Strategic Management: Creating Competitive Advantages Chapter One McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

What is Strategic Management?  Strategic management must become both a process and a way of thinking throughout the organization  Leaders must be proactive, anticipate change, and continually refine changes to their strategies 1-2

Defining Strategic Management  Strategic management  Analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages 1-3

Defining Strategic Management  Analysis  Strategic goals  Internal and external environment of the firm  Strategic decisions  What industries should we compete in?  How should we compete in those industries? 1-4

Defining Strategic Management  Actions  Allocate necessary resources  Design the organization to bring intended strategies to reality 1-5

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? 1-6

Strategic Management Concepts 1-7 Exhibit 1.1

Key Attributes of Strategic Management  Stakeholders  those individuals, groups, and organizations who have a “stake” in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, the community at large, 81-8

Strategic Management Process  Intended strategy  Decisions are determined only by analysis  Realized strategy  Decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences 1-9

Strategic Management Process 1-10 Exhibit 1.2

Strategic Management Process Exhibit 1.3 The Strategic Management Process 1-11

Strategic Analysis  Consists of “advance work” that must be done in order to effectively formulate and implement strategies  Starting point 1-12

Strategy Implementation  Ensuring proper strategic controls and organizational designs  Establishing effective means to coordinate and integrate activities within the firm as well as with suppliers, customers, and alliance partners 1-13

Stakeholder Management  Stakeholder symbiosis view  Stakeholders are dependent upon each other for their success and well-being  Mutual benefits

Social Responsibility  Social responsibility  The expectation that businesses or individuals will strive to improve the overall welfare of society 1-15

Social Responsibility  Triple bottom line  Assessment of a company’s performance in financial, social, and environmental dimensions 1-16

Coherence in Strategic Direction  Hierarchy of goals  organizational goals ranging from, at the top, those that are less specific yet able to evoke powerful and compelling mental images, to, at the bottom, those that are more specific and measurable.  Vision, mission statement, strategic objectives 1-17

A Hierarchy of Goals Exhibit

Coherence in Strategic Direction  Organizational vision  Goal that is “massively inspiring, overarching, and long term”  Represents a destination that is driven by and evokes passion 1-19

Why Do Visions Fail?  The walk doesn’t match the talk  Irrelevance  Too much focus leads to missed opportunities  Not the holy grail  An ideal future irreconciled with the present 1-20

Coherence in Strategic Direction  Mission statement  Set of goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage  Has the greatest impact when it reflects an organization’s enduring, overarching strategic priorities and competitive positioning 1-21

Coherence in Strategic Direction  Strategic objectives  A set of organizational goals that are used to operationalize the mission statement and that are specific and cover a well-defined time frame. 1-22