After reading this lecture you will be able to know that:
What are Non financial
benefits of Strategic Management?
Why firms do no
Pitfalls to avoid in
Non- financial Benefits
of competitors’ strategies
Greater awareness of
performance reward relationships
Lesser resistance to
Besides helping firms avoid financial demise, strategic
management offers other tangible benefits, such as an
enhanced awareness of external threats, an improved
understanding of competitors' strategies, increased
employee productivity, reduced resistance to change, and a
clearer understanding of performance-reward
relationships. Strategic management enhances the
problem-prevention capabilities of organizations because
it promotes interaction among manager’s at all divisional and
functional levels. Interaction can enable firms
to turn on their managers and employees by nurturing them,
sharing organizational objectives with them,
empowering them to help improve the product or service, and
recognizing their contributions.
In addition to empowering managers and employees, strategic
management often brings order and
discipline to an otherwise floundering firm.
It can be the
beginning of an efficient and effective managerial
system. Strategic management may renew confidence in the current
business strategy or point to the need
for corrective actions. The strategic-management process
provides a basis for identifying and rationalizing
the need for change to all managers and employees of a firm; it
helps them view change as an opportunity
rather than a threat.
Greenly stated that
strategic management offers the following benefits:
1. It allows for identification, prioritization, and
exploitation of opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and
control of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established
6. It allows more effective allocation of time and resources to
7. It allows fewer resources and less time to be devoted to
correcting erroneous or ad hoc decisions.
8. It creates a framework for internal communication among
9. It helps integrate the behavior of individuals into a total
10. It provides a basis for clarifying individual
11. It encourages forward thinking.
12. It provides a cooperative, integrated, and enthusiastic
approach to tackling problems and
13. It encourages a favorable attitude toward change.
14. It gives a degree of discipline and formality to the
management of a business.
Why Some Firms Do No Strategic Planning?
Some firms do not engage in strategic planning and some firms do
strategic planning but receive no support
from managers and employees. Some reasons for poor or no
strategic planning are as follows:
1. Poor Reward
Structures—when an organization
assumes success, it often fails to reward success.
Where failure occurs, then the firm may punish. In this
situation, it is better for an individual to do
nothing (and not draw attention) than risk trying to achieve
something, fail, and be punished.
organization can be so deeply embroiled in crisis management and fire-fighting
that it does not have time to plan.
3. Waste of Time—some
firms see planning as a waste of time since no marketable product is
produced. Time spent on planning is an investment.
4. Too Expensive—some
organizations are culturally opposed to spending resources.
may not want to put forth the effort needed to formulate a plan.
6. Content with
Success—particularly if a firm is
successful, individuals may feel there is no need to
plan because things are fine as they stand. But success today
does not guarantee success tomorrow.
7. Fear of Failure—by
not taking action, there is little risk of failure unless a problem is urgent
pressing. Whenever something worthwhile is attempted, there is
some risk of failure.
individuals amass experience, they may rely less on formalized planning.
Rarely, however, is this appropriate. Being overconfident or
overestimating experience can bring
demise. Forethought is rarely wasted and is often the mark of
9. Prior Bad
Experience—People may have had a
previous bad experience with planning, where
plans have been long, cumbersome, impractical, or inflexible.
Planning, like anything, can be done
someone has achieved status, privilege, or self-esteem through effectively
using an old system, they often see a new plan as a threat.
11. Fear of the
Unknown—People may be uncertain of
their abilities to learn new skills, their aptitude
with new systems, or their ability to take on new roles.
Difference of Opinion—People may
sincerely believe the plan is wrong. They may view
the situation from a different viewpoint, or may have
aspirations for themselves or the organization
that are different from the plan. Different people in different
jobs have different perceptions of a
may not trust management.
Pitfalls to avoid in Strategic Planning
Strategic planning is an involved, intricate, and complex
process that takes an organization into non
chartered territory. It does not provide a ready-to-use
prescription for success; instead, it takes the
organization through a journey and offers a framework for
addressing questions and solving problems.
Being aware of potential pitfalls and prepared to address them
is essential to success.
Some pitfalls to watch for and avoid in strategic planning are
1. Using strategic planning to gain control over decisions and
2. Doing strategic planning only to satisfy accreditation or
3. Too hastily moving from mission development to strategy
4. Failing to communicate the plan to employees, who continue
working in the dark
5. Top managers making many intuitive decisions that conflict
with the formal plan
6. Top managers not actively supporting the strategic-planning
7. Failing to use plans as a standard for measuring performance
8. Delegating planning to a "planner" rather than involving all
9. Failing to involve key employees in all phases of planning
10. Failing to create a collaborative climate supportive of
11. Viewing planning to be unnecessary or unimportant
12. Becoming so engrossed in current problems that insufficient
or no planning is done
13. Being so formal in planning that flexibility and creativity
Business Ethics and Strategic Management
Business ethics can be
defined as principles of conduct within organizations that guide decision making
Good business ethics is a prerequisite for good strategic
management; good ethics is just good business.
A rising tide of consciousness about the importance of business
ethics is sweeping America and the world.
Strategists are the individuals primarily responsible for
ensuring that high ethical principles are espoused and
practiced in an organization. All strategy formulation,
implementation, and evaluation decisions have ethical
A new wave of ethics issues related to product safety, employee
health, sexual harassment, AIDS in the
workplace, smoking, acid rain, affirmative action, waste
disposal, foreign business practices, cover-ups,
takeover tactics, conflicts of interest, employee privacy,
inappropriate gifts, security of company records,
and layoffs has accented the need for strategists to develop a
clear code of business ethics. A
business ethics can
provide a basis on which policies can be devised to guide daily behavior and
at the work site.
The explosion of the Internet into the workplace has raised many
new ethical questions in organizations
today. For example, United Parcel Service (UPS) recently caught
an employee actually running a personal
business from his computer.
Merely having a code of ethics, however, is not sufficient to
ensure ethical business behavior. A code of
ethics can be viewed as a public relations gimmick, a set of
platitudes, or window dressing. To ensure that
the code is read, understood, believed, and remembered,
organizations need to conduct periodic ethics
workshops to sensitize people to workplace circumstances in
which ethics issues may arise. If employees see
examples of punishment for violating the code and rewards for
upholding the code, this helps reinforce the
importance of a firm's code of ethics.
Internet privacy is an emerging ethical issue of immense
– 38% of companies store
and review employees’ email messages
– Up from 15% in recent
– 54% companies monitor
employees’ internet connections
– Situation in Pakistan is
not much different
Advertisers, marketers, companies, and people with various
reasons to snoop on other people now can
discover easily on the Internet others' buying preferences,
hobbies, incomes, medical data, social security
numbers, addresses, previous addresses, sexual preferences,
credit card purchases, traffic tickets, divorce
settlements, and much more.
Some business actions
considered to be unethical include misleading
advertising or labeling, causing
environmental harm, poor product or service safety, padding
expense accounts, insider trading, dumping
banned or flawed products. In foreign markets, lack of equal
opportunities for women and minorities,
overpricing, hostile takeovers, moving jobs overseas, and using
nonunion labor in a union shop.
Nature of global competition:
Foreign competitors are battering U.S. firms in many industries.
In its simplest sense, the international
challenge faced by U.S. business is twofold:
(1) How to gain and maintain exports to other nations and
(2) How to defend domestic markets against imported goods.
Few companies can afford to ignore the presence of international
competition. Firms that seem insulated
and comfortable today may be vulnerable tomorrow; for example,
foreign banks do not yet compete or
operate in most of the United States.
More and more countries around the world are welcoming foreign
investment and capital. As a result, labor
markets have steadily become more international. East Asian
countries have become market leaders in
labor-intensive industries, Brazil offers abundant natural
resources and rapidly developing markets, and
Germany offers skilled labor and technology. The drive to
improve the efficiency of global business
operations is leading to greater functional specialization. This
is not limited to a search for the familiar lowcost
labor in Latin America or Asia. Other considerations include the
cost of energy, availability of
resources, inflation rates, existing tax rates, and the nature
of trade regulations. Yang Shangkun insists that
China's door is still open to foreign capital and technology,
despite the continued strength of the
The ability to identify and evaluate strategic opportunities and
threats in an international environment is a
prerequisite competency for strategists. The nuances of
competing in international markets are seemingly
infinite. Language, culture, politics, attitudes, and economies
differ significantly across countries. The
availability, depth, and reliability of economic and marketing
information in different countries vary
extensively, as do industrial structures, business practices,
and the number and nature of regional