Strategic management

Creating competitive advantage

Who cares?
Why should anyone care about the strategic
direction of firms?
Understand direction of
your company, competitors, other companies

Who cares?
Integration and coordination
Across time and across organization

Assess the organizations performance and adjust

to a changing environment

Two perspectives of organizational

leadership: Do managers matter?
Romantic (or internal): Organizational
leader as key force in determining
organizational success or failure
Success creates CEO superheroes
Failure creates CEO scapegoats

Two perspectives of
organizational leadership
External factors: changes in external factors

Shifts in customer tastes, preferences

International competition
Rising material costs
Price erosion

External conditions determine contexts in

which organizational leaders create or lose
organizational value

Strategic management process

Strategic management
Analyses, decisions, and actions for
creating and sustaining competitive
advantage

Analysis
Analysis of strategic inputs
Internal and external environment
Strategic goals: vision, mission, objectives

Decisions
Two broad decisions of strategic
management
Industries in which to compete
How to compete in those industries

Encompasses both domestic and

international operations

Actions
Resource allocation: where to focus
resources
Organizational design: how to group people
and tasks

Competitive advantage
Some firms outperform others over a long
period
Competitive advantage with respect to the
marketplace
Meeting present and future demand
Doing so in ways that customers regard as
unique and valuable and that competitors find
difficult to imitate or substitute

4 key attributes of strategic

management
1. Directed at overall organizational goals
2. Includes multiple stakeholders
3. Incorporates short-term and long-term
perspectives
4. Recognizes trade-offs between
effectiveness and efficiency

Three major steps of the strategic

management processes
Strategy analysis
Strategy formulation (decisions)
Strategy implementation (actions)

Strategy analysis
Understanding conditions
in external environment
Opportunities for creating
value
Threats to competitive
advantage

Understand firm strengths

and weaknesses
Activities in value chain
(click on the link)
Firms resource base

Strategy formulation (decisions)

Competing in specific product markets
Cost leadership or differentiation
Maintain advantage through different stages of
industry life cycle

Business portfolio
Choosing the business(es) in which to compete
Creating synergies among businesses

International strategy
Modes of entry
Creating and sustaining competitive
advantage internationally

Strategy implementation
(actions)
Corporate governance
Organizational design

Corporate governance
Systems that ensure managers operate in
shareholders interests
Internal control: Primary participants
Shareholders
Strategic managers
Board of directors

External control: financial markets,

regulators, press

Organizational stakeholders
Capital markets
Owners (shareholders)
Lenders

Product markets
Suppliers (goods, services, capital, labor)
Customers
Community

Organization: Employees and managers

Corporate social responsibility

Firm as citizen
Customers evaluate both a firms
products/services and its practices in
producing those products
Business involves environmental and social
considerations in addition to economic ones
Social innovation: societys needs may
create business opportunities

Organizational design
Structures consistent with strategy
Organizational forms

Key drivers of strategy

Globalization: flow of goods, services,
capital, people, information, knowledge
across borders
Technology: new knowledge about products
and production and distribution
Intellectual capital: human knowledge as
source of competitive advantage

Coherence in strategic direction

Goal hierarchy
Vision: destination driven by passion
Mission
Statement purpose and basis of competition
Communicates to stakeholders
Value-focused

Objectives: yardstick for measuring goal

attainment

Each must be consistent with one another