STRATEGIC MANAGEMENT

Ch1 The Nature of Strategic Management

Strategy………. What is it ?
 Strategy is an integrated and coordinated set of
commitments and actions designed to exploit core
competencies and gain competitive advantage (Hitt,
Ireland and Hoskinson, 2005)
Strategy ……………… cont

(Adapted from Hambrick and Fredickson, 2005)

Strategic Thought Communicate a purpose/vision
to others

Connect the strength of the

organization to environmental
opportunities

What
Directing and coordinating the
support activities
Why who
Vision
Mission Generating resources
exceeded resources that are
Who How used

Exploit today achievement

while investigates new
opportunities

Always responding to current

(Adapted from Huff et at al., 2009) conditions
Level of Strategy
Level of Strategy
 Corporate Strategy
 Directional Strategy: overall reference to growth,
stability and retrenchment
 Portfolio Strategy: industries or markets in which a firm
operates
 Parenting Strategy: the way a firm coordinates
activities, transfer resources and nourishes capabilities
among product lines
Level of Strategy
 Business Level :
Producing and marketing a good quality
Cost
product or service at a lower cost than your
Leadership
competitors

Creating a product or service that is perceived

Differentiation
as being unique “throughout the industry

Addressing a “focused” segment of the

Focus marketplace, product form or cost management
process
Level of Strategy
Strategic Management
 as the art and science of formulating, implementing,
and evaluating cross-functional decisions that enable an
organization to achieve its objectives (David and David,
2015)
 strategic management describes a set of decisions and
actions that contribute to the formulation and
implementation of plans designed to achieve a
company’s objectives (Pearce and Robinson, 2013)
 activities carried out during the strategic management
process are necessary for ensuring that a firm stays
competitive and earns above average returns (Hitt,
Ireland and Hoskinsson, 2014)
Strategic Management

TOP Management

Resources

Long term
Dimensions
Future

Consequences

External
Organization
Strategic Management
Successful organizations effectively
manage change, continuously adapting
their bureaucracies, strategies, systems,
products, and cultures to survive the
shocks and prosper from the forces that
decimate the competition (waterman,
1987; David and david, 2015)
 Benefits of Strategic Planning

Greater
Deeper/Improve
Commitment
d Understanding The Result
• To achieve
Enhanced • Of other’s All managers
objectives
Communication views and employees
• To
• Dialogue • Of what the on a mission to
implement
• Participation firm is help the firm
strategies
doing/planni succeed
• To work
ng and why
hard

(David and David, 2015)

 Competitive advantage perspective
Internal
• analyze the company's
resources
• Use the resources to initiate
a strategy that can not be
duplicated by your
competitor

Dynamic
• Sees the opportunity to
sharpen the pace and rising
Competitive Firm
inter-connection Strategy
Advantage Performance
• Developed a unique
resource to create disruptive
change

External
• Analyze industry
• Positioning the company to (Carpenter and Sanders, 2009)
take advantage
SWOT Analysis

Organizational Environmental
analysis analysis

Strengths Opportunities

Weaknesses Threats

Strategic choices
How does a strategy allow us to exploit our strengths, avoid or fix our weaknesses, exploit
our opportunities, and neutralize our threats?
Grand Theory of SM
 I/O Model Focus

Organizational Environmental
analysis analysis

Strengths Opportunities

Weaknesses Threats
I/O Model: Above-Average Returns

External Environments
 Strategy dictated by
General
Environment
the external
environment of the firm
(what opportunities
exist in these
environments?)
 Firm develops internal
skills required by
external environment
(what can the firm do
about the
opportunities?)

“Outside-in”
The External
The I/O Model of
Environment Above-Average Returns

1. Study the external

environment, especially
the industry
environment.

 The general environment

 The industry environment
 The competitor
environment
 The I/O Model of
The External Above-Average Returns
Environment

An Attractive Industry 2. Locate an attractive

industry with a high
potential for above-
average returns.

 An industry whose
structural characteristics
suggest above-average
returns
 The External
The I/O Model of
Environment Above-Average Returns

An Attractive Industry 3. Identify the strategy

called for by the
attractive industry to
Strategy Formulation earn above-average
returns.
 Selection of a strategy
linked with above-
average returns in a
particular industry
 The External
The I/O Model of
Environment Above-Average Returns

An Attractive Industry 4. Develop or acquire

assets and skills
needed to implement
Strategy Formulation the strategy.

 Assets and skills

Assets and Skills
required to implement
a chosen strategy
 The External
The I/O Model of
Environment Above-Average Returns

An Attractive Industry 5. Use the firm’s strengths

(its developed or
acquired assets and
Strategy Formulation skills) to implement the
strategy.

 Selection of strategic
Assets and Skills
actions linked with
effective
Strategy implementation of the
Implementation chosen strategy
 The I/O Model of
Above-Average Returns
The External
Environment

An Attractive Industry

Strategy Formulation
 Superior returns: Earning
of above-average returns
Assets and Skills

Strategy
Implementation

Superior Returns
Resource-Based Model Focus

Organizational Environmental
analysis analysis

Opportunities
Strengths

Threats
Weaknesses
 Criteria for Resources and Capabilities
That Become Core Competencies

Valuable Rare

Allow the firm to exploit Possessed by few, if any,

opportunities or neutralize current and potential
threats in its external Core competitors
environment
Competencies

Nonsubstitutable Costly to Imitate

When other firms cannot obtain them or must

obtain them at a much higher cost
 The RBV Model of Above-
Resources Average Returns

1. Identify the firm’s

resources. Study its
strengths and
weaknesses compared
with those of
competitors.
 Inputs into a firm’s
production process
 The RBV Model of Above-
Resources Average Returns

Capability 2. Determine the firm’s

capabilities. What do the
capabilities allow the firm
to do better than its
competitors.
 Capacity of an integrated
set of resources to
integratively perform a
task or activity
 The RBV Model of Above-
Resources Average Returns

Capability 3. Determine the potential

of the firm’s resources
and capabilities in terms
Competitive
of a competitive
Advantage
advantage.
 Ability of a firm to
outperform its rivals
 The RBV Model of Above-
Resources Average Returns

Capability 4. Locate an attractive

industry.
Competitive  An industry with
Advantage opportunities that can
be exploited by the
An Attractive Industry firm’s resources and
capabilities
 The RBV Model of Above-
Resources Average Returns

Capability 5. Select a strategy that

best allow the firm to
utilize its resources and
Competitive
capabilities relative to
Advantage
opportunities in the
An Attractive Industry external environment.
 Strategic actions taken
to earn above-average
Strategy returns
Implementation
 The RBV Model of Above-
Average Returns
Resources

Capability

Competitive
Advantage

An Attractive Industry  Superior returns: Earning

of above-average returns

Strategy
Implementation

Superior Returns
The Difference
Resources The External
Environment

Capability An Attractive Industry

Competitive Strategy Formulation

Advantage

An Attractive Industry
Assets and Skills

Strategy Strategy
Implementation Implementation

Superior Returns Superior Returns

The RBV Model The I/O Model

The Role of Strategic Management
 Thomson and Strickland (2003) :
 articulate a strategic vision and business mission
 Formulate the goals, which is the conversion of strategic
vision into specific performance to be achieved by the
company
 develop strategies to achieve the desired outcome
 implementing and execute the strategy
 evaluating and monitoring of performance and initiates
corrective adjustment to the long-term direction of the
company, objectives, strategy or the execution and
implementation of the strategy
Strategic Management Process
From Intent & Mission to Action

Mission/Intent Fundamental purposes

Objectives Measurable performance targets

Strategies Means to accomplish objectives

Tactics/Policies Actions to implement strategies

The Three
Stakeholder
Groups
 Stakeholder Management

 Two issues affect the extent of stakeholder involvement

in the firm
 How to divide returns
to keep stakeholders
involved?
 How to increase Capital
returns so everyone Organizational Market
has more to share?

Product
Market