1. STRATEGIC MANAGEMENT Alex Miller THIRD EDITION
© The McGraw-Hill Companies, Inc., 1998

2. The Content of Strategy
Chapter One
The Content of Strategy
Slide 1-1
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998

3. The Architecture of Strategy
FINANCIAL PERFORMANCE
Economic Value
Added
Profitability
Growth
Financial Risks
COMPETITIVE ADVANTAGE
Differentiation
Low Cost
Quick
Response
STRUCTURAL POSITION
Rivalry
Entrants
Substitutes
PROCESS EXECUTION
Product Development
Demand Management
Order Fulfillment
Customers
Suppliers
ENTERPRISE SYNERGIES
Core Competencies
Market Power
Shared Infrastructure
Balanced Cash Flows
Transnational Advantage
ORGANIZATIONAL CAPACITY
Leadership
Learning
Slide 1-2
Levers
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998

4. Managers Are Responsible to a Diverse Set of Stakeholders and Have Responsibilities to All of Them
Stockholders
Owners/
Local
Community
Associations
Trade
Suppliers
Managers
Customers
The Public at
Large
Governments
Employees
Slide 1-3
Exh. 1.1
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998

5. A Firm’s Financial Performance Depends on Its Competitiveness
Differentiation
Economic
Value
Added
Market
Value
Added
Competitive
Advantage
Cost Leadership
Quick Response
Value Captured for
Investors
Value Created for Customers
Slide 1-4
Exh. 1.4
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998

6. Two Hypothetical Examples of EVA Analysis
Weighted Average
Cost of Capital
Value Created
(Destroyed)
After-Tax
Operating Profit
minus =
67%
equity
Weighted
average
cost
@ 12%
$175
million
Operating
profit
10%
Firm A
33%
debt
@ 6%
Firm A’s
Created
Value
- $75
million
x$800
million
Total
capital
Taxes
$100
million
$80
million
$20
million
minus =
25%
equity
Weighted
average
cost
@ 20%
$200
million
Operating
profit
11%
Firm B
75%
debt
@ 8%
Firm B’s
Destroyed
Value
- $80
million
x$2000
million
Total
capital
Taxes
$120
million
$220
million
($100)
million
minus =
Slide 1-5
Exh. 1.7
Irwin/McGraw-Hill
© The McGraw-Hill Companies, Inc., 1998