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Strategic Management:
Creating Competitive Advantages
McGraw-Hill/Irwin Strategic Management: Text and Cases, 4e
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Learning Objectives
After reading this chapter, you should have a good understanding of:
The definition of strategic management and its four key attributes. The strategic management process and its three interrelated and principal activities. The significance of strategic issues The vital role of corporate governance and stakeholder management as well as how symbiosis can be achieved among an organizations stakeholders. The importance of social responsibility, including environmental sustainability, and how it can enhance a corporations innovation strategy. The need for greater empowerment throughout the organization. How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
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Strategic Management
Analysis
Strategic goals (vision, mission, strategic objectives) Internal and external environment of the firm
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Strategic Management
Strategic management is the study of why some firms outperform others
How to compete in order to create competitive advantages in the marketplace How to create competitive advantages in the market place
o Unique and valuable o Difficult for competitors to copy or substitute
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Key Attributes
Key Attributes of strategic management:
Directs the organization toward overall goals and objectives Includes multiple stakeholders in decision making Needs to incorporate short-term and long-term perspectives Recognizes trade-offs between efficiency and effectiveness
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Question
The final realized strategy of a firm is a combination of:
a) b) c) d) Intended and unrealized strategies Unrealized and emergent strategies Emergent and deliberate strategies Deliberate and unrealized strategies
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Adapted from Exhibit 1.2 Realized Strategy and Intended Strategy: Usually Not the Same Source: H. Mintzberg and J. A. Waters, Of Strategies, Deliberate and Emergent, Strategic Management Journal 6 (1985), pp. 25772.
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Strategic Analysis
Starting point in the strategic management process Precedes effective formulation and implementation of strategies
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Strategic Issues
Results from Strategic Analysis Strategic issues require top-management decisions
- Strategic decisions overarch several areas of a firms operations - Usually only top management has the perspective needed to understand their broad implications - Usually only top managers have the power to authorize necessary resource allocations
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Strategic Issues
Strategic issues require large amounts of the firms resources
- They involve substantial allocations of people, physical assets, and money - Strategic decisions commit the firm to actions over an extended period - In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm
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Strategic Issues
Strategic issues often affect the firms longterm prosperity
- Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer - Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy - Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains.
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Strategic Issues
Strategic issues are future-oriented
- They are based on what managers forecast, rather than what they know - Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options - A firm will succeed only if it takes a proactive (anticipatory) stance toward change
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Strategic Issues
Strategic issues usually have multifunctional or multibusiness consequences.
- Strategic decisions have complex implications for most areas of the firm - Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firms SBUs, divisions, or program units
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Strategic Issues
Strategic issues require considering the firms external environment
- All businesses exist in an open system. They affect and are affected by external conditions that are largely beyond their control - Successful positioning requires that strategic managers look beyond operations and consider what relevant others are likely to do
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Strategy Formulation
Business level strategy:
- Successful firms develop bases for competitive advantage
Cost leadership Differentiation Focusing on narrow or industry-wide market segments
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Diversification
- Related - Unrelated
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Strategy Implementation
Informational control
- Monitor and scan the environment - Respond effectively to threats and opportunities
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Question
Briefly describe the role of board of directors in corporate governance.
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Stakeholder Management
Two views of stakeholder management
- Zero sum
Stakeholders compete for attention and resources of the organization Gain of one is a loss to the other
- Symbiosis
Stakeholders are dependent upon each other Mutual benefits
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Social Responsibility
Social responsibility: the expectation that businesses or individuals will strive to improve the overall welfare of society
Managers must take active steps to make society better Socially responsible behavior changes over time Triple bottom line
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Source: www.starbucks.com
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Integrative view of the organization Assess how functional areas and activities fit together to achieve goals and objectives All managers and employees must take and integrative, strategic perspective of issues facing the organization
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Champion and guide ideas Create a learning infrastructure Establish a domain for taking action
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Subsidiary Management
Functional Management
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Company vision
Hierarchy of Goals
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Hierarchy of Goals
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Hierarchy of Goals
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Hierarchy of Goals