Reviewer: Business Policy

Strategic Management can be define as the

art and science of formulating, implementing,
and evaluating cross functional decisions that
enable an organization
to achieve its
objectives.
Stages of Strategic Management
1. Strategy Formulation includes
developing a vision and mission,
identifying an organizations external
opportunities and threats, determining
internal strength and weaknesses,
establishing long term objectives,
generating alternative strategies, and
choosing particular strategies to pursue.
2. Strategy implementation requires a
firm to establish annual objectives,
devise policies, motivate employees
and allocate resources so that
formulated strategies can be executed.
1. It is often called action stage of
strategic management.
3. Strategy evaluation is the final stage
in strategic management. Managers
desperately need to know when
particular strategies are not working
well.
3
Fundamental
strategy
evaluation activities
Reviewing external and
internal factors that are
the bases for current
strategies
Measuring
performance
Taking
corrective
actions
Strategic management is all about
gaining and maintaining competitive
advantage. This term can be defined as

anything that a firm does especially

well compare to rival firms.
A firm must strive to achieve sustained
competitive
advantage
by
(1)
continually adapting to changes in
external trends and events and internal
capabilities,
competencies,
and
resources: and by (2) effectively
formulating,
implementing,
and
evaluating strategies that capitalize
upon those factors.

Strategists are the individuals who are most

responsible for the success or failure of an
organization.
Vision Statement answers the question
what do we want to become?
Mission Statement is enduring statements
of purpose that distinguish one business from
other similar firms.

Mission Statement is a constant

reminder to its employees of why the
organizations exists and what are the
founders envisioned when they are put
their fame and fortune at risk t breathe
life into their dreams.

External Opportunities and Threats refer to

economic, social, cultural, demographic,
environmental,
political,
legal,
governmental,
technological,
and
competitive trends and events that could
significantly benefit or harm an organization
in the future.

Environmental Scanning process of

conducting research and gathering
assimilating external information

 Lobbying is one activity that some

organization utilize to influence
external opportunities and threats.
Internal Strength and Weaknesses are an
organizations controllable activities that are
performed especially well or poorly
Relative deficiency or superiority is
important information.
Objectives can be defined as specific results
that an organization seeks to achieve in
pursuing its basic mission. It is essential because
they state direction: aid in evaluation; create
synergy; reveal priorities; focus coordination;
and provide a basis for effective planning,
organizing, motivating and controlling activities.
Strategies are the means by which long-term
objectives will be achieved.
Annual objectives are short-term milestones
that organizations must achieve to reach longterm objectives.
Policies are the means by which annual
objectives will be achieved. It includes
guidelines, rules, and procedures established to
support efforts to achieve stated objectives.

Vision vs. Mission

It can be argued that profit, not

mission or vision is the primary
corporate motivator.
Shared vision creates a commonality of
interest that can lift workers out of the
monotony of daily work and put them
into a new world of opportunity and
challenge.

Importance of Vision and Mission Statements

To ensure unanimity of purpose within
the organization
To provide a basis, or standard, for
allocating organizational resources
To establish a general tone or
organizational climate
To serve as a focal point for individuals
to identify with the organizations
activities
To facilitate the translation of
objectives into a work structure
involving the assignment of tasks to
responsible elements within the
organization
To specify organizational purposes and
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

A mission statement is more than a statement
of specific details; it is declaration of attitude
and outlook. It usually broad in scope at least
two major reasons.
A good mission statement allows for
the generation and consideration of a
range of feasible alternative objectives
and strategies without unduly stifling
management creativity.
It needs to be broad to reconcile
differences effectively among, and
appeal to, an organizations diverse
stakeholders, the individuals and group
of individuals who have a special stake
or claim on the company.

Mission Statement Components

1. Customers who are the firms
customers?
2. Products or Services what are
the firms major products and
services?
3. Markets
geographically,
where does the firm compete?
4. Technology - is the firm
technologically current?
5. Concern for survival, growth
and profitability is the firm
committed to growth and
financial soundness?
6. Philosophy what are the basic
beliefs, values, aspirations, and
ethical priorities of the firm?
7. Self-concept what is the
firms distinctive competence
or
major
competitive
advantage?
8. Concern for public image - is
the firm responsive to social,
community, and environmental
concerns?
9. Concern for employees are
employees a valuable asset of
the firm?

attractiveness
of
various
strategies
2. Social forces, cultural, demographic,
and natural environment forces
Social
forces,
cultural,
demographic,
and
natural
environment forces have a
major impact on virtually all
products, services, markets,
and customers.
3. Political, governmental, and legal
forces
Federal, state, local, and foreign
governments
are
major
regulators,
deregulator,
subsidizers,
employers,
customers of organization.
4. Technological forces
Technological forces represent
major opportunities and threats
that must be considered in
formulating strategies.
5. Competitive forces
An important part of an
external audit is identifying rival
firms and determining their
strength,
weaknesses,
opportunities,
capabilities,
objectives, and strategies.

The Nature of an External Audit

The purpose of an external audit is to develop a
finite list of opportunities that could benefit a
firm and threats that should be avoided.
External forces
1. Economic forces
Economic factors have a direct
impact on the potential

The Industrial Organization (I/O) View

I/O approach to competitive
advantage advocates that external
factors are more important than
internal factors in a firm for
achieving competitive advantage.

Competitive Intelligence is a systematic and

ethical process for gathering and analyzing
information about competitions activities and
general business trends to a further business
own goals.
Firms need an effective competitive
intelligence program.
3 basic objectives of CI program
1. To provide a general understanding of
an industry and its competitors
2. To identify areas in which competitors
are vulnerable and to assess the impact
strategic actions would have on
competitors.
3. To identify potential moves that a
competitor
might
make
would
endanger a firms position in the
market.
Market Commonality can be defined as the
number and significance of markets that a
firms competes in with rivals.
Resource Similarity is the extent in which the
type and amount of a firms internal resources
are comparable to a rival
According to Porter, the nature of
competitiveness in a given industry can be
viewed as a composite of five forces:
1. Rivalry among competing firms is
usually the most powerful of the five
competitive forces. He strategies
pursued by one firm can be successful
only to the extent that they provide
competitive advantage over the
strategies pursued by rival firms.
2. Potential entry of new competitors
whenever new firms can easily enter a
particular industry, the intensity of

competitiveness among firms increases.

Despite of numerous barriers to entry,
new firms sometimes enter industries
with higher quality products, lower
prices, and substantial marketing
resources.
3. Potential Development of Substitute
Products the presence of substitute
products puts a ceiling on the price that
can be charged before consumers will
switch to substitute product.
4. Bargaining Power of Supplier affects
the intensity of competition in an
industry, especially when there is a
large number of suppliers, when there
are only a few good substitute raw
materials, or when the cost of switching
raw materials is especially high.
5. Bargaining Power of Consumers can be
the most important force affecting
competitive advantage. Bargaining
Power of Consumers also higher when
the product being purchased is
standard or undifferentiated.
Industry Analysis:
The EFE Matrix allows strategists to summarize
and evaluate economic, social, cultural,
demographic, environmental, political, and
competitive information.
The CPM identifies a firms major competitors
and its particular strengths and weaknesses in
relation to a sample firms strategic position.
The Nature of an Internal Audit
A firms strength that cannot be easily match or
imitate by competitors are called distinctive
competencies.
Organizational Culture can be define as a
pattern of behaviour that has been developed

by an organization as it learns to cope with its

problem of external adaptation and integration,
and that has worked well enough to considered
valid and to be taught to new members as the
correct way to perceive, think and feel.
The Function of Management
1.
2.
3.
4.
5.

Planning
Organizing
Motivating
Staffing
Controlling

Marketing can be describe as the process of

defining, anticipating, creating and fulfilling
customers needs and wants for products and
services.
7 Basics Function of Marketing
1. Customer Analysis the examination
and evaluation of consumer needs,
desires,
and
wants
involves
administering
customer
surveys,
analyzing
consumer
information,
evaluating
market
positioning
strategies,
developing
customer
profiles.
2. Selling product and services
3. Product and services planning
4. Pricing
5. Distribution
6. Marketing research the systematic
gathering, recording, and analyzing, of
data about problems relating to the
marketing of goods and services.
7. Opportunity Analysis
Benchmarking is an analytical tool used to
determine whether a firms value chain
activities are competitive compared to rivals
and thus conductive to winning in the market
place.

Long Term Objectives represents results

expected from pursuing certain strategies. It
should be quantitative, measurable, realistic,
understandable,
challenging,
hierarchical,
obtainable,
and
congruent
among
organizational units.
Strategies represent the actions to
be taken to accomplish long-term
objectives.