Benefits of Strategic Management Why Some Firms Do No Strategic Planning Seventeen Guidelines for the Strategic-Planning Process to Be

Enhanced Communication: a. Dialogue-- b. Participation
Deeper/Improved Understanding: a. Of others’ views ---b. Of what the
firm is doing/planning and why
Greater Commitment : a. To achieve objectives ---b. To implement
strategies ---c. To work hard
THE RESULT : All Managers and Employees on a Mission to Help the
Firm Succeed
Nonfinancial Benefits: It allows for identification, prioritization, and
exploitation of opportunities.---It provides an objective view of
management problems.---It represents a framework for improved
coordination and control of activities---It minimizes the effects of
adverse conditions and changes.--- It allows major decisions to better
support established objectives---It allows more effective allocation of
time and resources to identified opportunities. -.---It creates a
framework for internal communication among personnel. ----It helps
integrate the behavior of individuals into a total effort. --- It provides a
basis for clarifying individual responsibilities. ---- It encourages forward
thinking. ---- It encourages a favorable attitude toward change.---It gives
a degree of discipline and formality to the management of a business.
Financial benefits: Research indicates that organizations using strategic-
management concepts are more profitable and successful than those
that do not--- Businesses using strategic-management concepts show
significant improvement in sales, profitability, and productivity
compared to firms without systematic planning activities----High-
performing firms tend to do systematic planning to prepare for future
fluctuations in their external and internal environments. Firms with
planning systems more closely resembling strategic-management
theory generally exhibit superior long-term financial performance
relative to their industry---High-performing firms seem to make more
informed decisions with good anticipation of both short- and long-term
consequences.
Lack of knowledge or experience in strategic planning—No
training in strategic planning. Poor reward structures—When an
organization assumes success, it often fails to reward success.
When failure occurs, then the firm may punish--- Firefighting: An
organization can be so deeply embroiled in resolving crises and
firefighting that it reserves no time for planning---Waste of
time--- Too expensive: Some organizations see planning as too
expensive in time and money. Fear of the unknown---Laziness---
Fear of failure--- Overconfidence--- Prior bad experience--- Self-
interest: When someone has achieved status, privilege, or self-
esteem through effectively using an old system, he or she often
sees a new plan as a threat. ---Suspicion: Employees may not
trust management.
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---Viewing planning as
unnecessary or unimportant ---Becoming so engrossed in current
problems that insufficient or no planning is done --- Being so
formal in planning that flexibility and creativity are stifled
Effective
1. It should be a people process more than a paper process.--- It
should be a learning process for all managers and employee---It
should be words supported by numbers rather than numbers
supported by words---It should be simple and nonroutine---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-mindness
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 information.---It
should not be controlled by “technicians.”--- Do not pursue too
many strategies at once---Continually strengthen the “good
ethics is good business” policy

Benefits of vission mission statement: 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 purposeand direction, and to deter those who cannot
from participating further in the organization’s 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.
Ten Benefits of Having a Clear Mission and Vision: Achieve clarity of
purpose among all managers and employees.---Provide a basis for all
other strategic planning activities, including the internal and external
assessment, establishing objectives, developing strategies, choosing
among alternative strategies, devising policies, establishing
organizational structure, allocating resources, and evaluating
performance---Provide direction----Provide a focal point for all
stakeholders of the firm.---Resolve divergent views among managers.---
Promote a sense of shared expectations among all managers and
employees.---Project a sense of worth and intent to all stakeholders.---
Project an organized, motivated organization worthy of support.---
Achieve higher organizational performance.---Achieve synergy among
all managers and employees
Porter’s Five-Forces Model of competitive analysis is a widely
used approach for developing strategies in many industries. The
intensity of competition among firms varies widely across industries.
1--Potential Entry of New Competitors:
Whenever new firms can easily enter a particular industry, the intensity
of competitiveness among firms increases. Barriers to entry, however,
can include the need to gain economies of scale quickly, the need to
gain technology and specialized know-how, the lack of experience,
strong customer loyalty, strong brand preferences, large capital
requirements, lack of adequate distribution channels, government
regulatory policies, tariffs, lack of access to raw materials, possession of
patents, undesirable locations, counterattack by entrenched. firms, and
potential saturation of the market. Despite numerous barriers to entry,
new firms sometimes enter industries with higher-quality products,
lower prices, and substantial marketing resources. The strategist’s job,
therefore, is to identify potential new firms entering the market, to
monitor the new rival firms’ strategies, to counterattack as needed, and
to capitalize on existing strengths and opportunities. When the threat
of new firms entering the market is strong, incumbent firms generally
fortify their positions and take actions to deter new entrants, such as
lowering prices, extending warranties, adding features, or offering
financing specials.
2--Potential Development of Substitute Products:
The threat of substitutes is high when rivals or even companies outside
the industry offer more attractive and/or lower cost products. Buyers
then have the opportunity to make a price/performance trade-off. The
cost of switching is also a factor; if it is high, the treat of substitution is
low. The presence of substitute products puts a ceiling on the price that
can be charged before consumers will switch to the substitute product.
Price ceilings equate to profit ceilings and more intense competition
among rivals. Producers of eyeglasses and contact lenses, for example,
face increasing competitive pressures from laser eye surgery
Mission Statement Components Seven characteristics describe the most competitive companies:
1. Customers—2. Products or services---3. Markets— Market share matters; the 90th share point isn’t as important as
Geographically, where does the firm compete? the 91st, and
4. Technology—Is the firm technologically current?---5. Concern nothing is more dangerous than falling to 8 9.---Understand and
for survival, growth, and profitability—Is the firm committed to remember precisely what business you are in.---Whether it’s
growth and financial soundness?----6. Philosophy—What are the broke or not, fix it—make it better; not just products, but the
basic beliefs, values, aspirations, and ethical priorities of the whole
firm?----7. Self-concept: What is the firm’s distinctive company, if necessary. ---Innovate or evaporate; particularly in
competence or major competitiveadvantage?----8. Concern for technology-driven businesses, nothing quite recedes like success.
public image: Is the firm responsive to social, community, and ---Acquisition is essential to growth; the most successful
environmental concerns?---Concern for employees: Are purchases are in niches that add a technology or a related
employees a valuable asset of the firm? market. ---People make a difference; tired of hearing it? Too bad.
---There is no substitute for quality and no greater threat than
failing to be cost
Characteristics of a Mission Statement: Broad in scope; do not competitive on a global basis.
include monetary amounts, numbers, percentages, ratios, or
objectives----Less than 250 words in length---Inspiring----Identify
the utility of a firm’s products---Reveal that the firm is socially
responsible----Reveal that the firm is environmentally
responsible---Include nine components customers, products or
services, markets, technology, concern for survival/growth/
profits, philosophy, self-concept, concern for public image,
concern for employees---Reconciliatory---Enduring
3--Bargaining Power of Consumers: When customers are 5--Bargaining power of supplier:
concentrated or large or buy in volume, their bargaining power It refers to the pressure that suppliers can put on companies by
represents a major force affecting the intensity of competition in raising their prices, lowering their quality, or reducing the
an industry. Rival firms may offer extended warranties or special availability of their products.
services to gain customer loyalty whenever the bargaining power Backward integration strategy to gain control or ownership of
of consumers is substantial. Bargaining power of consumers also suppliers. This strategy is especially effective when suppliers are
is higher when the products being purchased are standard or unreliable, too costly, or not capable of meeting a firm’s needs
undifferentiated. When this is the case, consumers often can on a consistent basis In more and more industries, sellers are
negotiate selling price, warranty coverage, and accessory forging strategic partnerships with select suppliers in efforts to
packages to a greater extent. The bargaining power of consumers (1) reduce inventory and logistics costs (e.g., through just-in-time
can be the most important force affecting competitive deliveries); (2) speed the availability of next-generation
advantage. Consumers gain increasing bargaining power under components; (3) enhance the quality of the parts and
the following circumstances: If they can inexpensively switch to components being supplied and reduce defect rates; and (4)
competing brands or substitutes---If they are particularly squeeze out important cost savings for both themselves and
important to the seller---If sellers are struggling in the face of their suppliers
falling consumer demand---If they are informed about sellers’
products, prices, and costs---If they have discretion in whether
and when they purchase the product
4--Rivalry Among Competing Firms:
Competitive rivalry is a measure of the extent of competition
among existing firms. Intense rivalry can limit profits and lead to
competitive moves, including price cutting, increased advertising
expenditures, or spending on service/product improvements and
innovation. Conditions That Cause High Rivalry Among
Competing Firms: High number of competing firms---Similar size
of firms competing---Similar capability of firms competing---
Falling demand for the industry’s products---Falling
product/service prices in the industry--when consumers can
switch brands easily---When barriers to leaving the market are
high---When barriers to entering the market are low---When
fixed costs are high among firms competing---When the product
is perishable---When rivals have excess capacity---When
consumer demand is falling---When rivals have excess
inventory---When rivals sell similar products/services---When
mergers are common in the industry
Key terms: The Basic Functions of Management
Competitive Advantage: Strategic management is all about Planning consists of all those managerial activities related to
gaining and maintaining competitive advantage. This term can preparing for the future. Specific tasks include forecasting,
be defined as “anything that a firm does especially well establishing objectives, devising strategies, developing policies,
compared to rival firms.” When a firm can do something that and setting goals.
rival firms cannot do, or owns something that rival firms desire, Organizing includes all those managerial activities that result in
that can represent a competitive advantage. For example, in a a structure of task and authority relationships. Specific areas
global economic recession, simply having ample cash on the include organizational design, job specialization, job
firm’s balance sheet can provide a major competitive descriptions, job specifications, span of control, unity of
advantage. command, coordination, job design, and job analysis.
Strategists: Strategists are the individuals who are most
responsible for the success or failure of an organization. Motivating involves efforts directed toward shaping human
Strategists have various job titles, such as chief executive officer, behavior. Specific topics include leadership, communication,
president, owner, work groups, behavior modification, delegation of authority,
chair of the board, executive director, chancellor, dean, or job enrichment, job satisfaction, needs fulfillment,
entrepreneur. Strategists help an organization gather, analyze, organizational change, employee morale, and managerial
and organize information. They track industry and competitive morale.
trends, develop forecasting models and scenario analyses, Staffing activities are centered on personnel or human resource
evaluate corporate and divisional performance, spot emerging management. Included are wage and salary administration,
market opportunities, identify business threats, and develop employee benefits, interviewing, hiring, firing, training,
creative action plans. management development, employee safety, affirmative
External Opportunities and Threats: External opportunities and action, equal employment opportunity, union relations, career
external threats refer to economic, social, cultural, development, personnel research, discipline policies, grievance
demographic, environmental, political, legal, governmental, procedures, and public relations.
technological, and competitive trends and events that could Controlling refers to all those managerial activities directed
significantly benefit or harm an organization in the future. toward ensuring that actual results are consistent with planned
Examples are: Availability of capital can no longer be taken for results. Key areas of concern include quality control, financial
granted.---Consumers expect green operations and products.--- control, sales control, inventory control, expense control,
Marketing has moving rapidly to the Internet.--- Consumers analysis of variances, rewards, and sanctions.
must see value in all that they consume.--- Global markets offer
the highest growth in revenues.
Internal strengths and internal weaknesses are an
organization’s controllable activities that are performed
especially well or poorly. They arise in the management,
marketing, finance/accounting, production/operations, research
and development, and management information systems
activities of a business. Strengths and weaknesses are
determined relative to competitors. Relative deficiency or
superiority is important information. Also, strengths and
weaknesses can be determined by elements of being rather
than performance. For example, a strength may involve owner
ship of natural resources or a historic reputation for quality.
Strategies: Strategies are the means by which long-term
objectives will be achieved. Business strategies may include
geographic expansion, diversification, acquisition, product
development, market penetration, retrenchment, divestiture,
liquidation, and joint ventures.
Annual Objectives: are short-term milestones that organizations
must achieve to reach longterm objectives.
Long-Term Objectives: Objectives can be defined as specific
results that an organization seeks to achieve in pursuing its basic
mission. Long-term means more than one year.
Policies: Policies are the means by which annual objectives will
be achieved. Policies include guidelines, rules,