STRATEGIC MANAGEMENT

Notable Quotes
• “If we know where we are and something about how we got there, we might see where we are trending–
and if the outcomes which lie naturally in our course are unacceptable, to make timely change.” –
Abraham Lincoln
• “Without a strategy, an organization is like a ship without a rudder, going around in circles. It’s like a
tramp; it has no place to go.” –Joel Ross and Michael Kami
• “The formulation of strategy can develop competitive advantage only to the extent that the process can
give meaning to workers in the trenches.” –David Hurst

Doing Great in a Weak Economy

• When most firms were struggling in 2008, McDonald’s increased its revenues from $22.7 billion in 2007
to $23.5 billion in 2008.
• Jim Skinner, CEO of McDonald’s says, “We do so well because our strategies have been so well planned
out.”

UNIT 1: General Business Policies/Strategic Management: An Overview

Strategic Management
• the art and science of formulating, implementing, and evaluating cross-functional decisions that enable
an organization to achieve its objectives
• sometimes used to refer to strategy formulation, implementation, and evaluation.
• the purpose 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.

Strategic Management Process

• a sequential set of analyses and choices that can increase the likelihood that an organization will choose
‘good strategy’, that is, that generates competitive advantages

Stages of Strategic Management

1. 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
§ issues include deciding what new business 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
2. Strategy Implementation
§ requires a firm to establish annual objectives, devise policies, motivate employees, and allocate
resources so that formulated strategies can be executed
§ often called the “action stage” of strategic management
§ successful strategy implementation hinges upon managers’ ability to motivate employees, which
is more an art than a science
o strategies formulated but not implemented serve no useful purpose
3. Strategy Evaluation
§ the final stage in strategic management
§ all strategies are subject to future modification because external and internal factors are
constantly changing
 § fundamental strategy-evaluation activities are:
o reviewing external and internal factors that are the bases for current strategies
o measuring performance
o taking corrective actions
§ it is needed because success today is no guarantee of success tomorrow
§ success always create new and different problems; complacent organizations experience demise
• Waterman has noted: In today’s business environment, more than in any preceding era, the only
constant is change. Successful organizations effectively manage change, continuously adapting their
bureaucracies, strategies, systems, products, and cultures to survive the shocks and prosper from the
forces that decimate the competition.

Key Terms in Strategic Management

• Competitive Advantage
§ anything that a firm does especially well compared to rival firms
§ when a firm can do something that rival firms cannot do, or owns something that rival firms
desire, that can represent a competitive advantage
§ a firm must strive to achieve sustained competitive advantage by:
o continually adapting to changes in external trends and events and internal capabilities,
competencies, and resources
o effectively formulating, implementing, and evaluating strategies that capitalize upon
those factors
• Strategists
§ the individuals who are most responsible for the success or failure of an organization
§ they have various job titles, such as chief executive officer, president, owner, chair of the board,
executive director, chancellor, dean, or entrepreneur
• Vision and Mission Statements
§ Vision Statement
o answers the question “What do we want to become?”
o developing a vison statement is often considered the first step in strategic planning,
preceding even development of a mission statement
o “Our vision is to take care of your vision.”
o “To be the world’s best quick service restaurant. Being the best means providing
outstanding quality, service, cleanliness, and value, so that we make every customer in
every restaurant smile.” –McDonald’s
o “To be the bet tasting QSR… (quick service restaurant); to be the most endearing brand
that has ever been…; to lead in product taste at all times…;to provide FSC (food, service,
cleanliness) excellence in every encounter…; happiness in every moment…; by year 2020,
with over 4,000 stores worldwide, truly a GLOBAL BRAND (and the Filipino will be admired
worldwide).” –Jollibee
o “To sell food in a fast, friendly environment that appeals to pride conscious, health
minded customers.” –KFC
§ Mission Statement
o enduring statements of purpose that distinguish one business from other similar firms
o it addresses the basic question that faces all strategists: “What is our business?”
o a clear mission statement describes the values and priorities of an organization
o “Google’s mission is to organize the world’s information and make it universally accessible
and useful.” –Google
 o “To refresh the world; to inspire moments of optimism and happiness; to create value
and make a difference.” –Coca-Cola
o “We have a relentless drive to invent things that matter: innovations that build, power,
move and help cure the world. We make things that very few in the world can, but that
everyone need. This is a source of pride. To our employees and customers, it defines GE.”
–General Electronics
o “Our mission state is simple, yet the foundation of everything we do here at Virgin Atlantic
Airways.. to embrace the human spirit and let it fly. (“Screw it, let’s do it!”) –Virgin Atlantic
Airways
o “Warby Parker was founded with a rebellious spirit and a lofty objective: to offer designer
eyewear at a revolutionary price, while leading the way for socially conscious businesses.”
–Warby Parker
o “The mission of Southwest Airlines is dedication to the highest quality of Customer Service
delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” –
Southwest Airlines
o “To serve GREAT TASTING FOOD, bringing the JOY of EATING to everyone.” –Jollibee
o “Our passion, as a restaurant company, is to put a YUM on people’s faces around the
world, SATISFYING CUSTOMERS every time they eat our food and DOING IT BETTER than
any other restaurant company. The UNIQUE EATING EXPERIENCE at each of our
restaurants MAKE OUR CUSTOMER SMILE and inspire their loyalty for lift. Toward that
end, our associates around the world are trained to be CUSTOMER MANIACS.” –KFC
• 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
§ in a global economic recession, a few opportunities and threats that face many firms are listed
here:
o availability of capital can no longer be taken for granted
o consumers expect green operations and products
o marketing has moving rapidly to the Internet
o consumers must see value in all that they consume
o global markets offer the highest growth in revenues
o as the price of oil has collapsed, oil rich countries are focused on supporting their own
economies, rather than seeking out investments in other countries
o too much debt can crush even the best firms
o layoffs are rampant among many firms as revenues and profits fall and credit sources dry
up
o dramatic slowdowns in consumer spending are apparent in virtually all sectors, except
some discount retailers and restaurants
o there is reduced capital spending in response to reduced consumer spending
• Internal Strengths and Weaknesses
§ 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
§ determined relative to competitors
o relative deficiency or superiority is important information
§ can be determined by elements of being rather than performance
• Long-Term Objectives
§ objective
o specific results that an organization seeks to achieve in pursuing its basic mission
o 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
§ long-term
o more than one year
• Strategies
§ the means by which long-term objectives will be achieved
§ potential actions that require top management decisions and large amounts of the firm’s
resources
• Annual Objectives
§ 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