CHECKPOINT

Instruction: Be guided by the guide questions below.

CASE STUDY. Case Scenario 1: Palmetto.

Palmetto was an early pioneer of personal data assistants (PDAs) and dominates that market space (in terms of market share) with its core product, the Palmetto Pidgy. Because this product category was entirely new to the market, Palmetto had to internally develop the hardware and software sides of the business, and today is both a manufacturer of PDAs and a programmer and licensor of its PDA operating system software. Recently, however, the hand-held device maker's performance has taken a dive as a result of slumping sales and costly inventory problems. New large entrants are entering both the equipment and software sides of its business, putting further pressure on margins. Management is currently considering its options, including the breakup of Palmetto into two separate, independent public companies - one devoted to hardware, the other software.

What business strategy issues does Palmetto face?

What primary corporate strategy issues does Palmetto face?

OTHER REFERENCES TO LOOK:

LEARNING ACTIVIES What is Strategy? A company's strategy is management's game plan for growing the business, staking out a market position, attracting and pleasing customers, competing successfully, conducting operations, and achieving targeted objectives. In crafting a strategy, management is in effect saying, "Among all the strategic paths we could have chosen and all the strategic actions we could have taken, we have decided to focus on these markets and customer needs, compete in this fashion, allocate our resources and energies in these ways, and use these particular approaches to doing business." A company's strategy thus indicates its managers' choices about the specific actions it is taking and plans to take to move the company in the intended direction and achieve the targeted outcomes. It is partly the result of trial-and-error organizational learning about what and partly the product of managerial analysis and strategic thinking abo in light of all the circumstances surrounding the company's situation What is all about strategic management in tourism and hospitality industry? Strategic management is an inconstant process where any change in organization is operating will result in a change in the strategies of the organization works on the business model of an organization to create competitive advantage in the industry. Through proper consideration of the visitor statistics, the environment in which it is being operated, capacity of the resources related to the destination the strategic planning can be implemented successfully. The strategic management of the tourism destination also involves the collaboration between stakeholders in contributing to the overall development of the destination. Strategic Planning related to hospitality is a continuous process which requires analyzing and monitoring and making necessary changes with related to the data obtained subjected to the environmental conditions. A long-term vision is needed in strategic planning and it should go in terms with the image of the destination among the public. Identifying and making priorities for further development of the destination also need to be included in the strategic plan. The goals of the plan should clearly be quoted and these goals should be made measurable in terms of performance. Strategy and the Quest for Competitive AdvantageTypically, the central thrust of a company's strategy involves crafting moves to strengthen the company's long-term competitive position and financial performance. Indeed, what separates a robust approach from an ordinary or weak one is management's ability to forge a series of moves, both in the marketplace and internally, that makes the company distinctive, tilts the playing field in the company's favor by giving buyers a reason to prefer its products or services, and produces a sustainable competitive advantage over rivals. Four of the most frequently used strategic approaches to setting a company apart from rivals and achieving a sustainable competitive advantage are: 1. Strive to be the industry's low-cost provider, thereby aiming for a cost-based competitive advantage over rivals. 2. Out-competing rivals based on such differentiating features as higher quality, broader product and service selection, added performance, better service, more attractive styling technological superiority, or excellent value for the money. 3. Focusing on a narrow market niche and winning a competitive edge by doing a better job than serving buyers' unique needs and tastes constituting the niche. 4. Developing expertise and resource strengths give the company competitive capabilities that rivals can't easily imitate or trump their abilities.What makes a strategy a winner? Three questions can be used to test the merits of one strategy versus another and distinguish a winning strategy from a losing or mediocre strategy: 1. How well does the strategy fit the company's situation? To qualify as a winner, a strategy must be well-matched to industry and competitive conditions, a company's best market opportunities, and other aspects of the external enterprise environment. 2. Is the strategy helping the company achieve a sustainable competitive advantage? Winning strategies enable a company to gain a durable competitive advantage. 3. Is the strategy resulting in better company performance? a. gains in profitability and financial strength b. gains in the company's competitive strength and market standing A company's strategy is reflected in its action in the marketplace and the statements of senior managers about the company's current business approaches, plans, and efforts to strengthen its competitiveness and performance. Once it is clear what to look for, identifying a company's strategy is mainly one of researching information about the company's actions in the marketplace and its business approaches. Let us start by laying out the critical elements of their strategies. I. WHAT IS STRATEGIC MANAGEMENT? A. Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. 1. The term strategic management is used synonymously with strategic planning. 2. Strategic management aims to exploit and create new and different opportunities for tomorrow while long-range planning tries to optimize for tomorrow the trends of today.B. Stages of Strategic Management 1. The strategic-management process consists of three stages. a. Strategy formulation includes developing a vision and mission, identifying an organization's external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue. b. Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. In addition, strategy implementation includes developing a strategy- supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. C. 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.C. 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. 2. Three fundamental strategy evaluation activities are provided below: a. Reviewing external and internal factors that are the bases for current strategies b. Measuring performance C. Taking corrective action 3. Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels in a large organization: corporate, divisional, and functional. Smaller businesses may only have the corporate and functional levels. C. Integrating Intuition and Analysis 1 . The strategic-management process can be described as an objective, logical, systematic approach for making significant organizational decisions. It attempts to organize qualitative and quantitative information in a way that allows effective decisions to be made under conditions of uncertainty. 2. Most people recognize that intuition is essential to making good strategic management decisions. Intuition is particularly useful for making decisions in situations of great uncertainty or little precedent. D. Adapting to Change 1. The strategic-management process is based on the belief that organizations should continually monitor internal and external events and trends to make timely changes as needed. The rate and magnitude of changes that affect organizations are increasing dramatically. 2. By eliminating boundaries and speeding the flow of information, e-2. By eliminating boundaries and speeding the flow of information, e- commerce and globalization are transforming business and society. 3. The need to adapt to change leads organizations to key strategic- management questions, such as, "What kind of business should we become?" "Are we in the right field?" "Should we reshape our business?" "What new competitors are entering our industry?" 4. The Internet has changed how we organize our lives, inhabit our homes, and interact with family, friends, neighbors, and ourselves. Consumers today are flocking to blogs, forums, video sites and social networking sites instead of television, radio, newspapers, and magazines. II. KEY TERMS IN STRATEGIC MANAGEMENT A. Competitive Advantage 1. Competitive advantage is defined as anything that a firm does exceptionally well compared to rival firms. 2. Firms should seek a sustained competitive advantage by continually adapting to changes in external trends and internal capabilities and evaluating strategies that capitalize on those factors. 3. An increasing number of companies are gaining a competitive advantage by using the Internet for direct selling and communication with suppliers, customers, creditors,II. KEY TERMS IN STRATEGIC MANAGEMENT A Competitive Advantage 1. Competitive advantage is defined as anything that a firm does exceptionally well compared to rival firms. 2. Firms should seek a sustained competitive advantage by continually adapting to changes in external trends and internal capabilities and evaluating strategies that capitalize on those factors. 3. An increasing number of companies are gaining a competitive advantage by using the Internet for direct selling and communication with suppliers, customers, creditors, partners, shareholders, clients, and competitors who may be dispersed globally. B. Strategists 1. Strategists are individuals who are most responsible for the success or failure of an organization. 2. Strategists hold various job titles, such as chief executive officers, president, owner, chair of the board, executive director, chancellor, dean, or entrepreneur. 3. Strategists help an organization gather, analyze, and organize information. They track industry and competitive trends, develop forecasting models and scenario analyses, evaluate corporate and divisional performance, spot emerging market opportunities, identify business threats, and develop creative action plans. C. Vision and Mission Statements 1. Vision statements answer the question: "What do we want to become?" 2. Mission statements are "enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firm's operations in product and market terms." It addresses the fundamental question that faces all strategists: "What is our business?" It should include the values and priorities of an organization. D. External Opportunities and Threats 1. External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future2. Opportunities and threats are largely beyond the control of a single organization, thus the term external. 3. To survive in a global economic recession, firms must be aware of the new opportunities and threats that have surfaced as a result. 4. A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and avoid or reduce external threats. 5. The process of conducting research and gathering and assimilating external information is called environmental scanning or industry analysis. E. Internal Strengths and Weaknesses 1. Internal strengths and internal weaknesses are an organization's controllable activities that are performed exceptionally well or poorly. 2. Identifying and evaluating organizational strengths and weaknesses in the functional areas is an essential strategic management activity. 3. Strengths and weaknesses are determined relative to competitors and may be determined by performance and elements. F. Long-Term Objectives 1. Objectives can be defined as specific results that an organization seeks to achieve in pursuing its primary mission. 2. Long-term means more than one year.F. Long-Term Objectives 1. Objectives can be defined as specific results that an organization seeks to achieve in pursuing its primary mission. 2. Long-term means more than one year. 3. Objectives state direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and provide a basis for effective planning, organizing motivating, and controlling activities. 4. Objectives should be challenging, measurable, consistent, reasonable, and straightforward. G. Strategies 1. Strategies are how long-term objectives will be achieved. For example, business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint venture. H. Annual Objectives 1. Annual objectives are short-term milestones that organizations must achieve to reach long-term objectives 2. Like long-term objectives, annual objectives should be measurable, quantitative, challenging realistic, consistent, and prioritized. I. Policies 1. Policies are how annual objectives will be achieved. Policies include guidelines, rules, and procedures established to support efforts to achieve stated goals 2. Policies are most often stated in management, marketing, finance/accounting, production/operations, research and development, and computer information systems activities. 3. Substantial research shows that a healthier workforce can more effectively and efficiently implement strategies. Because smoking is a huge burden on companies worldwide, some firms are implementing policies to curtail smoking.III. BENEFITS OF STRATEGIC MANAGEMENT The principal benefit of strategic management has been to help organizations formulate better strategies by using a more systematic, logical, and rational approach to strategic choice. Communication is a key to successful strategic management. The principal aim of the communication process is to achieve understanding and commitment throughout the organization. It results in the great benefit of empowerment. As a result, more and more organizations are decentralizing the strategic management process. A. Financial Benefits 1. Research indicates that organizations using strategic-management concepts are more profitable and successful than those that do not. 2. High-performing firms tend to do systematic planning to prepare for future fluctuations in the external and internal environments. As a result, firms with planning systems more closely resembling strategic management theory exhibit superior long-term financial performance relative to their industries B. Nonfinancial Benefits 1. 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' strengths, increased employee productivity, reduced resistance to change, and a clearer understanding of performance-reward relationships 2. In addition to empowering managers and employees, strategic management oftenB. Nonfinancial Benefits 1. 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 strengths, increased employee productivity, reduced resistance to change, and a clearer understanding of performance-reward relationships 2. In addition to empowering managers and employees, strategic management often brings order and discipline to an otherwise floundering firm. 3. Greenley (Greenley G.F. "Does Strategic Planning Improve Company Performance?". Long range Planning 19 no.2 (April 1986:106) stated that strategic management offers these benefits: a. It allows for identification, prioritization, and exploitation of opportunities. b. It provides an objective view of management problems. c. It represents a framework for improved coordination and control of activities. d. It minimizes the effects of adverse conditions and changes. e. It allows major decisions to better support established objectives. f. It allows a more effective allocation of time and resources to identified opportunities. g. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions. h. It creates a framework for internal communication among personnel. i. It helps integrate the behavior of individuals into a total effort. j. It provides a basis for clarifying individual responsibilities. k. It encourages forward-thinking. 1. It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities. m. It encourages a favorable attitude toward change. n. It gives a degree of discipline and formality to the management of a business.IV. WHY SOME FIRMS DO NOT DO STRATEGIC PLANNING Some reasons for poor or no strategic planning are as follows: Lack of knowledge or experience Laziness Poor reward structures Content with success Fire fighting Fear of failure Waste of time Overconfidence Too expensive Prior bad experience Self-interest Fear of the unknown Honest difference of opinion Suspicion V. PITFALLS IN STRATEGIC PLANNING Some pitfalls to watch for and avoid in strategic planning are provided below: Using strategic planning to gain control over decisions and resources Doing strategic planning only to satisfy accreditation or regulatory requirementsV. PITFALLS IN STRATEGIC PLANNING Some pitfalls to watch for and avoid in strategic planning are provided below: Using strategic planning to gain control over decisions and resources Doing strategic planning only to satisfy accreditation or regulatory requirements Too hastily moving from mission development to strategy formulation Failing to communicate the plan to employees, who continue working in the dark Top managers making many intuitive decisions that conflict with the formal plan Top managers not actively supporting the strategic planning process Failing to use plans as a standard for measuring performance Delegating planning to a "planner" rather than involving all managers Failing to involve key employees in all phases of planning Failing to create a collaborative climate supportive of change Viewing planning as unnecessary or unimportant Becoming so engrossed in current problems that insufficient or no planning is done Being so formal in planning that flexibility and creativity are stifled VI. GUIDELINES FOR EFFECTIVE STRATEGIC MANAGEMENT Failure to Follow Certain Guidelines in Planning Can Cause Problems 1. An integral part of strategy evaluation must be to evaluate the quality of the strategic management process. Issues such as "Is strategic management in our firm a people process of a paper process?" should be addressed. 2. An important guideline for effective strategic management is open-mindedness. A willingness to consider new information, viewpoints, ideas, and possibilities are essential. 3. Strategic decisions require trade-offs such as long-range versus short-range considerations or maximizing profits versus increasing shareholders' wealth. 4. Subjective factors such as attitudes toward risk, concern for social responsibility, and organizational culture will always affect strategy-formulation decisions, but organizations must remain as objective as possible.VII. COMPARING BUSINESS AND MILITARY STRATEGY A Strong Military Heritage Underlies the Study of Strategic Management 1. Terms such as objectives, mission, strengths, and weaknesses were first formulated to address problems on the battlefield. 2. A fundamental difference between military and business strategy is that business strategy is formulated, implemented, and evaluated with the assumption of competition. In contrast, military strategy is based on an assumption of conflict. 3. The similarities between military and business strategy can be seen in Sun Tzu's The Art of War