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Transcribed Image Text: mavimum e
same type of thing often happens to companies that try to
operate outside the realm of their core competencies.
improve efficiency and cut costs throughout an organiza-
tion's activity-cost chain while simultaneously improving the
features of the product or service that differentiate it in the
marketplace. Total quality can also improve an organization's
chances of becoming a leader in a given market niche.
COMPONENTS OF STRATEGIC
MANAGEMENT
Strategic management consists of two interrelated activities:
(a) strategic planning and (b) strategic execution. These two
primary components of strategic management are described
in the following sections.
CORE COMPETENCIES AND
COMPETITIVE ADVANTAGE
One task to be accomplished as part of the strategic plan-
ning process is identifying the organization's core competen-
cies. This task is generally completed as part of the SWOT
(strengths,
since an organization's core competencies should be part of
its strengths. A core competency is something an organi-
zation does so well that it can be viewed as a competitive
advantage. A competitive advantage is any aspect of the or-
ganization that (1) contributes directly and significantly to
increasing
(i.e.,
Strategic Planning
weaknesses, opportunities, and threats) analysis,
- Cost leadership strategies. Strategies in this category
seek to improve efficiency and control costs throughout an
organization's activity-cost chain (supplier activity costs,
in-house activity costs, and distribution activity costs).
Strategic planning is the process by which an organization
answers such questions as the following: Who are we? Where
are we going? How will we get there? What do we hope to
accomplish? What are our strengths and weaknesses? What
WHAT IS STRATEGIC
MANAGEMENT?
To understand strategic management, one must first under-
stand the concept of organizational strategy. Strategies are
defined as follows:
business
are the opportunities and
Strate
ment? Strategic planning involves developing a written plan
that has the following components: an organizational vision3;
threats in our
environ-
- Differentiation strategies. Strategies in this category
seek to add value, as defined by customers, to the organiza-
tion's products or services. Such strategies typically involve
gaining technological superiority over competitors, con-
tinually outperforming competitors in the area of quality,
providing more and better support services to customers,
and providing customers more value for their money.
customer demand by achieving superior value
Organizational strategies are the approaches adopted by
organizations to ensure successful performance in the
marketplace. These approaches are typically set forth in a
comprehensive document called the strategic plan.
superior quality, cost, and service) and (2) is difficult
for competitors to replicate.
An organization's core competencies might be based
its ability to achieve economy of scale, proprietary ac-
cess to
an organizational mission; guiding principles; broad strate-
gic objectives; and specific tactics, projects, and activities for
achieving the broad objectives. Specific tactics, projects, and
activities are often referred to as the "action plan."
technology,
expertise in a given area that
given
replicated,
cannot be
formance from critical processes, market proximity, high-
performance corporate culture, research and development
expertise, or ability to respond rapidly to market research
or in any other factors that contribute directly and signifi-
cantly to the organization's ability to provide superior value
consistently over time.
ability to maintain
Strategic management is management that bases all
actions, activities, and decisions on what is most likely-within
an ethical framework-to ensure successful performance in
the marketplace. From the strategic manager's perspective,
resources are wasted unless they contribute to success in the
marketplace, and the more direct the contribution, the better.
world-class
per-
Strategic Execution
. Market-niche strategies. Strategies in this category focus
on a narrowly defined segment of the market (market
niche) and attempt to make the organization in question
the market leader in that niche. Leadership can be achieved
by adopting cost leadership or differentiation strategies or
both designed to appeal specifically to the target market.
Strategic execution involves implementing strategies set
strategic planning, monitoring progress toward their
achievement, and adjusting the plans and strategies as nec-
essary. Strategic execution is implementation that achieves
forth
ancy and effectiveness.
efficiency
Monitoring involves
important that organizations understand their core
competencies. Too many organizations give in to the temp-
tation to pursue business that is outside the realm of their
core competencies rather than finding new marketers for
their core products and services. This approach typically
productivity problems that invariably
undermine the value of the organization's new products and
s const
antly checking actual perfor-
Total quality relates to strategic management in that it
enhances an organization's ability to gain a sustainable com-
petitive advantage in the marketplace. Handled properly,
total quality can be the most effective cost leadership or dif-
ferentiation strategy an organization can adopt. This is be-
cause the total quality approach is the best way to continually
COMPETITIVE STRATEGY
mance against performance benchmarks, Strategic monitor-
ing answers such questions as these: Are we achieving our
To survive and thrive in a globally competitive marketplace,
organizations must adopt a broad strategy that gives them
a sustainable competitive advantage. All such strategies fall
into one or more of the following categories:
objectives?
nas well as we need to perform? This is the
forming as
This is
the effectiveness question. Are we per-
s we need
is the efficiency
to quality
and
question. Adjusting as necessary involves making correc-
tions when the specific strategies or tactics adopted are not
producing the desired results. Such adjustments can involve
a minor tweaking of plans, a search for ways to overcome
unexpected barriers that are encountered, or even the adop-
tion of a whole new set of specific strategies.
services.
Perhaps the best way to understand what happens when
mpanies decide to operate outside the realm of their core
competencies is to consider a sports analogy. There have
several examples in which professional athletes whose
core competencies were in one sport attempted to cross over
and play another sport. Two that come immediately to mind
are Michael
the history of the National Basketball Association, and Dion
Jordan, one of the greatest basketball players in
a Hall of Fame-caliber defensive
Both of these gifted athletes left their core competencies
ting to basketball and football behind and attempted to
back in
foothall
play professional
It was not that these two high-profile athletes were not
good at baseball-they were; but they were just not good
enough to compete with other professionals whose core
competencies were in baseball. As a result, both had a mea-
sure of success playing baseball, but neither had a stellar ca-
reer. They simply could not perform in this new "market" at
the world-class level that they could in their core sports. This