Strategic Management: Chapter 2

Visionary organizations begin the the…
End in mind. For example, designing and building a house.
A statement about what an organization ultimately wants to accomplish; it captures the company’s aspiration.
Description of what an organization actually does, what its business is, and why it does it; this can be customer-oriented or product-oriented.
How the firm plans to accomplish its goals.
Strategic Management Process
Methods by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage.
Strategic Intent
The staking out of a desired leadership position that far exceeds a company’s current resources and capabilities.
Sony Corporation started out as a…
small Japanese company after World War 2 that invented an electric rice cooker and launched the world’s first pocket radio.
Customer-Oriented Missions
Define the firm in terms of solutions for customers. For example, Disney’s is to “make people happy.” Customer-oriented missions provide enhanced strategic flexibility and are not the same as “listening to customers”.
Product-Oriented Missions
Define the firm in terms of products or services. For example, U.S. Railroads’ mission is to have the “safest North American railroad.”
Do mission statements help gain and sustain competitive advantage?
The results are inconclusive. Firms need strategic commitments to succeed.
Researchers have found that visionary companies whose mission statements clearly capture the company’s aspirations financially…
outperformed their peers by a wide range.
Sometimes the effect of a firm’s mission statement on financial performance can be…
Negative. For example, Better World Books is an online bookstore that decided to reduce their donation commitment because their mission was threatening the future viability of the company.
In some cased, mission statements have little or no effect on…
Performance and competitive advantage. For example, Intel Corporation regularly changed its mission statement many times after having already accomplished successful transformations.
Strategic Commitments
Actions that are costly, long-term oriented, and difficult to reverse.
Organizational Values
Ethical standards and norms that govern the behavior of individuals within a firm or organization.
What are the three types of strategic management processes?
– Strategic Planning
– Scenario Planning
– Strategy as Planned Emergence.
The Strategic Management Process: Strategic Planning, also known as Long-Range Planning
A rational, top-down process through which management can program future success; typically concentrates strategic intelligence and decision making responsibilities in the office of the CEO.
Strategy as Strategic Planning: Top-down Rational Planning Steps
1. Define mission, vision, and goal or strategic intent.
2 and 3. External and Internal analysis of SWOT.
4. Create strategic fit through SWOT.
5. Formulate appropriate strategy.
6. Implement chosen strategy.
7. Monitor performance and modify if necessary.
Traditional View of Strategy
– Works reasonably well in a stable environment.
– Strategy is viewed as a scientific, engineering, or programming problem.
– The past predicts the future.
– Strategic thinking is separated from implementation.
The Strategic Management Process: Scenario Planning
Managers envision different what-if scenarios to anticipate multiple paths. The company implements the most probable option and then keeps the other scenarios as back-up in the event of changes. “The future cannot be known, but you can predict trends.”
Dominant Strategic Plan
The strategic option that managers think most closely matches reality at a given point in time.
The Strategic Management Process: Mintzberg’s Strategy as Planned Emergence
The goal is to figure it out as you go. Strategy can come from the top or the bottom. Some intended strategies drop off in the process but this allows for new emerging ideas to become realized.
Strategic Initiative
Any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
Emergent Strategy
Any unplanned strategic initiative undertaken by mid-level employees of their own volition.
Resource allocation processes, serendipity, autonomous actions, and real options create…
Bottom-up emergent strategies.
Intended Strategy
The outcome of a rational and structured top-down strategic plan.
Unrealized Strategy
Part or all of a firm’s strategic plan that falls by the wayside due to unexpected events.
Realized Strategy
Combination of intended and emergent strategy.
The Frappuccino was born at Starbucks through the…
autonomous actions of a mid-level manager who’s tenacity and persistence created a product that now contributes for 20% of Starbuck’s revenue.
Net Present Value is a widely used financial tool, but it is inappropriate to use when…
Uncertainty is high.
The Real Option Perspective
Uses a set of smaller decisions and keeps options open longer, preventing early shutdown of projects.

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