Strategic Management: Models, Plans, and Controls

Mission Statement

A mission statement is a written declaration of why a company exists and what it plans to accomplish. It provides general guidelines for the company's strategy formulation and decision-making.

Strategy Formulation Models

Shareholder Model

The shareholder model of strategy formulation operates from the basic premise that the key strategic purpose of a business is to maximize financial returns for its owners/shareholders.

Stakeholder Model

The stakeholder model of strategy formulation believes that businesses exist to benefit not just their shareholders, but also various groups, such as employees and customers, that have a meaningful stake in their operation.

Who Does Strategy Formulation Affect?

• Global Business
• Employees
• Consumers
• Shareholders
• Communities where it does business
• Creditors
• Suppliers

Types of Plans

Operational Plan

Operational plans are very short-term (less than one year) plans formulated for implementing strategic goals.

Tactical Plan

Tactical plans are one- to three-year plans formulated for implementing strategic plans.

Strategic Implementation Approaches

Prospectors

Prospectors are organizations whose basic strategic implementation involves extending their success through global expansion and finding new market opportunities.

Defenders

Defenders are organizations that implement a basic market strategy of concentrating on existing operations and generally defending their home turf.

Reactors

Reactors are organizations whose strategic implementation involves responding to strategic actions initiated by competitors.

Analyzers

Analyzers are organizations that take a middle ground between being prospectors and defenders.

Types of Knowledge

Tacit Knowledge

Tacit knowledge is informal in nature and difficult to communicate, such as a special cake recipe from a family member that calls for a pinch of this and a pinch of that.

Explicit Knowledge

Explicit knowledge is codifiable and easy to communicate or write down.

Organizational Controls

Bureaucratic Controls

Bureaucratic controls are systems of rules and regulations promulgated within a global business, which help maintain consistent procedures within an organization (e.g., all should fly coach, including the CEO).

Interpersonal Controls

Interpersonal controls involve executives engaging in personal contact with subordinates as a way of managing an organization (e.g., a manager interacting with every single employee).

Output Controls and Measurement

Output controls and measurement involve establishing specific goals on given metrics and then measuring to what extent these goals are being achieved at certain time intervals.

Examples of Output Controls

• Profit
• Growth
• Productivity
• Market Share
• Quality
• Six Sigma
• Corporate Social Responsibility (CSR)

Organizational Culture

Organizational culture represents the personality of a given organization, its shared norms and values. It is an effective control mechanism when norms are fully accepted.

Organizational Change

Organizational change represents the implementation of a different business or cultural path for the organization. There is often resistance to change, even if the change is necessary.