Strategic Management - the art and

science of formulating, implementing, and 3. Strategy Evaluation. This is a process

evaluating cross-functional decisions that by which the management assesses how
enable an organization to achieve its well a chosen strategy has been
objectives. implemented and how successful or
otherwise the strategy is. (E.g. KPIs, Matrix,
As this definition implies, strategic Objectives)
management focuses on integrating
management, marketing, finance and Three fundamental strategy-evaluation
accounting, production and operations, activities are:
research and development (R&D), and 1.​ reviewing external and internal
information systems to achieve factors based on the current
organizational success. strategies
2.​ measuring performance; and
Stages of Strategic Management: 3.​ taking corrective actions.

1.​ Strategy-formulation. It includes

developing a vision and a mission, Benefits in Engaging in Strategic
identifying an organization’s: Management
1. Financial Benefits: Organizations
[Link] and internal factors;
that use strategic-management
[Link] long-term objectives;
concepts are generally more profitable
[Link] alternative strategies;
and
and
successful than those that do not.
[Link] particular strategies to
pursue.
2. Non-Financial Benefits: Besides
2. Strategy Implementation. It requires a helping firms avoid financial demise,
firm to establish annual objectives, devise strategic management offers other
policies, motivate employees, and allocate tangible benefits, such as enhanced
resources so that formulated strategies can awareness of external threats, improved
be executed. understanding of competitors’ strategies,
increased employee productivity,
Strategy implementation includes: reduced resistance to change, and a
1.​ developing a strategy-supportive clearer understanding of
culture; performance–reward relationships.
2.​ creating an effective organizational
structure;
3.​ redirecting marketing efforts and Why Some Firms Do “No Strategic
preparing budgets ; Planning’
4.​ developing and using information 1. No formal training in strategic
systems; and management
5.​ linking employee compensation to 2. No understanding of or appreciation
organizational performance. for the benefits of planning
 3. No monetary rewards for doing ●​ Failing to create a collaborative
planning climate supportive of change
4. No punishment for not planning ●​ Viewing planning as unnecessary
5. Too busy “firefighting” (resolving or unimportant
internal crises) to plan ahead ●​ Becoming so engrossed in
6. View planning as a waste of time, since current problems that insufficient
no product/service is made or no planning is done
7. Laziness; effective planning takes time ●​ Being so formal in planning that
and effort; time is money
flexibility and creativity are stifled
8. Content with current success; failure to
realize that success today is no guarantee
for success tomorrow.
Types of Strategies and Vision and
9. Overconfident
Mission Analysis
10. Prior bad experience with strategic
planning done sometime or somewhere
Long-Term Objectives - represent
the results expected from
pursuing certain strategies.
13 Pitfalls in Strategic Planning Strategies represent the actions
●​ Using strategic planning to gain to be taken to accomplish
control over decisions and long-term [Link] time
resources frame for objectives and
●​ Doing strategic planning only to strategies should be consistent,
satisfy accreditation or regulatory usually from 2 to 5 years.
requirements
●​ Too hastily moving from mission Eight Desired Characteristics of
development to strategy formulation Objectives
●​ Failing to communicate the plan to 1. Quantitative
employees, who continue working 2. Measurable
in the dark 3. Realistic
●​ Top managers making many 4. Understandable 5. Challenging
intuitive decisions that conflict with 6. Hierarchical
the formal plan 7. Obtainable
●​ Top managers not actively 8. Congruent across departments
supporting the strategic-planning
process Ten Benefits of Having Clear
●​ Failing to use plans as a standard Objectives
for measuring performance 1. Provide direction by revealing
expectations 2. Allow synergy
●​ Delegating planning to a
3. Assist in evaluation by serving as
“planner” rather than involving all
standards 4. Establish priorities
managers
5. Reduce uncertainty
●​ Failing to involve key employees 6. Minimize conflicts
in all phases of planning 7. Stimulate exertion
 8. Aid in the allocation of resources 9. 3.​ Horizontal Integration - Seeking
Aid in the design of jobs ownership or increased control over
10. Provide the basis for consistent competitors.
decision making Ex.
BB&T acquired Susquehanna Bancshares.
Avoid Not Managing by Objectives:
4.​ Market Penetration - Seeking
●​ Managing by Extrapolation. increased market share for present
Adheres to the principle “If it ain’t products or services in present
broke, don’t fix it.” markets through greater marketing
●​ Managing by Crisis. Based on the efforts.
belief that the true measure of a Ex.
really good strategist is the ability to Under Armour signed tennis champion Andy
solve problems. Murray to a 4-year, $23 million marketing
●​ Managing by Subjective. Built on deal.
the idea that there is no general plan
for which way to go and what to do; 5.​ Market Development - Introducing
just do the best you can to present products or services into
accomplish what you think should be new geographic area.
done. Ex.
●​ Managing by Hope. Based on the Gap opened its first five stores in China.
fact that the future is laden with
great uncertainty and that if we try 6.​ Product Development - Seeking
and do not succeed, then we hope increased sales by improving
our second (or third) attempt will present products or services or
succeed. developing new ones
Ex.
Types of Strategies: Amazon just began offering its own line of
baby diapers and wipes.
1.​ Forward Integration - Gaining
ownership or increased control over 7.​ Related Diversification - Adding
distributors or retailers new but related products or services
Ex. Ex.
Amazon began rapid delivery services in Facebook acquired the text-messaging firm
some U.S. cities. WhatsApp for $19 billion.

2.​ Backward Integration - Seeking 8.​ Unrelated Diversification - Adding

ownership or increased control of a new, unrelated products or services
firm's suppliers Ex.
Ex. Kroger and Whole Foods Market are
Starbucks purchased a coffee farm. cooking meals, becoming restaurants.
 9.​ Retrenchment - Regrouping
through cost and asset reduction to Intensive Strategies:
reverse declining sales and profit 1.​ Market Penetration - seeking
Ex. increased market share for present
Staples closed 250 stores and reduced by products or services in present
50% the size of other stores. markets through greater marketing
efforts.
10.​Divestiture - Selling a division or 2.​ Market Development - introducing
part of an organization present products or services into
Ex. new geographic areas.
Sears Holdings divested its Land's End 3.​ Product Development - seeking
division to Sears' shareholders. increased sales by improving
present products or services or
11.​Liquidation - Selling all of a developing new ones.
company's assets, in parts, for their
tangible worth Diversification Strategies:
Ex. 1.​ Related Diversification - adding
The Trump Taj Mahal in Atlantic City, New new but related products or services
Jersey, faces liquidation. 2.​ Unrelated Diversification - adding
new, unrelated products or services

Vertical Integration Strategies Defensive Strategies:

●​ Forward Integration - Gaining 1.​ Retrenchment - regrouping through
ownership or increased control over cost and asset reduction to reverse
distributors or retailers declining sales and profit.
●​ Backward Integration - Seeking 2.​ Divestiture - selling a division or
ownership or increased control of a part of an organization.
firm’s suppliers 3.​ Liquidation - selling all of a
company’s asset, in parts, for their
How to use the Ansoff Matrix tangible worth.
Strategic questions that can be answered
using the matrix include: Levels of Strategies:
1. Market Penetration: How to sell more of Large Company:
your existing products or services to your ●​ Corporate level - Chief executive
existing customer base? officer
2. Market Development: How to enter new ●​ Division level - division president or
markets? executive vice president
3. Product and Development: How to ●​ Functional level - finance, marketing,
develop R&D, manufacturing, information
existing products or services. systems, and human resource
4. Diversification: How to move into new managers
markets with new products or services, ●​ Operational level - plant managers,
increase your sales with your existing sales managers, production and
customer base as well as acquisition. department managers.
 -​ Managers work closely with
Small Company: subordinates and priority to each
●​ Company level - owner or president activity performed by the functional
●​ Functional level - finance, marketing, unit.
R&D, manufacturing, information
systems, and human resource
managers
●​ Operational level - plant managers, Michael Porter’s Five Generic Strategies
sales managers, production and -​ Cost leadership emphasizes
department managers. producing standardized products at
a low per-unit cost for price-sensitive
consumers. This strategy always
targets a broad market.
●​ Corporate Level Strategy depicts the
move to establish or strengthen the
position in the market Two alternative types of cost leadership
Based on the following four initiatives: strategies can be defined.
• Diversifying ➢ Type 1 is a low-cost strategy that offers
• Coordination between various businesses products or services to a wide range of
• Identifying strategic fit to find a competitive customers at the lowest price available on
advantage the market.
• Strategic fit, indicates how well a ➢ Type 2 is a best-value strategy that offers
company’s objectives and strategies match products or services to a wide range of
its competencies and external environment. customers at the best price-value available
• Identifying priorities for allocating the on the market.
resources.
Differentiation (Type-3), is a strategy
aimed at producing products and services
●​ Business Level Strategy focuses on considered unique attributes that are valued
the approaches that can be used to by the customers and directed at
enhance the performance of the consumers who are relatively price
business. insensitive.
Following should be considered:
• Responding to changes in the environment Low-cost focus strategy (Type 4) that
• Attainable sustainable competitive offers products or services to a small range
advantage (yields above average profits ad (niche group) of customers at the lowest
gain market share) price available on the market.
• Developing distinctive competencies
• Dealing with the strategic issues of the Best-value focus strategy (Type 5) that
business. offers products or services to a small range
of customers at the best price-value
●​ Functional Level Strategy focuses available on the market. Sometimes called
on the smallest unit of a business. “focused differentiation,”.
Vision Statement Analysis (What do we 9. Achieve higher organizational
want to become?) - At a minimum, a vision performance. 10. Achieve synergy among
statement should reveal the type of all managers and employees.
business the firm engages.
Organizations carefully develop a written
Mission Statements: What Is Our mission statement in order to reap the
Business?`- Sometimes called a creed following benefits:
statement, a statement of purpose, a 1. To make sure all employees/managers
statement of philosophy, a statement of understand the firm’s purpose or reason for
beliefs, a statement of business principles, being.
or a statement “defining our business,” a 2. To provide a basis for prioritization of key
mission statement reveals what an internal and external factors utilized to
organization wants to be and whom it wants formulate feasible strategies. 3. To provide a
to serve. All organizations have a reason for basis for the allocation of resources.
being, even if strategists have not 4. To provide a basis for organizing work,
consciously transformed this reason into departments, activities, and segments
writing. around a common purpose.

Characteristics of a Mission Statement

Benefits of Clear Vision and Mission 1. Broad in scope; does not include
Statements monetary amounts, numbers, percentages,
1. Achieve clarity of purpose among all ratios, or objectives
managers and employees. 2. Fewer than 150 words in length
2. Provide a basis for all other strategic 3. Inspiring
planning activities, including internal and 4. Identifies the utility of a firm’s products
external assessment, establishing 5. Reveals that the firm is socially
objectives, developing strategies, choosing responsible
among alternative strategies, devising 6. Reveals that the firm is environmentally
policies, establishing organizational responsible
structure, allocating resources, and 7. Includes nine components: customers,
evaluating performance. products or services, markets, technology,
3. Provide direction. concern for survival/growth/profits,
4. Provide a focal point for all stakeholders philosophy, self-concept, concern for public
of the firm. image, concern for employees
5. Resolve divergent views among 8. Reconciliatory
managers. 9. Enduring
6. Promote a sense of shared expectations
Mission components:
among all managers and employees.
●​ Customers
7. Project a sense of worth and intent to all ●​ Products or services
●​ Markets
stakeholders. ●​ Technology Group
8. Project an organized, motivated ●​ Survival, growth, profits
●​ Philosophy
organization worthy of support. ●​ self- concept
●​ Public image
●​ Employees