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Strategic management consists of the analyses, decisions,

and actions an organization undertakes in order to create

and sustain competitive advantages.
First, the strategic management of an organization entails
three ongoing processes: analyses,
decisions, and actions.
Second, the essence of strategic management is the study
of why some firms outperform
Operational effectiveness means performing similar
better than rivals. Each of these is important, but none lead
to sustainable competitive
advantage because everyone is doing them
First, strategic management is directed toward overall
organizational goals and objectives.
That is, effort must be directed at what is best for the total
organization, not just a
single functional area..
Second, strategic management includes multiple
stakeholders in decision making. 18
Stakeholders are those individuals, groups, and
organizations who have a stake in the
success of the organization,
Third, strategic management requires incorporating both
short-term and long-term
perspectives. 19
Fourth, strategic management involves the recognition of
trade-offs between effectiveness
and efficiency.
doing the right thing (effectiveness) and doing things
right (efficiency)
Some authors have developed the concept of
ambidexterity which refers to a managers
challenge to both align resources to take advantage of
existing product markets as well

as proactively explore new opportunities.

Strategic management process strategy analysis, strategy
formulation, and strategy implementation
intended strategy of the firm. For a variety of reasons, the
intended strategy
rarely survives in its original form. Unforeseen
environmental developments, unanticipated
resource constraints, or changes in managerial preferences
may result in at least some parts
of the intended strategy remaining unrealized. On the other
hand, good managers will want
to take advantage of a new opportunity presented by the
environment, even if it was not
part of the original set of intentions.
Deliberate Strategy

the final realized strategy of any firm is a combination of

deliberate and emergent
strategy analysis study of firms external and internal
environments, and their fit with organizational vision and
strategy formulation decisions made by firms regarding
investments, commitments, and other aspects of operations
that create and sustain competitive advantage.
Strategy implementation actions made by firms that carry
out the formulated strategy, including strategic controls,
organizational design, and leadership.
Social Responsibility is the expectation that businesses or
individuals will strive to improve the overall welfare of
The Triple Bottom Line: Incorporating Financial as Well as
Environmental and Social Costs

happen can be estimated.

Organizations express priorities best through stated goals
and objectives that form
a hierarchy of goals, which includes its vision, mission, and
strategic objectives
A vision is a goal that is massively inspiring, overarching,
and long term. 91 It represents
a destination that is driven by and evokes passion
A companys mission statement differs from its vision in that
it encompasses both the
purpose of the company as well as the basis of competition
and competitive advantage.
Strategic objectives are used to operationalize the mission
Chapter 2
Environmental Scanning Environmental scanning involves
surveillance of a firms external environment to predict
environmental changes and detect changes already under
Environmental Monitoring Environmental monitoring tracks
the evolution of
environmental trends, sequences of events, or streams of
hard trend
a projection based on
measurable facts, events,
or objects. It is something
that will happen.
soft trend
something that might
happen and for which the
probability that it might

Competitive Intelligence Competitive intelligence (CI) helps

firms define and
understand their industry and identify rivals strengths and
Environmental Forecasting Environmental scanning,
monitoring, and competitive
intelligence are important inputs for analyzing the external
Scenario Analysis is a more in-depth approach to
forecasting. It draws on a range of
disciplines and interests, among them economics,
psychology, sociology, and demographics.
SWOT analysis
a framework for analyzing
a companys internal and
external environment and
that stands for strengths,
weaknesses, opportunities,
and threats.
The general idea of SWOT analysis is that a firms strategy
build on its strengths,
remedy the weaknesses or work around them,
take advantage of the opportunities presented by the
environment, and,
protect the firm from the threats.
The general environment is composed of factors that can
have dramatic effects on firm
Demographics are the most easily understood and
quantifiable elements of the general

environment. They are at the root of many changes in

society. Demographics include elements
such as the aging population, 27 rising or declining affluence,
changes in ethnic composition,
geographic distribution of the population, and disparities in
income level.
Sociocultural forces influence the values, beliefs, and
lifestyles of a society
Political processes and legislation influence environmental
regulations with which industries
must comply.
Developments in technology lead to new products and
services and improve how they are
produced and delivered to the end user. 37 Innovations can
create entirely new industries
and alter the boundaries of existing industries.
The economy affects all industries, from suppliers of raw
materials to manufacturers of
practice wherein the
Internet is used to tap a
broad range of individuals
and groups to generate
ideas and solve problems
a group of firms that
produce similar goods or
Competitive environment
factors that pertain to an
industry and affect a firms
threat of new entrants

finished goods and services, as well as all organizations in

the service, wholesale, retail,
government, and nonprofit sectors.
More firms are expanding their operations and market reach
beyond the borders of their
home country. Globalization provides both opportunities to
access larger potential markets
and a broad base of production factors such as raw
materials, labor, skilled managers,
and technical professionals.
Porters Five-Forces Model of Industry Competition
1. The threat of new entrants.
2. The bargaining power of buyers.
3. The bargaining power of suppliers.
4. The threat of substitute products and services.
5. The intensity of rivalry among competitors in an industry.

the possibility that the

profits of established
firms in the industry
may be eroded by new
Product differentiation
the degree that a product
has strong brand loyalty or
customer loyalty.
economies of scale
decreases in cost per unit
as absolute output per
period increases.
switching cost
one-time costs that a

buyer/supplier faces
when switching from one
supplier/buyer to another.

serve the same customer

needs as the industrys
products and services.

bargaining power of buyers

the threat that buyers
may force down prices,
bargain for higher quality
or more services, and play
competitors against each

intensity of rivalry among competitors in an industry

the threat that customers
will switch their business
to competitors within the

bargaining power
of suppliers
the threat that suppliers
may raise prices or reduce
the quality of purchased
goods and services.

a global network of linked
computers that use a
common transmission
format, exchange
information and store data.

threat of substitute
products and
the threat of limiting the
potential returns of an
industry by placing a
ceiling on the prices that
firms in that industry can
profitably charge without
losing too many customers
to substitute products.

zero-sum game
a situation in which
multiple players interact,
and winners win only by
taking from other players.

substitute products and services

products and services
outside the industry that

strategic groups
clusters of firms that share
similar strategies.

products or services that
have an impact on the
value of a firms products
or services.