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SM - Ch1
SM - Ch1
Chapter 1
The Nature of Strategic
Management
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Today’s Agenda
• Introduction
• Review Syllabus
• Other Administrative Details
• Overview of the Course
• Session chapter
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Dr. Khaled Bekhit, DBA, M.Phil., MBA
-Assistant Professor, School of Business, ESLSCA University, Egypt.
-MBA/PGD Academic Director at ESLSCA University, Egypt
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Course Description
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Course Learning Outcomes
1. Develop an understanding of the process of analyzing the external and
internal environment, deriving, selecting and implementing business
strategies in an organization.
2. Apply the strategic management process to real life business cases,
including current world/business news, and develop recommendations to
help firms create and sustain competitive advantage.
3. Master the use of specific tools to analyze the environment, derive and
select specific strategies for an organization.
4. Improve written and oral communication skills through the use of team
and individual assignments.
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Classes and Communication
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Assessment Strategy
Lectures: 1 session/week
Total 100 P
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Chapter Learning Objectives (1 of 2)
1. Describe the strategic-management process.
2. Discuss the three stages of strategy formulation,
implementation, and evaluation activities.
3. Explain the need for integrating analysis and intuition in
strategic management.
4. Define and give examples of key terms in strategic
management.
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Learning Objectives (2 of 2)
5.Illustrate the comprehensive strategic-management
model.
6. Describe the benefits of engaging in strategic
management.
7. Explain why some firms do no strategic planning.
8. Describe the pitfalls in actually doing strategic planning.
9.Discuss the connection between business and military
strategy.
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Can you classify it into Two Groups?
Operational
Cycle Times Logistics
Efficiency
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Operation Strategic
Managing Growth /
Costs Innovation
Creativity
Quality Control
Methods
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What is Competitive Advantage?
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Sources of Competitive Advantage
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Strategy and the Quest for
Competitive Advantage
• Competitive advantage:
– Requires meeting customer needs either more effectively
(with products or services that customers value more
highly) or more efficiently (by providing products or services
at a lower cost to customers).
• Sustainable competitive advantage requires:
– Giving buyers lasting reasons to prefer a firm’s products or
services over those of its competitors.
– Developing expertise and long-term competitive capabilities
that cannot be readily overcome.
– Putting the constant quest for sustainable competitive
advantage at center stage in crafting your strategy.
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What is A Strategy?
• Strategy as a choice:
– Is deciding to compete differently from rivals—pressuring
rivals by doing what they do not do or, even better, doing
what they cannot do.
– Guides the company in what it must do and also in
knowing what it must not do.
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Strategy Is about Making Choices
• Strategy is all about choosing How:
– How to position the firm in the marketplace.
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Apple Inc.: Exemplifying a Successful Strategy
Key elements of Apple’s successful strategy are:
• Designing and developing its own operating systems, hardware,
application software and services.
• Continuously investing in R&D and frequently introducing products.
• Strategically locating its stores and staffing them with knowledgeable
personnel.
• Maintaining a quality brand image, supported by premium pricing.
• Committing to corporate social responsibility and sustainability through
supplier relations.
• Cultivating a diverse workforce rooted in transparency.
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Strategic Approaches to Competitive
Advantage
• Porter’s Generic Strategies
• Porter proposed that a firm’s competitive advantage in
an industry is determined by its competitive scope—that
is, the breadth of the company’s or business unit’s target
market.
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Porter’s Generic Strategies
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Porter’s Generic Strategies
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Porter’s Generic Strategies
Porter’s Generic Strategies
• Cost leadership
– lower-cost competitive strategy that aims at the broad
mass market and requires “aggressive construction of
efficient-scale facilities, vigorous pursuit of cost reductions
from experience, tight cost and overhead control,
avoidance of marginal customer accounts, and cost
minimization”
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Porter’s Generic Strategies
• Differentiation
– involves the creation of a product or service that is
perceived throughout the industry as unique.
– can be associated with design, brand image,
technology, features, dealer network or customer
service
• Lowers customers sensitivity to price
• Increases buyer loyalty
• Can generate higher profits
• Once a fledgling computer company, Apple has set itself apart
through their Differentiation strategy.
6-25
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Porter’s Generic Strategies
• Cost focus
– low-cost competitive strategy that focuses on a
particular buyer group or geographic market and
attempts to serve only this niche to the exclusion of
others
• Claire’s, for example, seeks to appeal to young women by
selling inexpensive jewelry, accessories, and ear piercings.
Claire’s use of a focused cost leadership strategy has
been very successful
6-26
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Porter’s Generic Strategies
• Differentiation focus
– concentrates on a particular buyer group, product
line segment or geographic market to serve the
needs of a narrow strategic market more effectively
than its competitors.
6-27
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Defining Strategic Management
Strategic Management
• The art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives
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Stages of Strategic Management
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Stages of Strategic Management
• Strategy Formulation
– developing a vision and mission
– identifying an organization’s external opportunities and
threats
– determining internal strengths and weaknesses
– establishing long-term objectives
– generating alternative strategies
– choosing particular strategies to pursue
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Strategy Formulation Decisions
• What new businesses to enter
• What businesses to abandon
• Whether to expand operations or diversify
• Whether to enter international markets
• Whether to merge or form a joint venture
• How to avoid a hostile takeover
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Stages of Strategic Management
• Strategy Implementation
– requires a firm to establish annual objectives, devise
policies, motivate employees, and allocate resources
so that formulated strategies can be executed
– often called the action stage
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Stages of Strategic Management
• Strategy Evaluation
– Determining which strategies are not working well
– Three fundamental activities:
▪ reviewing external and internal factors that are the
bases for current strategies
▪ measuring performance
▪ taking corrective actions
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Key Terms in Strategic Management (2 of 6)
• Strategists
– Individuals most responsible for the success or failure
of an organization
– Help an organization gather, analyze, and organize
information
• Vision and Mission Statements
– A vision statement answers the question “What do we
want to become?”
– A mission statement answers the question “What is our
business?”
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Key Terms in Strategic Management (3 of 6)
• External Opportunities and Threats
– economic, social, cultural, demographic,
environmental, political, legal, governmental,
technological, and competitive trends and events that
could significantly benefit or harm an organization
• Internal Strengths and Internal Weaknesses
– an organization’s controllable activities that are
performed especially well or poorly
– determined relative to competitors
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Some Opportunities and Threats
• Availability of capital can no longer be taken for granted.
• Consumers expect green operations and products.
• Marketing is moving rapidly to the Internet.
• Commodity food prices are increasing.
• An oversupply of oil is driving oil and gas prices down.
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Key Terms in Strategic Management (4 of 6)
• Long-Term Objectives
– specific results that an organization seeks to achieve in
pursuing its basic mission
– long-term means more than one year
– should be challenging, measurable, consistent,
reasonable, and clear
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Key Terms in Strategic Management (5 of 6)
• Strategies
– the means by which long-term objectives will be
achieved
– may include geographic expansion, diversification,
acquisition, product development, market penetration,
retrenchment, divestiture, liquidation, and joint ventures
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Key Terms in Strategic Management (6 of 6)
• Annual objectives
– short-term milestones that organizations must achieve
to reach long-term objectives
– should be measurable, quantitative, challenging,
realistic, consistent, and prioritized
– should be established at the corporate, divisional, and
functional levels in a large organization
• Policies
– the means by which annual objectives will be achieved
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The Strategic-Management Model
• Where are we now?
• Where do we want to go?
• How are we going to get there?
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The Strategic-Management Model Addresses Three
Central Questions
1. Where are we now?
▪ Industry conditions and competitive pressures, market standing, competitive
strengths and weaknesses, and future prospects in light of changes taking
place in the business environment.
Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See
also Anik Ratnaningsih, NadjadjiAnwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s
Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics
and Technology, no. 4 (October 2010): 20.
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Is the Company’s Strategy a Winner?
• Three tests of a winning strategy:
• Exhibits good fit with situation.
• Results in competitive advantage.
• Promotes superior performance.
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What Makes a Strategy a Winner?
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Why Crafting and Executing Strategy
Are Important Tasks
• Strategy provides:
– A prescription for doing business.
– A road map to competitive advantage.
– A game plan for pleasing customers.
– A formula for attaining long-term standout marketplace
performance.
Good Strategy + Good Strategy Execution =
Good Management
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REVIEW QUESTIONS
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Questions-Choose one Best Answer
1)During what stage of strategic management are a firm's specific internal strengths and weaknesses
determined?
A) Formulation
B) Implementation
C) Evaluation
D) Feedback
E) Goal-setting
A) Strategy formulation
B) Strategy implementation
C) Strategy evaluation
D) Allocating resources
E) Measuring performance
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Questions-Choose one Best Answer
3) and are external forces transforming business and society today.
E) Stakeholders; strategy
D)illustrates that having more fixed assets than rival firms can provide major competitive advantages in a
global recession.
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Questions-Choose one Best Answer
5) An organization's vision statement
A) is a constant reminder to its employees of why the organization exists.
B) broadly charts the future direction of an organization.
C) addresses the basic question: "What is our business?"
D) answers the question: "What do we want to become?"
E) none of the above
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Questions-Choose one Best Answer
7) Long-term objectives should be all of the following EXCEPT
A) measurable.
B) continually changing.
C) reasonable.
D) challenging.
E) consistent.
A) Strategies
B) Strengths
C) Weaknesses
D) Policies
E) Opportunities
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Copyright
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