Chapter 1: Strategic Management Essentials Strategy Implementation

- requires a firm to establish annual objec1ves,

devise policies, mo1vate employees, and
Strategic management is the art and science of
allocate resources so that formulated strategies
formula1ng, implemen1ng, and evalua1ng. cross-
can be executed.
func1onal decisions that enable an organiza1on to
- oIen called the ac-on stage.
achieve its objec1ves.
Strategy Evaluation
Defining Strategic Management - Determining which strategies are not working
§ Strategic management is used synonymously well.
with the term strategic planning in this course. - Three fundamental strategy-evalua1on ac1vi1es
§ Some1mes the term strategic management is are (1) reviewing external and internal factors
used to refer to strategy formula1on, that are the bases for current strategies, (2)
implementa1on, and evalua1on, with strategic measuring performance, and (3) taking
planning referring only to strategy formula1on. correc1ve ac1ons.

Strategic Planning Key Terms in Strategic Management

- Is the process of formula1ng an organiza1on’s
Competitive Advantage
game plan; in a corporate seAng, this term may
- any ac1vity a firm does especially well
refer to the whole strategic-management
compared to ac1vi1es done by rival firms, or
process.
- any resource a firm possesses that rival firms
- A strategic plan results from tough managerial
desire.
choices among numerous good alterna1ves, and
- A firm must strive to achieve sustained
it signals commitment to specific markets,
compe11ve advantage.
policies, procedures, and opera1ons.
Strategist
Stages of Strategic Management - are the individuals most responsible for the
The strategic-management process consists of three success or failure of an organiza1on.
- help an organiza1on gather, analyze, and
stages: strategy formula2on, strategy implementa2on,
organize informa1on.
and strategy evalua2on.

Vision and Mission Statement

Strategy Formulation
A Vision statement answers the ques1on “What do
- includes developing a vision and a mission,
iden1fying an organiza1on’s external we want to become?”
- Developing a vision statement is oIen
opportuni1es and threats, determining internal
considered the first step in strategic planning,
strengths and weaknesses, establishing long-
term objec1ves, genera1ng alterna1ve preceding even development of a mission
statement.
strategies, and choosing par1cular strategies to
pursue. Mission statements answers the ques1on “What is our
business?
- Strategy formula1on decision includes what
- are “enduring statements of purpose that
new businesses to enter, what businesses to
abandon, whether to expand opera1ons or dis1nguish one business from other similar
firms.
diversify, whether to enter interna1onal
- A clear mission statement describes the values
markets, whether to merge or form a joint
venture, and how to avoid a hos1le takeover. and priori1es of an organiza1on.
External Opportunities and Threats Annual Objectives
- refer to economic, social, cultural, demographic, - are short-term milestones that organiza1ons
environmental, poli1cal, legal, governmental, must achieve to reach long-term objec1ves.
technological, and compe11ve trends and - should be measurable, quan1ta1ve, challenging,
events that could significantly benefit or harm realis1c, consistent, and priori1zed.
an organiza1on in the future. - Should be established at the corporate,
- This process of conduc1ng research and divisional, and func1onal levels in a large
gathering and assimila1ng external informa1on organiza1on.
is some1mes called environmental scanning or A set of annual objec1ves is needed for each long-term
industry analysis. objec1ve. These objec1ves are especially important in
strategy implementa1on, whereas long-term objec1ves
Internal Strengths and Weaknesses are par1cularly important in strategy formula1on.
- are an organiza1on’s controllable ac1vi1es that
are performed especially well or poorly. Policies
- are determined rela1ve to compe1tors. - are the means by which annual objec1ves will
be achieved.
Some Opportunity and Threats - Policies include, rules, and procedures
established to support efforts to achieve stated
objec1ves.
- are especially important in strategy
implementa1on because they outline an
organiza1on’s expecta1ons of its employees and
managers.
The Strategic-Management Model

Three important ques1ons to answer in developing a

Long-term Objectives strategic plan are as follows:
- defined as specific results that an organiza1on § Where are we now?
seeks to achieve in pursuing its basic mission. § Where do we want to go?
- Long-term means more than one year. § How are we going to get there?
- Objec1ves are essen1al for organiza1onal Benefits of Strategic Management
success because they provide direc1on.
- should be challenging, measurable, consistent, § Strategic management allows an organiza1on to
reasonable, and clear. be more proac1ve than reac1ve in shaping its
own future.
Strategies § It allows an organiza1on to ini1ate and
- the means by which long-term objec1ves will be influence (rather than just respond to)
achieved. ac1vi1es—and thus to exert control over its
- Business strategies may include geographic own des1ny.
expansion, diversifica1on, acquisi1on, product
development, market penetra1on, Benefits to a Firm That Does Strategic Planning
retrenchment, dives1ture, liquida1on, and joint
ventures.
Financial Benefits § Failing to involve key employees in all phases of
- Businesses using strategic-management planning.
concepts show significant improvement in sales, § Failing to create a collabora1ve climate
profitability, and produc1vity compared to firms suppor1ve of change.
without systema1c planning ac1vi1es. § Viewing planning as unnecessary or
- High-performing firms tend to do systema1c unimportant
planning to prepare for future fluctua1ons in § Becoming so engrossed in current problems
their external and internal environments. that insufficient or no planning is done.
§ Being so formal in planning that flexibility and
Nonfinancial Benefits crea1vity are s1fled.
- Enhanced awareness of external threats, How to gain and sustain competitive advantage
improved understanding of compe1tors’
strategies, increased employee produc1vity,
reduced resistance to change, and a clearer
understanding of performance–reward
rela1onships.

Why Some Firms Do No Strategic Planning

§ No formal training in strategic management

§ No understanding of or apprecia1on for the
benefits of planning
§ No monetary rewards for doing planning.
Comparing Business and Military Strategy
§ No punishment for not planning.
§ Too busy “firefigh1ng” (resolving internal crises) According to Webster’s New World Dic1onary,
to plan ahead. strategy is “the science of planning and direc1ng large-
§ View planning as a waste of 1me, since no scale military opera1ons, of maneuvering forces into the
product/service is made. most advantageous posi1on prior to actual engagement
with the enemy.
Pitfalls in Strategic Planning § A fundamental difference between military and
business strategy is that business strategy is
§ Using strategic planning to gain control over formulated, implemented, and evaluated with
decisions and resources. an assump1on of compe22on, whereas military
§ Doing strategic planning only to sa1sfy strategy is based on an assump1on of conflict.
accredita1on or regulatory requirements. § Both business and military organiza1ons must
§ Too has1ly moving from mission development adapt to change and constantly improve to be
to strategy formula1on successful.
§ Failing to communicate the plan to employees, Excerpts from Sun Tzu’s The Art of War Writings
who con1nue working in the dark
§ Top managers making many intui1ve decisions § War is a maaer of vital importance to the state:
that conflict with the formal plan. a maaer of life or death, the road either to
§ Top managers not ac1vely suppor1ng the survival or ruin. Hence, it is impera1ve that it be
strategic planning process. studied thoroughly.
§ Failing to use plans as a standard for measuring § Know your enemy and know yourself, and in a
performance. hundred baales you will never be defeated.
§ Delega1ng planning to a “planner” rather than § Skillful leaders do not let a strategy inhibit
involving all managers crea1ve counter movement.
 Chapter 2: The Nature of Strategic § Compe1tors in foreign markets may not exist, or
compe11on may be less intense than in
Management domes1c markets.
§ Foreign opera1ons may result in reduced tariffs,
Global/International Issues lower taxes, and favorable poli1cal treatment.
§ Joint ventures can enable firms to learn the
§ The underpinnings of strategic management
technology, culture, and business prac1ces of
hinge on managers gaining an understanding of
other people and to make contacts with
compe1tors, markets, prices, suppliers,
poten1al customers, suppliers, creditors, and
distributors, governments, creditors,
distributors in foreign countries.
shareholders, and customers worldwide.
§ Economies of scale can be achieved from
§ The price and quality of a firm’s products and
opera1on in global rather than solely domes1c
services must be compe11ve on a worldwide
markets. Larger-scale produc1on and beaer
basis, not just on a local basis.
efficiencies allow higher sales volumes and
lower-price offerings.
The Nature of Doing Business Globally § A firm’s power and pres1ge in domes1c markets
Exports of goods and services from the United States may be significantly enhanced if the firm
account for only 13.5 percent of U.S. gross domes1c competes globally. Enhanced pres1ge can
product. translate into improved nego1a1ng power
among creditors, suppliers, distributors, and
other important groups.
Globalization is a process of doing business worldwide,
so strategic decisions are made based on global
Disadvantages of Doing Business Globally
profitability of the firm rather than just domes1c § Foreign opera1ons could be seized by
considera1ons. na1onalis1c fac1ons.
§ Firms confront different and oIen liale-
Global strategy includes designing, producing, and understood social, cultural, demographic,
marke1ng products with global needs in mind, instead environmental, poli1cal, governmental, legal,
of considering individual countries alone. A global technological, economic, and compe11ve
strategy integrates ac1ons against compe1tors into a forces.
worldwide plan. § Weaknesses of compe1tors in foreign lands are
oIen overes1mated, and strengths are oIen
Multinational Firms or Interna1onal firm are underes1mated.
organiza1ons that conduct business opera1ons across § Language, culture, and value systems differ
na1onal borders. among countries, which can create barriers to
communica1on and problems managing people.
Advantages of Doing Business Globally § Gaining an understanding of regional
organiza1ons is difficult.
§ Firms can gain new customers for their
§ Dealing with two or more monetary systems can
products.
complicate interna1onal business opera1ons.
§ Foreign opera1ons can absorb excess capacity,
The Global Challenge
reduce unit costs, and spread economic risks
over a wider number of markets. § American economy is becoming much less.
§ Foreign opera1ons can allow firms to establish § A world economy and monetary system are
low-cost produc1on facili1es in loca1ons close emerging.
to raw materials or cheap labor. § Markets are shiIing rapidly and, in many cases,
converging in tastes, trends, and prices.
Protectionism refers to countries imposing tariffs, taxes, cultures than the personal achievement and
and regula1ons on firms outside the country to favor accomplishments espoused by the tradi1onal
their own companies and people. U.S. manager.
§ Many cultures around the world value modesty,
American Versus Foreign Business Culture team spirit, collec1vity, and pa1ence much
more than compe11veness and individualism,
§ To be successful in world markets, U.S. which are so important in the United States.
managers must obtain a beaer knowledge of § Punctuality is a valued personal trait when
historical, cultural, and religious forces that conduc1ng business in the United States, but it
mo1vate and drive people in other countries. is not revered in many of the world’s socie1es.
§ For mul1na1onal firms, knowledge of business § Ea1ng habits also differ drama1cally across
culture varia1on across countries can be cultures.
essen1al for gaining and sustaining compe11ve § Rules of e1queae vary, and managers must
advantage. learn the rules of others.
Cultural Pitfalls to Avoid to be a Better Manager § Americans oIen do business with individuals
they do not know, unlike businesspersons in
many other cultures.

Communication Differences across Countries

§ Americans some1mes come across as intrusive,

manipula1ve, and garrulous; this impression
may reduce their effec1veness in
communica1on.
§ Managers from the United States are much
more ac1on-oriented than their counterparts
around the world; they rush to appointments,
conferences, and mee1ngs—and then feel the
day has been produc1ve.
Cultural differences between U.S. and foreign § U.S. managers oIen use blunt cri1cism, ask
managers prying ques1ons, and make quick decisions.

§ Americans place an excep1onally high priority

on 1me, viewing 1me as an asset. Many
foreigners place more worth on rela1onships.
§ Personal touching and distance norms differ
around the world. Americans generally stand
about three feet from each other when carrying
on business conversa1ons, but Arabs and
Africans stand about one foot apart.
§ Family roles and rela1onships vary in different
countries.
§ Business and daily life in some socie1es are
governed by religious factors.
§ Time spent with the family and the quality of
rela1onships are more important in some
 Chapter 3: Ethics, Social Responsibility, and An Ethics Culture
Sustainability Ethics training programs should include messages from
the CEO or owner of the business, emphasizing ethical
Business ethics business prac1ces, the development and discussion of
- can be defined as principles of conduct within codes of ethics, and procedures for discussing and
organiza1ons that guide decision making and repor1ng unethical behavior.
behavior. Avoid Bribery
- To minimize wrongdoing among employees or
Bribery
managers
- the offering, giving, receiving, or solici1ng of any
item of value to influence the ac1ons of an
Social responsibility refers to ac1ons an organiza1on
official or other person in discharge of a public
takes beyond what is legally required to protect or
or legal duty.
enhance the well-being of living things.
- a crime in most countries of the world, including
the United States
Sustainability refers to the extent that an organiza1on’s
opera1ons and ac1ons protect, mend, and preserve
Bribe is a giI bestowed to influence a recipient’s
rather than harm or destroy the natural environment.
conduct.

Seven Principles of Admirable Business Ethics

Workplace Romance
1. Be trustworthy.
Workplace romance is an in1mate rela1onship between
2. Be open-minded.
two consen1ng employees, as opposed to sexual
3. Honor commitments and obliga1ons
harassment,
4. Do not misrepresent, exaggerate, or mislead.
5. Be a visibly responsible community ci1zen.
Sexual harassment (and discrimina1on) is illegal,
6. U1lize your accoun1ng prac1ce to eliminate
unethical, and detrimental to any organiza1on and can
ques1onable ac1vi1es.
result in expensive lawsuits, lower morale, and reduced
7. Do unto others as you would have them do unto
produc1vity.
you.

Workplace romance can be detrimental to workplace

Code of business ethics
morale and produc1vity:
- A wriaen document specifying expected
1. Favori1sm complaints can arise.
employee/manager behavior/conduct in an
2. Confiden1ality of records can be breached.
organiza1on.
3. Reduced quality and quan1ty of work can
- To ensure that the code of ethics is read,
become a problem.
understood, believed, and remembered,
4. Personal arguments can lead to work
periodic ethics workshops are needed to
arguments.
sensi1ze people to workplace circumstances in
5. Whispering secrets can lead to tensions and
which ethics issues may arise.
hos1li1es among coworkers.
6. Sexual harassment (or discrimina1on) charges
Whistle-blowing refers to employees repor1ng any
may ensue.
unethical viola1ons they discover or see in the firm.
7. Conflicts of interest can arise.
 Social Responsibility and Policy ISO 14001
- is a set of standards adopted by thousands of
§ Ralph Nader proclaims that organiza1ons have firms worldwide to cer1fy to their cons1tuencies
tremendous social obliga1ons. that they are conduc1ng business in an
§ Milton Friedman asserts that organiza1ons have environmentally friendly manner.
no obliga1on to do any more for society than is Environmental management system (EMS)
legally required. - When a firm or municipality operates u1lizing
“green” policies/prac1ces/procedures as
Social policy outlined by ISO 14001.
- concerns what responsibili1es the firm has to
employees, consumers, environmentalists,
6 major requirements of an EMS under ISO 14001
minori1es, communi1es, shareholders, and
other groups. 1. Show commitments to preven1on of pollu1on,
- Firms should strive to engage in social ac1vi1es con1nual improvement in overall environmental
that have economic benefits. performance, and compliance with all
applicable statutory and regulatory
Environmental Sustainability requirements.
2. Iden1fy all aspects of the organiza1on’s
§ Employees, consumers, governments, and ac1vi1es, products, and services that could have
socie1es are especially resenoul of firms that a significant impact on the environment,
harm rather than protect the natural including those that are not regulated.
environment. 3. Set performance objec1ves and targets for the
§ Conversely, people today are especially management system that link back to three
apprecia1ve of firms that conduct opera1ons in policies: (a) preven1on of pollu1on, (b)
a way that mends, conserves, and preserves the con1nual improvement, and (c) compliance.
natural environment. 4. Meet environmental objec1ves that include
training employees, establishing work
Sustainability report instruc1ons and prac1ces, and establishing the
actual metrics by which the objec1ves and
- reveals how a firm’s opera1ons impact the
targets will be measured.
natural environment.
5. Conduct an audit opera1on of the EMS.
- discloses to shareholders informa1on about the
6. Take correc1ve ac1ons when devia1ons from
firm’s labor prac1ces, product sourcing, energy
the EMS occur.
efficiency, environmental impact, and business
Wildlife Welfare
ethics prac1ces.
§ Consumers globally are becoming increasingly
ISO 14000/14001 Certification intolerant of any business or na1on that directly
or indirectly destroys wildlife, especially
ISO 14000 endangered wildlife, such as 1gers, elephants,
- refers to a series of voluntary standards in the whales, songbirds, and coral reefs.
environmental field. Food Suppliers and Animal Welfare
- The ISO 14000 family of standards concerns the
extent to which a firm minimizes harmful effects § Consumers expect humane treatment of
on the environment caused by its ac1vi1es and animals.
con1nually monitors and improves its own § Consumers are flocking to organic products.
environmental performance.