A business (company, enterprise or firm) is a legally recognized organization designed to

provide goods or services, or both, to consumers, businesses and governmental entities.[1]

Businesses are predominant in capitalist economies. Most businesses are privately owned. A
business is typically formed to earn profit that will increase the wealth of its owners and grow
the business itself. The owners and operators of a business have as one of their main objectives
the receipt or generation of a financial return in exchange for work and acceptance of risk.
Notable exceptions include cooperative enterprises and state-owned enterprises. Businesses can
also be formed not-for-profit or be state-owned.

The etymology of "business" relates to the state of being busy either as an individual or society
as a whole, doing commercially viable and profitable work. The term "business" has at least
three usages, depending on the scope — the singular usage (above) to mean a particular company
or corporation, the generalized usage to refer to a particular market sector, such as "the music
business" and compound forms such as agribusiness, or the broadest meaning to include all
activity by the community of suppliers of goods and services. However, the exact definition of
business, like much else in the philosophy of business, is a matter of debate and complexity of
meanings.

Strategic management
Strategic management is the process of specifying an organization's objectives, developing
policies and plans to achieve these objectives, and allocating resources so as to implement the
plans. It is the highest level of managerial activity, usu

An organization's strategy must be appropriate for its resources, environmental circumstances,

and core objectives. The process involves matching the company's strategic advantages to the
business environment the organization faces. One objective of an overall corporate strategy is to
put the organization into a position to carry out its mission effectively and efficiently. A good
corporate strategy should integrate an organization's goals, policies, and action sequences
(tactics) into a cohesive whole, and must be based on business realities. Business enterprises can
fail despite 'excellent' strategy because the world changes in a way they failed to understand.
Strategy must connect with vision, purpose and likely future trends. To see how strategic
management relates to other issues, see management and futures studies.

Strategic management can be seen as a combination of strategy formulation and strategy

implementation, but strategy must be closely aligned with purpose.

Strategy formulation involves:

* Doing a situation analysis: both internal and external; both micro-environmental and macro-
environmental.
* Concurrent with this assessment, objectives are set. This involves crafting vision statements
(long term view of a possible future), mission statements (the role that the organization gives
itself in society), overall corporate objectives (both financial and strategic), strategic business
unit objectives (both financial and strategic), and tactical objectives.
* These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan
provides the details of how to achieve these objectives.This three-step strategy formulation
process is sometimes referred to as determining where you are now, determining where you want
to go, and then determining how to get there. These three questions are the essence of strategic
planning.SWOT Analysis: I/O Economics for the external factors and RBV for the internal
factors.

Strategy implementation involves:

* Allocation of sufficient resources (financial, personnel, time, technology support)
* Establishing a chain of command or some alternative structure (such as cross functional teams)
* Assigning responsibility of specific tasks or processes to specific individuals or groups
* It also involves managing the process. This includes monitoring results, comparing to
benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling
for variances, and making adjustments to the process as necessary.
* When implementing specific programs, this involves acquiring the requisite resources,
developing the process, training, process testing, documentation, and integration with (and/or
conversion from) legacy processes.

Strategy formulation and implementation is an on-going, never-ending, integrated process

requiring continuous reassessment and reformation. Strategic management is dynamic. See
Strategy dynamics. It involves a complex pattern of actions and reactions. It is partially planned
and partially unplanned. Strategy is both planned and emergent, dynamic, and interactive. Some
people (such as Andy Grove at Intel) feel that there are critical points at which a strategy must
take a new direction in order to be in step with a changing business environment. These critical
points of change are called strategic inflection points.

Strategic management operates on several time scales. Short term strategies involve planning and
managing for the present. Long term strategies involve preparing for and preempting the future.
Marketing strategist Derek Abell (1993), has suggested that understanding this dual nature of
strategic management is the least understood part of the process. He claims that balancing the
temporal aspects of strategic planning requires the use of dual strategies simultaneously.

General approaches
In general terms, there are two main approaches, which are opposite but complement each other
in some ways, to strategic management:
* The Industrial Organization Approach
** based on economic theory — deals with issues like competitive rivalry, resource allocation,
economies of scale
** assumptions — rationality, self discipline behaviour, profit maximization
* The Sociological Approach
** deals primarily with human interactions
** assumptions — bounded rationality, satisfying behaviour, profit sub-optimality. An example
of a company that currently operates this way is Google
Strategic management techniques can be viewed as bottom-up, top-down, or collaborative
processes. In the bottom-up approach, employees submit proposals to their managers who, in
turn, funnel the best ideas further up the organization. This is often accomplished by a capital
budgeting process. Proposals are assessed using financial criteria such as return on investment or
cost-benefit analysis. The proposals that are approved form the substance of a new strategy, all
of which is done without a grand strategic design or a strategic architect. The top-down approach
is the most common by far. In it, the CEO, possibly with the assistance of a strategic planning
team, decides on the overall direction the company should take. Some organizations are starting
to experiment with collaborative strategic planning techniques that recognize the emergent
nature of strategic decisions.

The strategy hierarchy

In most (large) corporations there are several levels of strategy. Strategic management is the
highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to
corporate values, corporate culture, corporate goals, and corporate missions. Under this broad
corporate strategy there are often functional or business unit strategies.

Functional strategies include marketing strategies, new product development strategies, human
resource strategies, financial strategies, legal strategies, and information technology management
strategies. The emphasis is on short and medium term plans and is limited to the domain of each
department's functional responsibility. Each functional department attempts to do its part in
meeting overall corporate objectives, and hence to some extent their strategies are derived from
broader corporate strategies.

Many companies feel that a functional organizational structure is not an efficient way to organize
activities so they have reengineered according to processes or strategic business units (called
SBUs). A strategic business unit is a semi-autonomous unit within an organization. It is usually
responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An
SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible
for developing its business strategies, strategies that must be in tune with broader corporate
strategies.

The "lowest" level of strategy is operational strategy. It is very narrow in focus and deals with
day-to-day operational activities such as scheduling criteria. It must operate within a budget but
is not at liberty to adjust or create that budget. Operational level strategy was encouraged by
Peter Drucker in his theory of management by objectives (MBO). Operational level strategies are
informed by business level strategies which, in turn, are informed by corporate level strategies.
Business strategy, which refers to the aggregated operational strategies of single business firm
or that of an SBU in a diversified corporation refers to the way in which a firm competes in its
chosen arenas.

Corporate strategy, then, refers to the overarching strategy of the diversified firm. Such
corporate strategy answers the questions of "in which businesses should we compete?" and "how
does being in one business add to the competitive advantage of another portfolio firm, as well as
the competitive advantage of the corporation as a whole?"
Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler
strategic structure. This is being driven by information technology. It is felt that knowledge
management systems should be used to share information and create common goals. Strategic
divisions are thought to hamper this process. Most recently, this notion of strategy has been
captured under the rubric of dynamic strategy, popularized by the strategic management
textbook authored by Carpenter and Sanders [1]. This work builds on that of Brown and
Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as
necessarily embracing ongoing strategic change, and the seamless integration of strategy
formulation and implementation. Such change and implementation are usually built into the
strategy through the staging and pacing facets.

Reasons why strategic plans fail

There are many reasons why strategic plans fail, especially:
* Failure to understand the customer
** Why do they buy
** Is there a real need for the product
** inadequate or incorrect marketing research
* Inability to predict environmental reaction
** What will competitors do
*** Fighting brands
*** Price wars
** Will government intervene
* Over-estimation of resource competence
** Can the staff, equipment, and processes handle the new strategy
** Failure to develop new employee and management skills
* Failure to coordinate
** Reporting and control relationships not adequate
** Organizational structure not flexible enough
* Failure to obtain senior management commitment
** Failure to get management involved right from the start
** Failure to obtain sufficient company resources to accomplish task
* Failure to obtain employee commitment
** New strategy not well explained to employees
** No incentives given to workers to embrace the new strategy
* Under-estimation of time requirements
** No critical path analysis done
* Failure to follow the plan
** No follow through after initial planning
** No tracking of progress against plan
** No consequences for above
* Failure to manage change
** Inadequate understanding of the internal resistance to change
** Lack of vision on the relationships between processes, technology and organization
* Poor communications
** Insufficient information sharing among stakeholders
** Exclusion of stakeholders and delegates

Criticisms of strategic management

Although a sense of direction is important, it can also stifle creativity, especially if it is rigidly
enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely
tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can
lead to group think. It can also cause an organization to define itself too narrowly. An example of
this is marketing myopia.

Most theories of strategic management seem to have a lifespan less than that of the popularity of
the latest teen music idol. Many critics claim that this is because most of them generally do not
work. Keep in mind that this article describes only the 50 or so most successful theories, thus
exhibiting survivorship bias (ironically, itself an area of research in strategic management). For
every theory that gets incorporated into strategic management textbooks there are many that are
quickly forgotten. Many theories tend either to be too narrow in focus to build a complete
corporate strategy on, or too general and abstract to be applicable to specific situations. The low
success rate is further fueled by the management lecture circuit in which hundreds of self-
appointed gurus, many without serious academic credentials or substantial expertise, attempt to
sell books and explain their "revolutionary" and "groundbreaking" theories to audiences of
business executives for a sizable fee. While there are undoubtedly inspirational ideas contained
in these seminars, the theories expounded therein have not, for the most part, been subjected to
serious study. (See business philosophies and popular management theories for a more critical
view of management theories.)

Some critics take the opposite approach claiming effectively that there are not enough theories,
and when they arrive they are too late to help managers make any important decisions. These
commentators remind us that the basic, everyday purpose of strategic management is to match a
company's strategy with the business environment that the organization is in. Because the
environment is constantly changing, effective strategic management requires a continuous flow
of new theories suitable for the new circumstances. The problem with most theories is that they
solve yesterday's problems, similar to a business Maginot Line. Various approaches to solve this
problem have emerged, however, including Mintzberg's ideas of 'emergent strategies' and use of
ideas from complexity theory in what is often called complexity strategy.

Gary Hamel (2000) coined the term strategic convergence to explain the limited scope of the
strategies being used by rivals in greatly differing circumstances. He lamented that strategies
converge more than they should, because the more successful ones get imitated by firms that do
not understand that the strategic process involves designing a custom strategy for the specifics of
each situation.0.
 Elements of Strategic Management

Figure: Elements of Strategic Management

(i) Strategic Analysis

Strategic analysis is concerned with understanding the strategic position of the organisation.
What changes are going on in the environment, and how will they affect the organisation and its
activities? What is the resource strength of the organisation in the context of these changes?
What is it that those people and groups associated with the organisation -- managers,
shareholders or owners, unions and so on -- aspire to, and how do these affect the present
position and what could happen in the future?
The aim of strategic analysis is, then, to form a view of the key influences on the present and
future well-being of the organisation and therefore on the choice of strategy. These influences
are discussed briefly below. Understanding these influences is an important part of the wider
aspects of strategic management.

(a) The environment

The organisation exists in the context of a complex commercial, economic, political,

technological, cultural, and social world. This environment changes and is more complex for
some organisations than for others. Since strategy is concerned with the position a business takes
in relation to its environment, an understanding of the environment’s effects on a business is of
central importance to strategic analysis. The historical and environmental effects on the business
must be considered, as well as the present effects and the expected changes in environmental
variables. This is a major task because the range of environmental variables is so great. Many of
those variables will give rise to opportunities of some sort, and many will exert threats upon the
firm. The two main problems that have to be faced are, first, to distil out of this complexity a
view of the main or overall environmental impacts for the purpose of strategic choice; and
second, the fact that the range of variables is likely to be so great that it may not be possible or
realistic to identify and analyse each one.

(b) The resources of the organisation

Just as there are outside influences on the firm and its choice of strategies, so there are internal
influences. One way of thinking about the strategic capability of an organisation is to consider
its strengths and weaknesses (what it is good or not so good at doing, or where it is at a
competitive advantage or disadvantage, for example). These strengths and weaknesses may be
identified by considering the resource areas of a business such as its physical plant, its
management, its financial structure, and its products. Again, the aim is to form a view of the
internal influences -- and constraints -- on strategic choice.

(c) The expectations of different stakeholders

The expectations are important because they will affect what will be seen as acceptable in terms
of the strategies advanced by management. However, the beliefs and assumptions that make up
the culture of an organisation, though less explicit, will also have an important influence. The
environmental and resource influences on an organisation will be interpreted through these
beliefs and assumptions; so two groups of managers, perhaps working in different divisions of an
organisation, may come to different conclusions about strategy, although they are faced with
similar environmental and resource implications. Which influence prevails is likely to depend on
which group has the greatest power, and understanding this can be of great importance in
recognising why an organisation follows or is likely to follow, the strategy it does.
Together, a consideration of the environment, the resources, the expectations, and the objectives
within the cultural and political framework of the organisation provides the basis of the strategic
analysis of an organisation. However, to understand the strategic position an organisation is in, it
is also necessary to examine the extent to which the direction and implications of the current
strategy and objectives being followed by the organisation are in line with and can cope with the
implications of the strategic analysis. In this sense, such analysis must take place with the future
in mind. Is the current strategy capable of dealing with the changes taking place in the
organisation’s environment or not? If so, in what respects and, if not, why not?

It is unlikely that there will be a complete match between current strategy and the picture which
emerges from the strategic analysis. The extent to which there is a mismatch here is the extent of
the strategic problem facing the strategist. It may be that the adjustment that is required is
marginal, or it may be that there is a need for a fundamental realignment of strategy.

(ii) Strategic Choice

Strategic analysis provides a basis for strategic choice. This aspect of strategic management can
be conceived of as having three parts.

(a) Generation of strategic options

There may be several possible courses of action. At a given time a company might face a
decision about the extent to which it has to become a multinational firm. But, at a later time, the
international scope of the company's operations might bring up other choices: which areas of the
world are now the most important to concentrate on; is it possible to maintain a common basis of
trading across all the different countries? Is it necessary to introduce variations by market focus?
All of these considerations are important and need careful consideration: indeed, in developing
strategies, a potential danger is that managers do not consider any but the most obvious course of
action -- and the most obvious is not necessarily the best. A helpful step in strategic choice can
be to generate strategic options.

(b) Evaluation of strategic options

Strategic options can be examined in the context of the strategic analysis to assess their relative
merits. In deciding any of the options a company might ask a series of questions. First, which of
these options built upon strengths, overcame weaknesses and took advantage of opportunities,
while minimising or circumventing the threats the business faced? This is called the search for
strategic fit or suitability of the strategy. However, a second set of questions is important. To
what extent could a chosen strategy be put into effect? Could the required finance be raised,
sufficient stock be made available at the right time and in the right place, staff be recruited and
trained to reflect the sort of image the company wants to project? These are questions of
feasibility. Even if these criteria could be met, would the choice be acceptable to the
stakeholders?

(c) Selection of strategy

This is the process of selecting those options which the organisation will pursue. There could be
just one strategy chosen or several. There is unlikely to be a clear-cut ‘right’ or ‘wrong’ choice
because any strategy must inevitably have some dangers or disadvantages. So in the end, choice
is likely to be a matter of management judgement. It is important to understand that the selection
process cannot always be viewed or understood as a purely objective, logical act. It is strongly
influenced by the values of managers and other groups with interest in the organisation, and
ultimately may very much reflect the power structure in the organisation.

(iii) Strategy Implementation

Strategy implementation is concerned with the translation of strategy into action. Implementation
can be thought of as having several parts.

(a) Planning and allocating resources

Strategy implementation is likely to involve resource planning, including the logistics of

implementation. What are the key tasks needing to be carried out? What changes need to be
made in the resource mix of the organisation? By when? And who is to be responsible for the
change?

(b) Organisation structure and design

It is also likely that changes in organisational structure will be needed to carry through the
strategy. There is also likely to be a need to adapt the systems used to manage the organisation.
What will different departments be held responsible for? What sorts of information system are
needed to monitor the progress of the strategy? Is there a need for retraining of the workforce?

(c) Managing strategic change

The implementation of strategy also requires managing of strategic change and this requires
action on the part of managers in terms of the way they manage change processes, and the
mechanisms they use for it. These mechanisms are likely to be concerned not only with
organisational redesign, but with changing day-to-day routines and cultural aspects of the
organisation, and overcoming political blockages to change.

SBU

Strategic Business Unit or SBU is understood as a business unit within the overall corporate
identity which is distinguishable from other business because it serves a defined external market
where management can conduct strategic planning in relation to products and markets. The
unique small business unit benefits that a firm aggressively promotes in a consistent manner.
When companies become really large, they are best thought of as being composed of a number
of businesses (or SBUs).

In the broader domain of strategic management, the phrase "Strategic Business Unit" came into
use in the 1960s, largely as a result of General Electric's many units.

These organizational entities are large enough and homogeneous enough to exercise control over
most strategic factors affecting their performance. They are managed as self contained planning
units for which discrete business strategies can be developed. A Strategic Business Unit can
encompass an entire company, or can simply be a smaller part of a company set up to perform a
specific task. The SBU has its own business strategy, objectives and competitors and these will
often be different from those of the parent company. Research conducted in this include the BCG
Matrix.

This approach entails the creation of business units to address each market in which the company
is operating. The organization of the business unit is determined by the needs of the market.

An SBU is an operating unit or planning focus that groups a distinct set of products or services,
which are sold to a uniform set of customers, facing a well-defined set of competitors. The
external (market) dimension of a business is the relevant perspective for the proper identification
of an SBU. (See Industry information and Porter five forces analysis.) Therefore, an SBU should
have a set of external customers and not just an internal supplier.[1]

Companies today often use the word “Segment” or “Division” when referring to SBU’s, or an
aggregation of SBU’s that share such commonalities.

Vision & mission

THE ROLES OF MISSION, VISION AND VALUE IN STRATEGIC MANAGEMENT
When economies are healthy and businesses are doing well, it is easy for managers to become
complacent and not pay attention to long-term direction. Healthy economic conditions can be
forgiving of such inattention. When the economy changes and the business environment
becomes more competitive, those companies which have established a tradition of long-term
goals in conjunction with short-term planning are the companies which survive and even prosper.
Companies which ignored that aspect of their business find that the increased competition for
resources, customers and market share does not long tolerate poor or no planning. This research
considers the strategic management process and the roles that mission, vision and values play in
that process, and examines how each of these components affects branding, as well.

The mission takes on the issue of what the company is today, and what it will be in the future.
Many companies put the mission statement into writing and use it as the overarching principle by
which the company operates. This mission statement can be made available to employees,
investors, creditors, customers and any other stakeholders associated with the organization.
Ideally, all activities undertaken by individuals within the organization are in support of the
mission statement. Because of this, the statement should be clearly stated, concise and broad in
scope (Thompson

...
chieve with regard to financial performance (the relationship between debt and assets, for
example). Ratio analysis can be a useful tool for measuring financial position and developing
objectives, and value chain analysis (determining the value added by each process) can also be
brought into play here. Strategic objectives are those objectives that the company establishes in
order to build up the competitive position of the company and the general place that the company
occupies in the market. Long-range objectives are to be reached within three to five years, or
each year on an ongoing basis. Short-range objectives are those which are to be achieved in one
year or less, and are developed in order to reach the long-range objectives. After objectives have
been set, a strategy can be developed in order to reach the performance objectives. Strategies are
the plan by which the objectives will be achieved. Where objectives state what the company
wants to accomplish, and the mission states what the company does, the strategy presents how
the company is going to reach the objectives and achieve its mission. Strategies are developed
and presented through the use of a strategic plan. This plan presents the company's mission and
dir
...

Mission statement
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A mission statement is a formal, short, written statement of the purpose of a company or

organization. The mission statement should guide the actions of the organization, spell out its
overall goal, provide a sense of direction, and guide decision-making. It provides "the framework
or context within which the company's strategies are formulated."[1] Historically it is associated
with Christian religious groups; indeed, for many years, a missionary was assumed to be a
person on a specifically religious mission. The word "mission" dates from 1598, originally of
Jesuits sending ("missio", Latin for "act of sending") members abroad[1].

Vision statements, Mission statements and values

Vision: Defines the desired or intended future state of an organization or enterprise in terms of
its fundamental objective and/or strategic direction. Vision is a long term view, sometimes
describing how the organization would like the world in which it operates to be. For example a
charity working with the poor might have a vision statement which read "A world without
poverty"

Mission: Defines the fundamental purpose of an organization or an enterprise, succinctly

describing why it exists and what it does to achieve its Vision.

It is sometimes used to set out a 'picture' of the organization in the future. A vision statement
provides inspiration, the basis for all the organization's planning. It could answer the question:
"Where do we want to go?"

Values: Beliefs that are shared among the stakeholders of an organization. Values drive an
organization's culture and priorities.

Strategy: Strategy narrowly defined, means "the art of the general" (from Greek stratigos). A
combination of the ends (goals) for which the firm is striving and the means (policies)by which it
is seeking to get there.

Organizations sometimes summarize goals and objectives into a mission statement and/or a
vision statement. Others begin with a vision and mission and use them to formulate goals and
objectives.

While the existence of a shared mission is extremely useful, many strategy specialists question
the requirement for a written mission statement. However, there are many models of strategic
planning that start with mission statements, so it is useful to examine them here.

• A Mission statement tells you the fundamental purpose of the organization. It defines the
customer and the critical processes. It informs you of the desired level of performance.

• A Vision statement outlines what the organization wants to be, or how it wants the world
in which it operates to be. It concentrates on the future. It is a source of inspiration. It
provides clear decision-making criteria.

An advantage of having a statement is that it creates value for those who get exposed to the
statement, and those prospects are managers, employees and sometimes even customers.
Statements create a sense of direction and opportunity. They both are an essential part of the
strategy-making process.

Many people mistake vision statement for mission statement, and sometimes one is simply used
as a longer term version of the other. The Vision should describe why it is important to achieve
the Mission. A Vision statement defines the purpose or broader goal for being in existence or in
the business and can remain the same for decades if crafted well. A Mission statement is more
specific to what the enterprise can achieve itself. Vision should describe what will be achieved in
the wider sphere if the organization and others are successful in achieving their individual
missions.

A mission statement can resemble a vision statement in a few companies, but that can be a grave
mistake. It can confuse people. The mission statement can galvanize the people to achieve
defined objectives, even if they are stretch objectives, provided it can be elucidated in SMART
(Specific, Measurable, Achievable, Relevant and Time-bound) terms. A mission statement
provides a path to realize the vision in line with its values. These statements have a direct bearing
on the bottom line and success of the organization.

Which comes first? The mission statement or the vision statement? That depends. If you have a
new start up business, new program or plan to re engineer your current services, then the vision
will guide the mission statement and the rest of the strategic plan. If you have an established
business where the mission is established, then many times, the mission guides the vision
statement and the rest of the strategic plan. Either way, you need to know your fundamental
purpose - the mission, your current situation in terms of internal resources and capabilities
(strengths and/or weaknesses) and external conditions (opportunities and/or threats), and where
you want to go - the vision for the future. It's important that you keep the end or desired result in
sight from the start.[citation needed] .

Features of an effective vision statement include:

• Clarity and lack of ambiguity

• Vivid and clear picture
• Description of a bright future
• Memorable and engaging wording
• Realistic aspirations
• Alignment with organizational values and culture

To become really effective, an organizational vision statement must (the theory states) become
assimilated into the organization's culture. Leaders have the responsibility of communicating the
vision regularly, creating narratives that illustrate the vision, acting as role-models by embodying
the vision, creating short-term objectives compatible with the vision, and encouraging others to
craft their own personal vision compatible with the organization's overall vision. In addition,
mission statements need to be subjected to an internal assessment and an external assessment.
The internal assessment should focus on how members inside the organization interpret their
mission statement. The external assessment — which includes all of the businesses stakeholders
— is valuable since it offers a different perspective. These discrepancies between these two
assessments can give insight on the organization's mission statement effectiveness.

Another approach to defining Vision and Mission is to pose two questions. Firstly, "What
aspirations does the organization have for the world in which it operates and has some influence
over?", and following on from this, "What can (and /or does) the organization do or contribute to
fulfill those aspirations?". The succinct answer to the first question provides the basis of the
Vision Statement. The answer to the second question determines the Mission Statement.

Purpose
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This article may require cleanup to meet Wikipedia's quality standards.

Please improve this article if you can. (April 2007)

This article needs attention from an expert on the subject. See the talk
page for details. WikiProject Philosophy or the Philosophy Portal may be able
to help recruit an expert. (April 2008)

Purpose is a result, end, aim, or goal of an action intentionally undertaken[1], or of an object

being brought into use or existence, whether or not the purpose was a primary or secondary
effect. It is possible that an intentional act may have multiple purposes, only one of which is a
primary intention while the remainder are secondary intentions. For example, the introduction of
a gene into a species of rice may have the primary intention of providing resistance to disease
and a secondary intention of reducing nutritional value. The diminished nutritional value, though
perhaps regrettable, would be a secondary intention in that it is a known effect willingly
accepted.

First attested in c.1290, from earl Old French porpos "aim, intention", purpose is related to from
porposer "to put forth," from Vulgar Latin corruption of por- "forth" (Latin pro- "forth") and Old
French poser "to put, place".[2] Purpose is related to the term pose used from 1374 as to "put in a
certain position," or "suggest, propose, suppose, assume," a term use in Late Latin debating
(c.300–c.700) from pausare "to halt, rest, pause".[3]

Strategic planning
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It has been suggested that Strategic Technology Plan be merged into this
 article or section. (Discuss)

This article has multiple issues. Please help improve the article or
discuss these issues on the talk page.

• Its references would be clearer with a different or consistent style of

citation, footnoting or external linking. Tagged since February 2008.
• It uses first-person or second-person inappropriately. Tagged since
May 2009.

• It may need a complete rewrite to meet Wikipedia's quality standards.

Tagged since June 2008.

Strategic planning is an organization's process of defining its str/ategy, or direction, and making
decisions on allocating its resources to pursue this strategy, including its capital and people.
Various business analysis techniques can be used in strategic planning, including SWOT analysis
(Strengths, Weaknesses, Opportunities, and Threats ), PEST analysis (Political, Economic,
Social, and Technological), STEER analysis (Socio-cultural, Technological, Economic,
Ecological, and Regulatory factors), and EPISTEL (Environment, Political, Informatic, Social,
Technological, Economic and Legal).

Strategic planning is the formal consideration of an organization's future course. All strategic
planning deals with at least one of three key questions:

1. "What do we do?"
2. "For whom do we do it?"
3. "How do we excel?"

In business strategic planning, the third question is better phrased "How can we beat or avoid
competition?". (Bradford and Duncan, page 1).

In many organizations, this is viewed as a process for determining where an organization is

going over the next year or more -typically 3 to 5 years, although some extend their vision to 20
years.

In order to determine where it is going, the organization needs to know exactly where it stands,
then determine where it wants to go and how it will get there. The resulting document is called
the "strategic plan."

It is also true that strategic planning may be a tool for effectively plotting the direction of a
company; however, strategic planning itself cannot foretell exactly how the market will evolve
and what issues will surface in the coming days in order to plan your organizational strategy.
Therefore, strategic innovation and tinkering with the 'strategic plan' have to be a cornerstone
strategy for an organization to survive the turbulent business climate.

Strategic planning outline

The preparatory phase of a business plan relies on planning. The first chapters of a business plan
include Analysis of the Current Situation and Marketing Plan Strategy and Objectives.

Analysis of the current situation - past year

• Business trends analysis

• Market analysis
• Competitive analysis
• Market segmentation
• Marketing-mix
• SWOT analysis
• Positioning - analyzing perceptions
• Sources of information

Marketing plan strategy & objectives - next year

• Marketing strategy
• Desired market segmentation
• Desired marketing-mix
• TOWS-based objectives as a result of the SWOT
• Position & perceptual gaps
• Yearly sales forecast

The Strategic Planning Process

In today's highly competitive business environment, budget-oriented planning or

forecast-based planning methods are insufficient for a large corporation to survive and
prosper. The firm must engage in strategic planning that clearly defines objectives and
assesses both the internal and external situation to formulate strategy, implement the
strategy, evaluate the progress, and make adjustments as necessary to stay on track.

A simplified view of the strategic planning process is shown by the following diagram:

The Strategic Planning Process

Mission &
 Objective
s

Environmen
tal
Scanning

Strategy
Formulatio
n

Strategy
Implementat
ion

Evaluatio
n
& Control

Mission and Objectives

The mission statement describes the company's business vision, including the
unchanging values and purpose of the firm and forward-looking visionary goals that
guide the pursuit of future opportunities.
Guided by the business vision, the firm's leaders can define measurable financial and
strategic objectives. Financial objectives involve measures such as sales targets and
earnings growth. Strategic objectives are related to the firm's business position, and
may include measures such as market share and reputation.

Environmental Scan

The environmental scan includes the following components:

• Internal analysis of the firm

• Analysis of the firm's industry (task environment)
• External macroenvironment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external
analysis reveals opportunities and threats. A profile of the strengths, weaknesses,
opportunities, and threats is generated by means of a SWOT analysis

An industry analysis can be performed using a framework developed by Michael Porter

known as Porter's five forces. This framework evaluates entry barriers, suppliers,
customers, substitute products, and industry rivalry.

Strategy Formulation

Given the information from the environmental scan, the firm should match its strengths
to the opportunities that it has identified, while addressing its weaknesses and external
threats.

To attain superior profitability, the firm seeks to develop a competitive advantage over
its rivals. A competitive advantage can be based on cost or differentiation. Michael
Porter identified three industry-independent generic strategies from which the firm can
choose.

Strategy Implementation

The selected strategy is implemented by means of programs, budgets, and procedures.

Implementation involves organization of the firm's resources and motivation of the staff
to achieve objectives.

The way in which the strategy is implemented can have a significant impact on whether
it will be successful. In a large company, those who implement the strategy likely will be
different people from those who formulated it. For this reason, care must be taken to
communicate the strategy and the reasoning behind it. Otherwise, the implementation
might not succeed if the strategy is misunderstood or if lower-level managers resist its
implementation because they do not understand why the particular strategy was
selected.

Evaluation & Control

The implementation of the strategy must be monitored and adjustments made as

needed.

Evaluation and control consists of the following steps:

1. Define parameters to be measured

2. Define target values for those parameters
3. Perform measurements
4. Compare measured results to the pre-defined standard
5. Make necessary changes

Strategy
From Wikipedia, the free encyclopedia
Jump to: navigation, search

For other uses, see Strategy (disambiguation).

Strategy refers to a plan of action designed to achieve a particular goal. The word is of military
origin, deriving from the Greek word στρατηγός (stratēgos), which roughly translates as
"general".[1]

In military usage strategy is distinct from tactics, which are concerned with the conduct of an
engagement, while strategy is concerned with how different engagements are linked. How a
battle is fought is a matter of tactics: the terms and conditions that it is fought on and whether it
should be fought at all is a matter of strategy, which is part of the four levels of warfare: political
goals or grand strategy, strategy, operations, and tactics.

strategy - what is strategy?

Overall Definition:

Johnson and Scholes (Exploring Corporate Strategy) define strategy as follows:

"Strategy is the direction and scope of an organisation over the long-term: which achieves
advantage for the organisation through its configuration of resources within a challenging
environment, to meet the needs of markets and to fulfil stakeholder expectations".

In other words, strategy is about:

* Where is the business trying to get to in the long-term (direction)

* Which markets should a business compete in and what kind of activities are involved in such
markets? (markets; scope)
* How can the business perform better than the competition in those markets? (advantage)?
* What resources (skills, assets, finance, relationships, technical competence, facilities) are
required in order to be able to compete? (resources)?
* What external, environmental factors affect the businesses' ability to compete? (environment)?
* What are the values and expectations of those who have power in and around the business?
(stakeholders)

Strategy at Different Levels of a Business

Strategies exist at several levels in any organisation - ranging from the overall business (or group
of businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet
stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the
business and acts to guide strategic decision-making throughout the business. Corporate strategy
is often stated explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes successfully in a
particular market. It concerns strategic decisions about choice of products, meeting needs of
customers, gaining advantage over competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is organised to deliver
the corporate and business-unit level strategic direction. Operational strategy therefore focuses
on issues of resources, processes, people etc.

How Strategy is Managed - Strategic Management

In its broadest sense, strategic management is about taking "strategic decisions" - decisions that
answer the questions above.

In practice, a thorough strategic management process has three main components, shown in the
figure below:
Strategic Analysis

This is all about the analysing the strength of businesses' position and understanding the
important external factors that may influence that position. The process of Strategic Analysis can
be assisted by a number of tools, including:

PEST Analysis - a technique for understanding the "environment" in which a business operates
Scenario Planning - a technique that builds various plausible views of possible futures for a
business
Five Forces Analysis - a technique for identifying the forces which affect the level of
competition in an industry
Market Segmentation - a technique which seeks to identify similarities and differences between
groups of customers or users
Directional Policy Matrix - a technique which summarises the competitive strength of a
businesses operations in specific markets
Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a
businesses' overall competitive position
Critical Success Factor Analysis - a technique to identify those areas in which a business must
outperform the competition in order to succeed
SWOT Analysis - a useful summary technique for summarising the key issues arising from an
assessment of a businesses "internal" position and "external" environmental influences.

Strategic Choice
This process involves understanding the nature of stakeholder expectations (the "ground rules"),
identifying strategic options, and then evaluating and selecting strategic options.

Strategy Implementation

Often the hardest part. When a strategy has been analysed and selected, the task is then to
translate it into organisational action

SWOT analysis
From Wikipedia, the free encyclopedia
Jump to: navigation, search

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying
the objective of the business venture or project and identifying the internal and external factors
that are favorable and unfavorable to achieve that objective. The technique is credited to Albert
Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from
Fortune 500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model. Strategic Planning, has been the
subject of much researchCitation Needed.

• Strengths: attributes of the person or company that are helpful

to achieving the objective(s).
• Weaknesses: attributes of the person or company that are
harmful to achieving the objective(s).
• Opportunities: external conditions that are helpful to achieving
the objective(s).
• Threats: external conditions which could do damage to the
objective(s).

Identification of SWOTs are essential because subsequent steps in the process of planning for
achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given the
SWOTs. If the objective is NOT attainable a different objective must be selected and the process
repeated.
The SWOT analysis is often used in academia to highlight and identify strengths, weaknesses,
opportunities and threats [citation needed]. It is particularly helpful in identifying areas for development
[citation needed]
.

[edit] Matching and converting

Another way of utilizing SWOT is matching and converting.

Matching is used to find competitive advantages by matching the strengths to opportunities.

Converting is to apply conversion strategies to convert weaknesses or threats into strengths or

opportunities.

An example of conversion strategy is to find new markets.

If the threats or weaknesses cannot be converted a company should try to minimize or avoid
them.[1]

[edit] Evidence on the Use of SWOT

SWOT analysis may limit the strategies considered in the evaluation. J. Scott Armstrong notes
that "people who use SWOT might conclude that they have done an adequate job of planning
and ignore such sensible things as defining the firm's objectives or calculating ROI for alternate
strategies." [2] Findings from Menon et al. (1999) [3] and Hill and Westbrook (1997) [4] have
shown that SWOT may harm performance. As an alternative to SWOT, Armstrong describes a 5-
step approach alternative that leads to better corporate performance.[5]

These criticisms are addressed to an old version of SWOT analysis that precedes the SWOT
analysis described above under the heading "Strategic and Creative Use of SWOT Analysis."
This old version did not require that SWOTs be derived from an agreed upon objective.
Examples of SWOT analyses that do not state an objective are provided below under "Human
Resources" and "Marketing."

[edit] Internal and external factors

The aim of any SWOT analysis is to identify the key internal and external factors that are
important to achieving the objective. These come from within the company's unique value chain.
SWOT analysis groups key pieces of information into two main categories:

• Internal factors – The strengths and weaknesses internal to the

organization.
• External factors – The opportunities and threats presented by
the external environment to the organization. - Use a PEST or PESTLE
analysis to help identify factors
The internal factors may be viewed as strengths or weaknesses depending upon their impact on
the organization's objectives. What may represent strengths with respect to one objective may be
weaknesses for another objective. The factors may include all of the 4P's; as well as personnel,
finance, manufacturing capabilities, and so on. The external factors may include macroeconomic
matters, technological change, legislation, and socio-cultural changes, as well as changes in the
marketplace or competitive position. The results are often presented in the form of a matrix.

SWOT analysis is just one method of categorization and has its own weaknesses. For example, it
may tend to persuade companies to compile lists rather than think about what is actually
important in achieving objectives. It also presents the resulting lists uncritically and without clear
prioritization so that, for example, weak opportunities may appear to balance strong threats.

It is prudent not to eliminate too quickly any candidate SWOT entry. The importance of
individual SWOTs will be revealed by the value of the strategies it generates. A SWOT item that
produces valuable strategies is important. A SWOT item that generates no strategies is not
important.

[edit] Use of SWOT Analysis

The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis
may be used in any decision-making situation when a desired end-state (objective) has been
defined. Examples include: non-profit organizations, governmental units, and individuals.
SWOT analysis may also be used in pre-crisis planning and preventive crisis management.
SWOT analysis may also be used in creating a recommendation during a viability study/survey.

[edit] SWOT - landscape analysis

The SWOT-landscape systematically deploys the relationships between overall

objective and underlying SWOT-factors and provides an interactive, query-able 3D
landscape.

The SWOT-landscape grabs different managerial situations by visualizing and foreseeing the
dynamic performance of comparable objects according to findings by Brendan Kitts, Leif
Edvinsson and Tord Beding (2000).[6]
Changes in relative performance are continually identified. Projects (or other units of
measurements) that could be potential risk or opportunity objects are highlighted.

SWOT-landscape also indicates which underlying strength/weakness factors that have had or
likely will have highest influence in the context of value in use (for ex. capital value
fluctuations).

[edit] Corporate planning

As part of the development of strategies and plans to enable the organization to achieve its
objectives, then that organization will use a systematic/rigorous process known as corporate
planning. SWOT alongside PEST/PESTLE can be used as a basis for the analysis of business
and environmental factors.[7]

• Set objectives – defining what the organization is going to do

• Environmental scanning
o Internal appraisals of the organization's SWOT, this needs
to include an assessment of the present situation as well as a
portfolio of products/services and an analysis of the
product/service life cycle
• Analysis of existing strategies, this should determine
relevance from the results of an internal/external appraisal. This may
include gap analysis which will look at environmental factors
• Strategic Issues defined – key factors in the development of a
corporate plan which needs to be addressed by the organization
• Develop new/revised strategies – revised analysis of strategic
issues may mean the objectives need to change
• Establish critical success factors – the achievement of
objectives and strategy implementation
• Preparation of operational, resource, projects plans for
strategy implementation
• Monitoring results – mapping against plans, taking corrective
action which may mean amending objectives/strategies.[8]

[edit] Marketing
Main article: Marketing management

In many competitor analyses, marketers build detailed profiles of each competitor in the market,
focusing especially on their relative competitive strengths and weaknesses using SWOT analysis.
Marketing managers will examine each competitor's cost structure, sources of profits, resources
and competencies, competitive positioning and product differentiation, degree of vertical
integration, historical responses to industry developments, and other factors.

Marketing management often finds it necessary to invest in research to collect the data required
to perform accurate marketing analysis. Accordingly, management often conducts market
research (alternately marketing research) to obtain this information. Marketers employ a variety
of techniques to conduct market research, but some of the more common include:
 • Qualitative marketing research, such as focus groups
• Quantitative marketing research, such as statistical surveys
• Experimental techniques such as test markets
• Observational techniques such as ethnographic (on-site)
observation
• Marketing managers may also design and oversee various
environmental scanning and competitive intelligence processes to help
identify trends and inform the company's marketing analysis.

Using SWOT to analyse the market position of a small management consultancy with specialism
in HRM.[8]

Strengths Weaknesses Opportunities Threats

Reputation in Shortage of Well established Large consultancies

marketplace consultants at position with a well operating at a minor
operating level defined market level
rather than partner niche
level

Expertise at partner Unable to deal with Identified market for Other small
level in HRM multi-disciplinary consultancy in areas consultancies
consultancy assignments other than HRM looking to invade the
because of size or marketplace
lack of ability

Nature of Strategic Decisions and Nature1 of Strategic Management

Strategic decisions are also known as top-level management decisions.
However, the decision-making is made in different levels of management.
Strategic planning, corporate planning, strategic decisions are some
synonymous words used to refer top-level management decisions and
planning. In general, strategy formulation, especially, defining vision,
mission, objectives, and strategies are area of top-level management.
Promoters or entrepreneurs design vision and mission at the very beginning.
Objectives are sometimes reviewed and changed but strategies are timely
reviewed and changed. Therefore, in this whole process middle and bottom
level management also take part directly and indirectly.
Strategic issues require top-management decision and involve the allocation
of large amount of company resources. Strategic decisions have significant
impact on long-term prosperity of the firm and they are future oriented in
nature having multifunctional consequences. Strategic decisions are corporate
level decision therefore they tend to be value oriented and conceptual. Such
decisions are also characterized by greater risk, cost, and profit potentials. At
the other end of continuum, functional decisions are action oriented; and they
have relatively sort-rang focus, involve low risk and modest cost. 2
Strategic decision also covers strategy evaluation, choice, implementation,
and evaluation. Strategy formulation is not the solution unless the formulated
strategies are properly implemented. Thus strategic decision also covers how
strategies are implemented designing effective organizational structure,
designing required resources, defining plans and policies, and many others.
Such issues are discussed in the strategy implementation unit of this book.
Nature3 of Strategic Management
Management is everywhere in our life. Day to day management is required at
the personal life as well as in corporate life. Strategic management is related
to the formal and organized sector, especially in corporate sectors.
Furthermore, strategic level refers top-level, thus, this management process is
very comprehensive. It covers all the areas of the business. It is not specific
but a holistic in nature.
A broad and top-level strategic management can be compared with the
specific and functional management sectors. Strategic management is
relatively more important than any special functional area because all the
functional areas come under the strategic management focus. Strategic
management gives the ideology and basic guideline to all other functional
areas. Nowadays, each functional area is directed towards the strategic focus.
Subjects such as finance, marketing, accounting areas are shaping into
strategic finance, strategic marketing, and strategic accounting. Generally,
strategic management focuses into long-term goals, relatively broad, and is
also very important for the success of an organization.
Hence, strategic management is concerned to whole organization whereas
operational management is related to any specific functional area. Further, it is
more complex and ambiguous than the operational managements. In general,
strategic management covers all the areas of business and focuses into the
broad organizational issues.

The Strategic Planning Process

In the 1970's, many large firms adopted a formalized top-down strategic planning model. Under
this model, strategic planning became a deliberate process in which top executives periodically
would formulate the firm's strategy, then communicate it down the organization for
implementation. The following is a flowchart model of this process:
 The Strategic Planning Process

Mission

|
V

Objectives

|
V

Situation
Analysis

|
V

Strategy
Formulation

|
V

Implementation

|
V

Control

This process is most applicable to strategic management at the business unit level of the
organization. For large corporations, strategy at the corporate level is more concerned with
managing a portfolio of businesses. For example, corporate level strategy involves decisions
about which business units to grow, resource allocation among the business units, taking
advantage of synergies among the business units, and mergers and acquisitions. In the process
outlined here, "company" or "firm" will be used to denote a single-business firm or a single
business unit of a diversified firm.
Mission

A company's mission is its reason for being. The mission often is expressed in the form of a
mission statement, which conveys a sense of purpose to employees and projects a company
image to customers. In the strategy formulation process, the mission statement sets the mood of
where the company should go.

Objectives

Objectives are concrete goals that the organization seeks to reach, for example, an earnings
growth target. The objectives should be challenging but achievable. They also should be
measurable so that the company can monitor its progress and make corrections as needed.

Situation Analysis

Once the firm has specified its objectives, it begins with its current situation to devise a strategic
plan to reach those objectives. Changes in the external environment often present new
opportunities and new ways to reach the objectives. An environmental scan is performed to
identify the available opportunities. The firm also must know its own capabilities and limitations
in order to select the opportunities that it can pursue with a higher probability of success. The
situation analysis therefore involves an analysis of both the external and internal environment.

The external environment has two aspects: the macro-environment that affects all firms and a
micro-environment that affects only the firms in a particular industry. The macro-environmental
analysis includes political, economic, social, and technological factors and sometimes is referred
to as a PEST analysis.

An important aspect of the micro-environmental analysis is the industry in which the firm
operates or is considering operating. Michael Porter devised a five forces framework that is
useful for industry analysis. Porter's 5 forces include barriers to entry, customers, suppliers,
substitute products, and rivalry among competing firms.

The internal analysis considers the situation within the firm itself, such as:

• Company culture
• Company image
• Organizational structure
• Key staff
• Access to natural resources
• Position on the experience curve
• Operational efficiency
• Operational capacity
• Brand awareness
• Market share
• Financial resources
• Exclusive contracts
 • Patents and trade secrets

A situation analysis can generate a large amount of information, much of which is not
particularly relevant to strategy formulation. To make the information more manageable, it
sometimes is useful to categorize the internal factors of the firm as strengths and weaknesses,
and the external environmental factors as opportunities and threats. Such an analysis often is
referred to as a SWOT analysis.

Strategy Formulation

Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can
be developed. While different firms have different alternatives depending on their situation, there
also exist generic strategies that can be applied across a wide range of firms. Michael Porter
identified cost leadership, differentiation, and focus as three generic strategies that may be
considered when defining strategic alternatives. Porter advised against implementing a
combination of these strategies for a given product; rather, he argued that only one of the generic
strategy alternatives should be pursued.

Implementation

The strategy likely will be expressed in high-level conceptual terms and priorities. For effective
implementation, it needs to be translated into more detailed policies that can be understood at the
functional level of the organization. The expression of the strategy in terms of functional policies
also serves to highlight any practical issues that might not have been visible at a higher level.
The strategy should be translated into specific policies for functional areas such as:

• Marketing
• Research and development
• Procurement
• Production
• Human resources
• Information systems

In addition to developing functional policies, the implementation phase involves identifying the
required resources and putting into place the necessary organizational changes.

Control

Once implemented, the results of the strategy need to be measured and evaluated, with changes
made as required to keep the plan on track. Control systems should be developed and
implemented to facilitate this monitoring. Standards of performance are set, the actual
performance measured, and appropriate action taken to ensure success.
Dynamic and Continuous Process

The strategic management process is dynamic and continuous. A change in one component can
necessitate a change in the entire strategy. As such, the process must be repeated frequently in
order to adapt the strategy to environmental changes. Throughout the process the firm may need
to cycle back to a previous stage and make adjustments.

Drawbacks of this Process

The strategic planning process outlined above is only one approach to strategic management. It is
best suited for stable environments. A drawback of this top-down approach is that it may not be
responsive enough for rapidly changing competitive environments. In times of change, some of
the more successful strategies emerge informally from lower levels of the organization, where
managers are closer to customers on a day-to-day basis.

Another drawback is that this strategic planning model assumes fairly accurate forecasting and
does not take into account unexpected events. In an uncertain world, long-term forecasts cannot
be relied upon with a high level of confidence. In this respect, many firms have turned to
scenario planning as a tool for dealing with multiple contingencies.