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Definition of Strategic Management

• Strategic management is a process through

which:
› Organizations analyze and learn from their internal and
external environments,
› Establish strategic direction,
› Create strategies that are intended to move the
organization in that direction, and
› Implement those strategies
• All in an effort to satisfy key stakeholders
 Three Perspectives on Strategic
Management
• Traditional Perspective
› Origin
¤ Economics, other business disciplines, and consulting
firms
› View of Firm
¤ An economic entity
› Approach to Strategy Formulation
¤ Situation analysis of internal and external environments
leading to formulation of mission and strategies
› Source of Competitive Advantage
¤ Best adapting the organization to its environment by
taking advantage of strengths and opportunities and
overcoming weaknesses and threats
 Traditional Strategic Management
Process

Situation Analysis
(external environment)

Strategic Strategy Formulation Strategy Implementation

Direction (take advantage of (development &
(mission strengths/overcome execution of
& goals) weaknesses & threats) implementation plans)
 Strategy Fundamentals
• Traditional View • Contemporary View
› Environmental
determinism (the best
strategy is determined by
the environment)
› Firms should adapt to the
environment
› Strategy is deliberate
(intended)
› Enactment (firms can
influence their
environments)
› A firm should pursue
actions to make the
environment more
hospitable
› Strategy emerges from a
stream of decisions as
firms learn
 Three Perspectives on Strategic
Management
• Resource-based View
› Origin
¤ Economics, distinctive competencies and general
management capability
› View of Firm
¤ A collection of resources, skills and abilities
› Approach to Strategy Formulation
¤ Analysis of organizational resources, skills and
abilities. Acquisition of superior resources, skills
and abilities
› Source of Competitive Advantage
¤ Possession of resources skills and abilities that are
valuable, rare and difficult to imitate by competitors
The Organization as a Bundle of
Resources
General Organizational
Resources
•Firm Reputation
•Brand Names and Patents
•Contracts
•Stakeholder Relationships

Financial Resources Physical Resources

•Internal and External Organizational •Plants and Equipment
Sources of Financing Knowledge •Organizational Locations
•Financial Strength and Learning •Access to Raw Materials

Human Resources
•Skills, Background and
Training of Managers and
Employees
•Organization Structure
 Three Perspectives on Strategic
Management
• Stakeholder View
› Origin
¤ Business ethics and social responsibility
› View of Firm
¤ A network of relationships among the firm and its
stakeholders
› Approach to Strategy Formulation
¤ Analysis of the economic power, political influence,
rights and demands of various stakeholders
› Source of Competitive Advantage
¤ Superior linkages with stakeholders leading to trust,
goodwill, reduced uncertainty, improved business
dealings and ultimately higher firm performance
 A Typical Stakeholder Map

Activist Competitors
Local
Groups Communities

The Organization
Owners/Board of Directors
Suppliers Managers Customers
Employees

Unions The Media

Financial Government Agencies

Intermediaries and Administrators
 Can External Stakeholders Be
Managed?
• Internal Stakeholder
Management
› Nature of Relationship
¤ Contractual
› Physical Location
¤ Predominantly inside
organization structure,
sometimes geographically
diverse
› Motivation to Perform
¤ Regular payments,
retention, bonuses,
common purpose,
persuasion
› Direct Control
¤ Schedules, plans,
sometimes direct
supervision
• External Stakeholder
Management
› Nature of Relationship
¤ Contractual, legal or
informal
› Physical Location
¤ Predominantly outside
organizational structure;
sometimes included
› Motivation to Perform
¤ Regular payments,
retention, incentives,
bonuses, common
purpose, persuasion
› Direct Control
¤ Schedules, plans, less
often direct supervision
 The Strategic Management Process

Analyze the Environment,

Stakeholders and
Organizational Resources
(Chs. 2 & 3)

Establish Formulate Strategies Implement Strategies

Strategic Business-Unit (Ch. 5) & Establish Controls
Direction Corporate-Level (Ch. 6) (Chs. 7 & 8)
(Ch. 4) Entrepreneurship (Ch. 9)
 Strategy Formulation in a
Multibusiness Organization
Entire Corporation
(Corporate Level:
Domain Definition)

Business 1 Business 2
(Business Level: (Business Level:
Domain Direction/Navigation) Domain Direction/Navigation)

Marketing Finance Operations Research Human Resources

(Functional Level: Implementation and Execution)
 Why Go Global
• More favorable climate for foreign business
› Trade barriers falling
› Newly industrializing countries
› Worldwide shift towards market economies
› Easier to exchange capital in foreign markets
› Communication systems are worldwide
› English universally spoken
› Technical standards universal
• Domestic markets saturated
• Sometimes foreign markets more profitable
• Acquire state-of-the-art resources
• Lower cost for goods and services
• Acquire technical knowledge
 Strategic Planning Process vs.
Strategic Thinking
• The strategic planning process is often rigid
and unimaginative, with detailed instructions
pertaining to every aspect of the process
• Strategic thinking leads to creative solutions
and new ideas
• The best firms use both!
 Elements of Strategic Thinking
• Intent Focused
› Strategic intent--a managerial vision of where the firm is going
• Comprehensive
› A “systems” perspective. Envisions the firm as a part of a larger system of
value creation.
• Opportunistic
› Seizes unanticipated opportunities
• Long-term Oriented
› Looks several years into the future at what the firm will become
• Built on Past and Present
› learns from the past and builds on a foundation of the realities of the present
• Hypothesis Driven
› Creative ideas are then critically evaluated. Takes risks
 The Hospitality Industry –
Foodservice Players

Consists of institutional providers, food

contractors, and restaurants
• The US restaurant industry has 870,000
restaurants and sales of $426 billion
• The restaurant industry can be divided into
two main segments, quick-service and full-
service
The Hospitality Industry – Lodging
Players
The US lodging industry has over 42,000 hotels, 4.4
million guestrooms, and sales of about $103 billion
• Is composed of five segments:
• Luxury (upper upscale)
• Upscale
• Midscale with food and beverage
• Midscale without food and beverage
• Economy
• Hotels can be owned, franchised and operated by a
variety of different players in business relationships
 Major Concepts in Chapter 1
• The strategic management process involves
analysis of the environment and organization,
creation of strategic direction, strategy
formulation, strategy implementation and
strategic control
• Strategic thinking is a creative process that
should be encouraged
• The strategic management model used in this
book is built on three perspectives:
traditional, resource-based and stakeholder.
These perspectives complement each other.
 Major Concepts in Chapter 1
• Organizations should learn from and adapt to
aspects of their environment that would be
difficult or too expensive to change, but can
influence (enact) other aspects of their
environments
• Strategy is part deliberate and part emergent
• Superior organizational resources lead to
superior organizational performance
• Organizations sit at the center of a network of
stakeholders. Effective stakeholder management
can lead to acquisition of superior resources and
other positive outcomes
 Major Concepts in Chapter 1
• Globalization continues to increase as foreign
environments become more hospitable to
investment and organizations search for
world-class opportunities and resources
• Strategic thinking involves intuition and
creativity. It is intent focused,
comprehensive, opportunistic, long-term
oriented, built on past and present, and
hypothesis driven. Organizations should
encourage this kind of thinking.