Strategic ManagementBUS 469Midterm Examination Spring .docx

Strategic Management
BUS 469
Midterm Examination
Spring 2015
1. -
Outline and describe the steps in the strategic management
process.
Which do you consider the most difficult? Why?
Provide an example of company that failed due to neglect one
of the steps.
Session #1, Chapter 1
2. -
Why is it important to integrate both intuition and analysis into
the
strategic management process? Describe a example
from your
experience (work or personal) in which both were
applied to make a
decision. Session #1 - Chapter 1, Handout
3. -
Identify and discuss three leading current trends / issues that
affect
business today. How does each present an opportunity,
threat or challenge for
conducting business? Session 2, Chapter #3, Handout
4. -
What can be done to improve communication and coordination

within an organization to insure that people are working
together to achieve the firm’s goals?. Session 3, Chapter 4,
Handout
5.-
Which of the concepts in Developing a Vision did you find
especially helpful? How have you applied the techniques?
Session 4, Chapter #2, Handout on Vision
6. -
Describe three business strategies. In a recessionary economy
which ones are most companies implementing? Why? Sessions 5
& 6,
Exams are due at session #7
Rubrics
Answers should reflect knowledge of course content (text , class
discussion & handouts)., include personal judgment and
reference to current trends/ events.
Each answer should be formatted to highlight key concepts, be
grammatically correct and be at least a page & a half in length,
double spaced.
Category
5 Excellent
3 Adequate
1 Poor
1. -Writing Process
Organization/ Clarity
*Writing engages reader and enhances
his/her understanding of the topic.

*Vocabulary & sentence structure are
sophisticated and appropriate for the
discipline
*Writing clearly demonstrates an effective
pattern of organizing that facilitates the
reader’s understanding.
*Papers have an effective beginning,
sophisticated development, and thoughtful
conclusion.
*Demonstrates use of a carefully executed
writing process.
* Writing enables reader to
understand ideas with little or
no re-reading.
* Vocabulary and sentence
structure are adequate,
especially for discipline, but
may lack sophistication.
* Writing follows an appropriate
pattern of organization.
* Incomplete execution of writing
process.
* Writing requires reader to frequently

re-read in order to understand ideas or
writing is so confusing that reader fails
completely to understand ideas.
* Simplistic word choice limits
description and/ or expression
* Redundancies distract and confuse
reader.
* Writing’s overall structure lacks
coherence and organization.
* No apparent writing process used.
2. Explanation/ Evidence
* Main points clearly stated and well
advanced.
* Statements substantially supported with
compelling evidence.
* Effectively addresses audience.
* Main points adequately stated.
* Statements sufficiently
supported with relevant
evidence.
* Partially addresses audience.
* Main points not clearly stated.
* Statements insufficiently supported or
supported with irrelevant evidence.
* Misses audience.

3. Critical Thinking
* Insightful, well-articulated analysis,
synthesis, and critique of the subject
* Sustains a well-focused analysis,
connecting ideas in a sophisticated and
logical manner.
* Thoughtfully considers multiple
viewpoints / positions where appropriate.
* Cogent, clear analysis,
synthesis, and critique of the
subject.
* Connects ideas logically.
* Identifies multiple viewpoints
where appropriate.
* Superficial and/or poorly articulated
analysis of subject.
* Fails to connect ideas logically.
* Ignores or superficially evaluates
multiple viewpoints.
4. Research Techniques
* Uses appropriate materials from a variety
of resources to support ideas.
* Consistently employs a standard
documentation style.
* Adequately uses appropriate
materials from a variety of
resources to support ideas.
* Employs a standard

documentation style with few
errors.
* Fails to select and synthesize
appropriate resources.
* Makes significant errors in
documentation style.
5. Mechanics / Usage
* Sophisticated use of grammatical
conventions
* Writing is virtually free from the kinds of
errors that distract from meaning and
readability
* Grammatical structures are
generally appropriate, although
not necessarily perfect.
* Occasional errors may distract
from meaning and readability.
* Grammatical errors are so obvious
that they seriously distract readers.
Guidelines for Writing Examinations and Final Project Papers
Developed by Joseph A. Huggins
Examination questions should be at least one and a half pages in
length each.

Final project paper should be at least ten pages in length.
See syllabus also for writing guidelines
Strategic Management #6
Types of Strategies
Adapting to Social Media
Retrenchment Strategies
Retrenchment --Cost & asset reduction to reverse declining
sales & profit
BankruptcyChapter 7 – LiquidationChapter 9 –
MunicipalitiesChapter 11 – Reorganization for
CorporationsChapter 12 – Family FarmersChapter 13 –
Reorganization for Small Businesses and Individuals
Retrenchment Strategies
Guidelines --Failed to meet objectives & goals consistency; has
distinctive competenciesFirm is one of weaker

competitorsInefficiency, low profitability, poor employee
morale, pressure for stockholdersStrategic managers have
failedRapid growth in size; major internal reorganization
necessary
Divestiture StrategiesSelling a division or part of an
organization
Divestiture Strategies
Guidelines --Retrenchment failed to attain
improvementsDivision needs more resources than are
availableDivision responsible for firm’s overall poor
performanceDivision is a mis-fit with organizationLarge amount
of cash is needed and cannot be raised through other sources
Liquidation Strategies
Guidelines --Retrenchment & divestiture failedOnly alternative
is bankruptcyMinimize stockholder loss by selling firm’s assets
Selling company’s assets, in parts,
for their tangible worth
Michael Porter’s Generic Strategies
Cost Leadership Strategies
Differentiation Strategies
Focus Strategies

Generic StrategiesIn conjunction with differentiationEconomies
or diseconomies of scaleCapacity utilization achievedLinkages
w/ suppliers & distributors
Cost Leadership
Cost LeadershipWays of ensuring total costs across value chain
are lower than competitors’ total costs
Perform value chain activities more efficiently than rivals and
control factors that drive costs
Revamp the firm’s overall value chain to eliminate or bypass
some cost-producing activities
Cost LeadershipCan be especially effective when:
Price competition among rivals is vigorous
Rival’s products are identical and supplies are readily available
There are few ways to achieve differentiation
Most buyers use the product in the same way
Buyers have low switching costs
Buyers are large and have significant power
Industry newcomers use low prices to attract buyers
Generic StrategiesMany price-sensitive buyers
Few ways of achieving differentiation
Buyers not sensitive to brand differences
Large # of buyers with bargaining power
Really Low Cost Producer Advantage

Generic StrategiesGreater product flexibilityGreater
compatibilityLower costsImproved serviceGreater
convenienceMore features
Differentiation
Differentiation
Can be especially effective when:
There are many ways to differentiate and many buyers perceive
the value of the differences
Buyer needs and uses are diverse
Few rival firms are following a similar differentiation approach
Technology change is fast paced and competition revolves
around evolving product features
Generic StrategiesIndustry segment of sufficient sizeGood
growth potentialNot crucial to success of major competitors
Focused Strategies
Focused Strategy Can be especially effective when:
The target market niche is large, profitable,
and growing
Industry leaders do not consider the niche crucial
Industry leaders consider the niche too costly or difficult to

meet
The industry has many different niches and segments
Few, if any, other rivals are attempting to specialize in the same
target segment
Means for Achieving Strategies
Two or more companies form a temporary partnership or
consortium for purpose of capitalizing on some opportunity
Joint Venture/Partnering -
Reasons why Mergers and Acquisitions FailIntegration
difficulties
Inadequate evaluation of target
Large or extraordinary debt
Inability to achieve synergy
AOL & Time Warner
Means for Achieving StrategiesR&D partnerships
Cross-distribution agreements
Cross-licensing agreements
Cross-manufacturing agreements
Joint-bidding consortia
Cooperative Arrangements -
Means for Achieving StrategiesManagers who must collaborate

daily;
not involved in developing the venture
Benefits the company not the customers
Not supported equally by both partners
May begin to compete with one of the partners
Why Joint Ventures Fail -
Joint Ventures
Guidelines --Synergies between private and publicly
heldDomestic with foreign firm, local management can reduce
riskComplementary distinctive competenciesResources & risks
where project is highly profitable (e.g. Alaska Pipeline)Two or
more smaller firms competing with a larger firmNeed to
introduce new technology quickly
Reasons why Mergers and Acquisitions FailToo much
diversificationManagers overly focused on acquisitionToo large
an acquisitionDifficult to integrate different organizational
culturesReduced employee moral due to layoffs and relocations
Means for Achieving StrategiesProvide improved capacity
utilizationBetter use of existing sales forceReduce managerial
staffGain economies of scaleSmooth out seasonal trends in
salesGain new technologyAccess to new suppliers, distributors,
customers, products, creditors
Mergers & Acquisitions

First Mover Advantages
Benefits a firm may achieve by entering a new market or
developing a new product or service prior to rival firms
First Mover AdvantagesSecuring access to rare
resourcesGaining new knowledge of key factors &
issuesCarving out market shareEasy to defend position & costly
for rival firms to overtake
Potential Advantages
OutsourcingCompanies taking over the functional operations of
other firms
Business-process outsourcing (BPO)Less expensiveAllows firm
to focus on core businessEnables firm to provide better services
Benefits
Strategies in Action
Growth Planning Process
Goals
Long-Term Objectives
Blue Ocean Strategy
Types of Strategies
Integration Strategies
Intensive Strategies
Diversification Strategies

Growth Planning Process Overview
SWOT
Vision
Mission
Values
Performance
Evaluation
Goals
Objectives
Method of
Competition
Dashboard
Action Plans
Implementation
Balanced
Scorecard
Strategy
Development
Strategic
Growth
Plan

Goals
Marketing
Profitability
Infrastructure
Objectives --
QuantifiableMeasurableRealisticUnderstandableChallengingHie
rarchicalObtainableCongruentTime-line
Results expected from pursuing certain strategies
Strategies represent actions to accomplish long-term objectives
Strategists Should Avoid --Managing by ExtrapolationManaging
by CrisisManaging by SubjectivesManaging by Hope
Financial vs. Strategic Objectives
Financial ObjectivesGrowth in revenuesGrowth in
earningsHigher dividendsHigher profit marginsHigher earnings
per shareImproved cash flow
Strategic ObjectivesLarger market shareQuicker on-time

delivery than rivalsQuicker design-to-market times than
rivalsLower costs than rivalsHigher product quality than
rivalsWider geographic coverage than rivals
Trade-OffMaximize short-term financial objectives
– harm long-term strategic objectivesPursue increased market
share at
the expense of short-term profitabilityTradeoffs related to risk
of actions; concern
for business ethics; need to preserve natural environment;
social responsibility issues
The Balanced Scorecard
Robert Kaplan & David Norton --Strategy evaluation & control
techniqueBalance financial measures with
non-financial measuresBalance shareholder objectives
with customer & operational objectives
Marketing Dashboard
Easy-to-use analytics
and reporting tool

Vertical Integration Strategies
Gain Control Over --DistributorsSuppliersCompetitors
Forward Integration Strategies
Guidelines --Current distributors – expensive or
unreliableAvailability of quality distributors – limitedFirm
competing in industry expected to grow markedlyFirm has both
capital & HR to manage new business of distributionCurrent
distributors have high profit margins
Gain Control Over --DistributorsRetailers
Backward Integration Strategies
Guidelines --Current suppliers – expensive or unreliable# of
suppliers is small; # of competitors is largeHigh growth in
industry sectorFirm has both capital & HR to manage new
businessStable prices are importantCurrent suppliers have high
profit margins
Ownership or Control --
Firm’s suppliers
Horizontal Integration Strategies
Guidelines --Gain monopolistic characteristics
w/o federal government challengeCompetes in growing
industryIncreased economies of scale – major competitive
advantagesFaltering due to lack of managerial expertise or need
for particular resource
Ownership or Control --

Firm’s competitors
Types of Strategies
Intensive Strategies
Intensive Efforts --Improve competitive position with existing
products
Market Penetration Strategies
Increased Market Share --Present products/servicesPresent
markets Greater marketing efforts
Guidelines --Current markets not saturatedUsage rate of present
customers can be increased significantlyShares of competitors
declining; industry sales increasingIncreased economies of scale
provide major competitive advantage
Market Development Strategies
New Markets --Present products/services
to new geographic areas
Guidelines --New channels of distribution
– reliable, inexpensive, good qualityFirm is successful at what
it doesUntapped/unsaturated marketsExcess production
capacityBasic industry rapidly becoming global
http://www.letvc.com/product/217/the-history-of-apple-
company
History of Apple

Product Development Strategies
Increased Sales --Improving present
products/servicesDeveloping new products/servicesProducts in
maturity stage of life cycleIndustry characterized by rapid
technological developmentCompetitors offer better-quality
products @ comparable pricesCompete in high-growth
industryStrong R&D capabilities
Guidelines --
http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauc
e.htm
l
Malcolm Gladwell
Types of Strategies
DiversificationRelated – When their value chains posses
competitively valuable cross-business strategic fits
Unrelated – When their value chains are so dissimilar that no
competitively valuable cross-business relationships exist
http://www.youtube.com/watch?v=AUX4As-QpdM
Post it Notes
Related Diversification Preferred
To Capitalize on:Transferring competitively valuable expertise
Combining the related activities of separate businesses into a
single operation to lower costs

Exploiting common use of a well-known brand name
Cross-business collaboration to create
competitively valuable resource
strengths and capabilities
Diversification Strategies
Less Popular --More difficult to manage diverse business
activities
However --The greatest risk of being in a single industry is
having all your eggs in one basket
Related Diversification May be Effective When:An organization
competes in a no-growth or a slow growth industry
Adding new, but related, products would significantly enhance
the sales of current products
New, but related products could
be offered at highly competitive prices
Related Diversification May be
Effective When:New, but related, products have seasonal sales
levels that counterbalance an organization’s existing peaks and
valleys
An organization’s products are
currently in the declining stage
of the product’s life cycle

An organization has a strong
management team
Conglomerate Diversification Strategies
Guidelines --Declining annual sales & profitsCapital &
managerial ability
to compete in new
industryFinancial synergy between acquired and
acquiring firmsCurrent markets for present products - saturated
Unrelated DiversificationFavors capitalizing on a portfolio of
businesses that are capable of delivering excellent financial
performance
Entails hunting to acquire companies:Whose assets are
undervaluedThat are financially distressedWith high growth
potential but are
short on investment capital
Unrelated Diversification May be Effective When:Revenues
derived from an organization’s current products or services
would increase by adding new unrelated products
An organization competes in
a highly competitive or a

no growth industry
An organization’s current distribution channels can be used to
market new products to existing customers
Unrelated Diversification May be Effective When:New products
have counter-cyclical sales patterns
An organization’s basic industry is experiencing declining
annual sales and profits
An organization has the capital and managerial
talent to compete successfully in a new industry
Unrelated Diversification May be Effective When:An
organization has the opportunity to purchase an unrelated
business as an attractive investment opportunity
There exists financial synergy
between the acquired and acquiring firm
Existing markets for the present products are saturated
Antitrust action could be charged against a company
Blue Ocean Strategy
What are the advantages of competing with a Blue Ocean
Strategy as compared with competitors in a Red Ocean
environment?

Strategic Management # 4
The Business Vision & MissionImportance of Vision
and Mission StatementsDeveloping a Vision
Characteristics of a mission statement
Vision & Mission
Many organizations develop
both vision & mission statements
Essential for effectively establishing objectives and formulating
strategies
Important to articulate “WHY”
http://www.ted.com/talks/simon_sinek_how_great_leaders_inspi
re_action.html
Developing Vision & Mission
Clear mission is needed before
alternative strategies can be
formulated and implemented
Shared vision creates a community of interests

“The last thing IBM needs right now is a vision.” (July 1993)
Vision
What IBM needs most right now is a vision.” (March 1996)
-- Louis V. Gerstner, Jr., CEO, IBM Corporation
“We are limited, not by our abilities,
but by our vision.”
“What do we want to become?”
Vision
http://www.youtube.com/watch?v=a7Bnft23xsU
Starbucks
Agreement on the basic vision for which the firm strives to
achieve in the long run is critically important to the firm’s
success.
A Shared Vision --Creates commonality of interestsReduces
daily monotonyProvides opportunity & challenge
Vision

http://www.youtube.com/watch?v=ezVib_giTFo
Manslater
Vision
A vision statement is sometimes called
a picture of the company in the future
but it’s much more than that.
A vision statement is the inspiration,
the framework for all strategic planning.
Vision
The vision statement answers the question Where do we want to
go?
When creating a vision statement - it is important to articulate
the dreams and hopes for the business.
It reminds employees of what you are trying to build.
http://www.youtube.com/watch?v=0USn7eufXp
Microsoft
Vision
While a vision statement doesn’t tell you how you’re going to
get there, it does set the direction for your business planning.
It’s important when crafting a vision statement to let your

imagination go and dare to dream – and why it’s important that
a vision statement captures your passion.
Vision
Unlike the mission statement, a vision statement is for the
members of your company, not for your customers or clients.
When writing a vision statement, your mission statement and
your core competencies can be a valuable starting point for
articulating your values.
Mission StatementsINTERNAL MISSION STATEMENTMajor
Emphasis /Goals for next 1-3 yearsWhere Your Priorities Are
Now
EXTERNAL MISSION STATEMENTMarkets ServedNiche
DifferentiationCore CompetenceCompetitive advantage
Mission StatementsEnduring statement of purposeDistinguishes
one firm from anotherDeclares the firm’s reason for beingOR
A MANTRA!
“What is our business?”
http://www.youtube.com/watch?v=jT7xlFTinIw

Reveal what an organization wants to be and whom it wants to
serve
Mission StatementsBelief statementStatement of
purposeStatement of philosophyStatement of business principles
Also referred to as:
Mission Statements of
Well Known Enterprises
Examples of mission statements from real enterprises.
Mary Kay Cosmetics
"To give unlimited opportunity to women."
Merck
"To preserve and improve human life.
Walt Disney
"To make people happy."
Importance of Mission
Benefits from a strong mission
http://www.youtube.com/watch?v=Fua2VgwHveE
Mission

Resource Allocation
Unanimity of Purpose
Organizational Climate
Focal point for work
structure
Effective Missions
http://www.youtube.com/watch?v=LJhG3HZ7b4o
Make to Stick
Effective Mission Statements
3M
To solve unsolved problems innovatively
Google
To organize the world’s information and make it universally
accessible and useful
Anticipates customer needs
Identifies customer needs
Provides product / service to satisfy needs
Mission & Customer Orientation
An Effective Mission Statement

Affects development of vision & mission
Responsibilities to –
ConsumersEnvironmentalistsMinoritiesCommunitiesEmployees
Social Policy & Mission
Managerial philosophy shapes social policy
Social Policy & Mission
Social policy should be integrated in all strategic-management
activities
Mission should convey the social responsibility of the firm
What is a Vision?An Accomplishment to be AchievedA
Measurable OutcomeA Specific Date and Time to Accomplish
somethingThe way of getting from here to there
Anatomy of a Vision
WHAT
(Goal)
Why How
(Benefits) (Strategy)

Why a Vision is ImportantEstablish a direction & goals for
lifeGoals measure results
If you have no vision, how do you measure successA vision
challenges you to growA vision improves your self imageA
vision setting gives you confidenceA vision prompts you to be
motivated
Why is a vision Important?Critical to success
Motivates us to action
Turns dreams Into reality
Achieve personal and professional desired results
http://www.youtube.com/watch?v=_j3KsRamaF4
Joel Barker
Thoughts Influence Action
Feelings
ACTION
Positive Thoughts / Attitudes are the key to success
Thoughts
Negative AttitudesA Negative Attitude:

Keeps you focused on what you don’t have
Makes you blind to your own talents & abilities
Creates problems that don’t exist, and exaggerates those that do
exist
Is a guaranteed recipe for low self esteem
http://www.youtube.com/watch?v=v-oYtixsAgM
God’s Glasses
7 Questions of Goal Setting to Achieve your Vision 1: Your
Vision /Dream - What do you want? 2: Your Priorities - What’s
most important? 3: Your Design - What does it look like? 4:
Why - Why do you want it? 5: When - When do you want it? 6:
How - How will you achieve it? 7: Who - Whose help do you
need?
Start With the End in Mind
What do You Want to Happen?Business and Career
GoalsFinancial GoalsHealth and Fitness GoalsFamily
GoalsPersonal Goals
Areas to Set GoalsImprove Your Competence - Upgrade
SkillsDevelop Systems to Simplify Your Life - ClutterImprove

& Maintain Health - Diet, ExerciseInsure Financial
IndependenceStart Your Own Business
Decide What You Really WantWhat are the three most
important goals in your life right now?Are you making progress
to achieve them?What are the three biggest concerns in your life
right now?Are you taking steps to solve these worries?
Steps to Set a Goal1.- Choose a Goal2.- Intensify Your Desire
to achieve your goal3.- Develop a strong belief that you
can achieve the goal4.- Set a deadline for your goal5.- Write
your goal down6.- Break your goal down to mini-goals7.-
Define the tasks for every mini-goal8.- Start – Take a small
action9.- Follow up on your progress10.- Take corrective
actions if needed11.- Reward yourself for progress
Intensify Your Desire
to Achieve Your GoalsHave you ever failed to achieve your
goals?

Reason: You didn’t have a strong enough desire!
Desire is more important than thinking or action.
How committed are you to achieving this goal?
Can you see yourself actually achieving it?
List the benefits from reaching your goal
How will you personally benefit?
Develop a Strong Belief That You Can Achieve Your Goal
If you don’t believe
you can reach a goal
YOU WON’T
Use your Imagination. Create your own movie.
See yourself accomplishing your goal.
Experience the benefits of success.
How do you feel as you accomplish your goal?
Visualize your goal and experience the feelings.
Where Goal Setting
Can Go WrongGoals can be set unrealistically highGoals can
be too vagueGoal setting can be unsystematic, sporadic, &
disorganizedToo many goals = overloadTrying to do too much
too soonFailing to begin - to act ( procrastination)
http://www.youtube.com/watch?v=VA8D1cGW5Qk
Beat Procrastination

Questions
When Meeting ObstaclesDid you try hard enough?Was your
process, system approach effective?Did you have the right
skills, knowledge?Did you seek help from others?Was the goal
unrealistic?Did you take regular, small actions?Were your
actions - results focused?
Vision
What can you do to achieve your Vision?
The Internal AssessmentThe Nature of an Internal
AuditIntegrating Strategy &
CultureManagementMarketingOpportunity
AnalysisFinance/AccountingProduction/OperationsResearch &
DevelopmentManagement Information Systems
Critical Organization Factors
The Internal Environment
Management Leadership StylesManagement Philosophies –
Vision and MissionOrganization Structure and
ClimateOrganization Culture – Values, Social NetworkCompany

PoliciesResources
Nature of an Internal Audit
STRENGTHS & WEAKNESSES
Functional Areas of BusinessVary by organizationDivisions
have differing strengths & weaknessesPhysical resourcesHuman
resourcesOrganizational resources
Key Internal Forces
Distinctive Competencies:
Firm’s strengths that cannot be easily
matched or imitated by competitors
Internal Audit
Coordination & understanding among managers from all
functional areas
Key to Organizational Success
http://www.ted.com/talks/clay_shirky_on_institutions_versus_c
ollaboration.html
Clay Sharky Collabaration
Resource Based View (RBV)
Approach to Competitive Advantage
Internal resources are
more important than
external factors

http://pro.readitfor.me/?aID=read&step=1&ID=14
Good to Great - Collins
Resource Based View (RBV)
Empirical IndicatorsRareHard to imitateNot easily substitutable
Integrating Strategy & Culture
Organizational CultureOften Resistant to changeMay represent:
Strength
Weakness
Integrating Strategy& Culture
Organizational Culture Can Inhibit Strategic ManagementMay
miss external changes due to strongly held beliefsHave a natural
tendency to “hold the course” even during times of strategic
change
http://www.ted.com/talks/jason_fried_why_work_doesn_t_happ
en_at_work.html
U.S. Versus Foreign Cultures
To successfully compete in world markets, U.S. managers must
obtain a better knowledge of historical, cultural, and religious

forces that motivate and drive people in other countries.
Diversity within an organization is very important
Management
Functions of Management
Planning
Organizing
Motivating
Communicating
Coordinating
Staffing
Controlling
Management
Stage When Most Important
Function
Planning
Strategy Formulation
Organizing
Strategy Implementation
Motivating

Staffing
Controlling
Strategy Evaluation
Management
PlanningBeginning of management processBridge between
present & futureImproves likelihood of
attaining desired results
Planning
Synergy
Can develop through planning
Exists when everyone pulls together as a team that knows what
it wants to achieve
Management
OrganizingAchieves coordinated effortDefines task & authority
relationshipsDetermines who does whatDetermines who reports
to whom
Management
ControllingEstablish performance standardsMeasure individual
and

organizational performanceCompare actual performance to
planned performance standardsTake corrective action
Management Audit ChecklistDoes the firm use strategic
management concepts?
Are objectives / goals measurable?
Well communicated?
Do managers at all levels plan effectively?
Management Audit ChecklistDo managers delegate well?
Is the organization’s structure appropriate?
Are job descriptions clear?
Are job specifications clear?
Is employee morale high?
Management Audit ChecklistIs employee absenteeism low?
Is employee turnover low?
Are the reward mechanisms effective?
Are the organization’s control
mechanisms effective?
Marketing
Marketing Functions
Marketing research

Opportunity analysis
Target market segmentation
Customer analysis
Promotion & Selling products /services
Product & service planning & development
Pricing
Distribution
Marketing
Customer Needs or Wants for Products and
ServicesDefiningAnticipatingCreatingFulfilling
Marketing
Opportunity Analysis
Are markets segmented effectively?
Is the organization positioned well among competitors?
Has the firm’s market share been increasing?
Are the distribution channels reliable & cost effective?
Is the sales force effective?
Marketing
Does the firm conduct market research?
Are product quality & customer service good?
Are the firm’s products/services priced appropriately?
Does the firm have effective promotion, advertising, &
publicity strategies?

Marketing
Are the marketing planning & budgeting effective?
Do the firm’s marketing managers have adequate experience and
training?
Finance/Accounting
Finance/Accounting Functions
Investment decision (Capital budgeting)
Financing decision
Accurate Record Keeping
Basic Financial Ratios
Liquidity Ratios - Firm’s ability to meet its short-term
obligations
Leverage Ratios - Extent of debt financing
Activity Ratios - Effective use of firm’s resources
Profitability Ratios - Effectiveness shown by returns
on sales& investment
Growth Ratios - Firm’s ability to maintain economic position
Finance/Accounting AuditWhere is the firm strong / weak as

indicated by financial ratio analysis?
Can the firm raise short-term capital as needed?
Can the firm raise long-term capital as needed
through debt and/or equity?
Finance/Accounting AuditDoes the firm have sufficient working
capital?
Are capital budgeting procedures effective?
Are dividend payout policies reasonable?
Are the firm’s financial managers experienced & well trained?
Finance/Accounting Audit
Effective Financial Analysis Requires:
Analysis of how the ratios have changed over time
How the ratios compare to industry norms
(RMA) Robert Morris Associates
How the ratios compare with key competitors
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 4 -63
Production / Operations
Production/Operations Functions Process Capacity Inventory
Workforce Quality

Production / Operations Audit
Are suppliers of materials, parts, etc. reliable and reasonable?
Are facilities, equipment & machinery in good condition?
Are inventory-control policies and procedures effective?
Production/Operations Audit
Research & Development
Research & Development FunctionsDevelopment of new
products
before competitors
Improving product quality
Improving manufacturing
processes to reduce costs
Research & Development AuditAre the R&D facilities
adequate?
If R&D is outsourced, is it cost effective?
Are the R&D personnel well qualified?
Are R&D resources allocated effectively?
Research & Development AuditAre MIS and computer systems

adequate?
Is communication between R&D & other organizational units
effective?
Are present products technologically competitive?
Management Information Systems AuditDo managers use the
information system
to make decisions?
Is there a CIO or Director of Information
Systems position in the firm?
Is data updated regularly?
Management Information Systems AuditDo managers from all
functional areas contribute input to the information system?
Are there effective passwords for entry into the firm’s
information system?
Are strategists of the firm familiar with the information systems
of rival firms?
Management Information Systems AuditIs the information
system user-friendly?
Do all users understand the competitive advantages that
information can provide?
Are computer training workshops provided for users?
Is the firm’s system being improved?

Value Chain Analysis
Core competencies
Distinctive competencies
Benchmarking
Internal Success Factors
To achieve a competitive advantage, a company needs to
have a strategy that establishes a significant and sustainable
point of differentiation.
What internal factors are most responsible for a company
excelling in their industry ?
Strategic Management
Session #1What is Strategic Management?How do you do it?
The ProcessWhy do it? BenefitsAdapting to ChangeBalancing
Intuition & AnalysisIntegrating Analysis and Intuition
*

Art & science
of formulating, implementing, and evaluating, cross-functional
decisions
that enable an organization
to achieve its objectives
Strategic Management – Defined
The strategic plan is a
company’s ROAD MAP
1.-Formulation
- Situation Analysis
- Vision & Mission
- Goals
- Objectives
- Strategies 2.-Implementation
- Accountability
- Action Plans3.-Evaluation
- Control System
- Evaluation
External

Audit
Internal
Audit
Long-Term
Objectives
Generate,
Evaluate,
Select
Strategies
Implement
Strategies:
Mgmt Issues
Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS
Measure &
Evaluate
Performance
Comprehensive Strategic Management Model
Strategic Management achieves a firm’s success through
integration of the various functions
Management

MIS
Production/Operations
Finance/Accounting
Marketing
Research & Development
Personnel
Benefits of Strategic Management Proactive in shaping firm’s
future Initiate and influence firm’s activities Formulate better
strategies
- Systematic, Logical, Rational
Benefits of Strategic Management Identification of
opportunitiesObjective view of management problemsImproved
coordination & controlMinimizes adverse conditions &
changesDecisions that better support objectives
Benefits of Strategic ManagementEffective allocation of time &
resourcesInternal communication among personnelIntegration of
individual behaviorsClarify individual responsibilities
Encourage forward thinking

Benefits of Strategic ManagementEncourages favorable attitude
toward change
Provides discipline and formality to
the management
of the business
Benefits of Strategic Management
Non-Financial Benefits Improved understanding of competitors
strategies Enhanced awareness of Challenges (threats) Reduced
resistance to change Enhanced problem-prevention capabilities
Benefits of Strategic Management
Financial Benefits Improvement in sales Improvement in
profitability Productivity improvement
Why Some Firms Do No Strategic PlanningFear of
failureOverconfidencePrior bad experienceSelf-interestNo
perceived needHave no process
Why Some Firms Do No Strategic PlanningPoor reward
structuresFire-fightingWaste of timeToo
expensiveLazinessContent with success

Organizations must monitor changeOn-going processReview
Internal and external eventsMake Timely Adjustments
It is Critical to Adapt to Change
Change is Rapid & Accelerating
Need for a Cross-Impact Analysis
Dynamic & Continuous Process
Need to Track Trends
Need to Consider Potential Changes
& Develop Contingency Plans
Need to Consider Potential Impact
on Various Audiences
Cross-Impact Analysis
Economic Trends
New Opportnities
Technology
Demographics
Social Political
International
Forces
Customers
Driving Forces
Competition

Rate & magnitude of change increasing dramatically
Adapting to Change
E-commerce
Demographics
Technology
Peter Drucker: -- Think through the overall mission of a
business. Ask the key question: “What is our Business?”
Prime Task of Strategic Management
Today the Question is “What Should our business Be?”
Adapting to Change
Key Strategic Management Questions
Requires long-term focus
Effective Adaptation

1. Adapting to change in external trends,
internal capabilities and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing &
evaluating strategies
Integrating Intuition & Analysis
2
Analytical Thinking
Intuitive Thinking
Integrating Intuition & Analysis
Involve all levels of management
Use both Intuition & Objective Analysis for Balanced
Judgments
Apply it to all decisions

The strategic management process attempts to organize
quantitative and qualitative information under conditions of
uncertainty
Integrating Intuition and Analysis
Intuition is based on:
- Past experiences
- Judgment
- Feelings
Integrating Intuition and Analysis
Intuition is useful for
decision making in:Conditions of great uncertaintyConditions
with little precedent
L24
Strategic Management # 2
The External Assessment
External Situation Analysis
Sources of External Information
The Nature of the External Audit

Economic Factors
Political, Governmental, and Legal Forces
Technological Forces
Competitive Forces - Porter’s Five-Forces Model
Social, Cultural, Demographic &
Environmental Forces
The External Environment
The external environment includes the organizations and forces
outside the company that affect management’s ability to
successfully implement their strategies.
External Situational Analysis
Gather intelligence
External Situational Analysis
Sources of
InformationInternetLibrariesSuppliersDistributorsSalespersonsC
ustomersCompetition

Purpose of External AuditIdentify key issues that could affect
the firmOpportunitiesThreatsChallenges
External Strategic Management Audit
Forecasting Tools and TechniquesForecasts are educated
assumptions about future trends and eventsQuantitative
techniques – Most appropriate when historical data is available
and there is a constant relationshipQualitative
techniquesTrendwatching.comSpringwise.com
Performing the External Audit
Variables Important trends vs fads Market share / share of
mind & hearts Breadth of competing products Price
competitiveness World economies Proprietary account
advantages Technological advancements Global weather
patterns
PublicsAny group that has an actual or potential interest in or
impact on an organization’s ability to achieve its objectives
Financial publicsMedia publicsGovernment publicsCitizen-
action publicsLocal publicsGeneral publicInternal publics
Note to Instructor
In slideshow view, click on movie icon to launch Tom’s Shoes
video snippet. See accompanying DVD for full video segment.
Customers

Consumer markets
Business markets
Reseller markets
Government markets
International markets
Macro Environment
ECONOMIC
ENVIRONMENT
DEMOGRAPHIC ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT
POLITICAL/LEGAL ENVIRONMENT
CULTURAL ENVIRONMENT
NATURAL
ENVIRONMENT
Economic
Environment
Changes in employment &income
New products offering financially cautious buyers greater
value—the right combination of quality and service at a fair
price.

New technologies
Economic Environment
Note to Instructor
This graphic highlights a car targeted to India’s growing middle
class.
Discussion Questions
What changes might there be in U.S. income over the next year?
What are positioned as “value cars.”
The students might quote current economic declines or rises.
The “value cars” will probably include some of the smaller cars
by Kia, Ford, Honda, and Toyota.
Economic ForcesInterest RatesSequesterLayoffs, Threats of
downsizingEconomic standard of livingSevere weather -
tornadoes, floods, firesEnergy costs / availabilityFood
costsBRIC & PIIIGS
Political/Legal
Environment
Political environment consists of laws, government agencies,
and pressure groups that influence or limit various
organizations and individuals in a given society

Political, Government & Legal Forces
Key opportunities & threats Stabilize Banking, Housing &
Employment Supervise Rating Agencies Tax rates – increase ?
Lobbying efforts Healthcare Reform Immigration control
Government Regulation
Political / Legal Environment
Government Regulation -Banking, Immigration
Regulatory Agencies - FAA, FDA, Commerce, Fed Reserve
Increasing Legislation vs Agency Enforcement
Controlling the Process / Lobbying
Increased Emphasis on Ethics & Social Responsibility
You Move
No, You Move
Copyright © 2011 Pearson Education, Inc. Publishing as
Prentice Hall
Increased emphasis on ethics, socially responsible behavior &
cause-related marketing
Political Environment
The Company’s Macro-environment
Technological EnvironmentMost dramatic force in changing the

marketplaceCreates new products
and opportunitiesSafety & security of
new product always
a concern
Note to Instructor
Discussion Question
Ask students what changes they have seen in technology in the
past four years including medical products, communications,
and media.
They will most likely talk about the use of artificial organs and
stem cell research, the growth of PDA’s like the iPod, and the
use of new media products including DVR or TiVo.
Technological Environment
Technological Revolution
Growth Industries
New Industries
New Services & Products
Social Concerns
Government Research - SBIR
Applying Technology
Technological Forces
Major Impact –InternetCloud computingSocial Media -
FacebookOpen source development - Linux, WikiMobile

Communications - TwitterWidespread video surveillance Multi
media integration - Smart PhonesManufacturing – 3D Printers
Essential for nearly every strategic decision
3D Printer
http://www.ted.com/talks/lisa_harouni_a_primer_on_3d_printin
g.htm
l
Technological
Environment
Competitors
Firms must gain strategic advantage by positioning their
offerings against competitors’ offerings
Types of competition
Direct
Substitution
Discretionary income
Research is Critical
Competitive Forces
Collection & evaluation of data on competitors is essential for
successful strategy formulation
Competition on virtually all industries
can be described as intense.
Competitive ForcesMoody’s ManualsStandard Corporation

DescriptionsValue Line Investment SurveysDun’s Business
RankingsStandard & Poor’s Industry SurveysIndustry
WeekForbes, Fortune, Business WeekMystery shopping /
reverse engineering
Sources of Corporate Information
Porter’s Five Forces
Model of Competition
Potential development
of substitute products
Rivalry among
competing firms
Bargaining power
of suppliers
Potential entry of new competitors
Bargaining power
of consumers
Competitive ForcesShare of heart & mind mattersUnderstand
what business you are inBroke or not, fix it - The second
CurveInnovate or evaporateAcquisition is essential to
growthPeople make a differenceNo substitute for quality

7 Characteristics of most Competitive U.S. Firms:
Prentice Hall
Social, Cultural, Demographic
Environment
Cultural environment consists of institutions and other forces
that affect a society’s basic values, perceptions, and behaviors
Social, Cultural, Demographic & Environmental Forces
U.S. FactsAging population2025 = 18.5% population 65+
yearsLess CaucasianWidening gap between rich & poor
Facts (as of March 9, 2015)World population approaching 8
billion
As of March 9, 2015 = 7,300,214,150World population = 8
billion by 2024World population = 9 billion by 2054U.S.
population = 324,341,765
TrendsMore American households with people living aloneBy
2021 Hispanics will be largest minority groupAging Americans
– affects all organizationsPopulation shift to the south and

westInterest in fitness and exercise? Increasing
obesity?Decimation and degradation of the natural environment
Social-Cultural Environment
Race & Gender Issues
Cultural Values
Self-image
Views of others,
organizations, & society
International Issues
Demographics
Demography is the study of human populations in terms of size,
density, location, age, gender, race, occupation, and other
statistics
Demographic environment is
important because it involves
people, and people make up
markets
Demographic trends include age,
family structure, geographic population shifts, educational
characteristics, and population diversity

Demographic Environment
Age structure
Changing age structure of the population
Baby boomers include people
born between 1946 and 1964
Most affluent Americans
Note to Instructor
There are many Web sites targeted to boomers including this
link to Boomers International. Before following the link it
might be interesting to ask the following:
Discussion Questions
What type of information boomers might be seeking?
Generation X includes people
born between 1965 and 1976
High parental divorce rates

Cautious economic outlook
Less materialistic
Family comes first
Lag behind on retirement savings
Millennials (gen Y or echo boomers) include those born
between 1977 and 2000
Comfortable with technology
Includes
Tweens (ages 8–12)
Teens (13–19)
Young adults (20’s)
Quarter-Life Crisis
Quarter Life CrisisThe quarter life crisis is a term applied to the
period of life immediately following the major changes of
adolescence, usually ranging from the late teens to the early
thirties. The term is named by analogy with the mid-life
crisis.Characteristics of quarter-life crisis may include:
confronting one's own insecurity concerning ability to love
oneself, let alone another, personal insecurity regarding present
accomplishments re-evaluation of close interpersonal
relationships lack of friendships or romantic relationships,
disappointment with one’s job

Quarter-life Crisistendency to hold stronger opinionsboredom
with social interactionsfinancially-rooted stress, unexpectedly
high cost of livingloneliness, depression and suicidal
tendenciesa sense that others are doing better than
oneselffrustration with social skills
Generational marketing is important in segmenting people by
lifestyle of life state instead of age
Changing Family
More people are:
Divorcing or separating
Choosing not to marry
Choosing to marry later
Marrying without intending to have children
Increased number of working women
Stay-at-home dads
http://www.youtube.com/watch?v=2u2JuWroTn4

Growth in U.S. West and South and decline in Midwest and
Northeast
Moving from rural to metropolitan areas
Changes in where people work
Telecommuting
Home office
Divorcing or separating
Geographic shifts
Increased Diversity
Markets are becoming more
diverseInternationalNationalIncludes:EthnicityGay and
lesbianDisabled
Cultural environment consists of institutions and other forces
that affect a society’s basic values, perceptions, and behaviors
Cultural Environment
People’s view of themselves
Yankelovich Monitor’s consumer segments:
Do-it-yourselfers
Adventurers
People’s view of others
More “cocooning”

Shifts in Secondary Cultural Values
Note to Instructor
Do-It-Yourselfers—Recent Movers:Active consumers also view
the experience as a form of self-expression. They view their
homes as their havensView their projects as personal victories
over the high-priced marketplace.
Adventurers:Rarely follow a single path or do the same thing
twice.View the experience as far more exciting than the
entertainment value.They are more likely to engage in activities
most think are too dangerous.
People’s view of organizations – Tea Party Movement
People’s view of society
Patriots defend it
Reformers want to change it
Malcontents want to leave it
Shifts in Secondary Cultural Values
Natural environment
Natural environment involves the natural resources that are
needed as inputs by marketers or that are affected by marketing
activities
Trends

Shortages of raw materials
Increased pollution
Increase government intervention
Environmentally sustainable strategies
Climate Change – Extreme Variations
Natural Environment
Note to Instructor
This Web link connects to greenbiz.com. There are several Web
sites like this that provide information on business as to how to
practice green strategies including green marketing.
Occupation shifts
Prentice HallChanges in the WorkforceMore educatedMore
white collar
Communication & Promotion
Electronic Media / Social Media
Saturation Of Messages
Need for Differentiation
Struggle to Gain Attention
Trading Up - Emotional Satisfaction
& Scaling Down - Commodities
http://www.youtube.com/watch?v=MtwVQhEXCcc
Siri Commands

Speedup of International Communication &
TransportationManufacturing Moving to Low Cost
ProducersRise of Trade Blocs- BRIC + SASevere Debt for
Countries, International CompaniesIncreasing Use of Barter
Move to Controlled Market Economics - Russia, ChinaRapid
Dissemination of Global LifestylesDevelopment of Emerging
marketsInternational Alliances / Global ExpansionIncreasing
Religious & Ethnic Conflicts & Arab Spring Uprisings
Global Forces
Affecting Business
The Current Business Environment
What current major factors in a company’s external
environment need to be addressed as part of the strategic
planning process?

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