strategic-management

Internal factors can be determined in a number of ways, including computing ratios,
measuring performance, and comparing to past periods and industry averages. Various
types of surveys also can be developed and administered to examine internal factors such
as employee morale, production efficiency, advertising effectiveness, and customer loyalty.
Long-Term Objectives
Objectives can be defined as specific results that an organization seeks to achieve in pursuing
its basic mission. Long-term means more than one year. Objectives are essential for organizational
success because they state direction; aid in evaluation; create synergy; reveal priorities;
focus coordination; and provide a basis for effective planning, organizing, motivating, and
controlling activities. Objectives should be challenging, measurable, consistent, reasonable,
and clear. In a multidimensional firm, objectives should be established for the overall
company and for each division.
Strategies
Strategies are the means by which long-term objectives will be achieved. Business strategies
may include geographic expansion, diversification, acquisition, product development,
market penetration, retrenchment, divestiture, liquidation, and joint ventures. Strategies
currently being pursued by some companies are described in Table 1-1.
Strategies are potential actions that require top management decisions and large
amounts of the firm’s resources. In addition, strategies affect an organization’s long-term
prosperity, typically for at least five years, and thus are future-oriented. Strategies have
multifunctional or multidivisional consequences and require consideration of both the
external and internal factors facing the firm.
Annual Objectives
Annual objectives are short-term milestones that organizations must achieve to reach longterm
objectives. Like long-term objectives, annual objectives should be measurable, quantitative,
challenging, realistic, consistent, and prioritized. They should be established at the
TABLE 1-1 Sample Strategies in Action in 2009
Best Buy
As soon as Best Buy Company became victorious over longtime archrival Circuit City Stores,
Best Buy ran head on into a much larger, formidable competitor: Wal-Mart Stores. Based in
Richfield, Minnesota, and having 3,900 stores worldwide, Best Buy reported a 20 percent
decline in March 2009 earnings as its new rival Wal-Mart gained thousands of the old Circuit
City customers. But Best Buy now meets Wal-Mart’s prices on electronics items and provides
great one-on-one customer service with its blue-shirted employees. Best Buy remains well
ahead of Wal-Mart in U.S. electronics sales, but Wal-Mart is gaining strength.
Levi Strauss
San Francisco-based Levi Strauss added 30 new stores and acquired 72 others during the second
quarter of 2009. Known worldwide for its jeans, Levi Strauss is expanding and entrenching worldwide
while other retailers are faltering in the ailing economy. For that quarter, Levi’s revenues in
the Americas were up 8 percent to $518 million, although its Europe and Asia/Pacific revenues
declined 17 percent and 13 percent respectively. Levi’s CEO John Anderson says slim fit and skinny
jeans are selling best; and the two most popular colors today are very dark and the distressed look.
New York Times Company
New York Times Company’s CEO, Janet Robinson, says her company is selling off assets
and investing heavily in Internet technology in order to convince advertisers that the newspaper
is getting ahead of technological changes rapidly eroding the newspaper business.
Ms. Robinson is considering plans to begin charging customers for access to the newspaper’s
online content, because online advertising revenues are not sufficient to support the business.
The 160-year-old New York Times Company’s advertising revenues fell 30 percent in the
second quarter of 2009.
CHAPTER 1 • THE NATURE OF STRATEGIC MANAGEMENT 13