What Is Strategic Management? Strategic management refers to the art of planning your business at the highest possible level.

It is the duty of the companys leader (or leaders). Strategic management focuses on building a solid underlying structure to your business that will subsequently be fleshed out through the combined efforts of every individual you employ. Strategic management hinges upon answering three key questions: 1. What are my businesss objectives? 2. What are the best ways to achieve those objectives? 3. What resources are required to make that happen? Answering the first question requires serious thought about what your ultimate goals are for the business. What are you trying to make happen? What are you attempting to facilitate or enable? What is the best possible outcome your company can aspire to? Drilling down to uncover a companys core objectives can have several phases: Assessing the landscape within which the company will operate, and formulating how the company sees its role within that landscape. This is commonly known as a mission statement. Establishing objectives to answer some of the unmet needs, taking both a long- and short-term view of what the company can offer. This is commonly known as a vision statement. Stipulating the goals the company has for itself, both in terms of financial and strategic objectives. Strategic Management Process This is a six-stage process, run in-house usually by a Strategic Management Group. It is supported by various consultants and accessible to external stakeholders. A useful method for public and voluntary organizations 1. Historical context, examination of previous trends and the emergence of a future vision for the way ahead Situational Assessment, blame free SWOT Analysis of the present situation Strategic Issue Agenda, identify issues from points 1 and 2 above and acknowledge the relationships that exist between points 4-7 4. Strategic Options, define as many positive solutions to meet the SWOT analysis and future vision. Define strategies, and outline costs, feasibility, acceptability and effectiveness. 5. Feasibility Assessment, a selection of strategies is examined through Stakeholder Analysis and Resource Analysis. 6. Implementation, to evaluate the stakeholders predictions, a serious of evaluation programmes are devised. Within each stage above, 3 basic steps are followed Search, for ideas and information 3. Selection, determine priorities for action Within these 3 basic steps, 4 alternative criteria are used to assist using the best technique Quality

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Synthesis, observation of patterns, trends

Acceptance Innovation

Preservation THE STRATEGIC MANAGEMENT PROCESS Without a strategy the organization is like a ship without a rudder, going around in circles. Joel Ross and Michael Kami Chapter Outline Five Tasks of Strategic Management Developing a Strategic Vision and Mission Setting Objectives Crafting a Strategy Implementing and Executing the Strategy Evaluating Performance and Initiating Corrective Adjustments Why Strategic Management Is a Process Who Performs the Tasks of Strategy? Benefits of Thinking and Managing Strategically Thinking Strategically: The Three Big Strategic Questions 1. Where are we now? 2. Where do we want to go? Business(es) to be in and market positions to stake out? Buyer needs and groups to serve? Outcomes to achieve? 3. How do we get there? What is Strategy? A companys strategy consists of the set of competitive moves and business approaches that management is employing to run the company Strategy is managements game plan to Attract and please customers Stake out a market position Conduct operations

Compete successfully Achieve organizational objectives What is a Business Model? A companys business model addresses How do we make money in this business? Is the strategy that management is pursuing capable of delivering good bottom-line results? Do the revenue-cost-profit economics of the companys strategy make good business sense? Look at the revenue streams the strategy is expected to produce Look at the associated cost structure and potential profit margins Do the resulting earnings streams and ROI indicate the strategy makes sense and that the company has a viable business model? Strategy vs. Business Model : What is the Difference? Strategy -- Deals with a companys competitive initiatives and business approaches Business Model -- Concerns whether the revenues and costs flowing from the strategy demonstrate that the business can be amply profitable and viable Microsofts Business Model Redhat Linuxs Business Model Why Are Strategies Needed? To proactively shape how a companys business will be conducted To mold the independent actions and decisions of managers and employees into a coordinated, company-wide game plan Strategic Management Concept Figure 1-1: The Five Tasks of Strategic Management Developing a Strategic Vision Involves thinking strategically about Firms future business plans Where to go Tasks include Creating a roadmap of the future Deciding future business position to stake out Providing long-term direction Giving firm a strong identity Characteristics of a Strategic Vision A roadmap of a companys future Future technology-product-customer focus Geographic and product markets to pursue Capabilities to be developed Kind of company management is trying to create Missions vs. Strategic Visions A mission statement focuses on current business activities -- who we are and what we do Current product and service offerings Customer needs being served Technological and business capabilities A strategic vision concerns a firms future business path -- where we are going Markets to be pursued Future technology-product-customer focus Kind of company that management is trying to create Why is a Strategic Vision Important? A managerial imperative exists to look beyond today and think strategically about Impact of new technologies How customer needs and expectations are changing What it will take to outrun competitors Which promising market opportunities ought to be aggressively pursued External and internal factors driving what a company needs to do to prepare for the future Examples: Mission and Vision Statements Setting Objectives Converts strategic vision and mission into specific performance targets Creates yardsticks to track performance Pushes firm to be inventive and focused on results Helps prevent complacency and coasting Types of Objectives Required Outcomes focused on improving financial performance Outcomes focused on improving long-term, competitive business position Examples of Financial Objectives Grow earnings per share 15% annually Boost annual return on investment (or EVA) from 15% to 20% within three years

Increase annual dividends per share to stockholders by 5% each year Strive for stock price appreciation equal to or above the S&P 500 average Maintain a positive cash flow every year Achieve and maintain a AA bond rating Examples of Strategic Objectives Increase firms market share Overtake key rivals on quality or customer service or product performance Attain lower overall costs than rivals Boost firms reputation with customers Attain stronger foothold in international markets Achieve technological superiority Become leader in new product introductions Capture attractive growth opportunities Examples: Strategic Objectives Example: Strategic Objectives Examples: Strategic and Financial Objectives Example: Strategic Objective Example: Financial and Strategic Objectives Crafting a Strategy Strategy involves determining whether to Concentrate on a single business or several businesses (diversification) Cater to a broad range of customers or focus on a particular niche Develop a wide or narrow product line Pursue a competitive advantage based on Low cost or Product superiority or Unique organizational capabilities Crafting a Strategy Involves deciding how to Respond to changing buyer preferences Respond to new market conditions Grow the business over the long-term Achieve performance targets Outcompete rivals Figure 1-2: A Companys Strategy is Partly Planned and Partly Reactive The Hows That Define a Firm's Strategy How to grow the business How to please customers How to outcompete rivals How to respond to changing market conditions How to manage each functional piece of the business and develop needed organizational capabilities How to achieve strategic and financial objectives Figure 1-3: Understanding a Companys Strategy -- What to Look For Strategic Priorities of McDonalds Continued growth Providing exceptional customer care Remaining an efficient and quality producer Developing people at every organizational level Sharing best practices among all units Reinventing the fast food concept by fostering innovation in the menu, facilities, marketing, operation, and technology Core Elements of McDonalds Strategy Add 1750 restaurants annually Promote frequent customer visits via attractive menu items, low-price specials, and Extra Value Meals Be highly selective in granting franchises Locate on sites offering convenience to customers and profitable growth potential Focus on limited menu and consistent quality Careful attention to store efficiency Extensive advertising and use of Mc prefix Hire courteous personnel; pay an equitable wage; provide good training Crafting Strategy is an Exercise in Entrepreneurship Strategy-making is a market-driven and customer-driven activity that involves Keen eye for spotting emerging market opportunities Keen observation of customer needs Innovation and creativity Prudent risk-taking

Strong sense of how to grow and strengthen business Characteristics of Managers with Good Entrepreneurial Skills Boldly pursue new strategic opportunities Emphasize out-innovating the competition Lead the way to improve firm performance Willing to be a first-mover and take risks Respond quickly and opportunistically to new developments Devise trail blazing strategies Why Do Strategies Evolve? There is always an ongoing need to react to Shifting market conditions Fresh moves of competitors New technologies Evolving customer preferences Political and regulatory changes New windows of opportunity Crisis situations Figure 1-4: Strategic Approaches to Preparing for Future Market Conditions What is a Strategic Plan? Implementing and Executing Strategy Taking actions to put a freshly-chosen strategy into place Supervising the ongoing pursuit of strategy Improving the competence and efficiency with which the strategy is being executed Showing measurable progress in achieving the targeted results and objectives Strategy Implementation and Execution What Does Strategy Implementation and Execution Include? Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Motivating people to pursue the target objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture Installing needed information, communication, and operating systems Instituting best practices and programs for continuous improvement Exerting the leadership necessary to drive the process forward and keep improving Monitoring, Evaluating, and Taking Corrective Actions as Needed The tasks of crafting, implementing, and executing a strategy are not a one-time exercise Customer needs and competitive conditions change New opportunities appear; technology advances; any number of other outside developments occur One or more aspects of executing the strategy may not be going well New managers with different ideas take over Organizational learning occurs All these trigger the need for corrective actions and adjustments Characteristics of the Strategic Management Process Need to do the five tasks never goes away Boundaries among the five tasks are blurry Strategizing is not isolated from other managerial activities Time required comes in lumps and spurts The big challenge: To get the best strategy-supportive performance from employees, perfect current strategy, and improve strategy execution Who Performs the Five Strategic Management Tasks? Senior Corporate Executives Managers of Subsidiary Business Units Functional Area Managers Operating Managers Approaches to Performing the Strategy-Making Task Chief Architect Manager personally functions as chief strategist Delegate-It-to-Down-the-Line Managers

Manager delegates some strategy-making responsibility to subordinates in charge of key organizational units Collaborative/Team Manager enlists assistance and advice of key subordinates in hammering out a consensus strategy Corporate Intrapreneur Manager encourages subordinates to develop and champion proposals for new ventures Strategic Role of a Board of Directors Critically appraise and ultimately approve strategic action plans Evaluate strategic leadership skills of the CEO and candidates to succeed the CEO Strategic Management Principle A board of directors role in the strategic management process is to critically appraise and ultimately approve strategic action plans and to evaluate the strategic leadership skills of the CEO and others in line to succeed the incumbent CEO. Benefits of Strategic Thinking and a Strategic Approach to Managing Guides entire firm regarding what it is we are trying to do and to achieve Makes managers more alert to winds of change, new opportunities, and threatening developments Unifies numerous strategy-related decisions and organizational efforts Creates a proactive atmosphere Promotes development of an evolving business model focused on bottom-line success Provides basis for evaluating competing budget requests Chapter Two What is Marketing Management and what do product managers and marketing managers do? The Meaning of the terms Marketing Manager and Marketing Management Traditionally if a person had the title of manager, it meant that s/he had the responsibility to help guide the activities of at least a few employees. While this terminology has changed over the years, we still consider someone who has the title of manager to be responsible for overseeing the allocation of resources for the organization. For example, as an individual contributor I might have the responsibility of performing certain work (for example, writing marketing literature for the firms products), but not be responsible for the activities of anyone other than myself. In high technology industries, the word manager is often replaced with Director to indicate that a person has primary responsibility for a certain organizational function. For example, the marketing director may be responsible for all marketing activities in the firm. At other firms, the term marketing manager would be used to describe the same thing. In some organizations, the VicePresident of Marketing may perform the same functions. The term Product Manager is often used in high technology industries to assign responsibility to a specific individual or group for the successful supervision of all marketing activities related to a specific product or service. Sometimes the product managers responsibility is defined in terms of the product s/he is overseeing and sometimes the responsibility is defined in terms of a specific technology. For example, one high-tech firm might use the title of Product Manager-Digital Systems to describe the job of the person who is responsible for digital versus analog customer solutions. This brings up still another consideration. The use of titles varies across industries of types of organizations. We will discuss how different firms organize the marketing function in a later chapter.

What is marketing management? We will use the following definition of marketing management: Marketing Management is the process allocating the resources of the organization toward marketing activities. Thus, a marketing manager is someone who is responsible for directing expenditures of marketing funds. Related to the term management is the term strategy. Many words in the vocabulary of business management were taken from the field of military science. For example, the word strategy has been used in the military for many decades to indicate a long-term commitment of resources toward accomplishing a certain goal. Thus it is often said that management is responsible for conceptualizing strategies, and other employees are responsible for implementing those strategies. Management-by-Objectives programs in which a supervisor will formulate strategies and other employees will choose the method of reaching those objectives is an example of this relationship in action. As the reader can see, a discussion of strategy, objectives, and goals can very quickly develop into a miasma of terms and confusion. Thus, we will use the following definitions. First, we will consider goals and objectives to be identical terms. Second, we will use the term objective to refer to a broad-based design of where the organization would like to be at some point in the future. For example, as an objective, the organization might decide to be the leader in product quality as judged by customer surveys of our organization and our five leading competitors. We will define the term strategy as a method used to reach an objective. For example, to reach our product quality objective, our organization might decide to enroll in a total quality program offered by most large consulting firms. Thus, strategy will have two meanings. First, it is the overall orientation an organization chooses to allocate its resources, and second, strategy is a specific action used to implement these plans. Thus, there is a two-tiered nature to strategy. One at the top, as a broad guide to preferred action, and one below helping to implement objectives. Use strategy as a keyword search on the internet and see what you find. In marketing, we often use the four Ps to designate the areas of control a marketing manager has at his/her command. The four Ps as you probably already know are: Product, Price, Promotion, and Place. The four Ps represents a convenient way to summarize the main factors involved in any marketing strategy. However, seen in a contemporary sense, the four Ps may mistakenly be limited to downstream marketing activities only and as Chapter One indicates, there are also upstream marketing activities that are related to the marketing mix. If this does not make sense to you, please go back and review the terms used in Chapter One. The Marketing Management Cycle The planning cycle is composed of four basic steps. First, Planning is the process of examining and understanding the surroundings within which the organization functions. For example, environmental scanning is the process of studying and making sense of all the things that might impact the firms operation that are external to the firm. This would include studying and gaining an understanding of such things as: competition, legislation and regulation, social and cultural trends, and technology. Both present and developing trends in each of these areas must be identified and monitored. The planning stage also includes creating documents that outline the organizations intended response to these environmental (external) variables. Second, Implementation is the process of putting plans that have been made into action. It is the transition from expected reality to existing reality. Third, Monitoring is the process of tracking plans and identifying how plans related to changes that take place during program operation when more information is acquired. Correction is the stage in which we take action to return our plan to the desired state based on feedback obtained in the monitoring stage. If we find that return to the planned state is not practicable, we may adjust our planning outcomes. Thus, Monitoring and Correction may be considered two stages because after plans are put into action, one must continually monitor performance and make adjustments to the plan based on the feedback gathered through these monitoring activities. In summary, the marketing management cycle is composed of planning, implementing, monitoring, and correcting. We use the use the letters PIMC as a device to remember the stages. An example of the marketing management cycle in action: Lets Get It Together Family Organization Services The organizational mission of this service firm is: We provide families with means to improve their peace of mind and quality of life. Representatives of the firm meet with families, question them to understand how the family operates at present, do an on-site activities audit that models patterns of daily life for the family, and then offer suggestions about how the family can be better organized and more efficient in its use of time. Lets Get It Together is owned and operated by a mother of three children. After conducting several informal focus groups, she decided to start this business because she realized that her family and most other families she observed lived in a state of chaos. After attending a seminar on creativity and innovation, she decided that there was a real need in the marketplace for a not-for-profit educational institution to pass along all of the knowledge families have about how to manage their household activities more effectively. After she came up with the idea, the owner realized that she must get organized herself, thus based on the Five Ws and H Technique (Who, What, Where, When, Why, and How) she composed the following questions: What will the customer satisfaction entail, that is, what are the needs I am trying to meet? Who will receive customer satisfaction? Why will my organization deliver this particular customer satisfaction? Who will deliver customer satisfaction? Where will I deliver customer satisfaction? When will I deliver customer satisfaction? How will I deliver customer satisfaction? The owner then modeled the marketing management cycle as follows:

Planning: First answer the seven questions I have formulated. Answers to questions: Question # 1: What will the customer satisfaction entail, that is, what are the needs I am trying to meet? Answer: Provide easy-to-follow guidance on improving family organization Question # 2: Who will receive customer satisfaction? Answer: Families who perceive a need for being better organized. Question # 3: Why will my organization deliver customer satisfaction? Answer: First, there is a already perceived need to be better organized. Second, there are ways to fulfill that need that are not being provided to families. Question # 4: Who will deliver customer satisfaction? Answer: Lets get it together, through a small staff of highly trained and ethical individuals, will provide this service to families Question # 5: Where will I deliver customer satisfaction? Answer: The service will be provided through small introductory seminars and through meetings in the homes of the families, if preferred. Question # 6: When will I deliver customer satisfaction? Answer: Customer satisfaction will start with the first seminar and continue through a continuing association with Lets get it together. Question # 7: How will I deliver customer satisfaction? Answer: Through a personal and caring approach with my clients involving seminars and continuing personal contacts If you review the seven questions, and the answers above, you can see that some of the planning has been done. What remains is to identify specific actions that must take place to ensure success such as identifying the characteristics of the best candidates for our service, creation of the service materials (seminar materials, etc.) and details of the logistics by which the service will be promoted and provided. A brief example of one aspect of this organizations marketing planning is: We will provide seminars that last one-half day to families who perceive the need for help in organizing their activities, thus we must identify likely places to offer these seminars. We have obtained a list of community centers, where space is provided free-of-charge for such activities, and will offer our seminars there, initially. However, we may change that approach after initial seminars are offered (monitoring and correction) and move our seminars to more centrally located sites such as hotels and churches.

The Business Plan The business plan is an overall blueprint for the anticipated activities for the organization over a coming time period, usually one-year (short term) or five-year (long-term). We should mention that many businesses are moving their long term planning periods to ten years and beyond in order to better prepare for the future. These businesses often make use of creativity techniques, attempting to outline what changes may occur in their respective environments and how the organization should respond to those changes. The Marketing Plan To formulate effective marketing programs an organization needs to create and follow a marketing plan. A marketing plan is a document that describes the activities in which the organization intends to engage in a coming time period, usually one-year. However, there are often situations in which an organization will have a medium-term marketing plan (two to five years) and a long-term marketing plan that covers plans for a five-year period or greater. While there are many different approaches to preparing a marketing plan, the following conditions should exist: 1. 2. 3. 4. 5. Those who do the plan are accountable for the plans implementation. This same group is committed to the plans success. Management is committed to the plans success and is willing to expend the necessary resources for its successful implementation. The marketing plan is created in the context of the organizations overall business plan. People in the organization share a similar orientation to the marketing function.

If these five conditions are met, the organization is more likely to be able to successfully create and implement its marketing plan. An example for the marketing plan outline is as follows: I. Executive summary (a one-page to two-page overview of the contents of the plan)

Vision for the marketing plan (a paragraph that briefly describes the aspirations for the coming time period and the theme of the plan) III. S.W.O.T. analysis outlining the strengths and weaknesses (internal to the organization) of the organization and the opportunities and threats (external to the organization) that the organization faces. IV. Description of market/customer types and products/services that will provide satisfaction to those markets and customers a. Market grid of markets and customers b. Product/service positioning strategy V. Marketing objectives for the coming period (objectives should be SUMAC or specific, understandable, measurable, attainable, and consistent) VI. Description of marketing programs with timeline (a calendar of major marketing events planned, with a description of each event) This outline should be combined with the PIMC model described earlier in the chapter. The PIMC serves as a good guide for on-going implementation of the marketing plan. While the outline above is simplified, it touches on the critical areas for a marketing plan. It is important to point out, however, that a plan is only as good as its implementation, thus, it is usually better to have a poor plan and good implementation than a great plan that never gets implemented. That is, one small organization hired a consultant to help the organization create a marketing plan. However, after the consultant assisted the firm in creating a plan, the organization continued to run their business as usual and, thus, the plan did not really change how this small organization approached doing business with its customers. Thus, the organization ultimately failed and went out of business.

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Chapter Two Exercises 1. 2. 3. 4. 5. 6. 7. 8. 9. Summarize in a one-page report what you find after you get on the on the Internet and search the keyword management. Organize your answer according to the different categories you find in your search. Call your local grocery or supermarket and ask to interview the store manager. Schedule an interview and in the interview ask the manager how s/he would define marketing management. And how his/her job relates to marketing management. If you have an industry of interest, explore the definition of marketing management in that industry by interviewing someone who works in that industry. Apply the PIMC planning cycle (planning, implementation, monitoring, and correction) to model the actions necessary for a ten year old to set up a lemonade stand. Write a one-page essay on your analysis, identifying activities conducted in each step in the PIMC cycle. Use the marketing plan outline in the chapter to prepare a marketing plan for the lemonade stand. Limit your marketing plan to two pages using keywords to describe your plan. Search the Internet for the term Product manager and write a one-page summary of your findings. Write a job description for a marketing manager of the marketing function. How does it compare to the description you gave in answer to question six in chapter one? Access the Internet and write a one-page report regarding what you find when you do a search using the term marketing management. Explain how the information you found compares to what you read in chapter two. In a one page essay, make observations on Lets Get It Together Family Organization Services, including the benefits families can expect from participation and your estimate of demand for this new service. To what segment, if any, do you believe this service will appeal? Describe this segment of families using factors like family income, education, lifestyle, etc.

Chapter Two Glossary Marketing management - the process allocating the resources of the organization toward marketing activities Marketing Management Cycle the various steps adopted by the organization in its attempt to prepare for the future and manage the present. PIMC Planning, Implementation, Monitoring, and Correction. These steps are applied by the organization during the marketing management cycle. Marketing manager the person responsible for overseeing the allocation of resources to marketing activities. Business plan a document that describes the anticipated activities of the organization across its primary functions. Examples of these primary functions would be accounting and finance, research and development, operations management, and marketing. Marketing plan - a document that describes the activities leading to customer satisfaction the organization anticipates intends to engage in a coming time period, usually one-year.