strategic management 3rd edition

strategic management 3rd edition

Strategic Management: A Comprehensive Guide (3rd Edition)

1. Introduction to Strategic Management

Elements of Strategic Management Strategic management is the basis for thinking and organizational planning; understanding the industrial organization as external business context weaves functional objectives, culture, and strategies of an enterprise in affecting the external business context. The development of elementary business insight and language is supported through strategic management saturating the environment and organizational contexts. A major objective of all types of executive decision making and business organization is to develop mastery of the business context. Companies require orientation to various organizational strategies to survive and compete, as distinct from specific process-oriented theories.

Transformations to Strategic Management One transformation into strategic management is becoming conscious of scents of strategic behavior that in myriad ways distinguish strategic management from traditional management. A second transformation that reconciles the reality that operational activities actually cause development of ultimate superiority of strategic nature involves inappropriately placed objectives derived from reductive planning techniques that only occasionally align with expected fierce stakeholder competition. The model of business dominance has value to various perspectives, as does strategic management, and work cultures that correspond to type for other orientations, supporting contributions to society.

Purpose of Chapter This introductory chapter covers managerial implications that result from transitions into strategic management. A model of how strategic management can be implemented according to cultural traits is developed for subsequent thematic and chronological chapters. Supplementary information outlines essentials and conclusions that follow through strategic management business practice research. The chapter addresses decisions that establish objectives, mission, and vision statements of an organization, and operational activities that are classified according to strategic types of Grappa. The competitive elements of industries and their business organizations are highlighted in valuable perspectives.

2. Analyzing the External Environment

Overall, the business strategies of the future will not be vastly different from those successful today. Industry fundamentals and influential dynamics are also unlikely to change suddenly or radically. But only some will remain applicable to the changes in last technology, demographics, geography, inflation, and energy. The key for management is to understand future market signals and develop a perspective that begins with an awareness of the rate and direction of change in the underlying world both inside and outside the business firm which they serve.

7) Recognize the basic means of creating barriers to entry or contestability in these areas—that common carrier activities can produce large amounts of discretionary pricing power.

6) Meet future consumer product quality expectations by using either scale or skill expertise to avoid falling into the commodity-like price trap.

5) Increase the odds of success by tapping the future cost side pressures inherent in technological progress rather than ignoring them or dismissing their significance.

4) Protect against the potentially damaging effects of future high inflation rates and energy shortages, and recognize the varying degrees of risk associated with different national strategies of dealing with those problems.

3) Succeed in the international business arena by specializing in the types of products and services most likely to be in demand, and by exploiting differences in national conditions, whether they are in the form of lower labor costs or different consumption preferences for product variations.

2) Make the most of national growth potential by seeking out and developing profitable segments of the market, and by locking in the customer with a cost-effective strategy once he or she is there.

1) Protect those areas of strategic opportunity that are unique to the nation or company and build on these strengths to exploit opportunities, wherever they lie, be it at home or abroad.

The chapter also attempted to summarize and generalize the more idiosyncratic results of the separate studies that have been done or are going on, in order to draw some implications for future business strategies. In general, the conclusions of those studies suggest the following seven strategies for success:

The environmental trends, which have been seen in the past and will continue into the future, present significant challenges and opportunities for business. Among the environmental trends that have been identified as important to understand are those that deal with the increasing pace and rate of technological change that underlies the other environmental trends, those that look at societal issues about the demographic profile and consumer attitudes, and those that look at broader concerns like energy, inflation, and balance of payments. Successful businesses must also anticipate changes in political, legal, and regulatory areas. The effects of each of those environmental concerns will vary in magnitude and in kind for different industries and companies within the same industry. This chapter examined a set of tools and techniques that help managers identify significant environmental trends and think realistically about future business opportunities. The tools include simple extrapolation of past trends, detailed studies of interacting trends, more involved and broader use of experts, use of impact-modeling techniques, and broad country studies.

3. Assessing Internal Capabilities

A SWOT analysis usually reveals some critical issues that the firm faces. These current issues can provide good indicators of those likely to be faced in the future. The SWOT analysis provides a good basis for framing strategic goals for the coming planning period. Goals can be formulated to rectify weaknesses or to overcome threats, or perhaps to capitalize on strengths and exploit new opportunities.

Key Issues from SWOT Analysis

A SWOT analysis is a simple but useful tool used extensively by management in the business world. The objective of a SWOT analysis is, as the name suggests, to help management review the existing strengths, weaknesses, opportunities, and threats that the firm is facing. It is a useful tool for helping to focus attention on the environmental influences facing the business and the internal attributes of the business itself that can help equip it to deal with those influences. The SWOT analysis helps management to consolidate its thoughts and ideas from discussions and brainstorming sessions and to provide a useful way of summarizing different perspectives and ideas. Key to the application of the SWOT analysis is a collection and review of all the relevant internal and external data that is necessary to complete a comprehensive analysis.

SWOT Analysis

4. Formulating and Implementing Strategies

Top management, which is responsible for all decisions, does not like too many company issues decided at levels beneath their own. Clifford reports that in any of his interviews, the man in the street did not mind who made decisions. He believed the decisions were made by the appropriate people. This is important, as both Clifford and Stern found that managers’ preoccupations were usually with other managers, and very little concern existed for the people employed. A common objection to the Model is that it is too focused upon strategic making within the company. A company, especially a large company, does not exist in a vacuum. Its relationship with all parts of the external world is its strategy. Hostile takeover bids from rivals or from financial predators should bypass company strategies. Customer quality of service, backup, and support systems exist entirely outside the making of the strategic response.

The Harvard Policy Model, designed by Igor Ansoff in 1976, calls the strategic analysis a passive process of identifying and weighing environmental threats and opportunities. It suggests that a manager’s creative thought would be devoted to developing strategies that match these threats and opportunities. The logic is clear: exploit your opportunities and neutralize your threats. Business policy, as well as company strategy, is about doing something, making a judgment, and taking a risk. Out of this would come a company’s competitive edge. Formulating strategy, as a word, does not mean much at all unless it means what it says. The strategy is about doing. If strategic decisions are taken by a committee, then the committee should carry out its own decisions and not forget the committee room. The decision acceptor and decision maker would then be one and the same.

5. Evaluating Strategic Performance and Adjusting Strategies

But some strategic change generally tends to be required as significant trends occur, firm performance deteriorates, or as the organization’s goals change. The balanced scorecard is becoming an increasingly popular strategic management tool. The balanced scorecard focuses on both financial and strategic goals and includes a wide range of performance indicators. Typically, performance is assessed from a holistic perspective. However, the balanced scorecard is not the only useful performance measuring tool. Other performance measuring tools may focus on one or more performance components. Also, a wide variety of diagnostic tools can be used to identify why performance is effective or ineffective. These tools include industry and competitive analysis, diagnosis of competitive advantage, horizontal and vertical integration, cooperative strategy, and organizational assessment.

In this chapter, we examine how firms can evaluate their strategic performance and adjust their strategies. Evaluating performance requires developing suitable measures of performance and then applying those measures to the firm’s performance. However, strategic management suggests that key result components (KRC) must be rated in order to diagnose why performance is or is not effective in achieving organizational goals. Once goals are achieved by artists, the logic model’s inputs, activities, and outputs may be revisited to see if they are still appropriate for the revised goals. Strategic control systems can be then used to evaluate both evaluations and the new activities that have been identified. Care should be taken in adjusting strategies. The firm should not stray from its formal core competencies or mission.