1. Chapter 7: Strategy and Strategic Management
PowerPoint Presentation to Accompany Management, 2/e John R. Schermerhorn, Jr. and Barry Wright
Chapter 7: Strategy and Strategic Management
Prepared by: Jim LoPresti
University of Colorado, Boulder
Revised by: Dr. Shavin Malhotra
Ryerson University, Toronto, Ontario
Published by: John Wiley & Sons Canada, Ltd.

2. Planning Ahead — Chapter 7 Study Questions
What is strategic management?
What are the essentials of strategic analysis?
What are corporate strategies and how are they formulated?
What are business strategies and how are they formulated?
What are current issues in strategy implementation?
Management 2e – Chapter 7

3. Study Question 1: What is strategic management?
Basic concepts of strategy:
Competitive advantage — operating with an attribute or set of attributes that allows an organization to outperform its rivals.
Sustainable competitive advantage — one that is difficult for competitors to imitate.
Management 2e – Chapter 7

4. Study Question 1: What is strategic management?
Basic concepts of strategy
Strategy — a comprehensive action plan that identifies long-term direction for an organization and guides resource utilization to accomplish organizational goals with sustainable competitive advantage.
Strategic intent — focusing all organizational energies on a unifying and compelling goal.
Management 2e - Chapter 7

5. Study Question 1: What is strategic management?
Goal of strategic management is to create above-average returns for investors.
Returns exceeding those for alternative opportunities at equivalent risk.
Earning above-average returns depends in part on the organization’s competitive environment.
Management 2e - Chapter 7

6. Study Question 1: What is strategic management?
Strategic Management Process:
Strategic management — the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage.
Strategic analysis – process of analyzing the organization, the environment, its competitive position and current strategies
Management 2e - Chapter 7

7. Study Question 1: What is strategic management?
Strategic Management Process:
Strategy formulation – the process of crafting strategies to guide allocation of resources
Strategy implementation – putting strategies into action
Management 2e - Chapter 7

8. Figure 7.2 Strategy formulation and implementation in the strategic management process.
Management 2e - Chapter 7

9. Study Question 2: What are the essentials of strategic analysis?
Drucker’s strategic questions for strategy formulation:
What is our business mission?
Who are our customers?
What do our customers consider value?
What have been our results?
What is our plan?
Management 2e - Chapter 7

10. Study Question 2: What are the essentials of strategic analysis?
Analysis of mission:
The reason for an organization’s existence.
An important test of the mission is how well it serves the organization’s stakeholders.
Management 2e - Chapter 7

11. Figure 7.3 How external stakeholders can be valued as strategic constituencies of organizations.
Management 2e - Chapter 7

12. Study Question 2: What are the essentials of strategic analysis?
Analysis of core values:
Values are broad beliefs about what is or is not appropriate.
Organizational culture reflects the dominant value system of the organization as a whole.
Management 2e - Chapter 7

13. Study Question 2: What are the essentials of strategic analysis?
Strong core values
Helps build organizational identity.
Gives character to the organization in the eyes of employees and external stakeholders.
Backs up the mission statement.
Guides the behaviour of organizational members in meaningful and consistent ways.
Management 2e - Chapter 7

14. Study Question 2: What are the essentials of strategic analysis?
Analysis of objectives:
Operating objectives direct activities toward key and specific performance results.
Typical operating objectives:
Profitability
Market share
Human talent
Financial health
Cost efficiency
Product quality
Innovation
Social responsibility
Management 2e - Chapter 7

15. Study Question 2: What are the essentials of strategic analysis?
What are our Strengths?
Manufacturing efficiency?
Skilled workforce?
Good market share?
Strong financing?
Superior reputation?
What are our Weaknesses
Outdated facilities?
Inadequate research and development?
Obsolete technologies?
Weak management?
Past planning failures?
Management 2e - Chapter 7

16. Study Question 2: What are the essentials of strategic analysis?
What are our Opportunities?
Possible new markets?
Strong economy?
Weak market rivals?
Emerging technologies?
Growth of existing market?
What are our Threats?
New competitors?
Shortage of resources?
Changing market tastes?
New regulations?
Substitute products?
Management 2e - Chapter 7

17. Study Question 2: What are the essentials of strategic analysis?
Analysis of organizational resources and capabilities:
Core competency is a special strength that gives an organization competitive advantage
Important goal of assessing core competencies.
Potential core competencies:
Special knowledge or expertise.
Superior technology.
Efficient manufacturing approaches.
Unique product distribution systems.
Management 2e - Chapter 7

18. Figure 7.4 SWOT analysis of strengths, weaknesses, opportunities, and threats.
Management 2e – Chapter 7

19. Study Question 2: What are the essentials of strategic analysis?
Porter’s Model of Five Strategic Forces Affecting Competition:
Industry competition
The intensity of rivalry among firms and their competitive behaviour
New entrants
the threat of new competitors entering the market
Substitute products or services
the threat of substitute products or services
Management 2e - Chapter 7

20. Study Question 2: What are the essentials of strategic analysis?
Porter’s Model of Five Strategic Forces Affecting Competition:
Bargaining power of suppliers
the ability of resource suppliers to influence the cost of products or services
Bargaining power of customers
the ability of customers to influence the price they will pay for products or services
Management 2e - Chapter 7

21. Figure 7.5 Porter’s model of five strategic forces affecting industry competition.
Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).
Management 2e - Chapter 7

22. Levels of strategies: Corporate strategy Business strategy
Study Question 3: What are corporate strategies and how are they formulated?
Levels of strategies:
Corporate strategy
sets long-term direction for the total enterprise
Business strategy
identifies how a division or strategic business unit will compete in products or services
Functional strategy
guides activities within one specific area of operations
Management 2e - Chapter7

23. Questions addressed by different strategic level:
Study Question 3: What are corporate strategies and how are they formulated?
Questions addressed by different strategic level:
Corporate strategy
In what industries and markets should we compete?
Business strategy
How are we going to compete for customers in this industry and market?
Functional strategy
How can we best utilize resources to implement our business strategy?
Management 2e - Chapter 7

24. Figure 7.1 Three levels of strategy in organizations- corporate, business, functional strategies.
Management 2e - Chapter 7

25. Grand or master strategies:
Study Question 3: What are corporate strategies and how are they formulated?
Grand or master strategies:
Growth strategies:
seek an increase in size and the expansion of current operations.
Stability strategy:
maintains current operations without substantial changes
Renewal strategy:
tries to solve problems and overcome weaknesses that are hurting performance.
Combination strategy:
pursues growth, stability, or retrenchment in some
Management 2e - Chapter 7

26. Growth and diversification strategies:
Study Question 3: What are corporate strategies and how are they formulated?
Growth and diversification strategies:
Growth strategies
Seek an increase in size and the expansion of current operations.
Types of growth strategies:
Concentration strategies
Diversification strategies
Related diversification
Unrelated diversification
Vertical integration
Management 2e - Chapter 7

27. Restructuring strategies:
Study Question 3: What are corporate strategies and how are they formulated?
Restructuring strategies:
Tries to correct weaknesses by changing the mix or reducing the scale of operations.
Restructuring through turnaround
Restructuring through downsizing
Restructuring through divestiture
Management 2e - Chapter 7

28. Study Question 3: What are corporate strategies and how are they formulated?
Global strategies:
Globalization strategy.
World is one large market; standardize products and advertising as much as possible.
Ethnocentric view.
Multidomestic strategy.
Customize products and advertising to local markets as much as possible.
Polycentric view.
Transnational strategy.
Balance efficiencies in global operations and responsiveness to local markets.
Geocentric view.
Management 2e - Chapter 7

29. Cooperative strategies
Study Question 3: What are corporate strategies and how are they formulated?
Cooperative strategies
Strategic alliances — two or more organizations partner to pursue an area of mutual interest.
Types of strategic alliances:
Outsourcing alliances
Supplier alliances
Distribution alliances
Co-opetition
Management 2e - Chapter 7

30. E-business strategies
Study Question 3: What are corporate strategies and how are they formulated?
E-business strategies
The strategic use of the Internet to gain competitive advantage.
Popular e-business strategies
Business-to-business (B2B) strategies
Business-to-customer (B2C) strategies
Management 2e - Chapter 7

31. Web-based business models:
Study Question 3: What are corporate strategies and how are they formulated?
Web-based business models:
Brokerage model
Advertising model
Merchant model
Subscription model
Infomediary model
Community model
Management 2e - Chapter 7

32. Strategic portfolio planning:
Study Question 3: What are corporate strategies and how are they formulated?
Strategic portfolio planning:
Portfolio planning seeks the best mix of investments among alternative business opportunities.
BCG Matrix analyzes business opportunities according to market growth rate and market share
Management 2e - Chapter 7

33. Study Question 3: What are corporate strategies and how are they formulated?
BCG matrix
Ties strategy formulation to analysis of business opportunities according to …
Industry or market growth rate
Low versus high
Market share
Management 2e - Chapter 7

34. Figure 7.6 The BCG matrix approach to corporate strategy formulation.
Management 2e - Chapter 7

35. BCG matrix — business conditions and related strategies:
Study Question 3: What are corporate strategies and how are they formulated?
BCG matrix — business conditions and related strategies:
Stars
High share/high growth businesses.
Preferred strategy — growth.
Cash cows
High share/low growth businesses.
Preferred strategy — stability or modest growth.
Management 2e - Chapter 7

36. BCG matrix—business conditions and related strategies (cont.):
Study Question 3: What are corporate strategies and how are they formulated?
BCG matrix—business conditions and related strategies (cont.):
Question marks
Low share/high growth businesses.
Preferred strategy — growth for promising question marks and restructuring or divestiture for others.
Dogs
Low share/low growth businesses.
Preferred strategy — retrenchment by divestiture.
Management 2e - Chapter 7

37. Porter’s generic strategies model
Study Question 4: What are business strategies and how are they formulated?
Porter’s generic strategies model
Business-level strategic decisions are driven by:
Market scope
Source of competitive advantage
Market scope and source of competitive advantage combine to generate four generic strategies.
Management 2e - Chapter 7

38. Figure 7.7 Porter’s generic strategies framework: soft-drink industry examples.
Management 2e - Chapter 7

39. Porter’s generic strategies for gaining competitive advantage:
Study Question 4: What are business strategies and how are they formulated?
Porter’s generic strategies for gaining competitive advantage:
Differentiation strategy
Cost leadership strategy
Focused differentiation strategy
Focused cost leadership strategy
Management 2e - Chapter 7

40. Study Question 5: What are current issues in strategy implementation?
Strategic planning failures that hinder strategy implementation:
Failures of substance
Inadequate attention to major strategic planning elements
Failures of process
Poor handling of strategy implementation
Lack of participation error
Goal displacement error
Management 2e - Chapter 7

41. Study Question 5: What are current issues in strategy implementation?
Corporate governance:
System of control and performance monitoring of top management.
Done by boards of directors and other major stakeholder representatives.
Controversies regarding roles of inside directors and outside directors.
Increasing emphasis on corporate governance in contemporary businesses.
Management 2e – Chapter 7

42. Study Question 5: What are current issues in strategy implementation?
Strategic control
Making sure strategies are well implemented and that poor strategies are scrapped or modified.
The top leadership of a firm or organization is expected to exercise strategic control of the enterprise.
Management 2e - Chapter 7

43. Study Question 5: What are current issues in strategy implementation?
Strategic leadership
The capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies.
Management 2e - Chapter 7

44. Study Question 5: What are current issues in strategy implementation?
Critical tasks of strategic leadership
Be a guardian of trade-offs.
Create a sense of urgency.
Ensure that everyone understands the strategy.
Be a teacher.
Management 2e - Chapter 7

45. COPYRIGHT
Copyright © 2011 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein. 45