24 FEB 2019

24 FEB 2019

18 FEB 2019

18 FEB 2019

18 FEB 2019 · CHAPTER 5

18 FEB 2019 · Implementing marketing, finance/accounting, development and research, and managment information sysytem issues.

18 FEB 2019 · Chapter 1 “THE NATURE OF STRATEGIC MANAGEMENT” The notion of strategic management is to achieve and maintain competitive advantage. 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. It focuses on integrating management, marketing, finance/ accounting, production/operations, research and development, and information systems to achieve organizational success. 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. A strategic plan is in essence a company’s game plan, a company must have a good strategic plan to compete successfully. The strategic management process consists of three stages; strategy formulation, strategy implementation, and strategy evaluation. 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. The first stage strategy formulation issues include deciding what new businesses to enter, what businesses to abandon, how to allocate resources, whether to expand operations or diversify. The second stage strategy implementation (often called the action stage) requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. It includes developing an organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. This is often considered to be the most difficult stage in strategic management. This stage answers questions like what must we do to implement our part of the organization's strategy and how best can we get the job done? The third stage strategy evaluation is the final stage, managers need to know when particular strategies are not working well. They have to review external and internal factors that are the bases for current strategies, measure performance, and take corrective actions. Strategic management is all about gaining and maintaining competitive advantage. This term can be defined as anything that a firm does especially well compared to rival firms. Strategists are the individuals who are most responsible for the success or failure of an organization. Vision statements answer the question what do we want to become? and Mission statements are enduring statements of purpose that distinguish one business from other similar firms. It addresses the What is our business? External opportunities and external 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. Long term objectives for a company are taken into account for more than one year and annual objective are short- term milestones that organizations must achieve in the long term. Policies are the guides, rules and procedures to support efforts to achieve stated objectives; usually, they are stated in terms of management, marketing, production, finance, and research activities. Policies are really important in strategy implementation, they outline an organization’s expectations of its employees and managers. The strategic Management Model represents a clear and practical approach for formulating, implementing and evaluating strategies. This model is dynamic and continuous, the activities should be performed not only at the end of the year, actually, the process never really ends. Companies conduct formal meetings to discuss and update some variables of the firm such as the mission, vision, objectives, strategies, strengths and weaknesses; these meetings are better known as retreats. There are three main steps in a strategic management model: the strategy formulation, the implementation of that strategy and the evaluation of it. The process must be a self reflective that involve managers as well as employees, building a corporate culture. Both parties need to be part of the learning process, open to new ideas, new information and new viewpoints: be open mindedness. Typically the application of this model is more formal in larger and well established organizations; but not only big corporation can implemented, also small firms and governmental organizations, this is mainly because the strategic management model is becoming more widely around businesses. Application of the strategic management model brings multiple benefits, the principal one has been to help organizations formulate better strategies through the use of more systematic, logical and rational approach to strategic choice. A really important factor in the process is communication, achieve the understanding of and the commitment from employees as well as managers. When both of them understand what is happening, they feel involved in the firm, creating a better environment: managers and employees become more innovative and creative and the process empower them. This are not the only benefits, in the financial sector there are notable improvements in sales, profitability and productivity when a company implements this process. Companies make more informed decisions with good anticipation of short and long consequences. But, if there are many benefits, why some companies do not implement it? Well, some of the reasons are simple: there is a lack of knowledge or experience in strategic plans. Business people have the idea that a strategic management plan is a waste of time and money, and they do not want to put effort to formulate it. Some other reasons include, overconfidence, previous bad experience with it, self interest and suspicion. Each firm has its strategy, even though some of them do not really know where they are going; the strategic management process represent a logical, systematic and objective plan to achieve future decisions of a company. Organizations must adapt to changes and be constant to improve in order to be successful.

18 FEB 2019 · Chapter 2: “THE BUSINESS VISION AND MISSION” In the beginning, a new business is simply a collection of ideas. Starting a new business rests on set of beliefs that the new organization can offer some product or service to some customers, in some geographic area, using some type of technology, at a profitable price. Vision and Mission statements often can be found in the front of annual reports. What do we want to become? It is specially important for managers and executives in any organization to agree on the basic vision that the firm strives to achieve in the long term. A vision statement should answer the basic question, “What do we want to become?” A clear vision provides the foundation for developing a comprehensive mission statement. The vision statement should be short, preferably one sentence. What is our business? Current thought on mission statement is based largely on guidelines set forth in the mid 1970s by Peter Drucker, who is called “the father of modern management” for his pioneering studies at General Motors Corporation. Harvard Business Review has called Drucker “the preeminent management thinker of our time”. Visión versus Mission Many organization develop both a mission statement and a vision statement. Whereas the mission statement answer the question “What is our business?” the vision statement answer the question “what do we want to become” It can be argued that profit, not mission or vision, is the primary corporate motivator. Profit is perceived negatively by some employees in companies. Employees may see profit as something they earn and management then uses and even gives away shareholders. Although this perception is undesired and disturbing to management, it clearly indicates that both profit and vision are needed to motivate a workforce effectively. The process of Developing Vision and Mission Statements As indicated in the strategic-management model, clear vision and mission statements are needed before alternative strategies can be formulated and implemented. As many managers as possible should be involved in the process of developing these statements because though involvement, people become committed to an organization. Benefits of vision and mission statements According to Rarick and Vitton they found that the mission statement have a twice the average return on shareholders equity than those firms without a formalizes mission Business Week reports that firms using mission statement have a 30 percent higher return on certain financial measures than those without such statements. However, some studies have found that having mission statements does not directly contribute positively to financial performance. The divergent views among managers can be revealed and resolved through the process. A genius decision for a mission statement must be based on divergent views to have a chance to be a right and effective decision. It is always a choice between alternatives, each of which rests on different assumptions regarding the reality business and its environment and communicating with important internal and external stakeholders. Characteristics of a mission statement A mission statement is more than specific details; A good mission statement describes an organization’s purpose, customers, products or services, market, philosophy, and basic technology. A mission statement should define what the organization is and what it aspires to be. Be limited enough to include some ventures and broad enough to allow for work for creative growth. distinguish a given organization from all other, serve as a framework for evaluating both current and prospective activities and be stated in terms sufficiently clear to be widely understood throughout the organization A effective mission should include nine components because mission statement is often the most visible and public part of the strategic-management process. Customer. Product or services Market Technology Concern for survival, growth, and profitability Philosophy Self-concept Concern for public image Concern for employees. Here are some characteristics what a mission statement must have: -Broad in scope -Less than 250 words in length -inspiring -Identify the utility of a firm’s products -Reveal that the firms is socially responsible -Reveal that the firms is environmentally responsible -Include nine components -Reconciliatory -Enduring