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6 PART 1 • OVERVIEW OF STRATEGIC MANAGEMENT

Defining Strategic Management
Strategic management can be defined as the art and science of formulating, implementing,
and evaluating cross-functional decisions that enable an organization to achieve its objec-
tives. As this definition implies, strategic management focuses on integrating management,
marketing, finance/accounting, production/operations, research and development, 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 very 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.
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 have been so
reduced by the global economic recession 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 subti-
tle for the capstone course in business administration. This course integrates material from
all business courses. The Strategic Management Club Online at www.strategyclub.com
offers many benefits for business policy and strategic management students. Professor
Hansen at Stetson University provides a strategic management slide show for this entire
text (www.stetson.edu/~rhansen/strategy).

Stages of Strategic Management
The strategic-management process consists of three stages: strategy formulation, strategy
implementation, and strategy evaluation. Strategy formulation includes developing a vision
and mission, identifying an organization’s external opportunities and threats, determining
internal strengths and weaknesses, establishing long-term objectives, generating alternative
strategies, and choosing particular strategies to pursue. Strategy-formulation issues include
deciding what new businesses to enter, what businesses to abandon, how to allocate resources,
whether to expand operations or diversify, whether to enter international markets, whether to
merge or form a joint venture, and how to avoid a hostile takeover.
Because no organization has unlimited resources, strategists must decide which alter-
native strategies will benefit the firm most. Strategy-formulation decisions commit an
organization to specific products, markets, resources, and technologies over an extended
period of time. Strategies determine long-term competitive advantages. For better or
worse, strategic decisions have major multifunctional consequences and enduring effects
on an organization. Top managers have the best perspective to understand fully the ramifi-
cations of strategy-formulation decisions; they have the authority to commit the resources
necessary for implementation.
Strategy implementation requires a firm to establish annual objectives, devise poli-
cies, motivate employees, and allocate resources so that formulated strategies can be
executed. Strategy implementation includes developing a strategy-supportive culture,
creating an effective organizational structure, redirecting marketing efforts, preparing
budgets, developing and utilizing information systems, and linking employee compensa-
tion to organizational performance.