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 ramifications of strategy-
formulation decisions; they have the authority to commit the resources necessary for implementation.
Strategy implementation often is called the “action stage” of strategic management. Implementing
strategy means mobilizing employees and managers to put formulated strategies into action. Often
considered to be the most difficult stage in strategic management, strategy implementation requires
personal discipline, commitment, and sacrifice. Interpersonal skills are especially critical for successful
strategy implementation. Strategy implementation activities affect all employees and managers in an
organization. Every division and department must decide on answers to questions such as “What must we
do to implement our part of the organization’s strategy?” and “How best can we get the job done?” The
challenge of implementation is to stimulate managers and employees throughout an organization to work
with pride and enthusiasm toward achieving stated objectives.
Strategy evaluation is the final stage in strategic management. Managers desperately need to know when
particular strategies are not working well; strategy evaluation is the primary means for obtaining this
information. All strategies are subject to future modification because external and internal factors
constantly change. Three fundamental strategy-evaluation activities are (1) reviewing external and
internal factors that are the bases for current strategies, (2) measuring performance, and (3) taking
corrective actions. Strategy evaluation is needed because success today is no guarantee of success
tomorrow! Success always creates new and different problems; complacent organizations experience
demise.
Formulation, implementation, and evaluation of strategy activities occur at three hierarchical levels in a
large organization: corporate, divisional or strategic business unit, and functional.
Corporate-level strategy
At the corporate level strategy however, management must not only consider how to gain a competitive
advantage in each of the line of businesses the firm is operating in, but also which businesses they should
be in in the first place. This level of strategy is only necessary when the company operates in two or more
business areas through different business units with different business-level strategies that need to be
aligned to form an internally consistent corporate-level strategy.
Functional-level strategy
Functional-level strategy is concerned with the question “How do we support the business-level strategy
within functional departments. These strategies are often aimed at improving the effectiveness of a
company’s operations within departments.
Business-level strategy
The Business-level strategy is what most people are familiar with and is about the question “How do we
compete?”, “How do we gain (a sustainable) competitive advantage over rivals?”. The business-level
strategy is aimed at gaining a competitive advantage by offering true value for customers while being a
unique and hard-to-imitate player within the competitive landscape.
Chap 2
A core values statement specifies a firm’s commitment to integrity, fairness, discipline, equal
employment opportunity, teamwork, accountability, continuous improvement, or other such exemplary
attributes. Your core values define how you want the people in your organization to behave. Together
with your mission and vision statement, they are a foundational part of your organizational structure.
They articulate the underlying beliefs and purpose that each member of your organization is committed to
embodying.
Mission Statement: A declaration of an organization’s “reason for being.” It is also called a creed
statement, a statement of purpose.
Characteristics:
1. Broad in scope; does not include monetary amounts, numbers, percentages, ratios, or objectives
2. Fewer than 150 words in length
3. Inspiring
4. Identifies the utility of a firm’s products
5. Reveals that the firm is socially responsible
6. Reveals that the firm is environmentally responsible
7. Includes nine components: customers, products or services, markets, technology, concern for
survival/growth/profits, philosophy, self-concept, concern for public image, concern for
employees
8. Reconciliatory
9. Enduring
Mission Statement Components:
1. Customers - Who are the firm’s customers?
2. Products or services - What are the firm’s major products or services?
3. Markets - Geographically, where does the firm compete?
4. Technology - Is the firm technologically current?
5. Survival, growth, and profitability - Is the firm committed to growth and financial soundness?
6. Philosophy - What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
7. Distinctive competence - What is the firm’s major competitive advantage?
8. Public image - Is the firm responsive to social, community, and environmental concerns?
9. Employees - Are employees a valuable asset of the firm?
Importance of Vision and Mission Statements:
1. To make sure all employees/managers understand the firm’s purpose or reason for being.
2. To provide a basis for prioritization of key internal and external factors utilized to formulate
feasible strategies.
3. To provide a basis for the allocation of resources.
4. To provide a basis for organizing work, departments, activities, and segments around a common
purpose.
Benefits of Having a Clear Mission and Vision
1. Achieve clarity of purpose among all managers and employees.
2. Provide a basis for all other strategic planning activities, including internal and external
assessment, establishing objectives, developing strategies, choosing among alternative strategies,
 devising policies, establishing organizational structure, allocating resources, and evaluating
performance.
3. Provide direction.
4. Provide a focal point for all stakeholders of the firm.
5. Resolve divergent views among managers.
6. Promote a sense of shared expectations among all managers and employees.
7. Project a sense of worth and intent to all stakeholders.
8. Project an organized, motivated organization worthy of support.
9. Achieve higher organizational performance.
10. Achieve synergy among all managers and employees.
Developing Vision and Mission Statements
A widely used approach includes:
Select several articles about these statements and ask all managers to read these as background
information.
Ask managers themselves to prepare a vision and mission statement for the organization.
A facilitator or committee of top managers should then merge these statements into a single document
and distribute the draft statements to all managers.
A request for modifications, additions, and deletions is needed next, along with a meeting to revise the
document

Chap 3
The internal audit
An internal audit determines the organization’s position within its industry. This process is essential for
building and maintaining a sustainable competitive advantage
• Requires gathering, assimilating, and prioritizing information about the firm's management,
marketing, finance, accounting, production/operations, research and development (R and D), and
management information systems operations
• Provides more opportunity for participants to understand how their jobs, departments, and divisions
fit into the whole firm
The Resource-Based View (RBV) Approach
A resource based view (RBV) of a firm, recognises that each firm has a bundle of valuable resources that
it applies to give it a competitive advantage over its competitors. These resources are diverse in nature
and require a firm networks with other firm to develop complex solutions.
contends that internal resources are more important for a firm than external factors in achieving and
sustaining competitive advantage.
For a resource to be valuable, it must be either:
(1) rare,
(2) hard to imitate, or
(3) not easily substitutable.
These three characteristics of resources are called Empirical Indicators
These enable a firm to implement strategies that improve its efficiency and effectiveness and lead to a
sustainable competitive advantage.
Distinctive competencies
refers to a superior characteristic, strength, or quality that distinguishes a company from its competitors.
This distinctive quality can be just about anything—innovation, a skill, design, technology, name
recognition, marketing, workforce, customer satisfaction, or even being first to market.
A firm’s strengths that cannot be easily matched or imitated by competitors Building competitive
advantages involves taking advantage of distinctive competencies.
The Internal Factor Evaluation Matrix
A summary step in conducting an internal strategic-management audit is to construct an Internal Factor
Evaluation (IFE) Matrix. This strategy-formulation tool summarizes and evaluates the major strengths
and weaknesses in the functional areas of a business, and it also provides a basis for identifying and
evaluating relationships among those areas. Intuitive judgments are required in developing an IFE Matrix,
so the appearance of a scientific approach should not be interpreted to mean this is an all-powerful
technique. A thorough understanding of the factors included is more important than the actual numbers.
Similar to the EFE Matrix and the Competitive Profile Matrix (CPM) described in Chapter 7, an IFE
Matrix can be developed in five steps:
1. List key internal factors as identified in the internal-audit process. Use a total of 20 internal factors,
including both strengths and weaknesses. List strengths first and then weaknesses. Be as specific as
possible, using percentages, ratios, and comparative numbers. Recall that Edward Deming said, “In God
we trust. Everyone else bring data.” Include action-able factors that can provide insight regarding
strategies to pursue. For example, the factor “Our Quick Ratio is 2.1 versus industry average of 1.8” is not
actionable, whereas the factor “Our chocolate division’s ROI increased from 8 to 15 percent in South
America” is actionable. Also, be as divisional as possible, because consolidated data oftentimes is not as
revealing or useful in deciding among strategies as the underlying by-segment or division data.
2. Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to each factor. The weight
assigned to a given factor indicates the relative importance of the factor to being successful in the firm’s
industry. Regardless of whether a key factor is an internal strength or weakness, factors considered to
have the greatest effect on organizational performance should be assigned the highest weights. The sum
of all weights must equal 1.0.
3. Assign a 1 to 4 rating to each factor to indicate whether that factor represents a major weakness (rating
= 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4). Note
that strengths must receive a 3 or 4 rating and weaknesses must receive a 1 or 2 rating. Ratings are thus
company-based, whereas the weights in step 2 are industry-based.
4. Multiply each factor’s weight by its rating to determine a weighted score for each variable.
5. Sum the weighted scores for each variable to determine the total weighted score for the organization.
Regardless of how many factors are included in an IFE Matrix, the total weighted score can
range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Total weighted scores
well below 2.5 characterize organizations that are weak internally, whereas scores significantly
above 2.5 indicate a strong internal position. Like the EFE Matrix, an IFE Matrix should include
20 key factors. The number of factors has no effect on the range of total weighted scores because
the weights always sum to 1.0.
When a key internal factor is both a strength and a weakness, the factor may be included twice
in the IFE Matrix, and a weight and rating assigned to each statement. For example, the Playboy
logo both helps and hurts Playboy Enterprises; the logo attracts customers to Playboy magazine,
but it keeps the Playboy cable channel out of many markets. Be as quantitative as possible when
stating factors. Use monetary amounts, percentages, numbers, and ratios to the extent possible.
An example IFE Matrix is provided in Table 6-8 for a retail computer store. The table
reveals that the two most important factors to be successful in the retail computer store business
are “Revenues from repair/service in the store” and “Employee morale.” Note that the store is
doing best on “Average customer purchase” amount and “In-store technical support.” The store is
having major problems with its carpet, bathroom, paint, and checkout procedures. Note also that
the matrix contains substantial quantitative data rather than vague statements; this is excellent.
Overall, this store receives a 2.5 total weighted score, which on a 1 to 4 scale is exactly average/
halfway, indicating there is definitely room for improvement in store operations, strategies, policies,
and procedures.
The IFE Matrix provides important information for strategy formulation. For example, this
retail computer store might want to hire another checkout person and repair its carpet, paint,
and bathroom problems. Also, the store may want to increase advertising for its repair/services,
because that is a really important (weight 0.15) factor to being successful in this business.
Chap 3
External audit
focuses on identifying and evaluating trends and events beyond the control of a single firm
reveals key opportunities and threats confronting an organization so that managers can formulate
strategies to take advantage of the opportunities and avoid or reduce the impact of threats.
The external audit is aimed at identifying key variables that offer actionable responses.
Firms should be able to respond either offensively or defensively to the factors by formulating strategies
that take advantage of external opportunities or that minimize the impact of potential threats.

competitor intelligence is the process in which a company gathers and analyzes information about its
industry, business environment, competitors, and products with the goal of directing their future strategy.

The Matching Stage

The BCG matrix is a simple framework that all companies can use to evaluate their products. Anyone
can look at the matrix and grasp which of the business’s products are performing the best. In addition to
giving a bird’s-eye view of how products are performing, the matrix helps identify what factors make
each product successful or unsuccessful. It also lets you see how your products stack up against one
another.