2 ch01 SM

Hanoi
University of Science and Technology

SCHOOL OF ECONOMICS AND MANAGEMENT
Chapter 1
Overall of Strategy and Strategic

Management
EM4460E Strategic Managment
Objectives
● To understand strategy, strategic management and

its role in a corporation
● To understand different strategies in a corporation
● To understand the strategic management approaches
and process
● To recognize the challenges of strategic management
of a corporation
EM4460E Strategic Managment 2

Contents
● Definition of strategy and strategic management

● Classification of strategy in a corporation
● Strategic management process
● Challenges of strategic management
1. Concepts
Definition of Strategy

1. Concepts
Origins of strategy
• Strategy term comes from

Egypt: “Strategos”
• Is used in the army to
show the long term plan
and allocating resources
to win the enemy
• Roles of leader in the
army
• Art of leading
1. Concepts
Army Strategy
outside
Distinctive Situation
competencies Strategy
Inside
Important Goal: achieve the competitive
advantages; use the own strengths to
fight the enemy’s weaknesses

1. Concepts
Strategy in business field
occurred in the 60s of the 20th

Century
• Bigger scope of
activity
• Orientation
• Action framework to
be successful
1. Concepts
Strategy in Business field
Strengths Opportunities
Corporation
Internal External
Stategy
environment environment
Weaknesses Threats

1. Concepts
Definitions
- …..is an action that managers
take to attain one or more of the
organization’s goals.
- …is a general direction set for the
company and its various
components to achieve a desired
state in the future. Strategy results
from the detailed strategic planning
process
A strategy is an integrated and coordinated set of
commitments and actions designed to exploit core
competencies and gain a competitive advantage. (Hitt et al.,
2007)
1. Concepts
Intended and Realized Strategy
Selected Realised
Intended strategy
strategy
strategy (implemented)
Infeasible
Emerged
strategy
strategy

1 Concepts
Intended strategy
Intended strategy is the result of strategic planning (intended

strategy is implemented) and not included in strategic planning
(emerged strategy)
Case 1 realization
Realised S
Intended »
strategy (S) Intended S
Case 2 realization adapted to

environmental changes
Realized S
intended S ¹
Intended S
Environment changes
Case 3 situative decision;
Muddling through
Realised S
=
Emerged S
(source: Mintzberg, 1994)
1. Concepts
Definitions
Intended Strategy
• Long-term guideline
• concerning the company as a whole or important parts of
the company
• determined by management
• guaranteeing the permanent accomplishment of its
overriding objectives
• by building up new success potentials

1. Concepts
Roles of Strategy
• … is significant because it is not possible to foresee
the future. Without a perfect foresight, the firms
must be ready to deal with the uncertain events
which constitute the business environment.
• …..deals with long term developments rather than
routine operations (innovations or new products,
new methods of productions, or new markets to be
developed in future)
• … is created to take into account the probable
behavior of customers and competitors. Strategies
dealing with employees will predict the employee
behavior.
1. Concepts
Roles of Strategy
• Strategy is a well defined roadmap of an
organization (overall mission, vision and
direction of an organization)
• The objective of a strategy is to maximize
an organization’s strengths and to minimize
the strengths of the competitors.
• Strategy bridges the gap between “where
we are” and “where we want to be”.

2 Classification of strategy
• By time: Long term (>=5 years), Midterm (1-3 year), shorterm

(<1 year)
• By management level
Corporate strategy Corporate
Business strategy (generic SBU1 SBU2 SBU3

competitive strategy)
Functional strategy Marketing R&D Finance Production

HRM
Corporate strategy
Developed by top • Direction and long-term

manager/leader objectives
• Business fields and Scope of
operation
• Resources allocation among
business fields
Corporation has been doing and

will invest in which business fields?

Business strategy (SBU: strategic Business Unit)
How to help SBU to achieve the

How to help corporation/SBU to
goals
compete successfully in a specific
market or segmentation
2. Classification of strategy
Functional strategy
• Support the implementation of

corporate and business
strategy
• Statement of short term
objective and action plans for
functional units to achieve
SBU objectives and
corporate’s objectives

2. Classification of stategy
Functional strategies
Marketing
HRM
Attract and
Develpop
recruit
Terminate
Maintain

Finance
Functional strategy
Production

R&D
3. The Strategic Management

• Strategic management is the management of an
organization’s resources to achieve its goals and objectives.
• Strategic management involves setting objectives,

analyzing the competitive environment, analyzing the
internal organization, evaluating strategies, and ensuring
that management rolls out the strategies across the
organization.

4. The Strategic Management Process
Involves the full set of:
Commitments Decisions Actions
which are required for firms to achieve:
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
Strategic Competitiveness
Achieved when a firm successfully formulates
and implements a value-creating strategy
Sustained Competitive Advantage

Occurs when a firm develops a strategy that competitors
are not simultaneously implementing
Provides benefits which current and potential competitors
are unable to duplicate
Above-Average Returns
Returns in excess of what an investor expects to earn
from other investments with similar risk
Alternative Models of Superior Returns
Industrial Organization Resource-Based
Model Model
The External Environment Resources
An Attractive Industry Capability
Strategy Formulation Competitive Advantage

Assets and Skills An Attractive Industry
Strategy Implementation Strategy Implementation

Superior Returns Superior Returns
I/O Model of Superior Returns
The Industrial Organization model

suggests that above-average returns
for any firm are largely determined
by characteristics outside the firm.
This model largely focuses on industry

structure or attractiveness of the
external environment rather than
internal characteristics of the firm.

External Action required:
Environment Study the external
environment, especially
General Environment the industry environment.
Industry Environment
Competitive
Environment

Environment Locate an industry with
An Attractive high potential for above-
GeneralIndustry
Environment average returns.
An industry whose
Competitive
structural characteristics
Environment
suggest above-average
returns are possible

Environment Identify strategy called for
Attractive by the industry to earn
GeneralIndustry
Environment above-average returns.
Strategy
An industry whose
Competitive Formulation
Environment Selection of a strategy
suggest above-average
returns are linked with above-
possible
average returns in a
particular industry

Environment Develop or acquire assets
Attractive and skills needed to
GeneralIndustry
Environment implement the strategy.
Strategy
An industry whose
Environment Selection ofAssets
suggest above-average and Skills
a strategy
possible
Assetsinand
average returns a skills
required to implement
particular industry
a chosen strategy

Environment Use the firm’s strengths
Attractive (its assets or skills) to
GeneralIndustry
Environment implement the strategy.
Strategy
An industry whose
a strategy
possible
average returns a Strategy
Assetsinand skills
required to
particular industry Implementation
implement
a chosen strategy
Selection of strategic
actions linked with
effective implementation
of the chosen strategy

Environment Maintain selected strategy
Attractive in order to outperform
GeneralIndustry
Environment industry rivals.
Strategy
An industry whose
a strategy
possible
average returns a Strategy
Assetsinand skills
required to
particular industry Implementation
implement
a chosen strategy Superior Returns
Selection of strategic
actions linked with
Earning of above-
effective implementation
average
of the chosen returns
strategy

Resource-Based Model of Superior Returns
The Resource-Based model suggests

that above-average returns for any
firm are largely determined by
characteristics inside the firm.
This model focuses on developing or

obtaining valuable resources and
capabilities which are difficult or
impossible for rivals to imitate.

Action required:
Resources Identify firm resources.
Study strengths and weak-
Inputs to a firm’s nesses relative to rivals.
production process.

Action required:
Resources Determine what firm
Capability capabilities allow it to do
Inputs to a firm’s better than rivals.
production process.
Capacity for an integrated
set of resources to perform
a task or activity.

Action required:
Resources Determine how firm’s
Capability resources and capabilities
Inputs to a firm’s may create competitive
production process.
Capacity Competitive
for an integrated advantage.
Advantage
set of resources to
integratively perform a
Ability of a firm to
task or activity.
outperform its rivals

Action required:
Resources Locate an attractive
Capability industry.
Inputs to a firm’s
production process.
for an integrated
Advantage
set of resources to
integratively perform aAn Attractive
Ability of aIndustry
task or activity. firm to
outperform its rivals
Location of an industry
with opportunities that
can be exploited by the
firm’s resources and
capabilities

Action required:
Resources Select strategy that best
Capability exploits resources and
Inputs to a firm’s capabilities relative to
production process.
for an integrated opportunities in environs.
Advantage
set of resources to
outperform its rivalsStrategy
Formulation
with opportunities that and
Implementation
can be exploited by the
Strategic actions taken to
capabilities
earn above-average
returns

Action required:
Resources Maintain selected strategy
Capability in order to outperform
Inputs to a firm’s industry rivals.
production process.
for an integrated
Advantage
set of resources to
outperform its rivalsStrategy
Formulation
with opportunities that and
can be exploited by Superior Returns
Implementation
the
Strategic actions
capabilities taken
Earning to
of above-
earn above-average
average returns
returns
Resources and capabilities lead to

Competitive Advantage when they are:
Valuable allow the firm to exploit opportunities or

neutralize threats in its external
environment
Rare possessed by few, if any, current and

potential competitors
Costly to Imitate when other firms either cannot obtain them

or must obtain them at a much higher cost
Nonsubstitutable the firm must be organized appropriately to

obtain the full benefits of the resources in
order to realize a competitive advantage
When these four
criteria are met,
Resources and Core Competencies
Capabilities
become:
Core Competencies are resources and capabilities

that can serve as a source of Competitive Advantage.
The Resource-Based model argues that Core

Competencies are the basis for a firm’s Competitive
Advantage, Strategic Competitiveness and Ability to
Earn Above-average Returns.
4. THE STRATEGIC MANAGEMENT PROCESS
Chapter 2
The External
Strategic Inputs
Environment
Vision
Mission
Chapter 3
The Internal
Organization
Strategy Formulation Strategy Implementation
Chapter 5
Chapter 4 Competitive Chapter 6 Chapter 10 Chapter 11
Business-Level Rivalry and Corporate Corporate Organizational
Strategic Actions
Strategy Competitive Level Strategy Governance Structure and

Dynamics Controls
Chapter 7
Acquisition and Chapter 8 Chapter 9 Chapter 12 Chapter 13
Restructuring International Cooperative Strategic Strategic
Strategies Strategy Strategy Leadership Entrepreneurship
Strategic Outcomes
Strategic
Competitiveness
Above-Average
Returns
Source: Hitt, Ireland, Hoskisson, 2009: Strategic Management
EM4460E Strategic Managment Page 44

Strategic Management Level
>5 years Strategic Strategic Top managers

Objectives plans Corporation
Middle Managers
Tactic Tactic Functional department

1-5 years objectives plans
First line managers

Objectives Action plans Individual/team
<1
year
Management Scope of operation

Time
hierachy
45
5. Challenges of strategic management

Boeing and Airbus: A global competitive battle over supremacy in
producing commercial craft
● Boeing and Airbus two biggest commercial craft producers in the world.
● in 2001, Airbus had more orders than Boeing for the first time in their
competitive history.
● in 2006, Boeing regained its supremacy with 1,044 versus 790 orders for
commercial aircraft.
● The main turnaround in this battle for competitor orders has been most
visible in the super jumbo category with Airbus’s A-380 versus Boeing’s 787.
1. Why did Airbus win Boeing in 2001 in commercial airplanes market?

2. Why Boeing regain its leading position in commercial airplanes market in 2006?
- Both firms analyzed their similar competitive environments and made decisions that
fit with their view of the facts.
- Both firms want to be highly competitive (something we call a condition of strategic
competitiveness) and want it to earn profits in the form of above-average/returns.

Boeing and Airbus: A global competitive battle
over supremacy in producing commercial craft
Airbus won the competitor battle due
to:
- it focused on the midsized market as
well, using the A-320 strategy, which
competes with Boeing’s 737 and 757
aircraft.
- The A-320 was more efficient than
the aircraft used by Boeing, and
Boeing did not respond to customer
demands to create new, efficient
aircraft.
- There was an bombing attack in the
USA in 2001, the USA faced
economic crisis
Boeing and Airbus: A global competitive battle over

supremacy in producing commercial craft
Boeing’s strategy in regard to overall design with the 787 Dreamliner is
winning:
● It has been able to speed up the process by creating an efficient global
supply chain that involves many potential customers around the world,
including Japan, China, and others.
● Moreover, Airbus is behind in its schedule to produce the A-380 and its
midsized plane, the A-350, has also had redesign issues. The midsized A-
350, comparable to the Boeing 787, is behind schedule and Airbus has
had to provide significant incentive discounts to increase future orders.
● Airbus has been forced to produce more of its plane parts in European
countries because governments have significant ownership and provide
subsidies to Airbus (UK, Spain, German, French, etc.)
● in European countries. “Boeing outsources 85 percent of the work for its
787 ‘Dreamliner’ aircraft. The corresponding figure for Airbus’s A380 is 15
percent.” As a result of the design and development delays, Airbus’s
development costs for the A-380 have risen to $14 billion versus the $8
billion invested by Boeing for the 787.
Boeing and Airbus: A global competitive battle over
supremacy in producing commercial craft
● In making its decision to move ahead with the 787

Dreamliner versus a more jumbo aircraft comparable to the
A-380
● Boeing made a more concerted effort in connecting and
getting input from its airline customers, as well as the
ultimate customers, the passengers
● Boeing followed up with the ultimate creditors, the leasing
agents, and asked what they would prefer as far as risks
were concerned.
● These business-level strategies have created an obvious
advantage in the near-term for Boeing.
§ The technology used between military aircraft and
commercial aircraft, which indirectly contributes to lower
commercial aircraft development costs (50% income from
military aircraft)
Boeing received many orders from 2017 upto now
The battle between Airbus and Boeing still be continued in the future
5. Challenges of Strategic Management
Competition picture
A dangerous business
environment Global
Economics
§ Investments in the global
scope
§ Serious causes and effects
Fast change of
IT

The global economy is Traditional sources of

changing competitive advantage
no longer guarantee
• People, goods, services and
success
ideas move freely across
geographic boundaries New keys to success
• New opportunities emerge include:
in multiple global markets • Flexibility
• Markets and industries • Innovation
become more • Speed
internationalized • Integration
A country’s competitiveness is
achieved through the accumulation of
individual firms’ strategic
competitiveness in the global economy
Achieving improved competitiveness

allows a country's citizens to have a higher
standard of living

Fundamental nature of The pace of change

competition is changing is relentless....
• Rapid technological changes
and increasing
• Rapid technology diffusions
Traditional industry
• Dramatic changes in boundaries are
information and blurring, such as...
communication technologies
• Computers
• Increasing importance of • Telecommunications
knowledge
Technology and Technological change

ØTechnology diffusion and Disruptive technologies
§ Permanent change— IT rapidly replaced the old technology
It took the telephone 35 years to get into 25 percent of all homes in the United States. It took
TV 26 years. It took radio 22 years. It took PCs 16 years. It took the Internet 7 years
§ Breakthrough/disruptive tech development eliminates the value of

current exist tech and creates the new market

Rapid changing IT and communication
Ø Information age
§ Effectively and usefully
accessing and applying
information become
important competitive
advantage (for example
Apple)
§ IT includes personal
computer, cellphone, AI,
virtual, big data, iCloud, E-
commerce
§ Industrial 4.0 (AI, IoT, Big
Data, Machine learning)

Rapid Technology Changes
ØImproving the knowledge intensity

§ Strategic flexibility: a system of competency must be applied to
respond with diversified needs and opportunities in dynamic
and unstable competition
§ Strengthening the knowledge intesity (information, intelligence
and specialization): experience exchange, observations,
prediction

VUCA world/environment
(Volatility – Uncertainty – Complexity – Ambiguity)
Uncertainty
Volatility
(Unclear
(rate of
about the
change)
present)
Ambiguity
Complexity
(Lack of
(Multiple key
clarity about
decision
meaning of
factors)
an event)
EM4460E Strategic Managment 9/7/

16
Without a strategy the organization is like a ship

without a rudder going around in circles
Joel Ross and Michael Kami

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Hanoi

University of Science and Technology

Overall of Strategy and Strategic

EM4460E Strategic Managment

● To understand strategy, strategic management and

EM4460E Strategic Managment 2

● Definition of strategy and strategic management

EM4460E Strategic Managment 3

EM4460E Strategic Managment 4

• Strategy term comes from

EM4460E Strategic Managment 5

EM4460E Strategic Managment 6

Strategy in business field

occurred in the 60s of the 20th

EM4460E Strategic Managment 7

Strategy in Business field

EM4460E Strategic Managment 8

EM4460E Strategic Managment 9

Intended and Realized Strategy

EM4460E Strategic Managment 10

Intended strategy is the result of strategic planning (intended

Case 2 realization adapted to

EM4460E Strategic Managment 11

EM4460E Strategic Managment 12

EM4460E Strategic Managment 14

• By time: Long term (>=5 years), Midterm (1-3 year), shorterm

Corporate strategy Corporate

Business strategy (generic SBU1 SBU2 SBU3

Functional strategy Marketing R&D Finance Production

EM4460E Strategic Managment 15

Developed by top • Direction and long-term

Corporation has been doing and

EM4460E Strategic Managment 16

How to help SBU to achieve the

EM4460E Strategic Managment 17

• Support the implementation of

EM4460E Strategic Managment 18

EM4460E Strategic Managment 19

EM4460E Strategic Managment 20

EM4460E Strategic Managment 21

EM4460E Strategic Managment 22

EM4460E Strategic Managment 23

3. The Strategic Management

• Strategic management involves setting objectives,

EM4460E Strategic Managment

Commitments Decisions Actions

which are required for firms to achieve:

4. The Strategic Management Process

Sustained Competitive Advantage

An Attractive Industry Capability

Strategy Formulation Competitive Advantage

Strategy Implementation Strategy Implementation

EM4460E Strategic Managment

I/O Model of Superior Returns

The Industrial Organization model

This model largely focuses on industry

EM4460E Strategic Managment

EM4460E Strategic Managment

I/O Model of Superior Returns

EM4460E Strategic Managment

EM4460E Strategic Managment

I/O Model of Superior Returns

EM4460E Strategic Managment