Business Policy and Strategy - Chapter 1 - Basic Concepts
of Strategic Management UPDATED ACTUAL Questions
and CORRECT Answers
Strategic Management A set of managerial decisions and actions that determines the long-run
performance of a firm → Includes environmental scanning, strategy
implementation, and evaluation and control.
Increasing risks of error, costly mistakes, and even to take strategic management seriously in order to keep their companies
economic ruin are causing today's professional managers competitive in an increasingly volatile environment.
in all organizations
Phases of strategic management Phase 1: Basic Financial Planning
Phase 2: Forecast Based Planning
Phase 3: Externally Oriented Planning
Phase 4: Strategic Management
Phase 1: Basic Financial Planning ) Managers initiate serious planning when they are requested to propose next
years' budget. ) Projects are proposed on the basis of very little analysis, with
most information coming from within the firm. *) The time horizon is usually one
year.
Phase 2: Forecast Based Planning *) As annual budgets become less useful at stimulating long term planning,
managers attempt to propose 5 years plan.
*) They now consider projects that may take more than one year. In addition to
internal information, managers gather any available environmental data and
extrapolate current trends 5 years into the future.
*) The time horizon is usually three to five years.
Phase 3: Externally Oriented Planning *) Top Management takes control of the planning process by initiating strategic
planning.
*) The company seeks to increase its responsiveness to changing markets and
competition by thinking strategically.
*) Planning is taken out of the hands of lower level managers and concentrated in
a planning staff whose task is to develop strategic plans for the corporation.
, Phase 4: Strategic Management *) Top Management realized that the best strategic plans are worthless without
the input and commitment of lower level managers
*) Top managers forms planning groups of managers and key employees at many
levels from various departments.
*) They develop and integrate a series of strategic plans aiming at achieving the
company primary objectives.
*) Strategic plans now detail the implementation, evaluation and control issues.
*) The sophisticated annual five years strategic plan is replaced with thinking at all
levels of the organization through out the year.
*) Although Top Management may still initiate the strategic planning process, the
resulting strategies may come from anywhere of the Organization.
*) Planning is typically interactive across levels and is no longer top down.
) People at all levels are now involved.
To be successful in the long-run, companies must not , but they must also adapt those activities to satisfy new and changing markets.
only be able to execute current activities to satisfy an
existing market
The attainment of an appropriate match, or "fit," between has positive effects on the organization's performance. Strategic planning
an organization's environment and its strategy, structure, becomes increasingly important as the environment
and processes becomes more unstable.
Benefits of Strategic Planning 1. Clearer sense of strategic vision for the firm.
2. Sharper focus on what is strategically important.
3. Improved understanding of a rapidly changing environment.
To be effective, however, strategic management need 1. Where is the Organization now?
not always be a formal process. It can begin with a few 2. If no changes are made, where the Organization will be in one year? Two
simple questions. years? Five years? Ten Years? Are the answers acceptable?
3. If the answers are not acceptable, what specific actions should management
undertake? What are the risks and payoffs involved?
Globalization The integrated internalization of markets and corporations → Companies
expanding all over the world
Global Issue feature to learn how regional trade associations are forcing corporations to
establish a manufacturing presence wherever they wish to market goods or else
face significant tariffs.
*) Products can more easily be sold and moved across national boundaries.
Environmental sustainability Refers to the use of business practices to reduce a company's impact upon the
natural and physical, environment.
The effects of climate change on industries and Regulatory, supply chain, product & technology, litigation, reputational , and
companies throughout the world can be grouped into six physical
categories of risks:
Regulatory Risk Risk that regulations will effect how the company operates
of Strategic Management UPDATED ACTUAL Questions
and CORRECT Answers
Strategic Management A set of managerial decisions and actions that determines the long-run
performance of a firm → Includes environmental scanning, strategy
implementation, and evaluation and control.
Increasing risks of error, costly mistakes, and even to take strategic management seriously in order to keep their companies
economic ruin are causing today's professional managers competitive in an increasingly volatile environment.
in all organizations
Phases of strategic management Phase 1: Basic Financial Planning
Phase 2: Forecast Based Planning
Phase 3: Externally Oriented Planning
Phase 4: Strategic Management
Phase 1: Basic Financial Planning ) Managers initiate serious planning when they are requested to propose next
years' budget. ) Projects are proposed on the basis of very little analysis, with
most information coming from within the firm. *) The time horizon is usually one
year.
Phase 2: Forecast Based Planning *) As annual budgets become less useful at stimulating long term planning,
managers attempt to propose 5 years plan.
*) They now consider projects that may take more than one year. In addition to
internal information, managers gather any available environmental data and
extrapolate current trends 5 years into the future.
*) The time horizon is usually three to five years.
Phase 3: Externally Oriented Planning *) Top Management takes control of the planning process by initiating strategic
planning.
*) The company seeks to increase its responsiveness to changing markets and
competition by thinking strategically.
*) Planning is taken out of the hands of lower level managers and concentrated in
a planning staff whose task is to develop strategic plans for the corporation.
, Phase 4: Strategic Management *) Top Management realized that the best strategic plans are worthless without
the input and commitment of lower level managers
*) Top managers forms planning groups of managers and key employees at many
levels from various departments.
*) They develop and integrate a series of strategic plans aiming at achieving the
company primary objectives.
*) Strategic plans now detail the implementation, evaluation and control issues.
*) The sophisticated annual five years strategic plan is replaced with thinking at all
levels of the organization through out the year.
*) Although Top Management may still initiate the strategic planning process, the
resulting strategies may come from anywhere of the Organization.
*) Planning is typically interactive across levels and is no longer top down.
) People at all levels are now involved.
To be successful in the long-run, companies must not , but they must also adapt those activities to satisfy new and changing markets.
only be able to execute current activities to satisfy an
existing market
The attainment of an appropriate match, or "fit," between has positive effects on the organization's performance. Strategic planning
an organization's environment and its strategy, structure, becomes increasingly important as the environment
and processes becomes more unstable.
Benefits of Strategic Planning 1. Clearer sense of strategic vision for the firm.
2. Sharper focus on what is strategically important.
3. Improved understanding of a rapidly changing environment.
To be effective, however, strategic management need 1. Where is the Organization now?
not always be a formal process. It can begin with a few 2. If no changes are made, where the Organization will be in one year? Two
simple questions. years? Five years? Ten Years? Are the answers acceptable?
3. If the answers are not acceptable, what specific actions should management
undertake? What are the risks and payoffs involved?
Globalization The integrated internalization of markets and corporations → Companies
expanding all over the world
Global Issue feature to learn how regional trade associations are forcing corporations to
establish a manufacturing presence wherever they wish to market goods or else
face significant tariffs.
*) Products can more easily be sold and moved across national boundaries.
Environmental sustainability Refers to the use of business practices to reduce a company's impact upon the
natural and physical, environment.
The effects of climate change on industries and Regulatory, supply chain, product & technology, litigation, reputational , and
companies throughout the world can be grouped into six physical
categories of risks:
Regulatory Risk Risk that regulations will effect how the company operates
