Chapter 9 –

Strategic
management
Presentation prepared
by
Lucy Miller
Macquarie University
 Strategic
management
Learning objectives:
• What are the foundations of strategic competitiveness?
• What is strategic management?
• What types of strategies are used by organisations?
• How are strategies formulated?
• What are the current issues in strategy
implementation?

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 Sustainable strategic
competitiveness
• A competitive advantage allows an organisation to
deal with market and environmental forces better
than its competitors.
• The aim for any organisation is not just to achieve
competitive advantage but to make it sustainable in
spite of competitors’ attempts to copy or duplicate a
success story.
• Achieving and sustaining competitive advantage is
a challenging task.
• Adaptation is the key concept

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 What is organisational
strategy?
• Organisational strategy
– ‘A pattern in a stream of organisational
decisions’ (Henry Mintzberg).
1. Must be viewed in the context of several
decisions and the consistency among the
decisions.
2. The organisation must be aware of alternatives
in all of its decisions.

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 What is organisational
strategy?
• Strategic intent
– Focuses and applies organisational
energies on a unifying and
compelling goal.

• Strategies may change as

environmental conditions change

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 Strategic
management
• Strategic management
– The process of formulating and implementing
strategies to accomplish long-term goals and
sustain competitive advantage.
– Essentially involves:
• looking ahead;
• understanding the environment and
the organisation; and
• positioning the organisation for
competitive advantage in changing times.

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 Strategic management
goals
• Michael Porter argues that the ultimate goal for a
business should be superior profitability. This creates
value for shareholders in the form of above-average
returns.
• Above-average returns
– Returns exceeding what could be earned from
alternative investments of equivalent risk.
• The competition within the environment largely
determines whether above-average returns are
achievable.
• At PepsiCo, this goal is stated as: ‘To increase the value of
our shareholder’s investment.’
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 Strategic management
goals
• Monopoly environment
– Only one organisation and no competition. Most
are government-owned organisations.
• Oligopoly environment
– A small number of competitors feel themselves to be
constrained more by the actions of their rivals than
by those of their customers.
– Understanding of the principles of game theory
becomes a critical skill of strategists under an
oligopoly,
e.g. what will be a rival’s response to a price change?
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 Strategic management
goals
• Hypercompetition
– Environment in which there are at least several
players who directly compete with one another, e.g.
fast-food industry.
– The competition is direct and intense, so any
competitive advantage that is realised is
temporary.
– The customer generally gains in this
environment through lower prices and more
product/service innovation.

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The strategic management
process

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 The strategic management
process
• Strategy formulation
– Process of creating strategy.
– Involves assessing existing strategies, organisation
and environment to develop new strategies/plans
capable of delivering future competitive advantage.
• Strategy implementation
– Process of allocating resources and putting
strategies into action.
– Once strategies are created, must be acted on
to achieve the desired results.

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 The strategic management
process
• Five strategic management tasks
1. Identify organisational mission and objectives.
2. Assess current performance in relation to mission
and objectives.
3. Create strategic plans to accomplish purpose
and objectives.
4. Implement the strategic plans.
5. Evaluate results; change strategic plans
and/or implementation processes as
necessary.
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 Analysis of mission, values and
objectives
• The mission or purpose of an organisation may
be described as its reason for existence in
society.
• Mission statement
– Identifies the domain in which the organisation
intends to operate, including customers, products
and/or services, and location.
– Should communicate the underlying philosophy
that will guide employees.

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External stakeholders and the mission
statement

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Mission, values and objectives – Core
values
• Organisational culture
– The system of shared beliefs and values that
develops within an organisation and guides the
behaviour of its members.
• The presence of strong core values helps build
institutional identity, giving an organisation character
in the eyes of its employees and external
stakeholders.

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 Mission, values and
objectives
• Operating objectives direct activities towards
specific performances results. Peter Drucker
suggested these might include:
1. Profitability
2. Market share
3. Human talent
4. Financial health
5. Cost efficiency
6. Product quality
7. Innovation
8. Social responsibility

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 Analysis of organisational resources
and capabilities
• A SWOT analysis examines organisational strengths
and weaknesses as well as the external analysis of
environmental opportunities and threats.
• Core competencies are special strengths that give
an organisation competitive advantage.

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SWOT
analysis

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Analysis of industry and environment
(Porter’s five forces model)

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 Levels of
strategy
• Corporate strategy
– Sets long-term direction for the total enterprise.
• Business strategy
– Identifies how a division or strategic business unit
will compete in its product or service domain.
• Strategic business unit (SBU)
– A major business area that operates with
some autonomy.
• Functional strategy
– Guides activities within one specific area of
operations.
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Levels of strategy in
organisations

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 Growth and diversification
strategies
• Growth strategies involve expansion of the
organisation’s current operations.
– Growth through concentration is within the
same business area.
– Growth through diversification is by acquisition of
or investment in new and different business areas.
– Growth through vertical integration is by
acquiring suppliers or distributors.

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Video: Ozpress to expand facilities
overseas

Broadban
d

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 Restructuring and divestiture
strategies
• When an organisation has performance problems, a
retrenchment strategy may be used to reduce the scale
of current operations.
– Liquidation is when operations cease due to
the complete sale of assets/bankruptcy.
– Restructuring changes scale and/or mix of
operations to improve efficiency/performance.
– Downsizing decreases the size of operations with
the intention of becoming more streamlined.
– Divestiture sells off parts of organisation to
focus attention and resources on core business
areas.
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 Cooperation in business
strategies
• In strategic alliances, organisations join together
in partnership to pursue an area of mutual
interest.
• Outsourcing alliances are contracts to purchase
important services from another organisation such
as payroll, IT, and security.
• Distribution alliances involve organisations joining
together to accomplish product or service sales
and distribution.

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 E-business
strategies
• An e-business strategy strategically uses the internet
to gain competitive advantage
• B2B (business-to-business) – vertically link
organisations with members of their supply chain
• B2C (business-to-consumer) – link organisations
with their customers

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 Strategy
formulation
• Sustainable competitive advantage exists through
realising cost and quality, knowledge and speed,
creating a market stronghold and protecting financial
resources.
• The major opportunities for competitive advantage
are found in:
1. Cost and quality
2. Knowledge and speed
3. Barriers to entry
4. Financial resources.
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Porter’s generic strategies
framework: motor vehicle
industry examples

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 Strategy
formulation
• A differentiation strategy offers products that are
unique and different from the competition.
• A cost leadership strategy seeks to operate with
lower costs than competitors.
• A focused differentiation strategy offers a unique
product to a special market segment.
• A focused cost leadership strategy seeks the lowest
costs of operations within a special market segment.

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The product life
cycle

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 Portfolio
planning
• Portfolio planning
– Seeks the best mix of investments among
alternative business opportunities.
– In multi-business situations, allocates scarce
resources among competing uses.
• The BCG matrix analyses business opportunities
according to market growth rate and market share.
See diagram on next slide.

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The BCG
Matrix

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The GE Business
Screen

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 Adaptive
strategies
• The Miles and Snow adaptive model:
– A Prospector strategy pursues innovation and
new opportunities with prospects for growth.
– A defender strategy emphasises existing products
and market share without seeking growth.
– An analyser strategy maintains the stability
while exploring selective opportunities.
– A reactor strategy responds to competitive
pressures in order to survive.

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 Emergent
strategies
• Emergent strategies
– Develop progressively over time as ‘streams’ of
decisions made as managers learn and respond
to situations.
– Contains element of ‘craftsmanship’ which is
often overlooked my managers, who choose and
discard strategies quickly using formal models.
– Incremental/emergent strategic planning helps
managers become good at implementing
strategies, not just formulating them.

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 Strategy
implementation
• Current issues in strategy implementation include:
– Management practices and systems, from planning
and controlling through organising and leading must
be mobilised to support strategies.
– Corporate governance, the system of control
and performance monitoring of top
management.
– Strategic leadership, the capability to enthuse people
to successfully engage in process of continuous
change, performance enhancement and
implementation of organisational strategies.

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Video: Virgin combats Qantas with
Singapore deal

Broadban
d

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 Chapter 9 – Strategic
management
Summary:
• What are the foundations of strategic competitiveness?
• What is strategic management?
• What types of strategies are used by organisations?
• How are strategies formulated?
• What are the current issues in strategy
implementation?

© John Wiley and Sons