Group # 4 executed (eg developing a strategy-

supportive culture, creating an effective org

Chapter 1: The Nature of Strategic structure, redirecting marketing efforts,
Management preparing budgets, developing and utilizing
info systems, etc).
Strategic Management
-“action stage” (considered as the most
-achieve and maintain competitive difficult stage)
advantage
Third (Last): Strategy Evaluation
-art and science of formulating,
implementing, and evaluating cross- -All strategies are subject to modification,
functional decisions that enable an therefore are subject to evaluation
organization to achieve its objectives. -Three strategy-evaluation activities are: (1)
reviewing external and internal factors (2)
-synonymous to strategic planning
measuring performance (3) taking corrective
(academia)
actions.
-purpose is to exploit and create new and Sub topic: Intuition
different opportunities for tomorrow -Particularly helpful in making decisions in
Long-range planning situations with great uncertainty or little
precedent.
-tries to optimize for tomorrow the trends of -Intuition and analysis (analytic thinking)
today complement each other and go side by side
in strategic management.
Strategic Plan
Sub topic: Adapting to Change
-A company’s game plan
-Strategic Management Process is made on
-signals commitment to specific markets, the belief that organizations should
policies, procedures, and operations in lieu of continually monitor external and internal
other, “less desirable” courses of action. events and trends and respond to them
through making timely changes and
*Strategic Management Process (3 steps) planning.

-Aimed at allowing organizations to adapt -“What kind of business should we become”

“Are we in the right field(s)” “What new
effectively to change over the long-run.
competitors are entering our industry”
First: Strategy Formulation “Should we reshape our business” “What
strategies should we pursue” “How are our
-Identifying the company’s mission and customers changing” “Are new technologies
vision, SWOT, establishing long-term being developed that could put us out of
objectives, generating alternative strategies, business”
and choosing what strategies to pursue (eg. *Key Terms in Strategic Management
How to allocate resources, expand
Competitive Advantage
operations, form a joint venture, how to avoid
a hostile takeover). -“Anything that a firm does especially well
compared to rival firms.”
Second: Strategy Implementation -ways to have a competitive advantage:
-Establishing annual objectives, device *simply having cash on the firm’s balance
sheet can provide a major competitive
policies, motivate employees, allocate
resources so that formulated strategies are
advantage. Some cash-rich firms are buying scope of a firm’s operations in product and
distressed rivals. market terms.”
*having less fixed assets than rival firms also -Describes the values and priorities of an
can provide major competitive advantages in organization
a global recessions. External Opportunities and Threats
Sustained Competitive Advantage -Refer to economic, social, cultural,
- (1) Continually adapting to changes in demographic, environmental, political, legal,
external trends and events and internal governmental, technological, and
capabilities, competencies, and resources, competitive trends and events that could
and by (2) effectively formulating, significantly benefit or harm an organization
implementing, and evaluating strategies that in the future.
capitalize upon those factors. -Examples: Availability of capital can no
-An increasing number of companies are longer be taken for granted, consumers
gaining a competitive advantage by using the expect green operations and products,
Internet for direct selling and for consumers must see value in all that they
communication with its shareholders who consume, global markets offer the highest
may be dispersed globally. growth in revenues, etc.
-E-commerce is minimizing the expense and -Firms need to formulate strategies to take
cumbersomeness of time, distance, and advantage of external opportunities and to
space in doing business, thus yielding better avoid or reduce the impact of external
customer service, greater efficiency, threats.
improved products, and higher profitability. Environmental Scanning
-Digital communication has become the -“Industry Analysis”
name of the game in marketing.
-The process of conducting research and
Strategists gathering and assimilating external
-Individuals who are most responsible for the information
success or failure of an organization. -Lobbying
-Strategists help an organization gather, Internal Strengths and Weaknesses
analyze, and organize information.
-Are an organization’s controllable activities
-Usually serve in a support or staff role that are performed especially well or poorly.
(usually found in higher levels of
management) Objectives
-CEO, or any manager who has a -Can be defined as specific results that an
responsibility for a unit or division, organization seeks to achieve in pursuing its
responsibility for profit and loss outcomes, or basic mission.
direct authority over a major piece of -Should be challenging, measurable,
business is a strategic manager. consistent, reasonable, and clear.
Vision Statements Long-Term Objectives
-“What do we want to become?” -Performance goals of an organization
-First step in strategic planning, preceding intended to be achieved over a period of
even development of a mission statement. more than a year.
Mission Statements -Especially important in strategy formulation
-“Enduring statements of purpose that Annual Objectives
distinguish one business from other similar -Short-term milestones that organizations
firms. A mission statement identifies the must achieve to reach long-term objectives.
-Especially important in strategy
implementation, represent the basis for
allocating resources.
Policies
-Means by which annual objectives will be
achieved.
- Guide to decision making
-Outline an organization’s expectations of its
employees and managers.

Strategic Management Model

3 questions to ask when developing a

strategic plan:
-Where are we now?
-Where do we want to go?
-How are we going to get there?
Retreats understanding of performance-reward
-Wherein organizations semi-annually relationships. Other benefits include:
conduct formal meetings to discuss and
update the firm’s vision and mission,
as well as its SWOT, strategies,
objectives, policies, and
performance.
Benefits of Strategic
Management
-Help organizations formulate better
strategies through the use of a more
systematic, logical, and rational
approach to strategic ideas.
-NOTE: Communication is a key to
a successful strategic management
-Major aim is to achieve the
understanding of and commitment
from all managers and employees.
-Benefit: opportunity to empower individuals.
*Empowerment (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.
*Participation is a key to gaining commitment
for needed changers.

Subtopic: Financial Benefits

-Businesses using strategic-management
concepts show significant improvement in Why Some Firms Do No Strategic
sales, profitability, and productivity Planning
compared to firms without systematic -Lack of knowledge, poor reward structures,
planning activities. firefighting (more involved in putting out
-High-performing firms seem to make more “fires” or resolving crises and have no time
informed decisions with good anticipation of planning), waste of time, too expensive,
both short and long-term consequences. laziness, content with success, fear of failure,
overconfidence, prior bad experience, self-
Subtopic: Nonfinancial Benefits interest, fear of the
-Enhanced awareness of external threats, an Unknown, honest difference of opinion,
improved understanding of competitors’ suspicion.
strategies, increased employee productivity,
reduced resistance to change, and a clearer
Pitfalls in Strategic Planning

Guidelines for Effective Strategic

Management
Comparing Business and Military The Process of Developing Vision and
Strategy Mission Statements
-Strategy comes from (Greek) strategos, 1. Select several articles about these
which means stratos (the army) and agos (to statements and ask all managers to read
lead) these as background information.
-Key aim of both is “to gain competitive 2. Ask managers themselves to prepare a
advantage” vision and mission statement for the
-Success is a product of both continuous organization.
attention to changing external and internal 3. A facilitator, or committee of top
conditions and the formulation and managers, should then merge these
implementation of insightful adaptations to statements into a single document and
those conditions distribute the draft statements to all
-Difference: bus strategy is formulated, managers.
implemented and evaluated with an 4. A request for modifications, additions, and
assumption of competition, whereas military deletions is needed next, along with a
strategy is based on assumption of conflict. meeting to revise the document.
CHAPTER 2: THE BUSINESS VISION AND 5. To the extent that all managers have input
MISSION into and support the final documents,
Vision Statement organizations can more easily obtain
managers’ support for other strategy
 Answers the question, “What do we formulation, implementation, and evaluation
become?” activities.
 Provides the foundation for
developing a comprehensive mission
statement Importance (Benefits) of Vision and
 Should be established first and Mission Statements
foremost
 Should be short, preferably one 1. To ensure unanimity of purpose within the
sentence organization
Mission Statement 2. To provide a basis, or standard, for
allocating organizational resources
 Answers the question, “ what is our
business?” 3. To establish a general tone or
 Declaration of an organization’s organizational climate
“reason for being” 4. To serve as a focal point for individuals to
 Essential for effectively establishing identify with the organization’s purpose and
objectives and formulating strategies direction, and to deter those who cannot from
 Sometimes called a creed statement, participating further in the organization’s
a statement of purpose, a statement activities
of philosophy, a statement of beliefs, 5. To facilitate the translation of objectives
a statement of business principles, or into a work structure involving the
a statement “defining our business”
assignment of tasks to responsible elements
 Reveals what an organization wants within the organization
to be and whom it wants t serve
 Foundation for priorities, strategies, 6. To specify organizational purposes and
plans, and work assignments then to translate these purposes into
objectives in such a way that cost, time, and
performance parameters can be assessed
and controlled.
Characteristics of a Mission Statement 8. Project an organized, motivated
A Declaration of Attitude organization worthy of support.

 Mission statement is a declaration of 9. Achieve higher organizational

attitude and outlook performance.
 A good mission statement allows for 10. Achieve synergy among all managers
the generation and consideration of a and employees.
range of feasible alternative
objectives and strategies without
unduly stifling management Mission Statement Components
creativity. 1. Customers—Who are the firm’s
 Mission statement needs to be broad customers?
to reconcile differences effectively
among, and appeal to, an 2. Products or services—What are the firm’s
organization’s diverse stakeholders, major products or services?
the individuals and group of 3. Markets—Geographically, where does the
individuals who have a special stake firm compete?
or claim on the company
4. Technology—Is the firm technologically
A Customer Orientation current?
 Describes an organization’s purpose, 5. Concern for survival, growth, and
customers, products or services, profitability—Is the firm committed to growth
markets, philosophy, and basic
and financial soundness?
technology.
6. Philosophy—What are the basic beliefs,
10 Benefits of Having a Clear Mission and
values, aspirations, and ethical priorities of
Vision
the firm?
1. Achieve clarity of purpose among all
7. Self-concept—What is the firm’s distinctive
managers and employees.
competence or major competitive
2. Provide a basis for all other strategic advantage?
planning activities, including the internal and
8. Concern for public image—Is the firm
external
responsive to social, community, and
assessment, establishing objectives, environmental concerns?
developing strategies, choosing among
9. Concern for employees—Are employees a
alternative strategies, devising policies,
valuable asset of the firm?
establishing organizational structure,
allocating resources, and Characteristics of a Mission Statement
evaluating performance. • Broad in scope; do not include monetary
amounts, numbers, percentages, ratios, or
3. Provide direction.
objectives
4. Provide a focal point for all stakeholders of
• Less than 250 words in length
the firm.
• Inspiring
5. Resolve divergent views among
managers. • Identify the utility of a firm’s products
6. Promote a sense of shared expectations • Reveal that the firm is socially responsible
among all managers and employees. • Reveal that the firm is environmentally
7. Project a sense of worth and intent to all responsible
stakeholders. • Include nine components
customers, products or services, markets, 3. Political, governmental, and legal
technology, concern for survival/growth/ forces
profits, philosophy, self-concept, concern for 4. Technological forces
public image, concern for employees 5. Competitive forces

• Reconciliatory A Comprehensive Strategic-Management

• Enduring Model
Chapter 3: The External
Assessment
External Strategic Management Audit
- Sometimes called environmental
scanning or industry analysis
The Nature of An External Audit
External audit

- focuses on identifying and

evaluating trends and events beyond
the control of a single firm, such as
increased foreign competition,
population shifts to the Sunbelt, an
aging society, consumer fear of
traveling, and stock market volatility.
- reveals key opportunities and threats
confronting an organization so that
managers can formulate strategies to
take advantage of the opportunities
and avoid or reduce the impact of
threats.
- develops a finite list of opportunities
that could benefit a firm and threats
that should be avoided.
- not aimed at developing an
exhaustive list of every possible The Process of Performing an External
factor that could influence the Audit
business; rather, it is aimed at
identifying key variables that offer - must involve as many managers and
actionable responses. employees as possible
- a company first must gather
Key External Force competitive intelligence and
information about economic, social,
- can be divided into five broad
cultural, demographic,
categories:
1. Economic forces environmental, political,
2. Social, cultural, demographic, and governmental, legal, and
natural environment forces technological trends
 Freund emphasized that these key Advantages and Disadvantages of a
external factors should be: Weal Dollar for Domestic Firms

1. important to achieving long-term and

annual objectives
2. measurable
3. applicable to all competing firms,
and
4. hierarchical in the sense that some
will pertain to the overall company
and others will be more narrowly
focused on functional or divisional
areas.

The Industrial Organization(I/O) View

- approach to competitive advantage

advocates that external (industry) Social, Cultural, Demographic, and
factors are more important than Natural Environment Forces
internal factors in a firm achieving
competitive advantage. - changes have a major impact on
- Porter’s Five- Forces Model is an virtually all products, services,
example of the I/O perspective, markets, and customers.
which focuses on analyzing external
forces and industry variables as a
basis for getting and keeping
competitive advantage.

Economic Forces

- are the factors that help to determine

the competitiveness of the
environment in which the firm
operates
Key Social, Cultural, Demographic, and Technological Forces
Natural Environment Variables
Internet

- has changed the very nature of

opportunities and threats by altering
the life cycles of products, increasing
the speed of distribution, creating
new products and services, erasing
limitations of traditional geographic
markets, and changing the historical
trade-off between production
standardization and flexibility.
- altering economies of scale,
changing entry barriers, and
redefining the relationship between
industries and various suppliers,
creditors, customers, and
competitors.
- chief information officer (CIO) and
chief technology officer (CTO). This
Political, Governmental, and Legal trend reflects the growing
Forces importance of information
technology (IT) in strategic
- are major regulators, deregulators,
management
subsidizers, employers, and
customers of organizations. Political, Competitive Force
governmental, and legal factors,
therefore, can represent key - An important part of an external
opportunities or threats for both audit is identifying rival firms and
small and large organizations. determining their strengths,
weaknesses, capabilities,
opportunities, threats, objectives,
and strategies.

Seven characteristics describe the most

competitive companies:

1. Market share matters; the 90th share

point isn’t as important as the 91st, and
nothing is more dangerous than falling to
89.

2. Understand and remember precisely

what business you are in. Market commonality can be defined as the
number and significance of markets that a
3. Whether it’s broke or not, fix it—make it firm competes in with rivals.
better; not just products, but the
whole company, if necessary. Resource similarity is the extent to which
the type and amount of a firm’s internal
4. Innovate or evaporate; particularly in resources are comparable to a rival.
technology-driven businesses,
nothing quite recedes like success. Porter’s Five-Forces Model of competitive
analysis is a widely used approach for
5. Acquisition is essential to growth; the developing strategies in many industries.
most successful purchases are in
niches that add a technology or a The nature of competitiveness in a given
related market. industry can be viewed as a composite of
five forces:
6. People make a difference; tired of hearing
it? Too bad. 1) Rivalry among competing firms
2) Potential entry of new competitors
7. There is no substitute for quality and no 3) Potential development of
greater threat than failing to be cost- substitute products
competitive on a global basis. 4) Bargaining power of suppliers
5) Bargaining power of consumers
Key Question about Competitors
The following three steps for using Porter’s
Five-Forces Model can indicate whether
competition in a given industry is such that
the firm can make an acceptable profit:

1. Identify key aspects or elements of each

competitive force that impact the
firm.

2. Evaluate how strong and important each

element is for the firm.
Competitive Intelligence Programs
3. Decide whether the collective strength of
- as formally defined by the Society of
the elements is worth the firm
Competitive Intelligence
entering or staying in the industry.
Professionals (SCIP), is a
systematic and ethical process for
Rivalry Among Competing Firms
gathering and analyzing information
about the competition’s activities and Rivalry among competing firms is usually
general business trends to further a the most powerful of the five competitive
business’s own goals (SCIP Web forces. The strategies pursued by one firm
site).
can be successful only to the extent that costly.
they provide competitive advantage over the
strategies pursued by rival firms. Changes In more and more industries, sellers are
in strategy by one firm may be met with forging strategic partnerships with select
retaliatory counter moves, such as lowering suppliers in efforts to :
prices, enhancing quality, adding features,
(1) reduce inventory and logistics costs
providing services, extending warranties,
(e.g., through just-in-time deliveries);
and increasing advertising.
(2) speed the availability of next-generation
Potential Entry of New Competitors
components;
- Whenever new firms can easily
(3) enhance the quality of the parts and
enter a particular industry, the
components being supplied and reduce
intensity of competitiveness among
defect rates; and
firms increases.
- Barriers to entry, however, can (4) squeeze out important cost savings for
include the need to gain economies both themselves and their suppliers.
of scale quickly, the need to gain
technology and specialized know- Bargaining Power of Consumers
how, the lack of experience, strong
customer loyalty, strong brand When customers are concentrated or large
preferences, large capital or buy in volume, their bargaining power
requirements, lack of adequate represents a major force affecting the
distribution channels, government intensity of competition in an industry.
regulatory policies, tariffs, lack of
access to raw materials, possession Rival firms may offer extended warranties or
of patents, undesirable locations, special services to gain customer loyalty
counterattack by entrenched firms, whenever the bar- gaining power of
and potential saturation of the consumers is substantial
market.
The bargaining power of consumers can be
Potential Development of Substitute the most important force affecting
competitive advantage.
Products
Consumers gain increasing bargaining
Bargaining Power of Suppliers
power under the following circumstances:
- The bargaining power of suppliers
1. If they can inexpensively
affects the intensity of competition in
switch to competing brands
an industry, especially when there is
or substitutes
a large number of suppliers, when
2. If they are particularly
there are only a few good substitute
important to the seller
raw materials, or when the cost of
3. If sellers are struggling in the
switching raw materials is especially
face of falling consumer
 demand
4. If they are informed about
sellers’ products, prices, and
costs
5. If they have discretion in
whether and when they
purchase the product

Forecasting Tools and Techniques

Forecasts are educated assumptions about

future trends and events.

Forecasting is a complex activity because of

factors such as technological innovation,
cultural changes, new products, improved
services, stronger competitors, shifts in
government priorities, changing social
values, unstable economic conditions, and
unforeseen events.

Industry Analysis: The External Factor

Evaluation (EFE) Matrix

An External Factor Evaluation (EFE) Matrix

allows strategists to summarize and
evaluate economic, social, cultural,
demographic, environmental, political,
governmental, legal, technological, and
competitive information.

The Competitive Profile Matrix (CPM)

The Competitive Profile Matrix (CPM)

identifies a firm’s major competitors and its
particular strengths and weaknesses in
relation to a sample firm’s strategic position.
The weights and total weighted scores in
both a CPM and an EFE have the same
meaning.