Strategic Management
Set of managerial decisions and actions that determines the long-run performance of a firm.
4 Phases in the Evolution of Strategic Management
1. Basic financial planning – internal focus on budgeting (1 yr horizon)
2. Forecast-based planning – extrapolate the current situation into the future (3-5 yr horizon)
3. Externally-oriented planning – planning department and/or consultants develop a top-down strategy with no lower level involvement.
4. Strategic management – involves various departments and levels across the organization. An ongoing process that includes implementation, evaluation and control issues.
Highly Rated Benefits
• Clearer sense of strategic vision
• Sharper focus on strategic importance
• Improved understanding of changing environment
Not Always a Formal Proces
• Where is the organization now? (not where do we hope it is)
• If no changes are made, where will the organization be in 1, 2, 5 or 10 years?
• What specific actions should management undertake?
• What are the risks and payoffs?
Globalization
Internationalization of markets and corporations Global (worldwide) markets rather than national markets
Electronic Commerce
Use of the Internet to conduct business transactions Basis for competition on a more strategic level rather than traditional focus on product features and costs
Regional Trade Organizations
• European Union (EU) – 25 member nations promote 60% local content to avoid tariffs
• North American Free Trade Agreement (NAFTA) – Canada, Mexico and US 62.5% local content.
• Mercosur/Mercosul – South American equivalent of NAFTA
• Central American Free Trade Agreement (CAFTA) – duty free textiles, consumer goods and farm exports.
• Association of South Eastern Asian Nations (ASEAN) – less powerful due to due to Chine, Japan and Korea exclusion.
Electronic Commerce -- Trends
• Forcing company transformation – networking of suppliers, customers and partners
• Market access & branding changing – disintermediation of traditional distribution channels
• Balance of power shift to consumer – access to many options and comparative shopping
• Competition changing – due to low barriers to entry
• Pace of business increasing – dog years = Internet years
• Internet pushing companies beyond traditional boundaries – supply chain management and virtual companies
• Knowledge key asset – source of competitive advantage