Strategic Management

Week 1: Chapter 1

Strategic google definition:

-Relating to the identification of long term or overall aims and interests and the means of achieving them

-Company should take strategic actions to cope with fundamental changes in the environment; company should be adaptable to the environment

-Carefully designed or planned to serve a purpose/advantage/end goal

Strategy= what you do, why and how you do it

Moments in time of strategic thinking within business

-Blockbuster wasn’t strategic enough to adapt to the developing technology, whereas Netflix was strategic and adapted to the new technological environment

-Blackberry wasn’t strategic enough to adapt to developing technology, whereas Apple was strategic and innovative its technology to fit the new environment

-Amazon was strategic and adapted to the new technological environment, with its fast and customer friendly online shopping they have outgrown all of the other internet retailers

-Tesla was strategic and adapted to the new technological environment which resulted in the best selling electric vehicle

1)Globalization; supply chain is important

NAFTA and Trump; Britain and EU

2) Innovation; ongoing pressure of technology (ex. Big data) on to businesses to adapt

CHAPTER 1

Strategic management is a set of managerial decisions and actions that help determine the long-term performance of an organization

4 basic elements of strategic management:

1) environmental scanning 2) strategy formulation 3) strategy implementation 4) evaluation and control

4 phases of strategic management:

Phase 1- basic financial planning: proposing the following year’s budget; projects proposed with little analysis; time consuming

Phase 2- forecast-based planning: managers propose 5 year plans because annual budgets are useless for long term planning; consider projects that take more than one year; gather environmental data; time consuming;

Phase 3- externally oriented (strategic) planning: top management initiates a formal strategic planning system; increasing responsiveness to changing markets and competition by thinking and acting strategically; planning staff/top management develops long-term plans with help from consultants but minimal input from lower levels

Phase 4- strategic management: top management forms planning groups of managers and employees to develop plans focused on the company’s competitive advantages; during the 5 year plan strategic thinking comes from all levels not just top management

Explain how globalization, innovation, and environmental sustainability influence strategic management

INNOVATION- new products, services, methods and organizational approaches that allow the business to achieve returns

-Innovation generates business opportunities in the market and long term success for a business

-Many companies thought that size was the core competitive advantage but this is wrong, innovation is a core element of successful strategic management.

-With the ongoing pressure of technology (ex. Big data) on to businesses to adapt to the new environment by innovating

-A strategic management approach suggests that if an organization stands still, it will be run over by the competition therefore companies need to adapt to new environments and innovate

-Sears struggled to innovate and IBM struggled until a new CEO transformed the company with innovation

SUSTAINABILITY-

-Before the 21st century, companies weren’t concerned with pollution; in those days, the word sustainability was used to describe competitive advantage, not the environment

-Today, triple bottom line is used to describe a business’s sustainability which involves environmental sustainability; companies prepare three different bottom lines in their annual report:

-Traditional Profit/Loss

-People Account: social responsibility of the organization

-Planet Account: environmental responsibility of the organization (ex.Pollution limits, waste removal, recycle)

-Companies that pursue a sustainable approach to business have a responsibility to its employees, customers and community (environment)

GLOBALIZATION

- Globalization, the integrated internationalization of markets and corporations; jobs, knowledge, and capital are now able to move across borders with far greater speed ex. Banks, Nike outsourcing their manufacturing in Asia

-With globalization,strategic management is becoming an increasingly important way to keep track of international developments and position a company for long-term competitive advantage. Ex. General Electric moved a R&D lab from Japan to China in order to learn about developing new products

-Regional trade agreements ex. European Union, NAFTA, Mercosur, Andean Community, CAFTA, and ASEAN

The differences between the theories of organization

Theory of population ecology- once an organization is successfully established in a environmental niche, it is unable to adapt to changing conditions

Institution theory- organizations can and do adapt to changing conditions by imitating other successful organizations

Strategic choice perspective- not only do organizations adapt to a changing environment but they also have the opportunity and power to reshape their environment

Organizational learning theory- organizations adjust defensively to a changing environment and uses knowledge offensively to improve the fit between itself and its environment

The Activities where learning organizations excel

-Strategic management's primary value is in helping an organization operate successfully in a dynamic, complex environment by becoming less bureaucratic and more flexible

-No such thing as a permanent competitive advantage

-Richard DèAveni says: Any sustainable competitive advantage lies not in following a centrally managed five year plan but also a series of strategic short term thrusts, this means that corporations must develop strategic flexibility- the ability to shift from one dominant strategy to another

-Strategic flexibility: demands a long term commitment to the development and nurturing of critical resources and capabilities; demands that a company becomes a learning organization

-Learning organization: an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights

Basic model of strategic management and its components

Environmental scanning: monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the corporation

-The simplest way to represent the outcomes of environmental scanning is through SWOT

External environment: consists of variables (opportunities and threats) that are outside the organization and not typically within the short-run control of top management

-May be forces and trends within the natural or societal environment or the organizations industry

Internal environment: consists of variables (strengths and weaknesses) that are within the organization itself and are within the short-run control of top management.

-Include the corporation’s structure, culture, capabilities, and resources.

Identify some common triggering events that act as stimuli for strategic change

Punctuated equilibrium- describes corporations as evolving through relatively long periods of stability (equilibrium periods) punctuated by relatively short bursts of fundamental change (revolutionary periods).

-After a long period of fine-tuning an existing strategy, some sort of shock to the system is needed to motivate management.

-A triggering event is something that acts as a stimulus for a change in strategy. Examples:

1) New CEO

2) External intervention: A firm’s bank suddenly refuses to approve a new loan or suddenly demands payment in full on an old one.

3) Threat of a change in ownership: Another firm may initiate a takeover by buying a company’s common stock.

4) Performance gap: exists when performance does not meet expectations. Sales and profits either are no longer increasing or may even be

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