to those of
participative decision making.
b) An accurate assessment of the impact of strategy formulation on organizational
performance requires not only financial evaluation criteria but also nonfinancial
evaluation criteria—measures of behavior-based effects.
(1) Promoting positive behavioral consequences enables the firm to achieve its
financial goals.
(2) Regardless of the profitability of strategic plans, several behavioral effects
of strategic management improve the firm’s welfare:
(a) Strategy formulation activities enhance the firm’s ability to prevent
problems.
(b) Group-based strategic decisions are likely to be drawn from the best
available alternatives.
(c) The involvement of employees in strategy formulation improves their
understanding of the productivity-reward relationship in every
strategic plan and, thus, heightens their motivation.
(d) Gaps and overlaps in activities among individuals and groups are
reduced as participation in strategy formulation clarifies differences
in roles.
(e) Resistance to change is reduced.
II. The Strategic Management Process
A. Businesses vary in the processes they use to formulate and direct their strategic
management activities.
planners of similar size.
2. Small businesses that rely on the strategy formulation skills and limited time of an
in their industries.
3. Firms with multiple products, markets, or technologies tend to use more complex
strategic management systems.
Chapter 01 - Strategic Management
1-2
whole or part.
1. Because of the similarity among the general models of the strategic management
thought in the strategic management area.
2. Exhibit 1.6, Strategic Management Model, serves three major functions.
strategic management process.
b) It is the outline for this book.
C. Components of the Strategic Management Model
1. This section will define and briefly describe the key components of the strategic
management model.
a) Company Mission
(1) The mission of a company is the unique purpose that sets it apart from
other companies of its type and identifies the scope of its operations.
(2) Company mission describes the company’s product, market, and
technological areas of emphasis in a way that reflects the values and
priorities of the strategic decision makers.
(3) Social responsibility is a critical consideration for a company’s strategic
decision makers since the mission statement must express how the
company intends to contribute to the societies that sustain it.
(4) A firm needs to set social responsibility aspirations for itself, just as it does
in other areas of corporate performance.
b) Internal Analysis
(1) The company analyzes the quantity and quality of its financial, human, and
physical resources.
(2) The company also assesses the strengths and weaknesses of its
management and organizational structure.
(3) Finally, it contrasts the company’s past successes and traditional concerns
with its current capabilities in an attempt to identify the company’s future
capabilities.
c) External Environment
(1) A firm’s external environment consists of all the conditions and forces that
affect its strategic options and define its competitive situation.
(2) The strategic management model shows the external environment as three
interactive segments: the remote, industry, and operating environments.
Chapter 01 - Strategic Management
1-3
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
d) Strategic Analysis and Choice
(1) Simultaneous assessment of the external environment and the company
opportunities.
(2) These opportunities are possible avenues for investment. However they
must be screened through the criterion of the company mission to generate
a set of possible and desired opportunities.
(3) Strategic analysis and choice in single or dominant product/service
e) Long-Term Objectives
(1) The results that an organization seeks over a multiyear period are its long-
term objectives.
employee development.
f) Generic and Grand Strategies
(1) Many businesses explicitly and all implicitly adopt one or more generic
options.
(3) Enlightened managers seek to create ways their firm possesses both low
cost and differentiation competitive advantages as part of their overall
generic strategy.
(4) They usually combine these capabilities with a comprehensive, general
to be achieved.
(5) 14 basic approaches can be identified: concentration, market development,
product development, innovation, horizontal integration, vertical
integration, joint venture, strategic alliances, consortia, concentric
diversification, conglomerate diversification, turnaround, divestiture, and
liquidation.
g) Short-Term Objectives
Chapter 01 - Strategic Management
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whole or part.
(1) Short-term objectives are the desired results that a company seeks over a
period of one year or less.
(2) Companies typically have many short-term objectives to provide guidance
for their functional and operational activities.
h) Action Plans
(1) Action plans translate generic and grand strategies into action.
(2) They do this by using four elements
(3) The identify specific functional tactics and actions, establish a clear
time frame to complete each action, assign responsibility for each
action, and link action to specific objectives
i) Functional Tactics
build a sustainable competitive advantage.
(2) These short-term, limited-scope plans are called tactics.
(3) Managers in each business function develop tactics that delineate the
functional activities undertaken in their part of the business and usually
include them as a core part of their action plan.
advantage.
j) Policies that Empower Action
(1) Speed is a critical necessity for success in today’s competitive, global
marketplace.
repetitive or time-sensitive managerial decision making.
(4) Creating policies that guide and preauthorize the thinking, decisions, and
actions of operating managers and their subordinates in implementing the
business’s strategy is essential for establishing and controlling the ongoing
process of the firm in a manner consistent with the firm’s strategic
objectives.
subordinates in implementing business strategies.
k) Restructuring, Reengineering, and Refocusing the Organization
Chapter 01 - Strategic Management
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whole or part.
(1) Here, the process of strategic management takes an internal focus—doing
work efficiently and effectively.
(2) The intense competition in the global market place has made internally
focused questions recast themselves with unprecedented attentiveness to
the marketplace.
recast their organization.
(4) The company’s structure, leadership, culture, and reward systems may all
be changed to ensure cost competitiveness and quality demanded by
unique requirements of its strategy.
l) Strategic Control and Continuous Improvement
and making necessary adjustments.
(2) In contrast to post-action control, strategic control seeks to guide action on
behalf of the generic and grand strategies as they are taking place and
when the end results are still several years away.
(3) The rapid, accelerating change of the global marketplace of the last 10
control in many organizations.
(4) Continuous improvement provides a way for managers to provide a form
of strategic control that allows their organization to respond more
proactively and timely to rapid developments in hundreds of areas that
influence a business’s success.
D. Strategic Management as a Process
the achievement of an aim.
a) The strategic management model in Exhibit 1.6, Strategic Management
Model, depicts a process.
b) In the strategic management process, the flow of information involves historical,
in the actions of the business.
d) The interrelated stages of the process are the 11 components discussed in the
previous section.
e) Finally, the aim of the process is the formulation and implementation of
strategies that work, achieving the company’s long-term mission and near-term
objectives.
2. Viewing strategic management as a process has several important implications.
Chapter 01 - Strategic Management
1-6
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
a) First, a change in any component will affect several or all of the other
components.
(1) Most of the arrows in the model point two ways, suggesting that the
flow of information is usually reciprocal.
(a) The external environment has affected the company’s mission, and
the revised mission signals a competitive condition in the
environment. (example)
b) A second implication is that strategy formulation and implementation are
sequential.
(1) The process begins with development or reevaluation of the company
mission.
environment.
(b) Then follow, in order, strategic choice, definition of long-term
objectives, design of the grand strategy, definition of short-term
objectives, design of operating strategies, institutionalization of the
strategy, and review and evaluation.
(a) A firm’s strategic posture may have to be reevaluated in response to
changes in any of the principle factors that determine or affect its
performance.
(b) Entry by a major new competitor, the death of a prominent board
equal attention each time planning activity takes place.
(e) Firms in an extremely stable environment may find that an in-depth
assessment is not required every five years.
(f) Companies are often satisfied with only a minimal amount of time
addressing this subject.
is undertaken at these times.
c) A third implication is the necessity of feedback from institutionalization, review,
and evaluation to the early stages of the process.
Chapter 01 - Strategic Management
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whole or part.
(1) Feedback can be defined as the analysis of post-implementation results
that can be used to enhance future decision making.
(a) Therefore, as indicated in Exhibit 1.6, strategic managers should
assess the impact of implemented strategies on external
environments.
actions.
(c) Strategic managers also should analyze the impact of strategies on
the possible need for modifications in the company mission.
d) A fourth implication is the need to regard it as a dynamic system.
affect interrelated and interdependent strategic activities.
(2) Managers should recognize that the components of the strategic process
are constantly evolving but that formal planning artificially freezes those
components, much as an action photograph freezes the movement of a
swimmer.
