2. Strategic Management:
Chapter one
Strategic Management:
Text and Cases, 3rd Edition
Strategic Management: Creating Competitive Advantages, 3rd Edition
Part 1: strategic analysis
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3. Learning Objectives
After reading this chapter, you should have a good understanding of:
The definition of strategic management and its four key attributes.
The strategic management process and its three interrelated and principal activities.
The vital role of corporate governance and stakeholder management as well as how “symbiosis” can be achieved among an organization’s stakeholders.
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4. Learning Objectives
After reading this chapter, you should have a good understanding of:
The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.
The key environmental forces that are creating more unpredictable change and requiring greater empowerment throughout the organization.
How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
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5. Two Perspectives of Leadership
Romantic view
Leader is the key force in organization’s success
External control perspective
Focus is on external factors that affect an organization’s success
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6. Two Perspectives of Leadership
Leaders can make a difference
Must be aware of opportunities and threats faced in external environment
Must have thorough understanding of the firm’s resources and capabilities
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7. Strategic Management Analysis Strategic decisions Actions
Strategic goals (vision, mission, strategic objectives)
Internal and external environment of the firm
Strategic decisions
What industries should we compete in?
How should we compete in those industries?
Actions
Allocate necessary resources
Design the organization to bring intended strategies to reality
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8. Strategic Management
Strategic management is the study of why some firms outperform others
How to compete in order to create competitive advantages in the marketplace
How to create competitive advantages in the market place
Unique and valuable
Difficult for competitors to copy or substitute
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9. Strategic Management Process
Adapted from Exhibit 1.2 Realized Strategy and Intended Strategy: Usually Not the Same
Source:H. Mintzberg and J. A. Waters, “Of Strategies, Deliberate and Emergent,” Strategic Management Journal 6 (1985), pp
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10. Strategic Analysis Starting point in the strategic management process
Precedes effective formulation and implementation of strategies
Exhibit 1.3 The Strategic Management Process
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11. Strategic Analysis (cont.)
Clear goals and objectives permit effective allocation of resources
Hierarchy of goals
Vision
Mission
Strategic objectives
Adapted from Exhibit 1.3 The Strategic Management Process
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12. Strategic Analysis (cont.)
Managers
Scan the environment
Analyze competitors
General environment
Industry environment
Adapted from Exhibit 1.3 The Strategic Management Process
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13. Strategic Analysis (cont.)
Frameworks for analyzing a firm’s internal environment
Strengths
Weaknesses
Analyzing strengths can uncover potential sources of competitive advantage
Adapted from Exhibit 1.3 The Strategic Management Process
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14. Strategic Analysis (cont.)
Intellectual assets are drivers of
Competitive advantage
Wealth creation
Networks and relationships among
Employees
Customers
Suppliers
Alliance partners
Adapted from Exhibit 1.3 The Strategic Management Process
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15. Strategic Formulation
Successful firms develop bases for competitive advantage
Cost leadership
Differentiation
Focusing on narrow or industry-wide market segments
Sustainability
Industry life cycle
Adapted from Exhibit 1.3 The Strategic Management Process
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16. Strategic Formulation (cont.)
Firm’s portfolio or group of businesses
What business(es) should we be in?
How can we create synergies among the businesses?
Diversification
Related
Unrelated
Adapted from Exhibit 1.3 The Strategic Management Process
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17. Strategic Formulation (cont.)
Appropriate entry strategies for foreign markets
Sustain competitive advantage in global markets
Adapted from Exhibit 1.3 The Strategic Management Process
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18. Strategic Formulation (cont.)
Digital technologies change the way business is conducted
Added value
Impact on performance
Digital technologies can enhance
Cost leadership
Differentiation
Adapted from Exhibit 1.3 The Strategic Management Process
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19. Strategic Implementation
Informational control
Monitor and scan the environment
Respond effectively to threats and opportunities
Behavioral control
Effective corporate governance
Interests of managers and owners of the firm
Adapted from Exhibit 1.3 The Strategic Management Process
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20. Strategic Implementation (cont.)
Organizational structure and design
Organizational boundaries
Flexible
Permeable
Strategic Alliances
Adapted from Exhibit 1.3 The Strategic Management Process
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21. Strategic Implementation (cont.)
Develop organization that is committed to
Excellence
Ethical behavior
Learning organization responsive to
Rapid and unpredictable change in today’s competitive environments
Adapted from Exhibit 1.3 The Strategic Management Process
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22. Strategic Implementation (cont.)
Corporate entrepreneurship and innovation
New opportunities
Enhance innovative capacity
Autonomous entrepreneurial behavior
Product champions
Adapted from Exhibit 1.3 The Strategic Management Process
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23. Strategic Implementation (cont.)
New ventures and small businesses
Major engine of economic growth
Recognize viable opportunities
Entrepreneurial leadership skills
Adapted from Exhibit 1.3 The Strategic Management Process
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24. Corporate Governance and Stakeholder Management
Corporate governance: the relationship among various participants in determining the direction and performance of corporations
Shareholders
Management (led by the CEO)
Board of Directors
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25. Corporate Governance and Stakeholder Management
Board of Directors
Elected representatives of the owners
Ensure interests and motives of management are aligned with those of the owners
Effective and engaged Board of Directors
Shareholder activism
Proper managerial rewards and incentives
Exhibit 1.4 The Key Elements of Corporate Governance
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26. Stakeholder Management
Two views of stakeholder management
Zero sum
Stakeholders compete for attention and resources of the organization
Gain of one is a loss to the other
Symbiosis
Stakeholders are dependent upon each other
Mutual benefits
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27. Social Responsibility
Social responsibility: the expectation that businesses or individuals will strive to improve the overall welfare of society
Managers must take active steps to make society better
Socially responsible behavior changes over time
Triple bottom line
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28. Strategic Management Perspective
Integrative view of the organization
Assess how functional areas and activities “fit together” to achieve goals and objectives
All managers and employees must take and integrative, strategic perspective of issues facing the organization
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29. Strategic Management Perspective
Key driving forces increasing the need for strategic perspective and involvement
Globalization
Technology
Intellectual capital
These forces are
Interrelated
Accelerating the rate of change and uncertainty
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30. Enhancing Employee Involvement
Local Line Leaders
Have significant profit and loss responsibility
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31. Enhancing Employee Involvement
Local Line Leaders
Champion and guide ideas
Create a learning infrastructure
Establish a domain for taking action
Executive Leaders
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32. Enhancing Employee Involvement
Local Line Leaders
Have little positional power and formal authority
Generate their power through the conviction and clarity of their ideas
Executive Leaders
Internal Networkers
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33. Coherence in Strategic Direction
Company vision
Massively inspiring
Overarching
Long-term
Driven by and evokes passion
Fundamental statement of the organization’s
Values
Aspiration
Goals
Hierarchy of Goals
Company vision
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34. Coherence in Strategic Direction
Mission statements
Purpose of the company
Basis of competition and competitive advantages
More specific than vision
Focused on the means by which the firm will compete
Hierarchy of Goals
Company vision
Mission statements
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35. Coherence in Strategic Direction
Strategic objectives
Operationalize the mission statement
Provide guidance on how the organization can fulfill or move toward the “higher goals”
More specific
Cover a more well-defined time frame
Hierarchy of Goals
Company vision
Mission statements
Strategic objectives
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36. Coherence in Strategic Direction
Strategic objectives
Measurable
Specific
Appropriate
Realistic
Timely
Challenging
Resolve conflicts that arise
Yardstick for rewards and incentives
Hierarchy of Goals
Company vision
Mission statements
Strategic objectives
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