1. CHAPTER 7 STRATEGY AND STRATEGIC MANAGEMENT
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CHAPTER 7
STRATEGY AND STRATEGIC MANAGEMENT

2. OVERVIEW What is strategic management?
What are the essentials of strategic analysis?
What are the corporate strategies and how are they formulated?
What are business strategies and how are they formulated?
What are some current issues in strategy implementation?

3. What Is Strategic Management?
Competitive Advantage
Sustainable Competitive Advantage
Strategy
Strategic Intent
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.

4. What Is Strategic Management?
STRATEGIC MANAGEMENT PROCESS
Strategic Management
Strategic Analysis
Strategy Formulation
Strategy Implementation

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

6. ESSENTIALS OF STRATEGIC ANALYSIS
Mission – Statement expresses the organization’s reason for existence in society
An important test of the mission is how well it serves the organization’s stakeholders

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

8. ESSENTIALS OF STRATEGIC ANALYSIS
Core Values -
Organizational Culture

9. 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

10. ESSENTIALS OF STRATEGIC ANALYSIS
What are our Weaknesses
Outdated facilities?
Inadequate research and development?
Obsolete technologies?
Weak management?
Past planning failures?
What are our Strengths?
Manufacturing efficiency?
Skilled workforce?
Good market share?
Strong financing?
Superior reputation?
Management 2e - Chapter 7

11. 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?

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

13. 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

14. Corporate Strategy 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

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

16. Corporate Strategy 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

17. Corporate Strategy 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

18. Corporate Strategy 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

19. Corporate Strategy 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.

20. Corporate Strategy 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

21. Corporate Strategy 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

22. Business-level Strategy
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.

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

24. Business-level Strategy
Porter’s generic strategies for gaining competitive advantage:
Differentiation strategy
Cost leadership strategy
Focused differentiation strategy
Focused cost leadership strategy

25. 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

26. 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.

27. 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.

28. 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.

29. 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.

30. Review
Can an organization have a good strategy and still fail to achieve competitive advantage?
Would a monopoly get a perfect score for in