I. WHAT IS STRATEGIC MANAGEMENT? A. Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. 1. The term strategic management is used synonymously with strategic planning.
2. The purpose of strategic management is to exploit and create new and different opportunities for tomorrow while long-range planning tries to optimize for tomorrow the trends of today. B.Stages of Strategic Management 1. The strategic-management process consists of three stages. a. Strategy formulation includes developing a vision and mission, identifying an organization’s external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue. b. Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed; strategy implementation includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. c. Strategy evaluation is the final stage in strategic management. Managers desperately need to know when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information. 2. Three fundamental strategy evaluation activities are provided below: a. Reviewing external and internal factors that are the bases for current strategies b. Measuring performance c. Taking corrective action
3. Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels in a large organization: corporate, divisional, and functional. Smaller businesses may only have the corporate and functional levels. B. Integrating Intuition and Analysis 1. The strategic-management process can be described as an objective, logical, systematic approach for making major decisions in an organization. It attempts to organize qualitative and quantitative information in a way that allows effective decisions to be made under conditions of uncertainty. 2. Most people recognize that intuition is essential to making good strategic management decisions. Intuition is particularly useful for making decisions in situations of great uncertainty or little precedent. D. Adapting to Change 1. The strategic-management process is based on the belief that organizations should continually monitor internal and external events and trends so that timely changes can be made as needed. The rate and magnitude of changes that affect organizations are increasing dramatically. 2. By eliminating boundaries and speeding the flow of information, e-commerce and globalization are transforming business and society. 3. The need to adapt to change leads organizations to key strategic-management questions, such as, “What kind of business should we become?” “Are we in the right field?” “Should we reshape our business?” “What new competitors are entering our industry?” II. KEY TERMS IN STRATEGIC MANAGEMENT A.Competitive Advantage 1. Competitive advantage is defined as anything that a firm does especially well compared to rival firms. 2. Firms should seek a sustained competitive advantage by continually adapting to changes in external trends and internal capabilities and evaluating strategies that capitalize on those factors. 3. An increasing number of companies are gaining a competitive advantage by using the Internet for direct selling and for communication with suppliers, customers, creditors, partners, shareholders, clients, and competitors who may be dispersed globally.
B. Strategists 1. Strategists are individuals who are most responsible...