Strategic Management
By: nsurbato • November 20, 2018 • Course Note • 6,510 Words (27 Pages) • 1,011 Views
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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