What Is Strategic Management?

Once there were two company presidents who competed in the same industry. These two presidents decided to go on a camping trip to discuss a possible merger. They hiked deep into the woods. Suddenly, they came upon a grizzly bear that rose up on its hind legs and snarled. Instantly, the first president took off his knapsack and got out a pair of jogging shoes. The second president said, “Hey, you can’t outrun that bear.” The first president responded, “Maybe I can’t outrun that bear, but I surely can outrun you!” This story captures the notion of strategic manage­ment, which is to gain and sustain competitive advantage.

1. What Is a Cohesion Case?

A distinguishing, popular feature of this text is the cohesion case, named so because a written case on a company appears at the end of this chapter, and then all other chapters feature end-of-chapter assurance of Learning Exercises to apply strategic-planning concepts, tools, and techniques to the cohesion case company. The Hershey company is featured as the new cohesion case in this edition, because Hershey is a well-known, well-managed global firm undergoing strategic change. By working through the Hershey-related exercises at the end of each chapter, students become well prepared to develop an effective strategic plan for any company assigned to them (or their team) to perform a strategic-management case analysis. case analysis is a core part of almost every strategic-management course globally.

2. Defining Strategic Management

Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. As this defi­nition implies, strategic management focuses on integrating management, marketing, finance and accounting, production and operations, research and development (R&D), and informa­tion systems to achieve organizational success. the term strategic management in this text is used synonymously with the term strategic planning. the latter term is more often used in the business world, whereas the former is often used in academia. Sometimes the term strate­gic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. the purpose of strategic management is to exploit and create new and different opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends of today.

The term strategic planning originated in the 1950s and was popular between the mid-1960s and the mid-1970s. During these years, strategic planning was widely believed to be the answer for all problems. at the time, much of corporate America was “obsessed” with strategic planning. Following that boom, however, strategic planning was cast aside during the 1980s as various planning models did not yield higher returns. the 1990s, however, brought the revival of strate­gic planning, and the process is widely practiced today in the business world. Many companies today have a chief strategy officer (CSO). McDonald’s hired a new cSO in October 2015.

A strategic plan is, in essence, a company’s game plan. Just as a football team needs a good game plan to have a chance for success, a company must have a good strategic plan to compete successfully. Profit margins among firms in most industries are so slim that there is little room for error in the overall strategic plan. A strategic plan results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, pro­cedures, and operations in lieu of other, “less desirable” courses of action.

The term strategic management is used at many colleges and universities as the title for the capstone course in business administration. this course integrates material from all business courses, and, in addition, introduces new strategic-management concepts and techniques being widely used by firms in strategic planning.

Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).

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