Strategic

Manageme
nt:
Creating
Competitiv
e
chapter 1
Advantages
Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education

1-2

The Importance of
Leadership
Consider
Maintaining competitive success or even
surviving over long periods of time is
difficult for companies of any size.
SO how much credit (or blame) does a
leader deserve?

Two Perspectives of
Leadership

1-3

External Control
Perspective

Romantic View

Leader is the key

force in the
organizations
success

External forces
determine the
organizations
success

i.e. Steve Jobs

i.e. economic
downturns

OR?

Leaders can make a

difference

1-4

Must be proactive - anticipate change

Continually refine strategies
Be aware of external opportunities and
threats
Thoroughly understand their firms
resources and capabilities
Make strategic management both a
process and a way of thinking
throughout the organization

Defining Strategic
Management

1-5

Strategic Management involves

Analysis
Strategic

goals (vision, mission, strategic objectives)

Internal and external environment

Decisions - Formulation
What

industries should we compete in?

How should we compete in those industries?

Actions - Implementation
Allocate

necessary resources
Design the organization to bring intended strategies
to reality

1-6

Two Fundamental
Questions
1. How should we compete in order to

create competitive advantages in

the marketplace?
2. How can we create competitive

advantages in the marketplace that

are unique, valuable, and difficult for
rivals to copy or substitute?
NOTE: Operational effectiveness is not enough to
sustain a competitive advantage.

Strategic Management
1-7

Key Attributes of strategic management

Directs the organization toward overall goals

and objectives.

Includes multiple stakeholders in decision

making.

Needs to incorporate short-term and longterm perspectives.

Recognizes trade-offs between efficiency

and effectiveness.

Strategic Management Tradeoffs

1-8

Managers need to be
ambidextrous

Focusing on shortWh
term efficiency al ile
so

Aligning resources
to take advantage
of existing product
markets

Focusing on longterm effectiveness

Expanding
product-market
scope by
proactively
exploring new
opportunities

Question?
1-9

According to Henry Mintzberg, the

realized strategies of a firm
A.
B.
C.
D.

are a combination of deliberate and

emergent strategies.
are a combination of deliberate and
differentiation strategies.
must be based on a companys strategic
plan.
must be kept confidential for competitive
reasons.

Intended vs Realized
Strategies

1-10

The Business Environment is far from

predictable.
Intended Strategy
Realized Strategy

Organizational
decisions are
determined only by
analysis

versu
Intended strategy
s
rarely survives in its
original form

Decisions are
determined by both
analysis (deliberate) &
unforeseen
environmental
developments,
unanticipated resource
constraints, and/or
changes in managerial
preferences (emergent)

1-11

Strategic Management
Process

Exhibit 1.2 Realized Strategy and Intended Strategy: Usually

Not the Same
Source: Mintzberg, H. & Waters, J.A., Of Strategies: Deliberate and Emergent, Strategic Management
Journal, Vol. 6, 1985, pp. 257-272. Copyright John Wiley & Sons Limited. Reproduced with permission.

Example: Failure of Intended

Strategy
1-12

BORDERS bookstore focused on its intended

strategy a physical retail presence.

Sticking to what you know best can be very

dangerous.
BORDERS found the consumer shift away from
brick & mortar book stores to online book buying
and digital books an overwhelming environmental
force against which they had few defenses.
Unanticipated developments can often have very
negative consequences for businesses regardless
of how well formulated their strategies are.

1-13

Strategic Management
Process

Exhibit 1.3 The

Strategic
Management Process

Strategy Analysis
1-14

Starting point in the strategic

management process
Precedes effective formulation and
implementation of strategies
Involves careful analysis of the
overarching goals of the organization
Requires a thorough analysis of the
organizations external and internal
environment

Strategy Analysis cont.

1-15

Analyzing Organizational Goals & Objectives

Establish a hierarchy of goals
Vision
Mission
Strategic

Objectives

Analyzing the External Environment of the

Firm
Managers must monitor & scan the environment
as well as analyze competitors
The

General Environment
The Industry Environment

Strategy Analysis cont.

1-16

Assessing the Internal Environment of

the Firm

Analyzing strengths & relationships among

activities that constitute a firms value chain
Can uncover potential sources of competitive
advantage

Assessing a Firms Intellectual Assets

Knowledge workers & other intellectual assets

drive competitive advantage & wealth creation
Networks & relationships plus technology
enhances collaboration, accumulates & stores
knowledge

Strategy Formulation
1-17

Based on strategy analysis

Developed at several levels
Involves decisions that can create and
sustain competitive advantage

Investment decisions
Commitment of resources
Operational synergies
Recognizing viable opportunities

Strategy Formulation
cont.

1-18

Formulating Business-Level Strategy

Successful firms develop bases for sustainable

competitive advantage through
Cost leadership and/or
Differentiation, as well as
Focusing on a narrow or industrywide market segment

Formulating Corporate-Level Strategy

Addresses a firms portfolio (or group) of businesses

What business(es) should we compete in?
How can we manage this portfolio of businesses to
create synergies?

Strategy Formulation
cont.

1-19

Formulating International Strategy

What is the appropriate entry strategy?

How do we go about attaining competitive
advantage in international markets?

Entrepreneurial Strategy and

Competitive Dynamics

How do we recognize viable opportunities?

How do we formulate effective strategies?

Strategy Implementation
1-20

Implements the formulated strategy

Ensures proper strategic control systems

Establishes an appropriate organizational design coordinates & integrates activities within the firm
Coordinates activities with suppliers, customers,
alliance partners
Leadership ensures organizational commitment to
excellence & ethical behavior
Promotes learning & continuous improvement
Acts entrepreneurially in creating new
opportunities

1-21

Strategy Implementation
cont.

Strategic Control & Corporate

Governance

Informational control
Monitor & scan the environment
Respond effectively to threats & opportunities

Behavioral control
Proper balance of rewards & incentives
Appropriate cultures & boundaries (or constraints)

Effective corporate governance

1-22

Strategy Implementation
cont.

Creating Effective Organizational

Designs

Organizational structures must be consistent

with strategy
Organizational boundaries must be flexible &
permeable
Strategic alliances must capitalize on
capabilities of other organizations

1-23

Strategy Implementation
cont.

Creating a Learning Organization &

an Ethical Organization

Effective leaders
Set

a direction
Design the organization
Develop an organization committed to
excellence & ethical behavior

Create a learning organization

Benefit

from individual & collective talents

1-24

Strategy Implementation
cont.

Fostering Corporate
Entrepreneurship

Firms must continually improve & grow

Firms must find new ways to renew
themselves
Entrepreneurship & innovation provide for
new opportunities
Enhance

a firms innovative capacity

Allow autonomous entrepreneurial behavior

Corporate Governance &

Stakeholder Management
1-25

Corporate Governance: the

relationship among various participants
in determining the direction and
performance of corporations.
Primary participants:

The shareholders
The management (led by the Chief
Executive Officer)
The Board of Directors (BOD)

Corporate Governance
cont.

1-26

Board of Directors

Elected representatives
of the owners
Ensure interests &
motives of management
are aligned with those of
the owners

Need an effective and

engaged Board
Shareholder activism
Proper managerial rewards
& incentives
External control mechanisms

Exhibit 1.4 The Key Elements

of Corporate Governance

Stakeholder Management
1-27

Exhibit 1.5 An Organizations Key Stakeholders & the Nature of

Their Claims

Stakeholder Management
1-28

Two views of stakeholder

management
Zero Sum

Stakeholders
compete for
OR?
attention &
resources
Gain of one is a loss
to the other

Symbiosis

Stakeholders are
dependent upon
each other for
success & wellbeing
Receive mutual
benefits

Question?
1-29

Outback Steakhouse has developed a

sophisticated quantitative model and found
that there were positive relationships
between employee satisfaction, customer
satisfaction, and financial results. According
to the text, this is an example of ___________.
A. zero-sum relationship among stakeholders
B. stakeholder symbiosis
C. rewarding stakeholders
D. emphasizing financial returns

Social Responsibility
1-30

Social responsibility: the expectation that

businesses or individuals will strive to
improve the overall welfare of society.

Firms have multiple stakeholders and must go

beyond a focus solely on financial results
Firms must create shared value identify &
expand connections between societal & economic
progress
Firms can measure a triple bottom line
Assessing financial, social, AND environmental
performance
Embracing environmental sustainability.

Example: Making Sustainability

Profitable
1-31

Rapidly developing economies are often seen as

sustainability laggards, due to weak regulatory bodies,
resource shortages, competition from more
industrialized countries & firms.

Yet Sekems leadership had a vision: as Egypts first

organic farm, of growing organic cotton.

Sekems farming techniques reclaimed arable land from

the Sahara, and decreased greenhouse gases. It also
meant cotton needed 20%-40% less water.

Responding to worldwide demand, from 2006 until the

Arab Spring of 2011, Sekem improved cotton yields by
30%, & increased revenues by 14%.

Sekem took the long-term view of strategy & it paid off.

Empowered Strategic
Management

1-32

Strategic management requires an

integrative view of the organization
ALL functional areas & activities must fit
together to achieve goals & objectives
Leaders are needed throughout:

Local line leaders have profit & loss

responsibility
Executive leaders champion & guide ideas
Internal networkers hold little positional
power, but have conviction & clarity of ideas

Coherence in Strategic
Direction

1-33

Organizations express priorities best

through stated goals & objectives that
form a hierarchy of goals

Vision evokes powerful & compelling

mental images of a shared future
Mission encompasses the organizations
current purpose, basis of competition, &
competitive advantage
Strategic Objectives operationalize the
mission statement with specific yardsticks

1-34

Coherence in Strategic
Direction

Exhibit 1.6 A Hierarchy of Goals

Coherence in Strategic
Direction

1-35

Organizational Vision

A massively inspiring goal

Overarching, long term
A destination driven by & evoking passion
Developed & implemented by leadership
A fundamental statement of an
organizations values, aspirations, and goals
Captures both the minds & hearts of
employees

Coherence in Strategic
Direction

1-36

Organizational Visions can backfire

The Walk Doesnt Match the Talk

Irrelevance
Not the Holy Grail
Too Much Focus Leads to Missed
Opportunities
An Ideal Future Irreconciled with the
Present

Coherence in Strategic
Direction

1-37

Mission Statement

States the purpose of the company & builds

a common understanding of that purpose
More specific than the vision
Focused on the means by which the firm
will compete
Incorporates stakeholder management
Communicates why an organization is
special & different
Can & should change when competitive
conditions change

Coherence in Strategic
Direction

1-38

Strategic Objectives

Used to operationalize the mission statement

Provide guidance on how to fulfill mission &
vision
Are measurable, specific, appropriate,
realistic & timely
Can be short-term action plans
Can be both financial and nonfinancial
Should be challenging, yet help resolve
conflicts
Provide a yardstick for rewards & incentives