Introducing

Strategy
and
Strategy-Making
CBME2
Topics
What is Strategy?
Key Terms is Strategic Management
The Strategic Management Model
I. What is Strategy?
In its simplest conception strategy is regarded as a unifying
idea which links purpose and action. For an intelligent
treatment of the subject, strategy is any course of action for
achieving an organization’s purpose(s). The first modern
business strategy theorist, strategy in the area of business is
defined as ‘the determination of the basic, long-term goals
and objectives of an enterprise, and the adoption of courses
of action and the allocation of resources necessary for those
goals.
I. What is Strategy?
Although still tentative and preliminary as a definition, it is
possible to advance a little further and say that strategy is ‘a
coordinated series of actions which involve the deployment
of resources to which one has access for the achievement of
a given purpose. Strategy therefore combines the
articulation of human goals and the organization of human
activity to achieve those goals. The setting of goals involves
the identification of opportunity.
I. What is Strategy?
Strategy is a process of translating perceived opportunity
into successful outcomes, by means of purposive action
sustained over a significant period of time. At a minimum
there must be a clear intent translatable into specific
objectives and some defined and effective means of
achieving these objectives by deliberate action involving the
use of resources to which one has access.
Strategic management
The art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives. As this definition
implies, strategic management focuses on integrating
management, marketing, finance/accounting,
production/operations, research and development, and
information systems to achieve organizational success.
Strategic management
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; long-range
planning, in contrast, tries to optimize for tomorrow the
trends of today.
Stages of Strategic Management
The strategic-management process consists of three stages:
Strategy formulation
Strategy implementation
Strategy evaluation
 Stages of Strategic Management
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.
Strategy-formulation issues include deciding what new businesses to enter,
what businesses to abandon, how to allocate resources, whether to
expand operations or diversify, whether to enter international markets,
whether to merge or form a joint venture, and how to avoid a hostile
takeover. Because no organization has unlimited resources, strategists
must decide which alternative strategies will benefit the firm most.
 Stages of Strategic Management
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.
 Stages of Strategic Management
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. All strategies are subject to future modification because
external and internal factors are constantly changing.
Three fundamental strategy evaluation activities are (1) reviewing external
and internal factors that are the bases for current strategies, (2) measuring
performance, and (3) taking corrective actions. Strategy evaluation is
needed because success today is no guarantee of success tomorrow!
Success always creates new and different problems; complacent
organizations experience demise.
Integrating Intuition and
Analysis
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. Yet strategic
management is not a pure science that lends itself to a nice, neat, one-two-
three approach.
Based on past experiences, judgment, and feelings, most people recognize that
intuition is essential to making good strategic decisions. Intuition is particularly
useful for making decisions in situations of great uncertainty or little precedent.
It is also helpful when highly interrelated variables exist or when it is necessary
to choose from several plausible alternatives.
Adapting to Change
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 as evidenced
how the global economic recession has caught so many
firms by surprise. Firms, like organisms, must be “adept at
adapting” or they will not survive.
II. Key Terms in Strategic
Management
Before we further discuss strategic management, we should define
nine key terms:
competitive advantage, strategists, vision and mission statements,
external opportunities and threats, internal strengths and
weaknesses, long-term objectives, strategies, annual objectives, and
policies.
II. Key Terms in Strategic
Management
Competitive Advantage - 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.” When a firm can do something that
rival firms cannot do, or owns something that rival firm’s
desire, that can represent a competitive advantage.
 II. Key Terms in Strategic
Management
Strategists - are the individuals who are most responsible for the
success or failure of an organization. Strategists have various job
titles, such as chief executive officer, president, and owner, chair
of the board, executive director, chancellor, dean, or
entrepreneur.
Strategists help an organization gather, analyze, and organize
information. They track industry and competitive trends, develop
forecasting models and scenario analyses, evaluate corporate and
divisional performance, spot emerging market opportunities,
identify business threats, and develop creative action plans.
II. Key Terms in Strategic
Management
Vision and Mission Statements – Many organizations today
develop a vision statement that answers the question
“What do we want to become?” Developing a vision
statement is often considered the first step in strategic
planning, preceding even development of a mission
statement. Many vision statements are a single sentence.
For example, the vision statement of Stokes Eye Clinic in
Florence, South Carolina, is “Our vision is to take care of
your vision.”
II. Key Terms in Strategic
Management
Mission statements are “enduring statements of purpose that
distinguish one business from other similar firms. A mission
statement identifies the scope of a firm’s operations in product
and market terms.” It addresses the basic question that faces
all strategists: “What is our business?” A clear mission
statement describes the values and priorities of an
organization. Developing a mission statement compels
strategists to think about the nature and scope of present
operations and to assess the potential attractiveness of future
markets and activities.
II. Key Terms in Strategic
Management
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. Opportunities and threats are
largely beyond the control of a single organization—thus the
word external.
 II. Key Terms in Strategic
Management
Internal Strengths and 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.
Identifying and evaluating organizational strengths and weaknesses
in the functional areas of a business is an essential strategic
management activity. Organizations strive to pursue strategies that
capitalize on internal strengths and eliminate internal weaknesses.
Strengths and weaknesses are determined relative to competitors.
 II. Key Terms in Strategic
Management
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. Objectives
are essential for organizational success 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. Objectives
should be challenging, measurable, consistent, reasonable, and
clear. In a multidimensional firm, objectives should be
established for the overall company and for each division.
II. Key Terms in Strategic
Management
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.
II. Key Terms in Strategic
Management
Annual Objectives - are short-term milestones that
organizations must achieve to reach long-term objectives.
Like long-term objectives, annual objectives should be
measurable, quantitative, challenging, realistic, consistent,
and prioritized.
II. Key Terms in Strategic
Management
Policies - are the means by which annual objectives will be
achieved. Policies include guidelines, rules, and procedures
established to support efforts to achieve stated objectives.
Policies are guides to decision making and address
repetitive or recurring situations. Policies are most often
stated in terms of management, marketing,
finance/accounting, production/operations, research and
development, and computer information systems activities.
III. The Strategic-Management
Model
The strategic-management process can best be studied and
applied using a model. Every model represents some kind of
process. The framework illustrated in Figure 1 is a widely
accepted, comprehensive model of the strategic-
management process.
 III. The Strategic-Management
Model
This model does not guarantee success, but it does represent a clear and
practical
approach for formulating, implementing, and evaluating strategies.
Three important questions to answer in developing a strategic plan:
1. Where are we now?
2. Where do we want to go?
3. How are we going to get there?
 III. The Strategic-Management
Model
1. Where are we now?
Identifying an organization’s existing vision, mission, objectives, and
strategies is the logical starting point for strategic management because a
firm’s present situation and condition may preclude certain strategies and
may even dictate a particular course of action.
Every organization has a vision, mission, objectives, and strategy, even if
these elements are not consciously designed, written, or communicated.
 III. The Strategic-Management
Model
2. Where do we want to go?
The answer to where an organization is going can be determined largely
by where the organization has been! The strategic-management process
is dynamic and continuous. A change in any one of the major components
in the model can necessitate a change in any or all of the other
components.
 III. The Strategic-Management
Model
3. How are we going to get there?
For instance, a shift in the economy could represent a major opportunity
and require a change in long-term objectives and strategies; a failure to
accomplish annual objectives could require a change in policy; or a major
competitor’s change in strategy could require a change in the firm’s
mission. Therefore, strategy formulation, implementation, and evaluation
activities should be performed on a continual basis, not just at the end of
the year or semiannually. The strategic-management process never really
ends.