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Summary BMAN 321 - Strategic Management Comprehensive Exam Notes (CH1 -8)
Ch 1 - 8 Summarised for Exam & Test purposes with added past papers included at the back as well as a "cram" summary for Strategic Management (BMAN 321)
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By: mahenintsoar-jaona • 6 year ago
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BMAN 321STRATEGIC MANAGEMENT
GeekyS
Notes & Past papers
2014
, STRATEGIC MANAGEMENT STUVIA.CO.ZA BMAN 321
CH 1: THE NATURE OF STRATEGIC MANAGEMENT
Learning Outcomes:
1. Describe the strategic-management process.
2. Explain the need for integrating analysis and intuition in strategic management.
3. Define and give examples of key terms in strategic management.
4. Discuss the nature of the strategic –management process studied and applied using a model; formulation,
implementation, and evaluation of activities and strategies. [Fig 1-1]
5. Describe the benefits of good strategic management.
6. Discuss how a firm may achieve sustained competitive advantage.
Strategic management
Definition: The art and science of formulating, implementing, and evaluating cross-functional decisions that
enable an organization to achieve its objectives
Focuses on integrating the organisation to achieve organisational success.
Strategic management is used synonymously with the term strategic planning.
Sometimes the term strategic management is used to refer to strategy formulation, implementation, and
evaluation, with strategic planning referring only to strategy formulation
The purpose of strategic management is to exploit and create new and different opportunities for
tomorrow vs. Long-range planning that tries to optimize for tomorrow the trends of today.
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3 Stages of strategic management [Process]
Strategy Strategy Strategy
Formulation Implementation Evaluation
Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels in a large
organization: corporate, divisional/ strategic business unit, and functional
Strategic management helps a firm function as a competitive team
Strategy formulation
Includes: Issues Includes:
Developing a vision and mission Deciding what new businesses to enter,
Identifying an organization’s external opportunities and What businesses to abandon,
threats How to allocate resources,
Determining internal strengths and weaknesses Whether to expand operations or diversify,
Establishing long-term objectives Whether to enter international markets,
Generating alternative strategies Whether to merge or form a joint venture,
And choosing particular strategies to pursue How to avoid a hostile takeover.
Strategy implementation
Often called the action stage Includes:
Requires a firm to: Developing a strategy-supportive culture
Establish annual objectives Creating an effective organisational structure
Devise policies Redirecting marketing efforts, preparing budgets
Motivate employees Developing & utilising information systems
And allocate resources so that formulated strategies Linking employee compensation to organisational
can be executed performance.
The challenge of implementation is to stimulate managers Interpersonal skills especially critical for successful
& employees throughout an organisation to work with strategy implementation.
pride and enthusiasm toward achieving stated objectives. Strategy implementation activities affect all employees
& managers in an organisation.
Strategy evaluation
Reviewing external and internal factors that are the bases for current strategies
measure performance
taking corrective actions
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Integrating intuition and analysis
Most organizations can benefit from strategic management, which is based upon integrating intuition and
analysis in decision making
Intuition is essential to making good strategic decisions and particularly useful for making decisions in
situations of great uncertainty or little precedent
Key terms in strategic management
Competitive advantage • A mission statement broadly charts the future
• Anything that a firm does especially well direction of an organization.
compared to rival firms/ owns something rival External opportunities and external threats
firms desire • Refer to economic, social, cultural, demographic,
• Getting & keeping competitive advantage is environmental, political, legal, governmental,
essential for long-term success in an technological, and competitive trends and
organization. events that could significantly benefit or harm
• A firm must strive to achieve sustained an organization in the future
competitive advantage by: • Opportunities & threats are largely outside the
~ Adapting to changes in external trends & control of a firm and thus external
events & internal capabilities, competencies • Firms need to formulate strategies to take
& resources advantage of external opportunities to avoid/
~ Effectively formulating, implementing and reduce the impact of external threats.
evaluating strategies that capitalize on those • Environmental scanning/ industry analysis = the
factors process of conducting research & gathering
• E-commerce is minimizing the expense & external info.
inconvenience of time, distance, and space in • Possible opportunities and threats:
doing business yielding better customer ~ Computer hacker problems are increasing.
service, greater efficiency, improved products, ~ Intense price competition is plaguing most
and higher profitability. firms.
Strategists ~ Unemployment and underemployment rates
• Individuals most responsible for the success or remain high.
failure of an organization ~ Interest rates are rising.
• Should be highly adaptable and role models. ~ Product life cycles are becoming shorter.
Vision statement ~ State and local governments are financially
• Answers the question “what do we want to weak.
become?” ~ Green operations
• Often considered the first step in strategic ~ Laws
planning ~ New products
• Usually single sentences ~ Catastrophe’s
Mission statements Internal strengths and internal weaknesses
• Enduring statements of purpose that distinguish • An organization’s controllable activities that are
one business from other similar firms performed especially well or poorly
• Identifies the scope of a firm’s operations in • Determined relative to competitors and a firm’s
product and market terms own objectives
• Addresses the basic question that faces all • Relative deficiency/ superiority is important
strategists: “what is our business?” information.
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• Internal factors can be determined in a nr of • Should be measurable, quantitative, challenging,
ways: realistic, consistent, and prioritized
~ Computing ratios • Should be established at the corporate,
~ Measuring performance divisional, and functional levels in a large
~ Comparing to past periods & industry organization
averages • Especially important in strategy implementation
~ Surveys can be conducted – employee Strategies
morale, production efficiency, advertising • The means by which long-term objectives will be
effectiveness & customer loyalty. achieved
Objectives • Have multifunctional/ multidivisional
• Specific results that an organization seeks to consequences.
achieve in pursuing its basic mission • May include geographic expansion,
• Long-term - more than one year important in diversification, acquisition, product
strategy formulation. [2-5 years] development, market penetration,
• Essential for organizational success as they: retrenchment, divestiture, liquidation, and joint-
~ State direction ventures
~ Aid in evaluation Policies
~ Create synergy • The means by which annual objectives will be
~ Reveal priorities achieved
~ Focus coordination • Includes guidelines, rules, and procedures
~ Provide a basis for effective planning, established to support efforts to achieve stated
organizing, motivating, staffing and objectives
controlling activities. • Guides to decision making and address
• Should be challenging, measurable, consistent, repetitive or recurring situations
reasonable, and clear • Allows consistency & coordination within and
Annual objectives between organizational departments.
• Short-term milestones that organizations must
achieve to reach long-term objectives
The strategic-management model FIG1.1 [p1]
Three important questions to answer in developing a strategic plan:
Where are we now?
Where do we want to go?
How are we going to get there?
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Benefits of good strategic management
FIG 1-2: BENEFITS TO A FIRM THAT DOES STRATEGIC PLANNING
Enhanced Deeper/ Improved Greater The RESULT
Communication Understanding Commitment
•dialogue •other's views •to achieve •all managers &
•of what the firm is objectives employees on a
•participation mission to help
doing/ planning & •to implement
why strategies the firm succeed
•to work hard
Historically, the principal benefit of strategic
management has been to help organizations Nonfinancial benefits
formulate better strategies through the use of a It allows for identification, prioritization, and
more systematic, logical, and rational approach to exploitation of opportunities.
strategic choice It provides an objective view of management
Communication is a key to successful strategic problems.
management It represents a framework for improved
Through dialogue and participation, managers and coordination and control of activities.
employees become committed to supporting the It minimizes the effects of adverse conditions and
organization changes.
It allows major decisions to better support
Financial benefits established objectives.
Organizations using strategic management It allows more effective allocation of time and
concepts are more profitable &successful than resources to identified opportunities.
those that don’t It allows fewer resources and less time to be
Businesses using strategic-management concepts devoted to correcting erroneous or ad hoc
show significant improvement in sales, profitability, decisions.
and productivity compared to firms without It creates a framework for internal communication
systematic planning activities among personnel.
High-performing firms seem to make more
informed decisions with good anticipation of both
short- and long-term consequences
Why some firms do no strategic planning
Lack of knowledge in strategic planning Fear of failure
Poor reward structures Overconfidence
Firefighting Prior bad experience
Waste of time Self-interest
Too expensive Fear of the unknown
Laziness Honest difference of opinion
Content with success Suspicion
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Pitfalls in strategic planning
Using strategic planning to gain control over decisions and resources
Doing strategic planning only to satisfy accreditation or regulatory requirements
Too hastily moving from mission development to strategy formulation
Failing to communicate the plan to employees, who continue working in the dark
Top managers making many intuitive decisions that conflict with the formal plan
Top managers not actively supporting the strategic-planning process
Failing to use plans as a standard for measuring performance
Delegating planning to a “planner” rather than involving all managers
Failing to involve key employees in all phases of planning
Failing to create a collaborative climate supportive of change
Guidelines for effective strategic management
It should be a people process more than a paper process.
It should be a learning process for all managers & employees
It should be words supported by numbers instead of numbers supported by words
It should be simple and non-routine
It should vary assignments, team memberships, meeting formats, and even the planning calendar.
It should challenge the assumptions underlying the current corporate strategy
It should welcome bad news
It should welcome open-mindedness and a spirit of inquiry and learning.
It should not be a bureaucratic mechanism
It should not become ritualistic, stilted or orchestrated
It should not be too formal, predictable or rigid
It should not contain jargon or arcane planning language.
It should not be a formal system for control
It should not disregard qualitative info
It should be controlled by “technicians”
Do not pursue too many strategies at once
Continually strengthen the “good ethics is good business” policy
Comparing business and military strategy
A fundamental difference between military and business strategy is that business strategy is formulated,
implemented, and evaluated with an assumption of competition, whereas military strategy is based on an
assumption of conflict
Both business and military organizations must adapt to change and constantly improve to be successful
Sustained competitive advantage
To achieve competitive advantage, firms need to constantly focus on the identification of differential
product strategies, building or reshaping core competencies, acquiring unique technologies, and
accumulation of intellectual property, all of which can all be harnessed to make the company successful in
a highly competitive marketplace.
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CH2: THE BUSINESS VISION AND MISSION
Learning Outcomes:
1. Describe the nature and role of vision and mission statements in strategic management.
2. Discuss why the process of developing a mission statement is as important as the resulting document.
3. Identify the components of mission statements.
4. Discuss how clear vision and mission statements can benefit other strategic-management activities.
5. Evaluate mission statement of different organizations.
6. Write good vision and mission statements.
Vision versus mission
Vision statement Reveals what an organization wants to be and
Should answer the basic question, “What do we whom it wants to serve
want to become?” Also called a creed statement, a statement of
The vision statement should be short, preferably purpose, a statement of philosophy, a statement of
one sentence, and as many managers as possible beliefs, and a statement of business principles
should have input into developing the statement.
Shared vision creates a commonality of interests The process of developing vision and
that can lift workers out of the monotony of daily mission statements
work and put them into a new world of opportunity Select several articles about these statements and
and challenge ask all managers to read these as background
information.
Mission statement Ask managers themselves to prepare a vision and
A declaration of an organization’s “reason for mission statement for the organization.
being.” Merge these statements into a single document
Answers the pivotal question “what is our and distribute the draft statements to all managers
business?” Process should create an “emotional bond” and
Essential for effectively establishing objectives and “sense of mission” between the organization and its
formulating strategies employees
Importance (benefits) 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 organization’s purpose and direction
To facilitate the translation of objectives into a work structure
To specify organizational purposes
Example of a good mission statement:
Dell’s mission is to be the most successful computer company (2) in the world(3) at delivering the best customer
experience in markets we serve(1). In doing so, Dell will meet customer expectations of highest quality; leading
technology (4); competitive pricing; individual & company accountability (6); best-in-class service and support (7); flexible
customization capability (7); superior corporate citizenship (8); financial stability (5)
[Author comment statement only lacks 1 component: concern for employees (9)]
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