What is Strategic Management?

Key Terms in Strategic Management The Strategic-Management Model Benefits of Strategic Management Why Some Firms Do No Strategic Planning Pitfalls in Strategic Planning Guidelines for ffecti!e Strategic Management Business thics and Strategic Management "om#aring Business and Military Strategy The Nature of Glo$al "om#etition The "ohesion "ase and %#eriential %ercise The "ohesion "ase& Kris#y Kreme Donuts 'KKD() *++, CHAPTER OBJECTIVES -fter studying this cha#ter) you should $e a$le to do the follo.ing& /0 *0 Descri$e the strategic-management #rocess0 %#lain the need for integrating analysis and intuition in strategic management0 10 Define and gi!e e%am#les of 2ey terms in strategic management0 ,0 Discuss the nature of strategy formulation) im#lementation) and e!aluation acti!ities0 30 Descri$e the $enefits of good strategic management0 40 %#lain .hy good ethics is good $usiness in strategic management0 50 %#lain the ad!antages and disad!antages of entering glo$al mar2ets0 60 Discuss the rele!ance of Sun T7u8s The Art of War to strategic management0 90 Discuss ho. a firm may achie!e sustained com#etiti!e ad!antage0 /+0 %#lain MS :S; 9+++) /,+++) and /,++/

CHAPTER OVERVIEW "ha#ter / #ro!ides an o!er!ie. of strategic management0 - #ractical) integrati!e model of the strategic-management #rocess is introduced0 Basic acti!ities and terms in strategic management are defined0 The $enefits of strategic management are #resented0 :m#ortant relationshi#s $et.een $usiness ethics and strategic management are discussed0 :n addition) the cha#ter initiates discussion of three themes that are #resent throughout the te%t& glo$al considerations) electronic commerce) and the strategic im#lications of the natural en!ironment0

The first theme is that glo$al considerations im#act !irtually all strategic decisions0 The $oundaries of countries can no longer $e the $oundary of our minds0 :t has $ecome a matter of sur!i!al for $usinesses to see and a##reciate the .orld from the #ers#ecti!e of others0 The under#innings of strategic management hinge on managers gaining an understanding of com#etitors) mar2ets) #rices) su##liers) distri$utors) go!ernments) creditors) shareholders) and customers .orld.ide0 The

#rice and <uality of a firm8s #roducts and ser!ices must $e com#etiti!e on a .orld $asis) not =ust a local $asis0 - Glo$al Pers#ecti!e illustration is #ro!ided in all cha#ters of this te%t to em#hasi7e the im#ortance of glo$al factors in strategic management0 - second theme is that electronic commerce has $ecome a !ital strategicmanagement tool0 -n increasing num$er of com#anies are gaining com#etiti!e ad!antage $y using the :nternet for direct selling and for communication .ith su##liers) customers) creditors) #artners) shareholders) clients) and com#etitors .ho also may $e dis#ersed glo$ally0 ;n-line ser!ices allo. firms to sell #roducts) ad!ertise) #urchase su##lies) $y#ass middlemen) trac2 in!entory) eliminate #a#er.or2) and share information0 :n total) electronic commerce is minimi7ing the cum$ersomeness of time) distance) and s#ace in doing $usiness) .hich yields $etter customer ser!ice) greater efficiency) im#ro!ed #roducts) and higher #rofita$ility0 -n -commerce Pers#ecti!e is #ro!ided in each cha#ter0 - third theme e!idenced throughout this te%t is that the natural en!ironment is an im#ortant strategic issue0 With the demise of communism and the end of the "old War) #erha#s no greater threat e%ists to $usiness and society than the continuous decimation and degradation of our natural en!ironment0 This is a strategic issue that needs immediate and su$stanti!e attention $y all $usinesses and managers0 Natural n!ironment Pers#ecti!e is #ro!ided in all cha#ters0 >i2e the Glo$al Pers#ecti!es) these are $o%ed inserts0

EXTENDED CHAPTER OUTLINE WITH TEACHING TIPS :0 -0 W?-T :S ST@-T G:" M-N-G M NT? Strategic management can $e defined as the art and science of formulating) im#lementing) and e!aluating cross-functional decisions that ena$le an organi7ation to achie!e its o$=ecti!es0 The term strategic management is used synonymously .ith strategic #lanning0

/0

*0 :t is also used at many colleges and uni!ersities as the su$title for the ca#stone course in $usiness administration) Business Policy) .hich integrates material from all $usiness disci#lines0 B0 Stages of Strategic Management

/0 The strategic-management #rocess consists of three stages0

a0 Strategy formulation includes de!elo#ing a !ision and mission) identifying an organi7ation8s e%ternal o##ortunities and threats) determining internal strengths and .ea2nesses) esta$lishing long-term o$=ecti!es) generating alternati!e strategies) and choosing #articular strategies to #ursue0 $0 Strategy im#lementation re<uires a firm to esta$lish annual o$=ecti!es) de!ise #olicies) moti!ate em#loyees) and allocate resources so that formulated strategies can $e e%ecutedA strategy im#lementation includes de!elo#ing a strategy-su##orti!e culture) creating an effecti!e organi7ational structure) redirecting mar2eting efforts) #re#aring $udgets) de!elo#ing and utili7ing information systems) and lin2ing em#loyee com#ensation to organi7ational #erformance0 c0 Strategy e!aluation is the final stage in strategic management0 Managers des#erately need to 2no. .hen #articular strategies are not .or2ing .ellA strategy e!aluation is the #rimary means for o$taining this information0 Three fundamental strategy e!aluation acti!ities are #ro!ided $elo.& @e!ie.ing e%ternal and internal factors that are the $ases for current strategies Measuring #erformance Ta2ing correcti!e action Strategy formulation) im#lementation) and e!aluation acti!ities occur at three hierarchical le!els in a large organi7ation& cor#orate) di!isional) and functional0 Smaller $usinesses may only ha!e the cor#orate and functional le!els0 "0 :ntegrating :ntuition and -nalysis

*0 a0 $0 c0 10

The strategic-management #rocess can $e descri$ed as an o$=ecti!e) logical) systematic a##roach for ma2ing ma=or decisions in an organi7ation0 :t attem#ts to organi7e <ualitati!e and <uantitati!e information in a .ay that allo.s effecti!e decisions to $e made under conditions of uncertainty0 D0 -da#ting to "hange

/0 The strategic-management #rocess is $ased on the $elief that organi7ations should continually monitor internal and e%ternal e!ents and trends so that timely changes can $e made as needed0 The rate and magnitude of changes that affect organi7ations are increasing dramatically0 *0 The need to ada#t to change leads organi7ations to 2ey strategic-management <uestions) such as) BWhat 2ind of $usiness should $e $ecome?C B-re .e in the right field?C BShould .e resha#e our $usiness?C BWhat ne. com#etitors are entering our industry?C Teaching Tip: Strategy D Business is a maga7ine that #u$lishes articles that focus on strategic management issues0 The maga7ine) .hich contains e%cellent feature articles) is a!aila$le online at Ehtt#&FF...0strategy-$usiness0comFG0

Teaching Tip: The Business Policy D Strategy Di!ision of the -cademy of Management maintains a .e$site that contains a .ide !ariety of useful information on strategic management to#ics0 The site is a!aila$le at Ehtt#&FF...0aom0#ace0eduF$#sG0 ::0 -0 K H T @MS :N ST@-T G:" M-N-G M NT Strategists

/0 Strategists are indi!iduals .ho are most res#onsi$le for the success or failure of an organi7ation0 Strategists hold !arious =o$ titles) such as chief e%ecuti!e officers) #resident) o.ner) chair of the $oard) e%ecuti!e director) chancellor) dean) or entre#reneur0 B0 Mission and Iision Statements /0 Mission statements are Benduring statements of #ur#ose that distinguish one $usiness from other similar firms0 - mission statement identifies the sco#e of a firm8s o#erations in #roduct and mar2et terms0C :t addresses the $asic <uestion that faces all strategists& BWhat is our $usiness?C :t should include the !alues and #riorities of an organi7ation0

*0 Iision statements ans.er the <uestion& BWhat do .e .ant to $ecome?C "0 /0 %ternal ;##ortunities and Threats

%ternal o##ortunities and e%ternal threats refer to economic) social) cultural) demogra#hic) en!ironmental) #olitical) legal) go!ernmental) technological) and com#etiti!e trends and e!ents that could significantly $enefit or harm an organi7ation in the future0

*0 ;##ortunities and threats are largely $eyond the control of a single organi7ation) thus the term external0 D0 /0 :nternal Strengths and Wea2nesses

:nternal strengths and internal .ea2nesses are an organi7ation8s controlla$le acti!ities that are #erformed es#ecially .ell or #oorly0

*0 :dentifying and e!aluating organi7ational strengths and .ea2nesses in the functional areas of a $usiness is an essential strategic-management acti!ity0 10 Strengths and .ea2nesses are determined relati!e to com#etitors and may $e determined $y $oth #erformance and elements of $eing0 0 >ong-Term ;$=ecti!es

/0 ;$=ecti!es can $e defined as s#ecific results that an organi7ation see2s to achie!e in #ursuing its $asic mission0

*0 >ong term means more than one year0 F0 Strategies

/0 Strategies are the means $y .hich long-term o$=ecti!es .ill $e achie!ed0 Business strategies may include geogra#hic e%#ansion) di!ersification) ac<uisition) #roduct de!elo#ment) mar2et #enetration) retrenchment) di!estiture) li<uidation) and =oint !enture0 *0 Strategies currently $eing #ursued $y Nestle) Jnile!er) >egend Grou# >td0) and Kris#y Kreme are descri$ed in Ta$le /-/0 G0 -nnual ;$=ecti!es

/0 -nnual o$=ecti!es are short-term milestones that organi7ations must achie!e to reach long-term o$=ecti!es0 *0 >i2e long-term o$=ecti!es) annual o$=ecti!es should $e measura$le) <uantitati!e) challenging) realistic) consistent) and #rioriti7ed0 ?0 Policies

/0 Policies are the means $y .hich annual o$=ecti!es .ill $e achie!ed0 Policies include guidelines) rules) and #rocedures esta$lished to su##ort efforts to achie!e stated o$=ecti!es0 *0 Policies are most often stated in terms of management) mar2eting) financeFaccounting) #roductionFo#erations) research and de!elo#ment) and com#uter information systems acti!ities0 Global Perspective Box: Do JS Firms Dominate -ll :ndustries? The Wall Street Kournal8s annual ran2ing of the .orld8s largest $usinesses sho.s that JS firms do not dominate in oil #roduction and #u$lic finance0 The to# firms for these industries are #ro!ided. :::0 -0 T? ST@-T G:" M-N-G M NT M;D > The Strategic Management Model is sho.n in Figure /-/0

/0 The frame.or2 illustrated in Figure /-/ is a .idely acce#ted) com#rehensi!e model of the strategic-management #rocess0 This model does not guarantee success) $ut it does re#resent a clear and #ractical a##roach for formulating) im#lementing) and e!aluating strategies0 *0 The strategic-management #rocess is dynamic and continuous0 - change in any one of the ma=or com#onents in the model can necessitate a change in any or all of the other com#onents0 Teaching Tip: There are a num$er of consulting firms that s#eciali7e in hel#ing their clients .or2 through the strategic #lanning #rocess0 -n e%am#le is the "enter for Strategic Management0 The #hiloso#hy of this firm is included in a se!en-#age

article entitled) BThe --B-"8s of Strategic Management0C The article is .ell done and #ro!ides a nice e%am#le of ho. a consulting firm hel#s lead a firm through the central ideas in!ol!ed in the strategic-management #rocess0 The article is a!aila$le at Ehtt#&FFcsmintl0#remierdomain0comFa$cs0htmlG0 :I0 :I0 B N F:TS ;F ST@-T G:" M-N-G M NT "ommunication is the 2ey to success0 The ma=or aim of the communication #rocess is to achie!e understanding and commitment throughout the organi7ation0 :t results in the great $enefit of em#o.erment0 -0 Financial Benefits /0 @esearch indicates that organi7ations using strategic-management conce#ts are more #rofita$le and successful than those that do not0 *0 ?igh-#erforming firms tend to do systematic #lanning to #re#are for future fluctuations in the e%ternal and internal en!ironments0 Firms .ith #lanning systems more closely resem$ling strategic-management theory generally e%hi$it su#erior long-term financial #erformance relati!e to their industry0 B0 Nonfinancial Benefits

/0 Besides hel#ing firms a!oid financial demise) strategic management offers other tangi$le $enefits) such as an enhanced a.areness of e%ternal threats) an im#ro!ed understanding of com#etitors8 strengths) increased em#loyee #roducti!ity) reduced resistance to change) and a clearer understanding of #erformance-re.ard relationshi#s0 *0 :n addition to em#o.ering managers and em#loyees) strategic management often $rings order and disci#line to an other.ise floundering firm0 10 Greenley stated that strategic management offers these $enefits& a0 $0 c0 d0 e0 f0 g0 h0 i0 =0 20 l0 m0 n0 :t allo.s for identification) #rioriti7ation) and e%#loitation of o##ortunities0 :t #ro!ides an o$=ecti!e !ie. of management #ro$lems0 :t re#resents a frame.or2 for im#ro!ed coordination and control of acti!ities0 :t minimi7es the effects of ad!erse conditions and changes0 :t allo.s ma=or decisions to $etter su##ort esta$lished o$=ecti!es0 :t allo.s more effecti!e allocation of time and resources to identified o##ortunities0 :t allo.s fe.er resources and less time to $e de!oted to correcting erroneous or ad hoc decisions0 :t creates a frame.or2 for internal communication among #ersonnel0 :t hel#s integrate the $eha!ior of indi!iduals into a total effort0 :t #ro!ides a $asis for clarifying indi!idual res#onsi$ilities0 :t encourages for.ard thin2ing0 :t #ro!ides a coo#erati!e) integrated) and enthusiastic a##roach to tac2ling #ro$lems and o##ortunities0 :t encourages a fa!ora$le attitude to.ard change0 :t gi!es a degree of disci#line and formality to the management of a $usiness0

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W?H S;M F:@MS D; N; ST@-T G:" P>-NN:NG Some reasons for #oor or no strategic #lanning are as follo.s& Poor re.ard structures Fire fighting Waste of time Too e%#ensi!e >a7iness "ontent .ith success Fear of failure ;!erconfidence Prior $ad e%#erience Self-interest Fear of the un2no.n ?onest difference of o#inion Sus#icion P:TF->>S :N ST@-T G:" P>-NN:NG Some #itfalls to .atch for and a!oid in strategic #lanning are #ro!ided $elo.& Jsing strategic #lanning to gain control o!er decisions and resources Doing strategic #lanning only to satisfy accreditation or regulatory re<uirements Too hastily mo!ing from mission de!elo#ment to strategy formulation Failing to communicate the #lan to em#loyees) .ho continue .or2ing in the dar2 To# managers ma2ing many intuiti!e decisions that conflict .ith the formal #lan To# managers not acti!ely su##orting the strategic-#lanning #rocess Failing to use #lans as a standard for measuring #erformance Delegating #lanning to a B#lannerC rather than in!ol!ing all managers Failing to in!ol!e 2ey em#loyees in all #hases of #lanning Failing to create a colla$orati!e climate su##orti!e of change Iie.ing #lanning to $e unnecessary or unim#ortant Becoming so engrossed in current #ro$lems that insufficient or no #lanning is done Being so formal in #lanning that fle%i$ility and creati!ity are stifled

I:0

I::0 -0

GJ:D >:N S F;@ FF "T:I ST@-T G:" M-N-G M NT Failure to Follo. "ertain Guidelines in Planning "an "ause Pro$lems

/0 -n integral #art of strategy e!aluation must $e to e!aluate the <uality of the strategicmanagement #rocess0 :ssues such as B:s strategic management in our firm a #eo#le #rocess or a #a#er #rocess?C should $e addressed0 *0 Strategic decisions re<uire trade-offs such as long-range !ersus short-range considerations or ma%imi7ing #rofits !ersus increasing shareholders8 .ealth0 10 Su$=ecti!e factors such as attitudes to.ard ris2) concern for social res#onsi$ility) and organi7ational culture .ill al.ays affect strategy-formulation decisions) $ut organi7ations must remain as o$=ecti!e as #ossi$le0 I:::0 -0 BJS:N SS T?:"S -ND ST@-T G:" M-N-G M NT Business thics

/0 Business ethics can $e defined as #rinci#les of conduct .ithin organi7ations that guide decision ma2ing and $eha!ior0 Good $usiness ethics are a #rere<uisite for good strategic managementA good ethics is =ust good $usiness0 *0 - code of $usiness ethics can #ro!ide a $asis on .hich #olicies can $e de!ised to guide daily $eha!ior and decisions at the .or2 site0 Teaching Tip: Business Ethics maga7ine #osts selected articles from each $imonthly issue on the maga7ine8s .e$site at Ehtt#&FF...0$usiness-ethics0comG0 These articles #ro!ide rich information for lecture material0 :t also lists the to# /++ cor#orate citi7ens at Ehtt#&FF...0$usiness-ethics0comF/++$est0htmG0 Teaching Tip: The follo.ing are .e$sites that #ro!ide e%am#les of codes of ethics0 National -ssociation of @ealtors& Ehtt#&FF...0realtor0orgFmem#ol.e$0nsfF#agesFcode?o#endocumentG -merican Psychological -ssociation& Ehtt#&FF...0a#a0orgFethicsFcode0htmlG Kohnson D Kohnson& Ehtt#&FF...0=n=0comFcommunityF#oliciesF#harmaceutical Lmedicine0htmG E-Commerce Perspective Box: This insert as2s the <uestion) B:s it ethical for an em#loyee to conduct #ersonal $usinessFentertainment online .hile at .or2?C For instance) after installing Telemate soft.are) Wol!erton and -ssociates learned that $roadcast0com and MTrade0com .ere among the most !isited sites at the com#any0 ;$!iously em#loyees .ere do.nloading music and trading stoc2s from .or20 Natural Environment Perspective Box: This insert discusses the use of :S; /,+++ "ertification to gain strategic ad!antage0 The :S; ':nternational ;rgani7ation for Standardi7ation( is $ased in Gene!a) S.it7erland and re#resents a net.or2 of the national standards institutes for /,5 countries0 :ts standards are !oluntary $ut .idely acce#ted .orld.ide0 :S; /,+++ is a series of !oluntary standards in the en!ironmental field0 This family of standards addresses the e%tent to .hich a firm minimi7es harmful effects on the en!ironment caused $y its acti!ities and continually

monitors and im#ro!es its o.n en!ironmental #erformance0 The J0S0 n!ironmental Protection -gency offers a guide on $ecoming :S; /,++/ certified0 :N0 -0 ";MP-@:NG BJS:N SS -ND M:>:T-@H ST@-T GH - Strong Military ?eritage Jnderlies the Study of Strategic Management /0 Terms such as objectives, mission, strengths) and weaknesses .ere first formulated to address #ro$lems on the $attlefield0 *0 - fundamental difference $et.een military and $usiness strategy is that $usiness strategy is formulated) im#lemented) and e!aluated .ith the assum#tion of com#etition) .hile military strategy is $ased on an assum#tion of conflict0 10 The similarities $et.een military and $usiness strategy can $e seen in Sun T7u8s The Art of War0 Ta$le /-* #ro!ides e%cer#ts0 N0 -0 T? N-TJ@ ;F G>;B-> ";MP T:T:;N :nternational Firms or Multinational "or#orations

/0 ;rgani7ations that conduct $usiness o#erations across national $orders are called international firms or multinational cor#orations0 *0 The term parent compan refers to a firm in!esting in international o#erationsA host country is the country .here that $usiness is conducted0 B0 -d!antages and Disad!antages of :nternational ;#erations

/0 -d!antages of :nternational ;#erations a0 Firms ha!e numerous reasons to formulate and im#lement strategies that initiate) continue) or e%#and in!ol!ement in $usiness o#erations across $orders0

/0 Foreign o#erations can a$sor$ e%cess ca#acity) reduce unit costs) and s#read economic ris2s o!er a .ider num$er of mar2ets0 *0 Foreign o#erations can allo. firms to esta$lish lo.-cost #roduction facilities in locations close to ra. materials andFor chea# la$or0 10 "om#etitors in foreign mar2ets may not e%ist) or com#etition may $e less intense than in domestic mar2ets0 ,0 Foreign o#erations may result in reduced tariffs) lo.er ta%es) and fa!ora$le #olitical treatment in other countries0 30 Koint !entures can ena$le firms to learn the technology) culture) and $usiness #ractices of other #eo#le and to ma2e contacts .ith #otential customers) su##liers) creditors) and distri$utors in foreign countries0 40 Many foreign go!ernments and countries offer !aried incenti!es to encourage foreign in!estment in s#ecific locations0 50 conomics of scale can $e achie!ed from o#eration in glo$al rather than solely domestic mar2ets0 >arger-scale #roduction and $etter efficiencies allo. higher sales !olumes and lo.er #rice offerings0

$0 Perha#s the greatest ad!antage is that firms can gain ne. customers for their #roducts and ser!ices) thus increasing re!enues0 *0 a0 Disad!antages of :nternational ;#erations

There are also numerous #otential disad!antages of initiating) continuing) or e%#anding $usiness across national $orders0
/0 Firms confront different social) cultural) demogra#hic) en!ironmental) #olitical) go!ernmental) legal) technological) economic) and com#etiti!e forces .hen doing $usiness internationally0 Wea2nesses of com#etitors in foreign lands are often o!erestimated and strengths underestimated0 >anguage) culture) and !alue systems differ among countries0 :t is necessary to gain an understanding of regional organi7ations such as the uro#ean conomic "ommunity and the >atin -merican Free Trade -rea0 Dealing .ith t.o or more monetary systems can com#licate international $usiness o#erations0 The a!aila$ility) de#th) and relia$ility of economic and mar2eting information in different countries !ary e%tensi!ely) as do industrial structures) $usiness #ractices) and nature of regional organi7ations0

*0 10 ,0 30 40

Teaching Tip: - fun .e$site that demonstrates the glo$al $readth of one com#any is the site entitled BThe "oca-"ola Bottles of the WorldC Ehtt#&FF...0#l6s0comFco2e0htmG0 This site sho.s ho. "o2e has ada#ted its $ottle to reflect the language and customs of the different countries that it o#erates in0 Teaching Tip: Hou are in!ited to !isit te%t8s .e$site Ehtt#&FF...0#renhall0comFda!idG for this cha#ter8s World Wide We$ e%ercises0 ISSUES FOR REVIEW AND DISCUSSION /0 Explain wh S!"a!#$i% &ana$#'#n! ()!#n i* %all#+ a ,%ap*!(n# %(-"*#./ -ns.er& Business #olicy is commonly called a ca#stone course $ecause students8 ma=or res#onsi$ility in this class is to use all 2no.ledge gained in #rior courses to chart the future direction of different organi7ations0
0. Wha! a*p#%! () *!"a!#$ )("'-la!i(n +( (- !hin1 "#2-i"#* !h# '(*! !i'#3 Wh 3

at

-ns.er& :m#ortant as#ects of strategy formulation include de!elo#ing a $usiness mission) #erforming an e%ternal audit) conducting an internal audit) generating alternati!e strategies) and choosing among alternati!e strategies0 Performing an e%ternal audit generally ta2es the most time0 For e%am#le) identifying com#etitors8 strengths and .ea2nesses is an essential as#ect of the e%ternal audit0 ffecti!e use of the :nternet can reduce the time re<uired for #erforming an e%ternal audit0

4. Wh i* *!"a!#$ i'pl#'#n!a!i(n ()!#n %(n*i+#"#+ !h# '(*! +i))i%-l! *!a$# in !h# *!"a!#$i%5'ana$#'#n! p"(%#**3

-ns.er& Strategy im#lementation is often considered to $e the most difficult stage in strategic management $ecause it re<uires disci#line) sacrifice) commitment) and hard .or2 from all em#loyees and managers0 :t is al.ays more difficult to do something than to say you8re going to do it0
6. Wh i* i! *( i'p("!an! !( in!#$"a!# in!-i!i(n an+ anal *i* in *!"a!#$i% 'ana$#'#n!3

-ns.er& Neither intuition nor analysis alone is sufficient for ma2ing good strategic decisions0 :ntuition) $ased on one8s #ast e%#eriences) =udgment) and BgutC feelings) does not include the use of analytical strategic-management conce#ts that ha!e $een de!elo#ed and successfully tested in the $usiness .orld0 To ignore these techni<ues that are $ased on historical learning is li2e trying to rein!ent the .heel0 ?o.e!er) no analytical tools can ca#ture all as#ects of a gi!en organi7ation8s culture and situation0 Nor can analytical tools assimilate all the su$=ecti!e information that must $e considered in strategic management) such as #ersonalities) emotions) !alues) $eliefs) customs) and ethical factors0 Thus) it is !ery im#ortant to integrate intuition and analysis in strategic management0
7. Explain !h# i'p("!an%# () a 8i*i(n an+ 'i**i(n *!a!#'#n!. -ns.er& @eaching agreement on formal !ision and mission statements can greatly facilitate the #rocess of reaching agreement on an organi7ation8s strategies) o$=ecti!es) and #olicies0 ;rgani7ational success de#ends on reasona$le agreement on these issues) so a clear mission statement is a most im#ortant strategic-management tool0 9. Di*%-** "#la!i(n*hip* a'(n$ (:;#%!i8#*< *!"a!#$i#*< an+ p(li%i#*.

-ns.er& >ong-term o$=ecti!es and strategies are #roducts of strategy formulation0 Shortterm 'annual( o$=ecti!es and #olicies are #roducts of strategy im#lementation0 Firms should translate long-term o$=ecti!es into annual o$=ecti!es0 Similarly) strategies should $e su##orted .ith clear #olicies0
=. Wh +( (- !hin1 *('# %hi#) #x#%-!i8# ())i%#"* )ail !( -*# a *!"a!#$i%5'ana$#'#n! app"(a%h !( +#%i*i(n 'a1in$3 -ns.er& Some chief e%ecuti!e officers) strategists) and organi7ations ha!e $een successful) to date) .ithout using strategic-management conce#ts and techni<ues0 ?o.e!er) success today is no guarantee for success tomorro.0 The $usiness .orld is $ecoming glo$al in sco#eA technology is changing the nature of com#etition in all industries0 Strategic management ena$les organi7ations to recogni7e and ada#t to change more readilyA successfully ada#ting to change is the 2ey to sur!i!al and #ros#erity0 There is no good alternati!e a##roach to strategic management0 >. Di*%-** !h# i'p("!an%# () )##+:a%1 in !h# *!"a!#$i%5'ana$#'#n! '(+#l.

-ns.er& Note in the strategic-management model that feed$ac2 is critically im#ortant0 "hanges can occur that im#act all strategic-management acti!ities0 Feed$ac2 allo.s these changes to $e identified and ad=ustments to $e made0 Feed$ac2 in the strategic-

management #rocess #romotes the creation of a climate for t.o-.ay communication and) thus) allo.s es#rit de cor#s to $e achie!ed in an organi7ation0
?. H(w %an *!"a!#$i*!* :#*! #n*-"# !ha! *!"a!#$i#* will :# #))#%!i8#l i'pl#'#n!#+3 -ns.er& Strategists can $est assure that strategies formulated .ill $e effecti!ely im#lemented $y in!ol!ing as many managers as #ossi$le in the strategy formulation #rocess0 -lso) it is im#ortant to communicate effecti!ely .hy changes are needed0 @A. Gi8# an #xa'pl# () a "#%#n! p(li!i%al +#8#l(p'#n! !ha! %han$#+ !h# (8#"all *!"a!#$ () an ("$aniBa!i(n. -ns.er& Students8 ans.ers .ill !ary0 Some #ossi$le e%am#les might include /( the recent tariffs #laced on steel im#orted into the JS and ho. that has changed strategy for steel com#anies $oth at home and a$road) *( the change in guidelines and re<uirements for air#ort safety and su$se<uent changes in the strategies of airlines) or 1( the #olitical in!estigations into the nron case and #otential changes that may result in ma=or accountingFconsulting firms0 @@. Wh( a"# !h# 'a;(" %('p#!i!("* () (-" %(ll#$# (" -ni8#"*i! 3 Wha! a"# !h#i" *!"#n$!h* an+ w#a1n#**#*3 H(w *-%%#**)-l a"# !h#*# in*!i!-!i(n* %('pa"#+ !( (-" %(ll#$#3 -ns.er& -ns.ers to this <uestion .ill !ary $y institution0 @0. I) (- (wn#+ a *'all :-*in#**< w(-l+ (- +#8#l(p a %(+# () :-*in#** %(n+-%!3 I) #*< wha! 8a"ia:l#* w(-l+ (- in%l-+#3 I) n(< h(w w(-l+ (- #n*-"# !ha! (-" #'pl( ##* w#"# )(ll(win$ #!hi%al :-*in#** *!an+a"+*3

-ns.er& :t is ad!isa$le for all $usinesses) large and small) to ha!e a clear code of $usiness ethics0 Such codes #ro!ide a guideline for a##ro#riate $eha!ior and aid in decision ma2ing0 "hris MacDonald states these guidelines 'a!aila$le at ...0ethics.e$0ca( for de!elo#ing a code of ethics& What .ill $e the purpose of your ne. code? :s it to regulate $eha!ior? To ins#ire? Different 2inds of documents ser!e different #ur#oses0 :s your ne. document intended to gui!e #eo#le or to set out re"uirements? :s it really a "ode of thics that you need? Hou might consider creating a Statement of Ialues) a Policy) a Mission Statement) and a "ode of "onduct0 - code of ethics should $e tailored to the needs and !alues of your organi7ation0 Many ethics codes ha!e t.o com#onents0 First) an aspirational section) often in the #ream$le) that outlines .hat the organi7ation as#ires to) or the ideals it ho#es to li!e u# to0 Second) an ethics code .ill ty#ically list some rules or principles) .hich mem$ers of the organi7ation .ill $e e%#ected to adhere to0 Will your ne. ethics document include some sort of enforcement? :f so) .hat 2ind? ;ften the #rinci#les or !alues listed in an ethics document .ill $e listed in rough order of im#ortance to the organi7ation0 The ordering need not $e strict) $ut generally the !alue or #rinci#le listed first .ill ha!e a natural #rominence0

 Thin2 carefully a$out the process $y .hich you create your ne. code0 Who .ill $e in!ol!ed? - small .or2ing grou#? ;r all the #eo#le affected $y the code? ?o. .ill you distill the needs of your organi7ation and the $eliefs of your mem$ers into a document? The #rocess may matter as much as the final #roduct0 ?o. .ill your ne. code $e im#lemented? ?o. .ill it $e publici#e!) $oth inside and outside of your organi7ation? What ste#s) if any) .ill $e ta2en to ensure that the !alues em$odied in your code get im#lemented in organi7ational #olicies and #ractices? ?o.F.hen .ill your code $e re!ie.edFre!ised?
@4. W(-l+ *!"a!#$i%5'ana$#'#n! %(n%#p!* an+ !#%hni2-#* :-*in#**#* a* '-%h a* +('#*!i% )i"'*3 J-*!i) (-" an*w#". :#n#)i! )("#i$n

-ns.er& The ans.er to this <uestion is yes0 Many foreign $usinesses are using strategic-management conce#ts and techni<ues effecti!ely0 Students could loo2 in the ngland-$ased =ournal $ong %ange &lanning to read a$out foreign firms also $enefiting from strategic-management ideas0 -nother good foreign-$ased $usiness =ournal that carries strategic-management articles is the 'ournal of (anagement )tu!ies.
@6. Wha! +( (- :#li#8# a"# *('# p(!#n!ial pi!)all* (" "i*1* in -*in$ a *!"a!#$i%5 'ana$#'#n! app"(a%h !( +#%i*i(n 'a1in$3 -ns.er& There is a ris2 of too little to# management su##ort for the #rocess0 There is a ris2 of too little in!ol!ement $y line managers and em#loyees0 There is a ris2 that to# managers .ill underestimate the im#ortance of understanding and commitment0 @7. In (-" (pini(n< wha! i* !h# *in$l# 'a;(" :#n#)i! () -*in$ a *!"a!#$i%5'ana$#'#n! app"(a%h !( +#%i*i(n 'a1in$3 J-*!i) (-" an*w#". -ns.er& The single ma=or $enefit is the #otential for im#ro!ed understanding of the $usiness and industry on the #art of all managers and em#loyees0 Jnderstanding generally leads to increased commitment) .hich) in turn) leads to creati!ity) inno!ati!eness) and o!erall coo#erati!eness0 The #rocess is more im#ortant than the #lan0 -lso) the strategic-management #rocess allo.s an organi7ation to initiate and influence) rather than =ust res#ond and react to its en!ironment0 That is) it allo.s an organi7ation to $e #roacti!e) rather than reacti!e) in controlling its o.n destiny0 Strategic-management conce#ts #ro!ide an o$=ecti!e $asis for allocating resources and for reducing internal conflicts that can arise .hen su$=ecti!ity alone is the $asis for ma=or decisions0 @9. C('pa"# :-*in#** *!"a!#$ an+ 'ili!a" *!"a!#$ .

-ns.er& -s discussed in the latter #art of this cha#ter) $usiness and military strategy are similar in many res#ects0 Many of the ideas de!elo#ed in $usiness strategy .ere first formulated as military strategy0 Both military and $usiness organi7ations ha!e com#etitors0 - fundamental difference $et.een military and $usiness strategy is that $usiness strategy is formulated) im#lemented) and e!aluated .ith the assum#tion of com#etition) .hile military strategy is $ased on an assum#tion of conflict0

@=. Wha! +( (- )##l i* !h# "#la!i(n*hip :#!w##n p#"*(nal #!hi%* an+ :-*in#** #!hi%*3 A"# !h# < (" *h(-l+ !h# :#< !h# *a'#3 Answer: Personal ethics is the foundation of business ethics. Business ethics encompass more situations than personal ethics, but a personal ethics doctrine still provides a basis for all business ethics decisions. @>. Wh i* i! i'p("!an! )(" all :-*in#** 'a;("* !( *!-+ *!"a!#$i% 'ana$#'#n!< a* '(*! *!-+#n!* will n#8#" :#%('# a %hi#) #x#%-!i8# ())i%#" (" #8#n a !(p 'ana$#" in a la"$# %('pan 3 -ns.er& Strategic management ta2es #lace at multi#le le!els .ithin an organi7ation0 -lthough most students may ne!er $ecome the " ; of a cor#oration) they may $ecome the B$ranch managerC or de#artment head of a larger firm0 :n these roles) they may $e as2ed to com#lete a strategic #lan for their $ranch or de#artment0 :n addition) em#loyees at all le!els are fre<uently as2ed to contri$ute to the de!elo#ment of their firm8s strategic #lan0 -s a result) an understanding of the strategic-management #rocess is im#ortant0 @?. Explain wh %(n*-'p!i(n pa!!#"n* a"# :#%('in$ *i'ila" w("l+wi+#. Wha! a"# !h# *!"a!#$i% i'pli%a!i(n* () !hi* !"#n+3 -ns.er& -s a result of im#ro!ements in glo$al communications) consumers across the .orld are increasingly $eing e%#osed to the same ad!ertising) the same cultural e!ents) the same ne.s) and the same forms of entertainment0 -s a result) the tastes of consumers across the .orld are con!erging0 This de!elo#ment hel#s to e%#lain .hy consum#tion #atterns are $ecoming similar .orld.ide0

0A. Wha! a"# !h# a+8an!a$#* an+ +i*a+8an!a$#* () :#$innin$ #xp("! (p#"a!i(n* in a )("#i$n %(-n!" 3 -ns.er& The follo.ing are the #rimary ad!antages and disad!antages of initiating e%#ort o#erations in a foreign country0 -d!antages& %#ort o#erations can a$sor$ e%cess ca#acity) reduce unit costs) and s#read economic ris2s o!er a .ider num$er of mar2ets0 Firms can gain ne. customers for their #roducts and ser!ices) thus increasing re!enues0 "om#etitors in foreign mar2ets may not e%ist) or com#etition may $e less intense than in domestic mar2ets0 Disad!antages& Firms confront different and often little understood social) cultural) demogra#hic) and com#etiti!e forces .hen doing $usiness o!erseas0 Wea2nesses of com#etitors in foreign lands are often o!erestimated) and strengths are often underestimated0 >anguage) cultural) and !alue systems differ among countries) and this can create $arriers of communication and other #ro$lems0

0@. D#*%"i:# !h# %(n!#n! a8aila:l# (n !h# S&CO Cwww.*!"a!#$ %l-:.%('D w#:*i!#. -ns.er& The SM"; .e$site #ro!ides lin2s to .e$sites .ith information useful for case analysis such as cor#orate .e$sites) $usiness analysis ser!ices) ne.s sites) maga7ines) go!ernmental sites) and financial ratio analyses0 :t also #ro!ides lin2s to =o$ search .e$sites) graduate school .e$sites) and .e$sites related to strategic #lanning0 Se!eral soft.are #ac2ages are a!aila$le for #urchase on the site including a tem#late for generating the matrices re<uired for case analyses0 00. Li*! )(-" )inan%ial an+ )(-" n(n)inan%ial :#n#)i!* () a )i"' #n$a$in$ in *!"a!#$i% plannin$. -ns.er& Businesses engaging in strategic #lanning e%#erience the follo.ing financial $enefits0 They sho. significant im#ro!ement in sales) #rofita$ility) and #roducti!ity com#ared to firms .ithout strategic #lanning acti!ities0 Firms using strategic #lanning generally e%hi$it su#erior long-term financial #erformance relati!e to their industry and seem to ma2e more informed decisions .ith good antici#ation of $oth short and longterm conse<uences0 They are also #re#ared for fluctuations in their e%ternal and internal en!ironments0 :n addition to the financial $enefits) firms using strategic #lanning also e%#erience nonfinancial $enefits0 These include an enhanced a.areness of e%ternal threats) an im#ro!ed understanding of com#etitors8 strategies) increased em#loyee #roducti!ity) reduced resistance to change) and a clearer understanding of #erformance-re.ard relationshi#s0

04. Wh i* i! !ha! a )i"' %an *-*!ain a %('p#!i!i8# a+8an!a$# n("'all li'i!#+ p#"i(+ () !i'#3

)(" (nl

-ns.er& - firm can sustain a com#etiti!e ad!antage for only a certain #eriod of time due to ri!al firms0 These com#eting firms .ill attem#t to imitate the com#etiti!e ad!antage in order to undermine the leader0 06. Wh i* i! n(! a+#2-a!# !( *i'pl (:!ain a %('p#!i!i8# a+8an!a$#3 -ns.er& Because other firms .ill constantly attem#t to undermine firms .ith com#etiti!e ad!antages and imitate those ad!antages) organi7ations must constantly stri!e to achie!e a sustained com#etiti!e ad!antage0 07. H(w %an a )i"' :#*! a%hi#8# a *-*!ain#+ %('p#!i!i8# a+8an!a$#3 -ns.er& - sustained com#etiti!e ad!antage can $est $e achie!ed $y /( continually ada#ting to changes in e%ternal trends and e!ents and internal ca#a$ilities) com#etencies) and resources) and $y *( effecti!ely formulating) im#lementing) and e!aluating strategies that ca#itali7e u#on those factors0 09. C('pa"# an+ %(n!"a*! ISO ?AAA< @6AAA< an+ @6AA@. -ns.er& :S; 9+++ focuses on <uality control .hile :S; /,+++ focuses on o#erating in an en!ironmentally-friendly manner0 Both sets of standards .ere created $y the :nternational ;rgani7ation for Standardi7ation and #ro!ide uni!ersal guidelines for standardi7ation) $ut focus on different issues0 :S; 9+++ #ro!ides a frame.or2 for <uality management throughout the #roduction and distri$ution of #roducts and ser!ices0 :S; /,+++ is a series of standards in the en!ironmental field0 :S; /,++/ is #art of the /,+++ family of standards0 /,++/ standards offer a uni!ersal technical standard for en!ironmental com#liance in fields such as en!ironmental auditing) en!ironmental #erformance e!aluation) en!ironmental la$eling) and life-cycle assessment0