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Author Kennedy, Reed. Metadata Show full item record. Abstract Strategic Management is a page open educational resource designed as an introduction to the key topics and themes of strategic management. The open textbook is intended for a senior capstone course in an undergraduate business program and suitable for a wide range of undergraduate business students including those majoring in marketing, management, business administration, accounting, finance, real estate, business information technology, and hospitality and tourism.

It includes case studies, end of section key takeaways, exercises, and links to external videos, and an end-of-book glossary. Similarly, the failure to meet annual commitments may require a change in the policies applied. Some businesses start a new strategic management process cycle each year. This does not mean that managers will choose and implement a new strategy each year. In many cases, the implementation of the existing strategies will be resumed, or some changes will be made on them.

Strategic management process implementations are more formalized, especially in large, professionally managed businesses. The formalism here is to clearly define the responsibilities, authorities, duties, and approaches of the people involved in strategic planning. Smaller enterprises engage less strategically in the strategic management process. Businesses with many business units, product lines, markets, and technology also have a more formal process.

Formal strategic planning is most useful when environmental conditions are stable and stable. Strategic success where external environmental conditions are highly variable and less predictable; the flexibility in planning, the ability to learn about new opportunities, and the continuous realization of changes to suit new opportunities.

In such environments, planning systems can still provide very important contributions to the success of the operator, but not in a rigid structure Thompson-Martin, Let's take a closer look at the phases of strategy formulation, strategy implementation and strategy evaluation of the strategic management process that we have briefly discussed.

Stratigraphy involves the creation of vision and mission, the identification of opportunities and threats arising from outside the enterprise, the identification of strengths and weaknesses stemming from within the enterprise, the determination of long-term objectives, the establishment of alternative strategies and the selection of strategies to be followed.

Topics such as which tasks to enter, which jobs to leave, how to distribute resources, how to expand the scope of business, whether to enter international markets, whether to join with another business or not will be discussed. If businesses have limited resources such as raw materials and capital, these resources should be directed to the alternate that benefits the most for the enterprise.

Strategy-building decisions mean that businesses will be tied to specific products, markets, resources and technologies for a long period of time. Strategies also define long-term competitive advantages. Supervisors also have the authority to channel resources to specific areas for the implementation of strategies. In the long run, the intention is longer than a year. Determination of Strategies What is critical after determining the goals we want to achieve in the long term is how to reach these goals.

There can be more than one option to reach a goal. Each of these options has a different superfluous against each other. The important thing is to choose the one that will make the most of the business and to make the most contribution to reach its final goals. Strategies come into play at this point. Among the most frequently used business strategies are a geographical expansion, product development, market penetration, market development, removal of some of the business assets, exiting certain businesses, creating joint ventures, and so on.

Strategies should be seen as potential actions that are determined by the top management of the business and that make significant contributions from the resources of the business human resources, capital, raw materials, etc. In addition, the strategies will have an impact on the business's future average performance for five years. For this reason, the future is regarded as focussed. Activities such as the development of organizational culture, the formation of an effective organizational structure, the orientation of marketing efforts, the preparation of budgets, the development and use of information systems, and the linkage of employee pricing to the performance of the business are among the steps of strategy implementation.

Strategy implementation is called the action phase of strategic management. Implementing the strategy implies that employees and managers are mobilized to transform the previously selected strategies. Successful implementation of the strategies depends on the ability of the managers to motivate the employees, which is a much more artistic than scientific. Strategies that are created successfully but can not be put into practice will provide a benefit to the business.

Inter-personal relationships are also of particularly critical importance for the success of strategy implementation. The strategy affects all managers and employees in operating implementation activities.

Each department and unit should be well informed about the roles and responsibilities of the employer in carrying out the strategies and how to carry them out. The difficulty of the strategy implementation phase is motivating the entire staffed operator to work proudly and willingly in line with the strategies. One of the activities carried out in the implementation of the strategy is to form annual referrals, and the other is to determine the policies.

Strategy Creation Vision: To introduce all the people of the world to all the tastes of the world. Mission: bringing people to fresh food in the most effortless way. External Environmental Analysis: Young, working population continues to increase; the demand for organic food and healthy ready meals is increasing and people are getting more and more budget each day; The most appropriate alternative suitable country for investment in Turkey for foreign investment and economic conjuncture.

Long-Term Goals: To increase the global market share from 5 percent to 20 percent within 3 years. Strategy Selection: Creating a joint venture with a Turkish business.

Strategy Application Yearly Hedeserin Selection: Market share is aiming to reach 10 percent at the end of the first year, 15 percent in the second year and 20 percent in the third year. Strategy Valuation CFoods changed its strategy of disrupting the partnership and continuing on its own, thinking that market share predictions were wrong and that there was tissue disagreement with the Turkish company.

At the top of the strategic plan, when it starts hierarchically, there are the most general expressions of vision and mission statements, while at the bottom there are detailed action plans. Everyone in the business has a differentiating role and responsibility in the successful formation and execution of the strategic plan.

But as businesses grow, roles and responsibilities can become confused or unclear, which will adversely affect the success of the strategic plan. Some measures may be taken to ensure that the strategic plan works as well as possible. These measures will be covered under this heading. A perfect plan from a technical point of view will provide no benefit if it can not be implemented. Many businesses spend a significant amount of time, money, and effort to prepare strategic plans, but a number of changes are made to the thinking that comes to mind later on.

In other words, change does not come out of a strategic plan, but in the implementation and control phase of the plan. However, a plan that is technically incomplete but successfully applied is more useful than a plan that remains on paper and can not be put into practice. Strategic management, on the other hand, should not be a self-functioning bureaucratic mechanism. On the contrary, managers in operations and employees should be learning processes that will make them familiar with critical strategic problems and appropriate solutions in their solution.

The strategic management process should be ceremonial, resplendent and noisy, too formal, not easily predictable or rigid. Lenz offers the following for an effective strategic management process David, , Lenz, : The strategic planning process must have a jargon or a mysterious planning language that must be simple and non-routine. This process, which is expected to improve learning and action, should not be seen as a control mechanism only. Changes should be made in tasks, team memberships and meeting formats to prevent behavioral behavior that has returned to the routine.

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The Product Barringer, R. Duane Ireland Hatch does a great Hence, in order to survive and grow in the market, a business has to adopt the technological changes from time to time. It may be noted that scientific research for improvement and innovation in products and services is a regular activity in most of the big industrial organizations.

Today, no organization can afford to continue with the obsolete technologies. In recent years there have been many significant legal changes that have affected firms' behavior. The introduction or change in laws affects an organization's actions.

For example, an increase in the minimum wage and greater requirements for firms to recycle are few of the recent examples that have an impact on the costs and demand of the products. This refers to set of laws, regulations, which influence the business organizations and their operations. Every business organi- zation has to obey, and work within the framework of the law.

The various judgments given by the court in different matters relating to trade and industry also influence the business activities. It is more important to think about which factors are most likely to change and which ones will have the greatest impact on the firm. They must identify the key factors in their own environment. For some such as pharmaceutical companies' government regulation may be critical; for others, perhaps firms that have bor- rowed heavily, interest rate changes may be a huge issue.

Managers must decide on the relative importance of various factors. The higher the likelihood of a change occurring and the greater the impact of any change the more significant this factor will be to the firm's planning.

However, decision-makers naturally try where they can to shape the external environment in their favor. These bodies represent many firms and therefore may have more power than any individual firm when it comes to influencing government.

The larger organizations may also involve their own public relations departments or agencies that work with lobbying companies to try and introduce or delay particular forms of legislation. The microenvi- ronment examines the general business climate as it relates to the organization within its industry. The mi- croenvironment consists of stakeholder groups that a firm has regular dealings with.

The way these relation- ships develop can affect the costs, quality and overall success of a business. Some firms take quite an aggressive attitude towards their suppliers by trying to push down the prices and delay payments. Others view the relationship more as a partnership in which they are working together with suppliers and that by helping each other both can benefit.

The importance of suppliers can be seen if things go wrong. In Ford's image was damaged when tyres on its Explorer vehicles started exploding.

Bridgestone produced these tyres and the supplier ended up re-calling over 6. In Sony batteries in several Dell laptops caught fire which caused a terrible public relations issue for the computer manufacturer and led to over 4 million laptop batteries being recalled. Good negotiating skills and offering appropriate incentives may achieve get- ting the stores to stock the particular product.

The distributors used will determine the final price of the product and how it is presented to the end customer. When selling via retailers, for example, the retailer has control over where the products are displayed, how they are priced and how much they are promoted in-store.

A competitive advantage can be gained by changing distribution channels. Banks, insurance companies, holiday firms, hotels and many others businesses have seen the op- portunities created by the internet. Direct Line insurance, Dell computers and Amazon have re- duced costs by selling direct. Decision makers must monitor customer needs and try to anticipate how these will develop so that they can meet these requirements effectively in the present as well as the future.

To help understand their customers organizations are increasingly trying to gather information on them through various mechanisms. Many firms are also trying to develop relationships with customers to help ensure they come back time and time again. The growth of the internet has enabled customers to search quickly for alternatives and compare deals more easily; this puts pressure on firms to either provide better value for money or else lose their customers.

This interaction is further determined by the monopoly or oligopoly or oligopolistic or competitive market conditions.

In more competitive markets where there are many firms providing similar products customers have more choice; this may put downward pressure on prices and means that excellent customer service is essential.

The power of buyers - The stronger the power of buyers in an industry the more likely it is that they will be able to force down prices and reduce the profits of firms that provide the product. If they have the resources to buy the provider this threat can lead to a better service because they have real negotiating power 3. The power of suppliers - The stronger the power of suppliers in an industry the more difficult it is for firms within that sector to make a profit because suppliers can determine the terms and condi- tions on which business is conducted.

The degree of rivalry - This measures the degree of competition between existing firms. The higher the degree of rivalry the more difficult it is for existing firms to generate high profits. This means that existing firms will fight hard to survive because they cannot easily transfer their resources elsewhere. The substitute threat - This measures the ease with which buyers can switch to another product that does the same thing e.

The ease of switch- ing depends on what costs would be involved e. Reshaped global power structure. As the world recovers from the worst recession in decades, the rise of relationships between the public and private sectors has shifted the balance of global power faster than most could have imagined just a few years ago. Disruptive innovation. Innovations in technology continue to have massive effects on business and society. The emerging markets have become hotbeds of innovation, especially in efforts to reach the growing middle class and low-income consumers around the globe.

Faced with complexity, the trends are going to unfold and a clear picture emerges in the time to come. The organizations have to gear up before that. The trends that have been initiated by the above-mentioned driving forces are: 1. Emerging markets increase their global power: Today, emerging markets serve as the world's economic growth engine, and the far-reaching effects of their spectacular rise continue to outplay even developed economies of the world.

But their risks are often downplayed. Therefore an orga- nization has to focus on taking advantage of emerging-market opportunities but with careful plan- ning. Adjusted for variations in pur- chasing power parity, the ascent of emerging markets is even more impressive: the International Monetary Fund IMF forecasts that the total GDP of emerging markets could overtake that of the developed economies as early as Emerging economies are characterized by fierce competition, not only from global players but from local ones.

Cleantech becomes a competitive advantage: Renewable energy is still expensive in most places, which will limit its use in the short run. But as wind, solar and other renewable projects scale up, their prices will continue to fall.

The IEA predicts that power generation using renewable will triple between and Fossil fuels such as oil and coal will lose market share over time, as natural gas and nuclear power contribute to the diversified energy mix.

Hence, governments and organizations are announcing plans to shrink their carbon footprints. The move to CleanTech may represent a second industrial revolution that will have effects as great as the first. Green technology is now regarded as a strategic advantage. Global banking seeks recovery through transformation: The global financial system remains in flux. The uncertain scenario poses both opportunities and risks for financial institutions, alterna- tive asset managers and other enterprises that need funding to meet growth objectives.

The system will soon have to find answer to the critical issues of growth, regulatory issues, data and capital in the time to come. Governments enhance ties with the private sector: The recent time has been one of readjust- ment between developed and emerging economies, between the public and private sectors and between global institutions and nations.

These adjustments will continue as governments, organiza- tions and institutions define their roles in the post-crisis world. Rapid technology innovation creates a smart, mobile world: Smart technology offers the promise of remote access to health care and education, while blurring boundaries between indus- tries.

The power of the individual will grow and new competitors will emerge, disrupting industries and creating new business models. Now, every business is going to be in the 'tech-world'. Identify few key active political forces. Discuss how they are shaping the overall environment in the country. Suppose the foreign exchange reserves in the country gets depleted by half of the present level because of few developments in the outside world. Discuss the environmental effects it may lead to. There has been a thrust on women literacy.

Discuss the influences you see in the social envi ronment and their impact on business. Enumerate few of the technological advances in the field of agriculture and discuss its role in tapping better opportunities in the overseas market.

List out five major industries, which in your view, pose danger to environmental conditions. Mentioning your reasons suggest how these industries may correct the situation. Exploring Corporate Strategy. Arthur, Jr. Strategic Management, Concepts and Cases, Thirteenth edition. Dynamic nature of the environment along with vast multitude of factors, of which it is comprised of, makes it very difficult to predict.

Changing external variables make the environment of any organization uncertain. An organization which operates in a highly volatile environment is difficult to understand, because various factors change frequently and affect its performance,. Elements like technology, competitive situations, and income, attitude and value systems etc. Another reason is globalization due to which the degree of this uncertainty has increased. As the environment, an organization is facing is having complex variables, it becomes essential for the organization to carefully and effectively appraise it.

Its success depends on its ability to foresee the changes and to modify its business strategies accordingly. For example-When an issue related decision has to be taken, periodic monitoring of the environment may be done. Also, systematic and ad-hoc approaches are used for the relevant environment of the organization, white the processed form approach can be used to approach both the relevant and the general environment.

It allows the organization in summarizing the impact of various sectors of the environment. There are different methods of environmental scanning.

The external environment of any organization consists of a host of various factors. These factors are also termed as influences-known as events, trends, issues and expectations of different interested groups. By monitoring the environment through environmental scanning, the impact of different events, trends, issues and expectations, on strategic management process is studied by an organization. While using any of the above sources of information, the validity, reliability and time frame of the source should be checked to ensure the authenticity of the source used.

It provides a framework within which an organization can develop and alter its strategies. It gives an organized basis for discussion and information sharing to improve managerial strategic decision making. Strengths- Strengths are the strong areas or attribute of the company, which are used to overcome weakness and capitalize to take advantage of the external opportunities available in the industry.

Strength is an inherent capacity which an organization can use to gain strategic advantage over it competitors. Thus, SWOT Analysis is a broad conceptual approach which has some limitations like overemphasizing internal strengths or downplaying external threats. Westbrook criticizes SWOT analysis because it generates lengthy list where some factors can be placed in two categories i. Anf other limitation is that it uses no weights to reflect priority and use ambiguous words and phrases.

Yet SWOT provides a generalized view to assess internal capabilities in light of key external opportunities and threats. Weihrich which overcomes the weaknesses of SWOT. In SFAS, weights are given to different identified factors. An ETOP involves dividing the environment into different sectors and then analysing the impact of each sector on the organization.

By means of an ETOP, the organization comes to know where it stands. All the organizations must examine the ETOP to reduce the degree of threats on the basis of their competencies and capabilities.

It identifies the relevant environmental factors. Such factors might be general environment factors and task environment factors. Thereafter, it is necessary to identify their nature. Some factors are positive to the organization whereas others are negative. Therefore, it is necessary to find out their impact to the organization. The table uses positive, neutral, and negative signs in ETOP to denote the relevant impact of environmental factors.

Here is an example of a hypothetical bicycle manufacturing company. Note: Up arrows indicate favourable impact; down arrows indicate unfavourable impact, while horizontal arrows indicate a neutral impact. Various sectors of external environment i. In SWOT, after examining different sectors of external and internal environment, a list of strengths, weaknesses, opportunities, and threats is prepared.

This list becomes a source of information which is used by the strategists in forming compelling strategies. The TOWS Matrix developed by Heinz Weihrich, is an important systematic approach of scanning environment which helps in selecting strategic alternatives most suitable in the existing environment.

Environmental Threat and Opportunity Profile method of environmental scanning is a profile of opportunities and threats existing in external environment. For an organization, ETOP provides a clear picture to the strategists so that they can capitalize on an existing opportunity and formulate strategies to take its advantage and avoid an approaching threat.

The environmental scanning is also structured by preparation of Strategic Advantage Profile, which involves dividing internal environment different sectors and then in identifying the impact of each sector on the organization.

These methods of environmental scanning not only help the strategists, in appraising the mass of information available which is related to dynamic and complex environment, which an organization faces, but also present a clear picture of the strengths, weaknesses, opportunities and threats operating in the environment of the organization.

Organizational diagnosis is an effective way of looking at an organization to determine gaps between current and desired performance and how it can achieve its goals. The organizational diagnosis is the basis for sound growth and organizational development. The essential elements are structure, procedures, relationships and the cooperation within an organization. Each organization can be seen as consisting of various subsystems. Effective functioning of each of these elements is essential for smooth functioning of the organization.

Moreover the coordinated functioning of these subsystems also contribute to organizational effectiveness. For making organizational diagnosis the strengths, weaknesses and potential of each of the subsystems need to be examined. In addition the various processes that contribute to the effective functioning of the organization as a whole also needs to be examined.

The market share needs to be analyzed to verify if it is growing, stable or declining and that potential markets are being developed and targeted. The profitability of the product or brand needs to be analyzed with respect to pricing structure.

This will lead to the apportionment of costs to the cost of sales in terms of promotion. The overall turnover of the product or service will be marked from the overall sales figure in terms of targets.

Resourcing: Resourcing takes into account such things as purchasing costs and how the purchasing of the organization is done. Human resources such as staff retention, wage and salary costs and staff training and promotion need to be assessed.

It is also viewed as a skill for coordinating resources and putting them to productive use. Organizational Capabilities are developed in specific areas. We have divided an organization into six largely accepted functional areas as described below: Financial Capability: Factors influencing financial capability are: a Factors related to sources of funds b Factors related to usage of funds c Factors related to management of funds.

Marketing Capability: Factors influencing marketing Capability:- a Product related factors b Price related factors c Place related factors d Promotion related factors e Integrative and systemic factors. Information Management Capability: Factors influencing information management capability:- a Acquisition and retention of information, b Processing and synthesis of information, c Retrieval and usage of information, d Transmission and dissemination.

Human ResourceAnalysis There are many techniques for analysis that can be undertaken to diagnose organizational productivity. These include the following: 1 Rate of Employee Turnover: Mostly it is said that employee turn over is not good for the organizations.

But employers should remember that turnover is not that bad either. What is required is an optimum mix of turnover, not too high-not too low. A low rate of employee turnover may result into: 1. Bringing in new ideas and skills from new hires. Better employee-job matches. More staffing flexibility. Facilitate change and innovation. High rate of turnover may lead to decrease in: 1. Productivity 2. Service delivery 3.