SGMT 6000

Session 1
Introduction to Strategic Management
 What is Strategic Management?
“The pattern of objectives, purposes or goals, and the major policies and
plans for achieving those goals, stated in such a way as to define what
business the company is in or should be in and the kind of company it is
or should be.” (Andrews, 1971)
“A strategy is the pattern or plan that integrates an organization’s major
goals, policies and action sequences into a cohesive whole. Well-
formulated strategies help marshal and allocate an organization’s
resources into a unique and viable posture based upon its relative
internal competencies and shortcomings, anticipated changes in the
environment, and contingent moves by intelligent opponents”. (Quinn,
1980)
Strategy ”...means deliberately choosing a different set of activities to
deliver a unique mix of value.” (Porter, 1996)
“Strategic Management consists of the analyses, decisions, and
actions an organization undertakes in order to create and sustain
2 competitive advantages” (Dess et al., 2024)
 What are Foundations of a
Competitive Advantage?
“The myriad of activities that go into creating,
producing, selling, and delivering a product or
service are basic units of competitive
advantage.”

Source: Porter (1996)

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 How do Firms Create
Competitive Advantage?
Through strategic positioning which involves
“...performing different activities from rivals, or
performing similar activities differently.”

Source: Porter (1996)

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 What is Operational
Effectiveness?
• Performing activities better than rivals.
– Total quality
– Just-in-time supply chain management
– Benchmarking
– Business process reengineering
– Outsourcing
– Automation
– Artificial intelligence / Machine learning
– ...
Source: Porter (1996), Dess et al., 2024

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 Sustained Competitive
Advantages
• Is performing activities better than rivals
sufficient to sustain competitive
advantages?
– It is a necessary condition, but not sufficient
• Uniqueness?
• Imitability?
• Organizational design & complexity?
• Value creation & Value capture?

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 Key attributes of strategic
management
• Directs the organization toward overall goals
and objectives.
• Includes multiple stakeholders in decision
making.
• Incorporates both short-term and long-term
perspectives.
• Recognizes trade-offs between efficiency
and effectiveness.

Source: Dess et al., (2024), © McGraw Hill

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 Paradoxes / Tensions in
Managerial Decision Making
• Short-term vs. Long-term Focus?
– Innovation Paradox

• Insourcing or Outsourcing of Activities?

– Scope / Globalization Paradox

• Shareholder vs. Stakeholder Centricity?

– Obligation Paradox
• Whom does the firm serve?
• How are conflicting claims vis-à-vis the firm reconciled?

• What is the locus of idea origination within

organizations?
– Decision-making / Authority Flow Paradox
Source: Dess et al., (2024), © McGraw Hill
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Mintzberg’s Strategy as a Pattern
Intended Deliberate Realized
Strategies Strategies Strategies

Unrealized Emergent
Strategies Strategies

Thus, strategy can emerge from

“a pattern in the stream of decisions or actions”
Source: Dess et al., (2024), © McGraw Hill

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Strategic Management Process
• Analysis (Direction & Awareness)
– Strategic goals (vision, mission, strategic objectives)
– Internal and external environment

• Formulation (Decisions)
– What industry should we compete in?
– How should we compete in this industry?
– Should we compete in multiple industries and / or geographies?

• Implementation (Actions)
– Acquisition of resources and capabilities
– Resource allocation
– Organizational design

Source: Dess et al., (2024), © McGraw Hill

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 Strategic Management Process

Source: Dess et al., (2024), © McGraw Hill

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 Strategy Analysis

• Strategy analysis is the starting point in the

strategic management process.
• The analysis needs to be done to effectively
formulate and implement strategies.
• It involves careful analysis of the overarching goals
of the organization.

• It requires a thorough analysis of the organization’s

external and internal environment considering
different levels of analysis.
Source: Dess et al., (2024), © McGraw Hill

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 Strategy Formulation

• Based on strategy analysis, specific

strategies are formulated:
– Business-level strategy: How to compete in a given
business to attain competitive advantage.
– Corporate-level strategy: What businesses to compete in;
how businesses can be managed to achieve synergy.
– International strategy: What strategies are needed as the
business ventures beyond its national boundaries.
– Entrepreneurial initiatives: How can businesses create
new value.

Source: Dess et al., (2024), © McGraw Hill

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 Strategy Implementation

• Formulated strategy (ies) need to be

implemented through a set of coherent
actions related to:
– Strategic control systems.
– Organizational design, coordinating and integrating activities
within the firm.
– Interactions with suppliers, customers, alliance partners.
– Organizational commitment to excellence and ethical behavior.
– Continuous learning and improvement.
– Corporate venturing / intrapreneurship seeking new
opportunities.
Source: Dess et al., (2024), © McGraw Hill

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Coherence in Strategic Direction

• Organizations express priorities best

through stated goals and objectives that
form a hierarchy of goals.
– Vision evokes powerful and compelling mental images of a
shared future.
– Mission encompasses the organization’s current purpose,
basis of competition, and competitive advantage.
– Strategic objectives operationalize the mission statement
with specific yardsticks.

Source: Dess et al., (2024), © McGraw Hill

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Coherence in Strategic Direction

Source: Dess et al., (2021), © McGraw Hill

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Coherence in Strategic Direction

• Organizational vision.
– A “massively inspiring” goal, overarching, long term.
– A destination driven by and evoking passion.
– Developed and implemented by leadership.
– A fundamental statement of an organization’s values,
aspirations, and goals.
– Captures both the minds and hearts of employees.
– BUT can backfire and erode a company’s credibility.

Source: Dess et al., (2021), © McGraw Hill

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 York University’s Vision

“York’s vision is to provide a broad

sociodemographic of students with access
to a high quality education at a research
intensive University that is committed to
enhancing the well-being of the
communities we serve.”

Source: https://www.yorku.ca/about/mission-and-vision/

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Coherence in Strategic Direction

• Mission statement.
– Encompasses both the purpose of the company and
the basis of competition and competitive advantage.
– More specific than the vision.
– Focuses on the means by which the firm will
compete.
– Incorporates stakeholder management.
– Communicates why an organization is special and
different.
– Can and should change when competitive conditions
change.
Source: Dess et al., (2024), © McGraw Hill

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 York University’s Mission

“The mission of York University is the pursuit, preservation,

and dissemination of knowledge. We promise excellence in
research and teaching in pure, applied, and professional
fields. We test the boundaries and structures of knowledge.
We cultivate the critical intellect.

York University is part of Toronto: we are dynamic,

metropolitan, and multi-cultural. York University is part of
Canada: we encourage bilingual study, we value diversity.
York University is open to the world: we explore global
concerns. A community of faculty, students, staff, alumni, and
volunteers committed to academic freedom, social justice,
accessible education, and collegial self-governance. York
University makes innovation its tradition.”
Source: https://www.yorku.ca/about/mission-and-vision/

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Coherence in Strategic Direction

• Strategic objectives.
– Used to operationalize the mission statement to provide guidance
on how to fulfill mission and vision.
– Strategic objectives should be measurable, specific, appropriate,
realistic and timely to channel all employees’ efforts toward
common goals.
– They can be both financial and nonfinancial.
• Key measures are often captured and tracked in Balanced
Scorecards
– They should provide a yardstick for rewards and incentives.
– BUT too many objectives can result in lack of focus, paradox of
choice, and the emergence of competing agendas.

Source: Dess et al., (2024), © McGraw Hill

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 Corporate Governance and
Stakeholder Management
• Appropriate strategic management requires an
effective and appropriate corporate structure.
• Through rules, processes, and expected
behaviors, corporate governance regulates the
relationships among various participants in
determining the direction and performance of
corporations.
• Primary participants are:
– Shareholders (owners).
– Management (led by the Chief Executive Officer).
– The Board of Directors (BOD).
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Source: Dess et al., (2024), © McGraw Hill,
Corporate Governance: The role
of BOD
• Board of Directors
– Elected representatives of the owners.
– Ensure interests and motives of management
are aligned with those of the owners.
• Hire, evaluate, and fire the CEO
• Provide proper managerial rewards and incentives.
• Establish external control mechanisms.
• Address shareholder activism.

Source: Dess et al., (2024), © McGraw Hill

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 Stakeholder Management

Stakeholder Group Nature of Claim

Stockholders Dividends, capital appreciation
Employees Wages, benefits, safe working environment, job
security
Suppliers Payment on time, assurance of continued relationship

Creditors Payment of interest, repayment of principal

Customers Value , warranties

Government Taxes, compliance with regulations

Community Good citizenship behavior such as charities,

employment, not polluting the environment

24 Source: Dess et al., (2024), © McGraw Hill

 Social Responsibility and
Environmental Sustainability
• Firms have multiple stakeholders and must go
beyond a focus solely on financial results.
• Social responsibility is the expectation that
businesses or individuals will strive to improve the
overall welfare of society.
• Firms can measure a triple bottom line, assessing
financial, social, AND environmental performance.
• Sustainability projects can yield substantial
benefits even when they are difficult to quantify.

Source: Dess et al., (2024), © McGraw Hill

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 Profitability Ratios
• Measure the firm’s ability to create a positive margin by generating
revenues greater than costs incurred in the process of transforming
inputs into outputs in a marketplace.

• The computation of profitability ratios requires estimates and

assumptions, “which can always change”.

• Five key financial ratios from the general manager’s perspective are:

– Gross margin: Profitability at the level of a product or service before

overhead.
– Operating margin: Before I&T, more comprehensive, relevant for
bonuses.
– Net margin
– Return on Assets: Too high ratio may indicate underinvestment
undermining the long-term profitability.
– Return on Equity

26 Source: Berman, K., Knight, J., & Case, J. 2005. Profitability ratios: The higher the better (Mostly) (HBS)