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Management
, Ninth Edition
Robert Kreitner, Arizona State University
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| | Chapter Summaries
Chapter 7:
Strategic Management
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Strategic management sets the stage for virtually all managerial activity. Managers at all levels need to think strategically and to be familiar with the strategic management process for three reasons: farsightedness is encouraged, the rationale behind top-level decisions becomes more apparent, and strategy formulation and implementation are more decentralized today. Strategic management is defined as the ongoing process of ensuring a competitively superior fit between the organization and its ever-changing environment. Strategic management effectively merges strategic planning, implementation, and control.
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Strategic thinking, the ability to look ahead and spot key organization-environment interdependencies, is necessary for successful strategic management and planning. Four perspectives that can help managers think strategically are synergy, Porters model of competitive strategies, the concept of business ecosystems, and e-business strategic signposts. Synergy has been called the 1 + 1 = 3 effect because it focuses on situations where the whole is greater than the sum of its parts. Managers are challenged to achieve four types of synergy: market synergy, cost synergy, technological synergy, and management synergy.
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According to Porters generic competitive strategies model, four strategies are (1) cost leadership, (2) differentiation, (3) cost focus, and (4) focused differentiation. Porters model helps managers create a profitable organization-environment fit.
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Contrary to the traditional assumption that strategy automatically equates to competition, the business ecosystems model emphasizes that organizations need to be as good at cooperating as they are at competing. By balancing competition and cooperation, competitors can coevolve into a dominant economic community (or business ecosystem).
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The Internet is a disruptive technology that has managers scrambling to create successful e-business strategies. E-business pioneers have taught us these eight lessons: (1) a solid business model, not technology, should drive decisions about using the Internet; (2) evolving technologies will reshape the Internet and e-business opportunities; (3) new dot-com companies and established companies need different Internet strategies; (4) ways to make money on the Web include subscriptions, advertising space, sales to businesses and consumers, transaction fees, and commissions; (5) reliable brand names and sticky Web sites, integrated with a personal touch and hand holding, are required to build customer loyalty; (6) existing bricks-and-mortar assets such as factories and stores are useful in the Internet age only if they relate to core competencies that provide a competitive advantage; (7) contrary to the traditional rule against cannibalizing ones own sales, e-business sometimes requires a strategic revolution; and (8) informed consumers will not tolerate the use of sophisticated e-business partnerships, either domestic or foreign, to mask unethical labor practices and poor product quality.
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The strategic management process consists of four major steps: (1) formulation of grand strategy, (2) formulation of strategic plans, (3) implementation of strategic plans, and (4) strategic control. Corrective action based on evaluation of progress and feedback helps keep the strategic management process on track. Results-oriented strategic plans that specify what, when, and how are then formulated and translated downward into more specific and shorter-term intermediate and operational plans. Participative management can build needed middle-manager commitment during implementation. Problems encountered along the way should be detected by the strategic control mechanism or by ongoing evaluation and subjected to corrective action.
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Strategists formulate the organizations grand strategy after conducting a SWOT analysis. The organizations key capabilities and appropriate niche in the marketplace become apparent when the organizations strengths (S) and weaknesses (W) are cross-referenced with environmental opportunities (O) and threats (T). Strategic speed has become an important capability today, sometimes necessitating radical reengineering of the entire business cycle.
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Event outcome, event timing, and time series forecasts help strategic planners anticipate and prepare for future environmental circumstances. Popular forecasting techniques among todays managers are informed judgment, scenario analysis, surveys, and trend analysis. Each technique has its own limitations, so forecasts need to be crosschecked against one another.
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