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Principles of
Management 2.0

Mason Carpenter, Talya Bauer, Berrin Erdogan, and Jeremy Short

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Chapter 5 Strategic Management
Learning Objectives

 See how strategy fits in the

planning-organizing-leading-
controlling (P-O-L-C)
framework
 Better understand how strategies
emerge
 Understand strategy as trade-
offs, discipline, and focus
 Conduct internal analysis to
develop strategy
 Conduct external analysis to
develop strategy
 Formulate organizational and
personal strategy with the
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strategy diamond
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Understand How Strategy Fits in the
P-O-L-C Framework

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Strategic Management Process

The process by which a firm

manages the formulation and
implementation of its strategy
• The coordinated means by which an
organization achieves its goals and
objectives
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Strategic Management Process
• The set of processes
Strategy involved in creating or
Formulation determining the strategies
of the organization

• The methods by which

Strategy strategies are
Implementation operationalized or executed
within the organization

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Strategizing in P-O-L-C

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Corporate and Business Strategy

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 • Related Diversification
• Unrelated Diversification
Diversification

Synergy

Corporate
Strategy

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 SWOT Analysis
An assessment of strengths, weaknesses, opportunities
and threats

What do
What can
we want to
we do?
do?

What do
What
others
might we
expect us
do?
to do?

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 Internal External
Analysis Tools Analysis Tools

Value
chain
PESTEL
Industry
VRIO analysis
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 Discussion
• What is the difference between strategy formulation and
strategy implementation?
• What is the difference between business strategy and
corporate strategy?
• What are some of the forms of diversification and what
do they mean?
• What do you learn from a SWOT analysis?
• In SWOT analysis, what are some of the tools you might
use to understand the internal environment (identify
strengths and weaknesses)?
• In SWOT analysis, what are some of the tools you might
use to understand the external environment (identify
opportunities and threats)?
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 15
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Various Factors Can Undermine a Strategy

The plan is poorly constructed

Competitors undermine the advantages

envisioned by the plan

The plan was good, but poorly executed

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Intended, Deliberate, Realized, and
Emergent Strategies

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 Discussion
• What is an intended strategy?
• What is a realized strategy?
• Why is it important to understand the
difference between intended and realized
strategies?
• Why is there not a perfect match-up between
realized and intended strategies?
• What might interfere with the realization of an
intended strategy?

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What is Strategic Focus?
strategy as
Strategic focus is seen discipline
when an organization
is very clear about its
mission and vision,
and has a coherent,
well-articulated
strategy for achieving
those. strategy as
trade-offs

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Porter’s Generic Strategies

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 Differentiation or Price Leadership Strategy?

Southwest Airlines has

combined cost
cutting measures
with differentiation,
proving that it is
possible to succeed
using combination
strategies
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 Discussion
• What is strategic focus and why is it
important?
• What are Porter’s three generic
strategies?
• Can a firm simultaneously pursue a
low-cost and a differentiation
strategy?

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 Developing Strategy Through Internal
Analysis

The primary purpose for internal analysis is to understand

the unique resources, capabilities, and core competencies
of organizations that may enable them to outperform
their competitors overtime.

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Measuring Value with
Core Competencies
Product’s
performance
characteristics

Value
Attributes for
which
customers are
willing to pay

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 Resources and Capabilities

Resources

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Resources and Capabilities

Capabilities

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The Value Chain

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 Adding
Value Within
a Value
Chain

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 VRIO Analysis

Value Rarity

Inimitability Organization

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 Discussion
• What is the objective of internal analysis?
• What is the difference between a resource and a
capability?
• What is the difference between a tangible and an
intangible resource or capability?
• What is a core competency?
• What framework helps you identify those
resources, capabilities, or core competencies that
provide competitive advantage?
• Why might competitive advantage for a firm be
fleeting?
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 DEVELOPING STRATEGY
THROUGH EXTERNAL ANALYSIS

An external
analysis tells
the strategist •Begin with
what is the general
outside the environment
organization.

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Six General Environment Segments
PESTLE Analysis

legal political

environmental economic

technical social

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 AN ORGANIZATION’S
MICROENVIRONMENT

• A group of firms producing products that are close

substitutes
• Upstream Markets: industries that provide the raw
Industry material or inputs for the focal industry
• Downstream Markets: industries (sometimes
consumer segments) that consume the industry outputs

• Consists of stakeholder groups that a firm has

regular dealings with.
Industry
• The way these relationships develop can affect
Microenvironment the costs, quality, and overall success of a
business.

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Porter’s Five Forces

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 Porter’s Attractiveness and
Profitability Analysis
Likely to Profit Challenges to Profit
 Is the industry difficult to  Is the industry easy to
enter? enter?
 Is there limited rivalry?  Is there a high degree of
rivalry between firms
 Are buyers relatively
within the industry?
weak?
 Are buyers strong?
 Are suppliers relatively
 Are suppliers strong?
weak?
 Is it easy to switch to
 Are there few alternatives?
substitutes?
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 Discussion
• What are the six dimensions of the environment
that are of broad concern when you conduct a
PESTLE analysis?
• Which of the PESTLE dimensions do you believe
to be most important, and why?
• What are the key dimensions of a firm’s
microenvironment?
• What are the five forces referred to in the Porter
framework?
• Is there a dimension of industry structure that
Porter’s model appears to omit?
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The Strategy Diamond

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 Planning and Your Personal
Growth and Development Strategy

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 Personal Arenas and
Personal Vehicles
Differentiators
• What type of work do I want to • What do I need to accomplish
do? on my own?
• What leisure activities do I
like? • What do I want to accomplish
• Where do I want to live? on my own?
• What capabilities
(differentiators) do I need to • What do I need to accomplish
participate in these arenas? with the help of others?
• What organizations value these
capabilities (differentiators) • Who are they?
• What capabilities
(differentiators) do I want to
have and excel in?

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 Personal Staging and Pacing Personal Economic Logic

• What sequence of events does my • How does achievement of my

strategy require? strategy help me pay the bills?
• What are the financial
requirements and consequences • What dimensions of my strategy,
of each event? like arenas or differentiators, is
• What is my deadline for the first the economic logic of my strategy
event? most dependent on?
• Is the deadline flexible? Can I
manage the pacing of the • How sustainable is the economic
achievement of each event? logic of my strategy?
• How will timing affect
achievement of my personal
growth and development strategy
• Do some events provide an
opportunity to reconsider or
adjust my strategy?

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 Discussion
• What are the five facets of the Hambrick & Fredrickson
strategy diamond?
• What is the relationship between arenas and
differentiators if the strategy yields a positive economic
logic?
• If a firm is performing poorly financially, what might
this say about the differentiators, arenas, or both?
• Why is it important to consider vehicles as part of an
organization’s strategy?
• What is the difference between staging and pacing in
terms of the strategy diamond?
• What are some ways that you might apply staging and
pacing to an organization’s strategy?
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