Strategic Management QuickStudy.pdf


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BarCharts, Inc.®

WORLD’S #1 QUICK REFERENCE GUIDE

DEFINITIONS
Strategic Management is a process for conducting the
entrepreneurial activities of a firm for organizational
renewal, growth, and transformation. The major tasks
are: (1) set a mission and goals, (2) assess the
environment, (3) appraise company capabilities, (4)
craft the strategy, (5) implement the strategy, and (6)
evaluate and control the strategy.
Business Policy is a set of prescribed and discretionary
statements, limiting actions of individuals in the firm,
as set forth in directives and guides.
Mission is the reason for which the firm exists, and what
it will do. Basically, it describes the products/services
to be supplied, the markets to be served, and the
technology applied (if important).
Vision Statement answers the question, What do we
want to become?
Goals express the aspirations of the firm, general ends
that cannot be measured. Ex. “In unrelenting pursuit of
perfection.”
Objectives are specific targets to be accomplished by a
specified time. Ex. “Profits will grow at the rate of 5%
annually for the next five years.” Long-term objectives
(5 years or more) are strategic objectives and define the
desired character of the company, at the specified time.
Strategy is simply the means or general actions to be
taken to achieve long-term objectives. Strategic
management is the work of the General Manager.
General Manager is a person who is responsible for a
profit center, as opposed to a functional manager who
is responsible only for a cost or revenue center.
Generic Strategy is the name for a group of
similar specific strategies.
Levels of Strategy
1. Corporate level. What types of businesses
should we be in?
2. Business level. How do we compete?
3. Functional component level. What should our
organization do to synchronize with the
business-level strategy?
Opportunity is a set of circumstances that, if acted upon
at the right moment, will produce a gain.
Threat is the probability of a future event and its
potentially harmful impact on the firm.

Mission
& Vision
Evaluation
Capabilities

Forecast the
Environment

Strengths

Opportunities

Weaknesses

Threats
Set
Long-Term
Objectives

Craft
the Strategy

COMPANY MISSION:
WHAT IS OUR BUSINESS?
1.
2.
3.
4.
5.
6.

Basic product or service
Primary markets
Principal technology used (if relevant)
Customer satisfaction, quality, and societal goals
Company philosophy
Self-concept (identity)

THE ENVIRONMENT
THE REMOTE (MACRO)
ENVIRONMENTAL FACTORS

1.
2.
3.
4.
5.
6.

Economic
Social-demographic
Political-legal
Technological
Cultural
Ecological-natural

TASK (IMMEDIATE, OPERATING)
ENVIRONMENTAL FACTORS

1. The task environment comprises all persons,
groups, or entities that have an interest in the
company. These are called stakeholders.
2. A narrower definition refers to those
stakeholders with whom the firm has contact
from time to time, as follows:
a. Customers
b. Suppliers
c. Financial institutions
d. Competitors
e. Trade associations
f. Activist groups
g. Federal, state, and local government agencies
h. Media representatives
i. Unions

Evaluate &
Control
Strategy
Fig. 1, The Strategic Management Model

THREAT

A threat is an event, as defined by its impact on your
company and the probability of its occurrence, that
will result in harm to your company. It is an attack on
company underpinnings, such as:
1. Support of stakeholder groups
2. Resources: human, financial
3. Customer base
4. Capabilities, such as technology, products,
processes, management, and functional
5. Artificial barriers to competition: laws,
regulations, patents, and licenses
6. Social changes and customer preferences
4. Potential
computer
entrants
2. Buyers
1.

DEFINING AN INDUSTRY

1. Products
2. Competitors
3. Structure (number, size, relative strength, market
share of competitors, product differentiation)
4. Economic traits
5. Critical success factors
6. Entry barriers

Rivalry among
existing firms

3.

COMPETITIVE ENVIRONMENT:
MICHAEL E. PORTER’S 5-FORCE MODEL

See Figure 2.
As Porter says, the nature and intensity of competition
in an industry is a composite of five competitive
forces:
1. Rivalry among competitors in the industry
2. The bargaining power of buyers
3. The bargaining power of suppliers
4. The potential entry of new competitors
5. The power of firms with substitute products
Industry-driving forces increase incentive for the
industry to change. Examples of driving forces are
industry growth rate, product innovation, customer
preferences, firms entering and leaving the industry,
cost and productivity, and increasing globalization.
OPPORTUNITY

Implement
the Strategy

2. Advances in technology, e.g., fiber optics, gene
manipulation.
3. A misfortune befalls a major competitor who
then shuts down, liquidates, or goes bankrupt.
4. A competing company is put up for sale at a good
price.
5. A chance occurs for you to hire a noted expert
that you need.
6. A breakthrough in your product or process
(“Research & Development”) that makes
possible a gain in market share.

An opportunity is a combination of events or
circumstances that arise, which, if acted upon at a
certain time, will result in profit, gain, or victory. Such
circumstances may be caused by changes in the
environment or by changes in the company, relative to
the environment. Examples:
1. Opportunities arise for the firm as it is. These
include product and market extensions through
mergers, failures of competitors, and legal change.
1

Suppliers
5. Potential competitive
substitutive products
from firms in other
industries

Fig. 2, Porter’s Force Model

EVOLUTION OF
COMPANY CAPABILITIES
SITUATION ANALYSIS
1.
2.
3.
4.

How well is the company’s strategy working?
What are the company’s strengths and weaknesses?
What are its core products and competencies?
What benchmarks are being used for measuring its
situation?

APPROACHES TO INTERNAL
SCANNING & ANALYSIS
Value Chain Analysis
1. Basic concept: Value analysis identifies the primary
and support activities that create value.
2. It may be used to analyze and reduce business costs
and compare one business’ value chain with those of
competing companies. See Fig. 3 (next page).