CHAPTER 1 THE NATURE OF STRATEGIC PLANNING

What is Strategy?
A company’s strategy is management’s game plan for growing the business, staking out a market position, attracting and pleasing customers, competing
successfully, conducting operations, and achieving targeted objectives. In crafting a strategy, management is in effect saying, “Among all the strategic paths we
should have chosen and all the strategic actions we could have taken, we have decided to focus on these markets and customer needs, compete in this fashion,
allocate our resources and energies in these ways, and use these particular approaches to doing business.” A company’s strategy thus indicates its managers’
choices about the specific action it is taking and plans to take to move the company in the intended direction and achieve the targeted outcomes. It is partly the
result of trial-and-error organizational learning about what worked in the past and what didn’t and partly the product of managerial analysis and strategic
thinking about what actions need to be taken in light of all circumstances surrounding the company’s situation.
What about strategic management in tourism and hospitality industry?
Strategic management is an inconstant process where any change in the environment where the organization is operation will result in change in the strategies
of the organization. Strategic management works on the business model of an organization to create competitive advantage in the industry
Strategic Planning in Tourism Industry is the development of priorities based on strategies for planning developing and marketing of a destination. There are
many other names given for this including destination management planning and tourism action planning across the globe. Preparing a strategic management
plan is an essential step in creating long term success and sustainable tourism around the destination.
Through proper consideration of the visitor statistics, the environment in which it is being operated, capacity of the resources related to the destination the
strategic planning can be
Through proper consideration of the visitor statistics, the environment in which it is being l Strategic Planning related to hospitality is a continuous process
which requires analyzing and stakeholders in contributing to the overall development of the destination.
ty operated, capacity of the resources related to the destination the strategic planning can be implemented successfully.
The strategic management of the tourism destination also involves the collaboration between monitoring and making necessary changes with related to the data
obtained subjected to the environmental conditions.
A long-term vision is needed in strategic planning and it should go in terms with the image of the destination among the public. Identifying and making
priorities for further development of the destination also need to be included in the strategic plan. The goals of the plan should clearly be quoted and these goals
should be made measurable in terms of performance.
Strategy and the Quest for Competitive Advantage
Typically, the central thrust of a company's strategy involves crafting moves to strengthen the company's long-term competitive position and financial
performance. Indeed, what separates a robust approach from an ordinary or weak one is management's ability to forge a series of moves, both in the
marketplace and internally, that makes the company distinctive, tilts the playing field in the company's favor by giving buyers a reason to prefer its products or
services, and produces a sustainable competitive advantage over rivals.
Four of the most frequently used strategic approaches to setting a company apart from rivals and achieving a sustainable competitive advantage are:
1. Strive to be the industry's low-cost provider, thereby aiming for a cost-based Competitive advantage over rivals.
2. Out-competing rivals based on such differentiating features as higher quality, broader product and service selection, added performance, better service, more attractive styling, technological
superiority, or excellent value the the money.
3. Focusing on a narrow market niche and winning a competitive edge by doing a better job than serving buyers' unique needs and tastes constituting the niche.
4. Developing expertise and resource strengths give the company competitive capabilities that rivals can't easily imitate or trump their abilities.
What makes a strategy a winner?
Three questions can be used to test the merits of one strategy versus another and distinguish a winning strategy from a losing or mediocre strategy:
1. How well does the strategy fit the company's situation? To qualify as a winner, a strategy must be well-matched to industry and competitive conditions, a company's best market opportunities,
and other aspects of the external enterprise environment.
2. Is the strategy helping the company achieve a sustainable competitive advantage'? Winning strategies enable a company to gain a durable competitive advantage.
3. Is the strategy resulting in better company performance?
4. gains in profitability and financial strength
5. gains in the company's competitive strength and market standing
A company's strategy is reflected in its action in the marketplace and the statements of senior managers about the company's current business approaches,
plans, and efforts to strengthen its competitiveness and performance.
Once it is clear what to look for. Identifying a company's strategy is mainly one of researching information about the company's actions in the marketplace and
its business approaches. Let us start by laying out the critical elements of their strategies.
WHAT IS STRATEGIC MANAGEMENT?
Strategic management can be defined as the art and science of formulating, implementing, and evaluation cross-functional decisions that enable an
organization to achieve its objectives.
1. The term strategic management is used synonymously with strategic planning.
2. Strategic management aims to exploit and create new and different opportunities for tomorrow -while lone-range planning tries to optimize for tomorrow the trends of today.
Stages of Strategic Management
The strategic-management process consists of three stages
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.
2. Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. In addition,
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.
3. 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.
KEY TERMS IN STRATEGIC MANAGEMENT
Competitive Advantage
 Competitive advantage is defined as anything that a firm does exceptionally well compared to rival firms.
 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.
 An increasing number of companies are gaining a competitive advantage by using the Internet for direct selling and communication with suppliers, customers, creditors, partners, shareholders,
clients, and competitors who may be dispersed globally.
Strategists
 Strategists are individuals who are most responsible for the success or failure of an organization.
 Strategists hold various job titles, such as chief executive officers, president, owner, chair of the hoard, 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.
Vision and Mission Statements
 Vision statements answer the question: "What do we want to become?"
  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 fundamental question that faces all strategists: "What is our business?" It should include the values and priorities of an organization.

External Opportunities and Threats

1. 1. External opportunities and external threats refer to economic, social, cultural, and demographic, environmental, political, legal, governmental, technological, and competitive trends and
that could significantly benefit or harm an organization in the future.
2. Opportunities and threats are largely beyond the control of a single organization, thus the term external
3. To survive in a global economic recession, firms must be aware of the new opportunities and threats that have surfaced as a result.
4. A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and avoid or reduce external threats.
5. The process of conducting research and gathering and assimilating external information is called environmental scanning or industry analysis.
Internal Strengths and Weaknesses
 Internal strengths and internal weaknesses are an organization's controllable activities that are performed exceptionally well or poorly.
 Identifying and evaluating organizational strengths and weaknesses in the functional areas is an essential strategic management activity.
 Strengths and weaknesses arc determined relative to competitors and may be determined by performance and elements.

Long-Term Objectives
 Objectives can be defined as specific results that an organization seeks to achieve in pursuing its primary mission.
 Long-term means more than one year.
 Objectives state direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and provide a basis for effective planningI2rnizing, motivating, and controlling activities.
 Objectives should be challenging, measurable, consistent, reasonable. and straightforward.
Strategies
Strategies are how long-term objectives will be achieved. For example, business strategies may include geographic expansion, diversification, acquisition,
product development, market penetration, retrenchment, divestiture, liquidation, and joint venture.
Annual Objectives
 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.
Policies
 Policies are how annual objectives will be achieved. Policies include guidelines, rules, and procedures established to support efforts to achieve stated goals.
 Policies are most often stated in management, marketing. Finance/accounting, production operations, research and development, and computer information systems activities.
 Substantial research shows that a healthier workforce can more effectively and efficiently implement strategies. Because smoking is a huge burden on companies worldwide, some firms are
implementing policies to curtail smoking.

CHAPTER 2 THE BUSINESS VISION AND MISSION

Developing a Strategic Vision
Very early in the strategy-making process, the company's senior managers in any Tourism and Hospitality industry must wrestle with the issue of what
directional path the company should be taken and what changes in the company's product/ service-market-customer-technology focus would improve its current
market position and prospects.
Top management's views and conclusions about the company's direction and future product/service-customer-market-technology focus constitute a strategic
vision for the company. A strategic vision delineates management's aspirations for the business, providing a panoramic view of "where we are going" and a
convincing rationale for why this makes good business sense. A strategic vision thus points an organization in a particular direction, charts a strategic path for it
to follow in preparing for the future, and molds organizational identity.
For a strategic vision to function as a valuable managerial tool, it must understand what management wants its business to look like and provide managers with
a reference point in making strategic decisions and preparing the future.
A strategic vision is different from a mission statement. Whereas the chief concern of a strategic vision is "where we are going and why," a company mission
statement usually deals with a company's present business scope and purpose— "who we are, what we do, and why we are here." The buyer defines a
company's mission needs it seeks to satisfy, the customer groups and market segments it is endeavoring to serve, and the resources and technologies in trying to
please its customers.
In deciding "who we are and where we are going," many companies also develop a statement of values to guide the company's pursuit of its vision. By values,
we mean the beliefs, business principles, and the way of doing things that govern company operations and the behavior of organization members. Values, good
and bad, exist in every organization. They relate to fairness, integrity, ethics, innovativeness, teamwork, quality, customer service, social responsibility, and
community citizenship.
Core Values
The Tourism Vancouver Island team has come together to discuss and formalize a set of consensus core values that define the positive, proactive nature and
worldview of both the organization itself and its employees.
The Tourism Vancouver Island team has made the commitment to live and work with honesty and sincerity. We stand behind our word and honor any
commitments we make. We are consistent in our decisions while recognizing that to be fair we must be flexible. We are ethical and respectful of ourselves and
others."
 We live with integrity.
  We are passionate. .
 We communicate effectively.
 Team. Partner. Collaborate.
 We work hard and play hard.
 We support personal and professional development .
 We embrace and drive change.
 We use our resources to the fullest potential.

People can be genuinely inspired if their organization has a compelling vision and a clear, worthwhile mission; and these can be powerfully expressed in well-
crafted mission and vision statements.
These statements can be highly motivating when they are expressed clearly and with intent and communicated effectively to everyone in the organization. They
also describe your organization's purpose to customers, suppliers, and the media, on whom they can have the same effect.

MISSION AND VISION STATEMENTS EXPLAINED

These statements are the words leaders use to explain an organization's purpose and direction. When expressed clearly and concisely, they can motivate your
team or the organization as a whole with an inspiring vision of the future.
Purpose
The two statements do distinctly different jobs. Mission statements define the firm's or organization's purpose and primary objectives. These statements are set
in the present tense, and they explain why you exist as a business, both to members of the organization and to people outside it. Mission statements tend to be
short, clear, and powerful. Vision statements also define your organization's purpose, but they focus on its goals and aspirations. These statements are designed
to be uplifting and inspiring. They're also timeless: even if the organization changes its strategy, the vision will often stay the same.
Application
Usually, people write these statements for an organization, or an organizational unit, or a team. However, you can also create accounts to define the goals of
long-term projects or initiatives. Some examples of mission statements are shown below:
 Bristol-Myers Squibb Company (pharmaceuticals) — "To discover, develop, and deliver innovative medicines that help patients prevail over serious diseases."
 Walgreens (drugstores) — "Champion the health and well-being of every community in America."
 Nike (athletics) — "To bring inspiration and innovation to every athlete in the world."
 The Dow Chemical Company (chemicals) — "Become the most innovative, customer-centric, inclusive and sustainable Materials Science Company in the world."
Some examples of vision statements are shown below:
 Amazon (online retail) — "Our vision is to be earth's most customer-centric company where customers can find and discover anything they might want to buy online at the lowest possible
prices."
 PepsiCo (retail) — "Be the global leader in convenient foods and beverages by winning with purpose."
 Amnesty International (nonprofit) — "Our vision is a world in which every person enjoys all of the human rights enshrined in the Universal Declaration of Human Rights and other
international human rights standards."
 Ikea (retail) — "To create a better everyday life for the many people."
 The American Society for the Prevention of Cruelty to Animals (ASPCA) (nonprofit) — "The vision of the ASPCA is that the United States is a humane community in which all animals are
treated with respect and kindness."

These examples are concise, focused, and inspiring. Do everything you can to make your statements similarly succinct — long, rambling words can show that
managers haven't made tough but necessary decisions.
HOW TO CREATE A MISSION STATEMENT
To develop your mission statement, follow the steps below.
Step 1: Develop Your Winning Idea
First, identify your organization's "winning idea" or unique selling proposition (USP). It is the idea or approach that makes your organization stand out from its
competitors, and it is why customers come to you and not your competitors.
Developing a "winning idea" is a core goal of business strategy, and it can take a lot of effort to find, shape, test, and refine it. To start, let us refer to USP
Analysis (Unique Selling Proposition), SWOT Analysis, and Core Competence Analysis.

Step 2: Clarify Your Goal

Next, make a short list of the most critical measures of success for this idea. For instance, if your winning idea is to create cutting-edge products in a particular
idea is to provide excellent customer service in an area, what key performance indicator will let you know that your customers are delighted? Again, you don't
have to include exact figures here, but it's essential to have a general idea of what success looks like so that you know when you've achieved it.
Keep this statement in the present tense, and make sure it is short, simple, straightforward, and free of jargon. Yes, the language needs to be inspiring, but don't
include adjectives, just so it "sounds better."
HOW TO CREATE A VISION STATEMENT
Step 1: Find the Human Value in Your Work
First, identify your organization's mission. Then uncover the natural, human value in that mission. For example, how does your organization improve people's
lives? How do you make the world a better place?
Step 2: Distill into Values
Next, identify what you, your customers, and other stakeholders value the most about how your organization will achieve this mission. Distill these into values
that your organization has, or should have. Some examples of values include excellence, integrity, teamwork, originality, equality, honesty, freedom, service,
and strength. If you have a hard time identifying your organization's values, talk to your colleagues and team members. What values do they think the
organization stands for, or that it should stand for?
Step 3: Combine Your Mission and Values
Combine your mission and values, and polish your words until you have an inspiring statement that will energize people, inside and outside your organization.
It should be broad and timeless, and it should explain why the people in your organization do what they do.
MISSION STATEMENT COMPONENTS SOURCE:
Components and Questions That a Mission Statement Should Answer
1. Customers: Who are the firm's customers?
2. Products or services: What are the firm's major products or services?
3. Markets: Geographically, where does the firm compete?
4. Technology: Is the firm technologically current?
5. Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?
6. Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
7. Self-concept: What is the firm's distinctive competence or major competitive advantage?
8. Concern for public image: Is the firm responsive to social, community, and environmental concerns?
9. Concern for employees: Are employees a valuable asset of the firm?
 Nike: To bring inspiration and innovation to every athlete in the world
 Walmart: Be the destination for customers to save money, no matter how they want to shop
 Visa: To be the best way to pay and be paid. or everyone, everywhere.
 Southwest :To become the world's most flown, and most profitable airline
 Google :To provide access to the world's information in one click.
 Disney: To be the world's leading producer and provider of entertainment and information.
 Tesla: To create the most compelling electric car company of the 21st century.
 McDonald’s: To be the world's best quick service restaurant experience.
 Starbucks To establish Starbucks as the premier purveyor of the finest coffee in the world.

CHAPTER 3 ANALYZING A COMPANY'S EXTERNAL ENVIRONMENT

What is night audit in hotel and how to do it with a cloud property management system?
Front office audit, or more commonly night audit in a hotel, is a significant part of a hotel's accounting section. This process records, reviews, and collates all
financial activities of the hotel that have taken place in one day and posts them on appropriate account heads.
What is night audit in a hotel?
The hospitality environment runs 24*7, especially during season time. Guests check-in and checkout throughout the day. With every check-out, hoteliers need
to keep track of transactions carried out through cash or cards. At the end of the business day, hotels need to properly record and reconcile guest folios and their
transactions. The purpose of the night audit process is to collate revenue against various revenue heads. To be precise, hotel night audit evaluates and closes
daily cash flow into and out of the hotel's account. Also referred to as the end-of-day process, it ensures the rollover from one business day to the next day.
Here are some of the major functions of night audit
 Ensures rollover from one business day to the next day
 Reconciles all front office cash counters/accounts
 Verifies posted entries to guest/non-guest accounts
 Resolves room status and rate discrepancies
 Most importantly, generates several MIS reports called night audit reports

How to do night audit in a hotel?

Night audit is a mandatory process for hotels of all sizes, categories and services. The most convenient time to perform night audit is between the late evening
and early morning — just after the business day closes. This is the time when most revenue centers and POS outlets at a hotel are closed, making it the ideal
time to perform night audit. This helps the front office personnel, also called night auditor to initiate and finish the night audit process with minimal
interruption.
For the night auditor, some of the steps in the night audit process are —
 Total outstanding charge posting
Hotel night auditor needs to ensure that all guest transaction happened in a day are correctly captured, charged and posted to guest accounts.
 Reconcile room status
The night auditor must evaluate and analyze a particular day's occupancy report and the housekeeping room status report to find out the correct occupancy
status of a hotel.
 Verify room rates
It is mandatory to compare guest registration records with room reports to ensure rack rate and actual rates are the same. Verify no-shows of the day By
verifying no-shows of the day in the front office console, the night auditor ensures that the no-show bills are duly charged, and the rooms are marked as
'available' for future dates.
 Balance all departmental accounts
This process of balancing all revenue center accounts is called 'Trial Balance' that helps in accurately posting the day's room and tax charges.
The night audit process can be done manually — by pen and paper, or by using a hotel property management system (Hotel PMS). While doing the same by
pen and paper is a time-consuming and tedious process that leads to multiple errors, a Hotel PMS efficiently automates the whole process. Take Hotelogix
cloud-based Hotel PMS for example that helps you with an efficient night audit so that you can establish 100% accuracy of the process while cutting down
heavily on manual intervention that may lead to errors.
Hotel night audit procedure with Hotelogix cloud Hotel PMS Hotelogix PMS users can perform night audits with just a few clicks. This works in 2 ways —
1. Click on the drop-down button Frontdesk' on the top left corner and then click on 'Perform Night Audit'. The system will finish the process in no time.
 2. If you have missed the night audit for the last business day, the Hotel PMS will prompt you to do so with a pop-up box. You just need to click on 'Perform Night Audit' and the system will do it
for you.

Moreover, with Hotelogix PMS in place, you can also automate the whole process. You can run an auto night audit without even logging into your Hotelogix
account. In this, Hotelogix PMS will do the automatic check-in and no-shows to the reservations, based on the setup in the Admin Console.
The Hotelogix PMS helps generate several insightful reports on hotel business via the night audit process. Known as Night Audit Reports, these insights help
you review your hotel's operational effectiveness so that you can keep costs under control while making profit.
Night audit room details report
This report captures the total number of rooms and their total guests under each category such as occupied rooms, available rooms, day use rooms, etc. for the
day. It helps you to understand a particular day's occupied rooms, available rooms, check-ins, checkouts, no-shows, cancellations, complimentary rooms, day
use rooms, etc.
When performed with a smart Hotel PMS like Hotelogix, night audit process offers a massive amount of feedback on your hotel's operational and financial
aspects. You should consider leveraging a cloud-based hotel property management system to perform daily night audit at your hotel to reduce your workload
while ensuring accuracy of the whole process that is critical to your daily operations.
THE NATURE OF AN EXTERNAL AUDIT
The purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and avoid threats.
 Key External Forces
1. External forces can be divided into five broad categories: (1) economic forces; (2) social, cultural, demographic, and natural environment forces; (3) political, governmental, and legal forces;
(4) technological forces; and (5) competitive forces.
2. External trends and events significantly affect all products, services, markets, and organizations in the world.
3. Changes in external forces translate into changes in consumer demand for both industrial and consumer products and services. An example of this is a U.S. unemployment rate that is close to
10 percent.
 The Process of Performing an External Audit
1. The process of performing an external audit must involve as many managers and employees as possible. As emphasized in earlier chapters, involvement in the strategic-management process
can lead to understanding and commitment from organizational members.
2. To perform an external audit, a company first must gather competitive intelligence and information about social, cultural, demographic, environmental, economic, political, legal, governmental,
and technological trends.
a. Individuals can be asked to monitor various sources of information such as key magazines, trade journals, and newspapers.
b. The Internet is another source for gathering strategic information, as are corporate, university, and public libraries.
c. Suppliers, distributors, salespersons, customers, and competitors represent other sources of vital information.
3. Once information is gathered, it should be assimilated, evaluated, and prioritized.
4. Key external factors should be important to achieving long term and annual objectives, measurable, applicable to all competing firms, and hierarchical in the sense that some will pertain to the
overall company while others will be more narrowly focused.
THE INDUSTRIAL ORGANIZATION (PO) VIEW
 External Factors versus Internal Factors
1. External factors are more important than internal factors in a firm achieving competitive advantage. Industry forces primarily determine organizational performance.
2. Managing strategically from the I/0 perspective entails firms striving to compete in attractive industries, avoiding weak or faltering industries, and gaining a full understanding of key external
factor relationships
 Factors Affecting Firm Performance
1. Firm performance is primarily based on industry properties such as economies of scale, barriers to market entry, product differentiation, and level of competitiveness.
2. The recent global economic recession's negative impact on both strong and weak firms added credence to the notion that external forces are more important than internal.

ECONOMIC FORCES

Economic Factors Have a Direct Impact

Economic factors have a direct impact on the potential attractiveness of various strategies. For example, if interest rates rise, then funds needed for capital
expansion become costlier or unavailable.
The key economic variables that a firm should monitor should be studied. The list includes (1) shifts to a service economy; (2) availability of credit; (3) level of
disposable income; (4) propensity of people to spend; (5) interest rates; (6) inflation rate; (7) unemployment trends; and so on.
Trends in the dollar’s value have significant and unequal effects on companies in different industries and in different locations. For example, the
pharmaceutical, tourism, entertainment, motor vehicle, aerospace, and forest products industries benefit greatly when the dollar falls against the yen and euro.
Agricultural and petroleum industries are hurt by the dollar’s rise against the currencies of Mexico, Brazil, Venezuela, and Australia.
The slumping economy worldwide and depressed prices of assets have dramatically slowed the migration of people from country to country and from the cities
to the suburbs. As a result, there is lower demand for new or used homes. Thus, the housing market is expected to remain sluggish.
SOCIAL, CULTURAL, DEMOGRAPHIC, AND NATURAL ENVIRONMENT FORCES
1. Social, Cultural, Demographic, and Environmental Impact
a. Social, cultural, demographic, and environmental changes have a major impact on virtually all products, services, markets, and customers.
b. The United States is getting older and less White. By 2075, the United States will have no racial or ethnic majority.
c. Social, cultural, demographic, and environmental trends are shaping the way Americans live, work, produce, and consume. New trends are creating a different type of consumer and,
consequently, a need for different products, services, and strategies.
POLITICAL, GOVERNMENTAL, AND LEGAL FORCES
1. Federal, state, local, and foreign governments are major regulators, deregulators, subsidizers, employers, and customers of organizations. Political, governmental, and legal factors, therefore,
can represent key opportunities or threats for both small and large organizations.
1. For industries and firms that depend heavily on government contracts or subsidies, political forecasts can be the most important part of an external audit.
2. Changes in patent laws, antitrust legislation, tax rates, and lobbying activities can affect firms significantly.
3. Many countries worldwide are resorting to protectionism to safeguard their own industries. Many economists point out that the current rash of trade constraints will make it harder for
global economic growth to recover from the global recession.
4. A political debate raging in the United States concerns sales tax on the Internet. Wal-Mart, Target, and other large retailers are pressuring state governments to collect sales taxes from
Amazon.com and other online retailers.
2. American Labor Unions
1. The extent that a state is unionized can be a significant factor in strategic planning decisions as related to manufacturing plant location and other operational matters.
2. Huge declines of late in receipts of federal, state, and municipal governments has contributed to a sharp decline in the membership of public-sector unions. C. Laws, regulatory
agencies, and special-interest groups can have a major impact on the strategies of small, large, for-profit, and nonprofit organizations.
TECHNOLOGICAL FORCES
1. The Internet has changed the nature of opportunities and threats by altering the life cycles of products, increasing the speed of distribution, creating new products and services, erasing
limitations, and changing the historical trade-off between production standardization and flexibility
o Historically, total Internet retail sales the last two months of 2010 jumped 15.4 percent compared to 2009.
o To effectively capitalize on information technology, a number of organizations are establishing two new positions in their firms: chief information officer (CIO) and chief technology
officer (CTO). This trend reflects the growing importance of information technology (IT) in strategic management.
2. Technological forces represent major opportunities and threats that must be considered in formulating strategies.
o Technological advancements can dramatically affect organizations' product, services, markets, suppliers, distributors, competitors, customers, manufacturing practices, and competitive
position.
o Technology management is one of the key responsibilities of strategists. Firms should pursue strategies that take advantage of technological opportunities to achieve sustainable,
competitive advantages in the marketplace.
o Not all sectors of the economy are affected equally be forestry, and metals industries.
COMPETITIVE FORCES
1. An important part of an external audit is identifying rival firms and determining their strengths, weaknesses, opportunities, threats, objectives, and strategies.
o Collecting and evaluating information on competitors is essential for successful strategy formulation.
o Addressing questions about competitors such is important in performing an external audit.
o Competition in virtually all industries can be described as intense and sometimes cutthroat.
2. Seven concepts describe the most competitive companies:
o Market share matters.
o Understand and remember precisely what business you are in.
o Whether it's broke or not, fix it.
o Innovate or evaporate.
o Acquisition is essential to growth.
o People make a difference.
o There is no substitute for quality
COMPETITIVE ANALYSIS: PORTER'S FIVE-FORCES MODEL

Porter's Five-Forces Model

1. Porter's Five-Forces Model of competitive analysis is a widely used approach for developing strategies in many industries. The intensity of competition among firms varies widely from
industry to industry.
2. According to Porter, the nature of competitiveness in a given industry can be viewed as a composite of five forces:
1. Rivalry among competitive firms
2. Potential entry of new competitors
3. Potential development of substitute products
4. Bargaining power of suppliers
5. Bargaining power of consumers
3. These three steps can reveal whether competition in a given industry is such that a firm can make an acceptable profit:
1. Identify key aspects or elements of each competitive force that impact the firm.
2. Evaluate how strong and important each element is for the firm.
3. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry.
Rivalry among Competing Firms
1. Usually, the most powerful of the five competitive forces.
2. The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms.
3. The Internet, coupled with the common currency in Europe, enables consumers to make price comparisons easily across countries.
4. The intensity of rivalry among competing firms tends to increase as the number of competitors increases.
Potential Entry of New Competitors
1. Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firm's increases.
2. Despite numerous barriers to entry, new firms sometimes enter industries with higher-quality products, lower prices, and substantial marketing resources.
Potential Development of Substitute Products
1. In many industries, firms are in close competition with producers of substitute products in other industries.
2. Competitive pressures arising from substitute products increase as the relative price of substitute products declines and as consumers' switching costs decrease.
Bargaining Power of Suppliers
1. The bargaining power of suppliers affects the intensity of competition in an industry, especially when there are a large number of suppliers, when there are only a few good substitute raw
materials, or when the cost of switching raw materials is especially high.
2. Firms may pursue a backward integration strategy to gain control or ownership of suppliers. However, in many industries it is more economical to use outside suppliers of component parts than
to self-manufacture items.
3. In more and more industries, sellers are forging strategic partnerships with select suppliers to: 1) reduce inventory and logistics costs; 2) speed the availability of next-generation components;
3) enhance the quality of the parts and components being supplied and reduce defect rates; and 4) squeeze out important cost savings.
Bargaining Power of Consumers.
1. When customers are concentrated, are large, or buy in volume, their bargaining power represents a major force affecting intensity of competition in an industry.
2. In particular, consumers gain increasing bargaining power under the following circumstances:
o If they can inexpensively switch to competing brands or substitutes.
o If they are particularly important to the seller.
o If sellers are struggling in the face of falling consumer demand.
o If they are well informed about sellers' products, prices, and costs.
o If they have discretion in whether and when they purchase the product.
SOURCES OF EXTERNAL INFORMATION
A wealth of information is available to organizations from both published and unpublished sources.
1. Unpublished sources include customer surveys, market research, speeches at professional and shareholders' meetings, television programs, interviews, and conversations with stakeholders.
2. Published sources of strategic information include periodicals, journals, reports, government documents, abstracts, books, directories, newspapers, and manuals.
1. Web Sites for gathering strategic information:
2. http://marketwatch.com
3. http://moneycentral.msn.com
4. http://finance.yahoo.com
5. www.clearstation.com
6. https://us.etrade.com/e/t/invest/markets
7. www.hoovers.com
Standard & Poor's (S&P) Industry Surveys include the following sections of information:
1. Current environment
2. Industry trends
3. How the industry operates
4. Key industry ratios and statistics
5. How to analyze a company?
6. Glossary of industry terms
7. Additional industry information
8. References
 9. Comparative company financial analysis

FORECASTING TOOLS AND TECHNIQUES

Forecasts
1. Forecasts are educated assumptions about future trends and events.
2. Forecasting is a complex activity due to factors such as technological innovation, cultural changes, new products, improved services, stronger competitors, shifts in government priorities,
changing social values, unstable economic conditions, and unforeseen events.
3. Forecasting tools can be broadly categorized into two groups: quantitative techniques and qualitative techniques.
1. Quantitative forecasts are most appropriate when historic data are available and when the relationships among key variables are expected to remain the same in the future. Linear
regression, for example, is based on the assumption that the future will be just like the past.
2. Accurate forecasts can provide major competitive advantages for organizations. However, no forecast is perfect, and some are wildly inaccurate.
Making Assumptions
1. By identifying future occurrences that could have a major effect on the firm and making reasonable assumptions about those factors, strategists can carry the strategic-management process
forward.
2. Assumptions are needed only for future trends and events that are most likely to have a significant