Ch 01 Ppt Slides

Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinStrategic Management: Text and Cases, 4e

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Strategic Management: Creating Competitive Advantages

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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.

The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.

The need for 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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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

• 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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• Analysis ‾ 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

Strategic Management

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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 placeo Unique and valuableo Difficult for competitors to copy or substitute

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Key Attributes

Key Attributes of strategic management:• Directs the organization toward overall goals and objectives• Includes multiple stakeholders in decision making• Needs to incorporate short-term and long-term perspectives• Recognizes trade-offs between efficiency and effectiveness

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Question

• The final realized strategy of a firm is a combination of:a) Intended and unrealized strategies

b) Unrealized and emergent strategies

c) Emergent and deliberate strategiesd) Deliberate and unrealized strategies

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Strategic Management Process

Adapted from Exhibit 1.2 Realized Strategy and Intended Strategy: Usually Not the SameSource: H. Mintzberg and J. A. Waters, “Of Strategies, Deliberate and Emergent,” Strategic Management Journal 6 (1985), pp. 257-72.

•Insert Exhibit 1.2

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Strategic Analysis

• Starting point in the strategic management process

• Precedes effective formulation and implementation of strategies


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Strategic Analysis (cont.)

• Clear goals and objectives permit effective allocation of resources

• Hierarchy of goals- Vision- Mission- Strategic objectives

• Analyzing external environments- Managers must scan the environment and analyze

competitors- General environment- Industry environment

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• Frameworks for analyzing a firm’s internal environment

- Strengths- Weaknesses

• Analyzing strengths can uncover potential sources of competitive advantage

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• Intellectual assets are drivers of- Competitive advantage- Wealth creation

• Networks and relationships among- Employees- Customers- Suppliers- Alliance partners

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Strategy Formulation

• Business level strategy: - Successful firms develop bases for competitive

advantage• Cost leadership• Differentiation• Focusing on narrow or industry-wide market segments

- Sustainability- Industry life cycle

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Strategy Formulation (cont.)

Corporate-level strategy addresses:• 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

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Strategy Formulation (cont.)

• International Strategy- Appropriate entry strategies for foreign markets- Sustain competitive advantage in global markets

• Effective strategies for entrepreneurial initiatives

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Strategy 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

• Organizational structure and design

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Strategy Implementation (cont.)

• Organizational boundaries- Flexible- Permeable

• Strategic Alliances• Develop organization that is committed to

- Excellence- Ethical behavior

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Strategy Implementation (cont.)

• Learning organization responsive to- Rapid and unpredictable change

• Corporate entrepreneurship and innovation- New opportunities- Enhance innovative capacity- Autonomous entrepreneurial behavior- Product champions

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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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Question

• Briefly describe the role of board of directors in corporate governance.

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Corporate Governance and Stakeholder Management (cont.)

• 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


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Example: New Rules for Directors

In light of numerous corporate scandals, the role and rules for board of directors are being redefined. Few areas of focus :

- Numbers Knowledge - Strategy Focus - Time & Understanding- Watchdog

Source: Tipsheet, Business Week, January 22, 2007

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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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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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Example: Social Responsibility

Starbucks Coffee Company Corporate social responsibility is embedded throughout the

organization. The following are some of the commitments they have

made to be socially responsible:• Commitment to origins• Helping protect the environment• Starbucks in your community• Commitment to partners

Source: www.starbucks.com

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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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Enhancing Employee Involvement

• Have significant profit and loss responsibilityLocal Line

Leaders

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• Champion and guide ideas• Create a learning

infrastructure• Establish a domain for

taking action

Executive Leaders

Local Line Leaders

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• Have little positional power and formal authority

• Generate their power through the conviction and clarity of their ideas

Executive Leaders

Local Line Leaders

InternalNetworkers

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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 visionCompany vision

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• 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


Mission statementsMission statements

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• 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



Strategic objectivesStrategic objectives

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• Strategic objectives- Measurable- Specific- Appropriate- Realistic- Timely - Challenging- Resolve conflicts that arise- Yardstick for rewards and

incentives

Hierarchy of Goals



Strategic objectivesStrategic objectives

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Ch 01 Ppt Slides