CHAPTER SUMMARY – CHAPTER 8

The Importance of Strategic Management ✓ Define strategic management, strategy, and business model. ✓ Explain why strategic management is important.

Strategic management is what managers do to develop the organization’s strategies. Strategies are the decisions and actions that determine the long-run performance of the organization. A business model is a strategic design for how a company intends to profit from its strategies, work processes, and work activities. Strategic management is important for four reasons. First, it makes a difference in how well organizations perform. Second, it’s important for helping managers cope with continually changing situations. Third, strategic management helps coordinate diverse divisions, departments, functions, and work activities, and keeps all focused on achieving the organization’s goals. Finally, it’s important because it’s involved in many of the decisions that managers make.
The Strategic Management Process ✓ List the six steps in the strategic management process. ✓ Describe what managers do during external and internal analyses. ✓ Explain the role of resources, capabilities, and core competencies. ✓ Define strengths, weaknesses, opportunities, and threats.

The six steps in the strategic management process are: (1) identify the current mission, goals, and strategies; (2) do an external analysis; (3) do an internal analysis – steps 2 and 3 collectively are known as SWOT analysis; (4) formulate strategies; (5) implement strategies; and (6) evaluate strategies. (See Exhibit 8-1.) During an internal analysis, managers assess the organization’s resources (assets) and capabilities (how work is done). The major value-creating skills and capabilities are the organization’s core competencies. Any activities the organization does well or any unique