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Chapter 1 Notes

Strategic management involves formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives. It includes three stages: strategy formulation by analyzing strengths, weaknesses, opportunities, and threats to establish objectives and strategies; strategy implementation through setting annual objectives and allocating resources; and strategy evaluation by measuring performance and making corrections. Strategic management allows organizations to proactively shape their future and control their own destiny rather than just reacting to external factors. It can provide financial benefits like improved sales and profitability as well as non-financial benefits such as increased productivity and reduced resistance to change.

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91 views

Chapter 1 Notes

Strategic management involves formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives. It includes three stages: strategy formulation by analyzing strengths, weaknesses, opportunities, and threats to establish objectives and strategies; strategy implementation through setting annual objectives and allocating resources; and strategy evaluation by measuring performance and making corrections. Strategic management allows organizations to proactively shape their future and control their own destiny rather than just reacting to external factors. It can provide financial benefits like improved sales and profitability as well as non-financial benefits such as increased productivity and reduced resistance to change.

Uploaded by

InesBouguerra
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 1 Notes

 Strategic Management/Planning: the art and science of formulating, implementing,


and evaluating cross-functional decisions that enable an organization to achieve its
objectives.
 Refers to strategy formulation, implementation, and evaluation with strategic planning
referring only to strategy formulation.
 A strategic plan results from tough managerial choices among numerous good
alternatives, and it signals a commitment to specific markets, policies, procedures, and
operations.

Stages of Strategic Management:


 Strategy Formulation:
o Developing a vision & mission.
o Identifying an organization’s external opportunities & threats.
o Determining internal strengths & weaknesses.
o Establishing long-term objectives.
o Generating alternative strategies.
o Choosing particular strategies to pursue.
 What new business 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?
 Strategy Implementation:
o Requires a firm to establish annual objectives, devise policies, motivate employees, and
allocate resources so that formulated strategies can be executed.
o Often called the action stage.
 Strategy Evaluation:
o Determining which strategies are not working well.
o Three fundamental activities:
 Reviewing external & internal factors that are the bases for current strategies.
 Measuring performance.
 Taking corrective actions.
Key Terms in Strategic Management:
 Competitive Advantage: could be any resources a firm possesses that rival firms
desire or any activity a firm does especially well compared to activities done by rival
firms.
 A firm should strive to achieve a competitive advantage.
 Strategists:
 Vision & Mission Statements:
o A vision statement answers to “What do we want to become?”
o A mission statement answers to “What is our business?”
 External Opportunities & Threats:
o Economic, social, cultural, demographic, environmental, political, legal, and competitive
trends and events that could benefit or harm the firm.
 Internal Strengths & Internal Weaknesses:
o An organization’s controllable activities are performed especially well or poorly.
o Determined relative to competitors.
 Long-Term Objectives:
o Results that an organization seeks to achieve in pursuing its basic mission.
o Long-term means more than one year.
o Should be challenging, measurable, consistent, reasonable, and clear.
 Strategies:
o How will the long-term objectives be achieved?
o These may include geographic expansion, diversification, acquisition, product
development, market penetration, liquidation, and joint ventures.
 Annual Objectives:
o Short-term milestones that organizations must achieve to reach long-term
objectives.
o Should be established at the corporate, divisional, and functional levels in a large
organization.
 Policies:
o The means by which annual objectives will be achieved.
Benefits of Strategic Management:
 Strategic management allows an organization to be more proactive than reactive in
shaping its own future.
 Allows an organization to initiate & influence (rather than just respond to) activities-
and thus to exert control over its own destiny.
Financial Benefits:
o Firms using it should show significant improvement in sales, profitability, and
productivity compared to firms without systematic planning activities.
o 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.
 A clearer understanding of performance-reward relationships.

Why do some firms do no Strategic Planning?


 No formal training in strategic management.
 No understanding of or appreciation for the benefits of planning.
 No monetary rewards for doing the planning.
 No punishment for not planning.
 Too busy “firefighting” (resolving internal crises) to plan ahead.

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