How strategy is initiated?

 A triggering event is something that stimulates a change in strategy .Some of the possible triggering events is:

 New CEO: By asking a series of embarrassing questions, the new CEO cuts through the veil of complacency and forces people to question the very reason for the corporation‘s existence.

 Intervention by an external institution: The firm‘s bank suddenly refuses to agree to a new loan or suddenly calls for payment in full on an old one.

 Threat of a change in ownership: Another firm may initiate a takeover by buying

 the company‘s common stock.

 Management’s recognition of a performance gap: A performance gap exists when performance does not meet expectations. Sales and profits either are no longer increasing or may even be falling.

 Innovation of a new product that threatens the existence of the present status quo.

 Basic model of strategic management

 Strategic management consists of four basic elements

 1. Environmental scanning

2. Strategy Formulation

3. Strategy Implementation and

4. Evaluation and control

 Management scans both the external environment for opportunities and threats and the internal environmental for strengths and weakness. The following factors that are most important to the corporation‘s future are called strategic factors: strengths, weakness, opportunities and threats (SWOT)

 Strategy Formulation

 Strategy formulation is the development of long-range plans for they effective management of environmental opportunities and threats, taking into consideration corporate strengths and weakness. It includes defining the corporate mission, specifying achievable objectives, developing strategies and setting policy guidelines.

 Mission

 An organization‘s mission is its purpose, or the reason for its existence. It states what it is providing to society .A well conceived mission statement defines the fundamental , unique purpose that sets a company apart from other firms of its types and identifies the scope of the company ‗s operation in terms of products offered and markets served

  Objectives

 Objectives are the end results of planned activity; they state what is to be accomplished by when and should be quantified if possible. The achievement of corporate objectives should result in fulfillment of the corporation‘s mission.

 Strategies

 A strategy of a corporation is a comprehensive master plan stating how corporation will achieve its mission and its objectives. It maximizes competitive advantage and minimizes competitive disadvantage. The typical business firm usually considers three types of strategy: corporate, business and functional.

 Policies

 A policy is a broad guideline for decision making that links the formulation of strategy with its implementation. Companies use policies to make sure that the employees throughout the firm make decisions and take actions that support the corporation‘s mission, its objectives and its strategies.

 Strategic decision making

 Strategic deals with the long-run future of the entire organization and have three characteristic

 1. Rare- Strategic decisions are unusual and typically have no precedent to follow.

 2. Consequential-Strategic decisions commit substantial resources and demand a great deal of commitment

 3. Directive- strategic decisions set precedents for lesser decisions and future actions throughout the organization.