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Chapter 3Strategic Management: Planning and Execution for

Competitive Advantage

Objectives

After reading the chapter and reviewing thematerials presented the students will be able to:

• Define strategic management.

• Understand core competencies and competitiveadvantage.

• Conduct SWOT analysis.

• Develop the vision.

• Develop the mission.

• Develop the broad strategic objectives.

• Execute of the strategic plan.

What is StrategicManagement?

Strategic management is management that bases allactions, activities, and decisions on what is most likely –within an ethical framework – to ensure successfulperformance in the marketplace.

From the strategic manager’s perspective, resources arewasted unless they contribute to the success in themarketplace, and the more direct the contribution, thebetter.

Core Competencies

A core competency is something an organization doesso well that it can be viewed as a competitiveadvantage.

A competitive advantage is any aspect of theorganization that (1) contributes directly andsignificantly to increase customer demand by achievingsuperior value (superior quality, cost, and service) and(2) is difficult for competitors to replicate.

Strategic Planning Overview

The steps in a strategic planning process should be completedin order because each successive step grows out of thepreceding one.

Step 1: The SWOT (strengths, weaknesses, opportunities, andthreats) analysis provides a body of knowledge that is neededto undertake strategic planning.

Steps 2 & 3: The mission grows out of and supports the vision.

Step 4: The guiding principle, which represents theorganization’s value system, guide the organization’s behavioras it pursues its mission.

Step 5: The broad strategic objectives grow out of the missionand translate it into measurable terms.

Step 6: Specific tactics (action plan) tie directly to the broadobjectives. Typically there will be 2 to 5 tactical goals for eachobjective.

Creative Thinking in StrategicPlanning

In an age of global competition it is even more important thanever to think creatively when developing strategic plans.

Following are some strategies to promote creative thinking aspart of the strategic planning process:

(1) Begin by telling a couple of stories about creative ideasthat changed everything for a few selected organizations (e.g.Nokia’s idea to produce digital cellular phones when Motorolahad the lock on analog phones).

(2) Challenge participants to see who can suggest the mostridiculous idea and record all ideas.

(3) Do not allow naysayers to put down or criticize the ideas ofothers.

(4) Challenge all existing approaches, and

(5) Allow time for ideas to germinate – do not try to completethe planning process too quickly.

Conducting the SWOT Analysis

An organization’s internal situation isdefined by its strengths and weaknesses.

An organization’s external situation isdefined by the opportunities and threatsthat exist in a business environment.

The strategic plan should be designed insuch a way that it exploits theorganization’s strengths and opportunitieswhile simultaneously overcoming,accommodating, or circumventingweaknesses and threats.

Developing the Vision

A vision is like a beacon in the distance towards which an organizationis always moving.

Everything about the organization – its structure, policies, procedures,and allocation of resources – should support the realization of the vision.

In an organization with a clear vision, it is relatively easy to stayappropriately focused.

A well written vision statement has the following characteristics:

It is easily understood by its stakeholders. It is briefly stated, yet clearand comprehensive in its meaning. It is challenging, yet attainable. It islofty, yet tangible. It is capable of stirring excitement for allstakeholders. It is capable of creating unity of purpose among itsstakeholders. It is not concerned with numbers. It sets the tone foremployees.

For example: Pendleton Manufacturing Company will be the leadingproducer of fireproof storage cabinets.

Developing the Mission

The mission takes the next step anddescribes who the organization is, what itdoes, and where it is going.

For example: Pendleton ManufacturingCompany is a hazardous materials storagecompany dedicated to making your workenvironment safe and healthy. To thisend, Pendleton produces high qualityfireproof cabinets for safely storing toxicsubstances and hazardous materials for anever broadening market.

Developing the GuidingPrinciples An organization’s guiding principles establish the parameters within which it is free

to pursue its mission. These principles might be written as follows:

XYZ company will uphold the highest ethical standards in all its operations.

At XYZ company, customer satisfaction is the highest priority.

XYZ company will make every effort to deliver the highest quality products andservices in the business.

At XYZ company all stakeholders (customers, suppliers, and employees) will betreated as partners.

At XYZ company, employee input will be actively sought, carefully considered, andstrategically used.

At XYZ company, continual improvement of products, processes, and people will bethe norm.

XYZ company will provide employees with a safe and healthy work environment thatis conducive to consistent peak performance.

XYZ company will be a good corporate neighbor in all communities where itsfacilities are located.

XYZ company will take appropriate steps to protect the environment.

Developing Broad StrategicObjectives

Broad strategic objectives translate anorganization’s vision and mission into measurableterms.

Following are some broad strategic objectives: 1. To establish and maintain a world class

workforce at all levels of the organization. 2. To continually increase the organization’s

market share for its existing products andservices.

3. To continually introduce new products andservices to meet emerging needs in theorganizational development market.

Executing the Strategic Plan

Steps in executing strategic plan:

1. Communicate: Make sure all stakeholders understand the plan and where they fit into it.

2. Build capabilities: Make sure all stakeholders have the skills needed to carry out theirassignments and responsibilities in the plan.

3. Establish strategy supportive stimuli: In a work setting the most effective stimuli arereward and recognition incentives.

4. Eliminate administrative barriers: Administrative procedures put in place when movingin one direction can become inhibitors when the organization decides to move in anotherdirection.

5. Identify advocates and resisters: Assign all initial activity to advocates. Eventually allemployees must play a role in executing the strategic plan, but avoid resisters in the earlystages.

6. Exercise strategic leadership: Allocate resources based on priorities established in thestrategic plan.

7. Be flexible and improvise: Managers who want to make their organizations competitivemust be willing to improvise when necessary.

8. Monitor and adjust as needed: Developing and executing a strategic plan is an exampleof the plan-do-check-adjust cycle in action. Make necessary adjustments when roadblocksare encountered. Decide what needs to be done to overcome the barriers, and do it.

Summary

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 strategicmanager’s perspective, resources are wasted unless they contribute to the success in the marketplace, and themore direct the contribution, the better.

A core competency is something an organization does so well that it can be viewed as a competitive advantage.

A competitive advantage is any aspect of the organization that (1) contributes directly and significantly toincrease customer demand by achieving superior value (superior quality, cost, and service) and (2) is difficultfor competitors to replicate.

An organization’s internal situation is defined by its strengths and weaknesses. An organization’s externalsituation is defined by the opportunities and threats that exist in a business environment. The strategic planshould be designed in such a way that it exploits the organization’s strengths and opportunities whilesimultaneously overcoming, accommodating, or circumventing weaknesses and threats.

A vision is like a beacon in the distance towards which an organization is always moving.

The mission takes the next step and describes who the organization is, what it does, and where it is going.

An organization’s guiding principles establish the parameters within which it is free to pursue its mission.

Broad strategic objectives translate an organization’s vision and mission into measurable terms.

Steps in executing strategic plan: 1. Communicate 2. Build capabilities 3. Establish strategy supportive stimuli4. Eliminate administrative barriers 5. Identify advocates and resisters 6. Exercise strategic leadership 7. Beflexible and improvise 8. Monitor and adjust as needed.

Chapter 4Quality Management, Ethics, and Corporate Social

Responsibility

Objectives

After reading the chapter and reviewingthe materials presented the students willbe able to:

Define ethics Understand Integrity and Total Quality Know the Manger’s role in Ethics Perform ethics Training Handle Ethical Dilemmas Define Corporate Social Responsibility

Definition and Overview ofEthics

Ethics is about doing the right things within a moralframework.

Ethics is the practical application of morality.

The ever present challenge is not just determining whatis right but doing what is right.

Guidelines for determiningethical behavior

Just because a choice made is legal does not meanit is ethical.

A person’s behavior can be well within theprescribed limits of the law and still be unethical.

Some tests for determining ethical behaviorassume the behavior in question is legal.

By applying any one of the tests (morning aftertest, front page test, mirror test, role reversaltest, common sense test) a person should be ableto see through the gray area surrounding an issueand determine the ethical route to take.

Trust and Total Quality

One of the best ways managers can build trust isto protect the interests of those who are notpresent at the moment as if they are.

When a manager speaks up for someone who is notpresent but is being questioned or attacked,employees get two simultaneous messages:

1. Talking behind a colleague’s back is notacceptable behavior.

2. If this manager does not let me talk aboutfellow employees who are absent, he or she willnot let others talk about me when I am absent.

Values and Total Quality

Ethical behavior begins with values. Values that lead to ethical behavior

include fairness, dependability,integrity, honesty, and truthfulness.

These values tend to encourage a workenvironment that involves, empowers,values, and nurtures people: one thatnot only holds people responsible, butalso gives them support, leeway andresources needed to fulfill theirresponsibilities.

Integrity & Total Quality

It is important for managers in a total quality setting tounderstand that although honesty is fundamental to it,integrity is more than honesty.

People with integrity can be counted on to do the rightthing, do thing correctly, accomplish tasks thoroughlyand completely, finish work on time, and keeppromises.

The same is true of organizations.

Responsibility & Total Quality

Part of ethical behavior is accepting responsibility.

Accepting responsibility is critical in the modernworkplace because employees are drawn from a societythat, as a rule shuns responsibility – which is why ourshas become such a litigious society.

Manager’s Role in Ethics

Managers have three main responsibilities:

1. They are responsible for setting an example ofethical behavior.

2. They are responsible for helping employees makeethical choices.

3. They are responsible for helping employees followthrough and exhibit ethical behavior after theappropriate choice has been made.

Approaches to Ethics

Three approaches managers can use in carrying out theirresponsibilities related to ethics:

1. Best Ratio Approach: When hard decisions must bemade, managers should make the choice that will do themost good for the most people. This approach is sometimescalled situational ethics.

2. Black and White Approach: When difficult decisionsmust be made, mangers should make fair and impartialchoices regardless of the outcome and do the right thingwithout concern for short term circumstances.

3. Full Potential Approach: Decisions are made based onhow they will affect the ability of those involved to achievetheir full potential. Choices that can achieve this goalwithout infringing on the rights of others are consideredethical.

Organization’s Role in Ethics

Managers cannot establish ethical standards withoutsupport from all levels above them in the organization.An organization’s task in ethics can be summarized as:

1. Create an internal environment that promotes,expects, and rewards ethical behavior.

2. Setting an example of ethical behavior in all externaldealings.

Setting an Example

Organizations that take the “Do as I say, not as Ido” approach to ethics will not succeed.

Employees must be able to trust their employer toconduct all external and internal dealings in anethical manner.

Companies that do not pay their bills on time,companies that pollute, companies that fail to liveup to advertised quality standards or stand behindtheir guarantees, and companies that are not goodneighbors in their communities fail to set a goodethical example.

Such companies can expect employees to mimictheir unethical behavior.

Corporate SocialResponsibility

Corporate social responsibility (CSR) is a balancedapproach for organizations to address economic, socialand environmental issues in a way that aims to benefitpeople, communities, and society.

Summary

Ethics is about doing the right things within a moral framework.

Just because a choice made is legal does not mean it is ethical.

One of the best ways managers can build trust is to protect the interests of those who arenot present at the moment as if they are.

Values that lead to ethical behavior include fairness, dependability, integrity, honesty, andtruthfulness.

People with integrity can be counted on to do the right thing, do thing correctly,accomplish tasks thoroughly and completely, finish work on time, and keep promises.

Managers have three main responsibilities: 1. They are responsible for setting an exampleof ethical behavior. 2. They are responsible for helping employees make ethical choices. 3.They are responsible for helping employees follow through and exhibit ethical behaviorafter the appropriate choice has been made.

Three approaches managers can use in carrying out their responsibilities related to ethics:1. Best Ratio Approach 2. Black and White Approach 3. Full Potential Approach.

Organizations that take the “Do as I say, not as I do” approach to ethics will not succeed.

Corporate social responsibility (CSR) is a balanced approach for organizations to addresseconomic, social and environmental issues in a way that aims to benefit people,communities, and society.