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CHAPTER 6
STRATEGIC
MANAGEMENT
How Exceptional Managers
Realize a Grand Design

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 LEARNING OBJECTIVES

6-1 Identify the three principles underlying strategic

positioning.
6-2 Outline the five steps in the strategic-management
process.
6-3 Explain how an organization assesses the competitive
landscape.
6-4 Explain the three methods of corporate-level strategy.
6-5 Discuss Porter’s and Welch’s techniques for formulating a
business-level strategy.
6-6 Describe how to create, execute, and control a functional-
level strategy.
6-7 Describe how to enhance your strategic thinking.

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 MANAGE U – YOUR PERSONAL BRAND
REQUIRES A STRATEGY

• Why You Need a Personal Brand

• How to Create Your Brand:
• Identify the core message of your brand.
• Write a personal branding statement.
• Develop a social media strategy.
• Start networking.

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 STRATEGIC POSITIONING AND LEVELS OF
STRATEG

Strategic Positioning and Levels of Strategy

Levels of Strategy

Does Strategic Management Work for Small as Well

as Large Firms?

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 STRATEGIC POSITIONING AND ITS PRINCIPLES

Strategic positioning attempts to achieve sustainable

competitive advantage by preserving what is distinctive about
a company.
Strategy is the creation of a unique and valuable position.
• Few needs, many customers
• Broad needs, few customers
• Broad needs, many customers

Strategy requires trade-offs in competing.

Strategy involves creating a “fit” among activities.

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 LEVELS OF STRATEGY

• Corporate-Level Strategy
• Business-Level Strategy
• Functional-Level Strategy

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 FIGURE 6.1 THREE LEVELS OF STRATEGY

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 DOES STRATEGIC MANAGEMENT WORK FOR SMALL AS WELL
AS LARGE FIRMS?

• Evidence reveals that the use of strategic

management techniques and processes is
associated with increased small business
performance.
• Surprisingly, however, many small business
owners do not engage in strategic planning.

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 FIGURE 6.2 THE STRATEGIC-MANAGEMENT PROCESS

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 THE STRATEGIC-MANAGEMENT PROCESS

The Five Steps of the Strategic-Management Process:

1. Establish the Mission, Vision, and Values Statements

2. Assess the Current Reality

3. Formulate Corporate, Business, and Functional Strategies

4. Strategic Implementation: Execute the Strategies

5. Maintain Strategic Control: The Feedback Loop

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 ASSESSING THE CURRENT REALITY

SWOT Analysis

Using VRIO to Assess Competitive Potential: Value,

Rarity, Imitability, and Organization

Forecasting: Predicting the Future

Benchmarking: Comparing the Best

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 SWOT ANALYSIS

SWOT analysis is a good first step at gaining insight

into whether or not a company has competitive
advantage.
SWOT analysis is a situational analysis in which a
company assesses its strengths, weaknesses,
opportunities, and threats.
• Internal Environment: Analysis of internal strengths and
weaknesses
• External Environment: Analysis of external opportunities
and threats

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 FIGURE 6.3 SWOT ANALYSIS
SWOT stands for Strengths, Weaknesses, Opportunities, and
Threats.

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 USING VRIO TO ASSESS COMPETITIVE POTENTIAL: VALUE,
RARITY, IMITABILITY, AND ORGANIZATION

• VRIO (pronounced by its FIGURE 6.4.

letters, “V-R-I-O”) is a Is the resource or
framework for analyzing a capability . . .
Source: Adapted
resource or capability to from F. T.
determine its competitive Rothaermel,
Strategic
strategic potential by Management:
Concepts and
answering four questions Cases (New
York: McGraw-
about its value, rarity, Hill Education,
imitability, and 2012), p. 91 

organization

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 FORECASTING: PREDICTING THE FUTURE

• Trend Analysis
• Contingency Planning: Predicting Alternative
Futures

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 BENCHMARKING: COMPARING WITH THE BEST
FIGURE 6.5 Airline benchmarks, 2019

Source: Based on S.
McCartney, “The Best and
Worst U.S. Airlines of 2019,”
The Wall Street Journal,
January 15, 2020,
https://www.wsj.com/articles/ 
the-best-and-worst-u-s-
airlines-of-2019-
11579097301?
mod=searchresults&page=1 Access alternate text for slide image.
&pos=3. 

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 ESTABLISHING CORPORATE-LEVEL STRATEGY

Three Overall Types of Corporate Strategy

The BCG Matrix

Diversification Strategy

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 Three Overall Types of Corporate Strategy

Growth strategy:
• Involves expansion, as in sales revenues, market share,
number of employees, or number of customers.
Stability:
• Involves little or no significant change.
Defensive:
• Involves reduction in the organization’s efforts.
• Retrenchment

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 THE BCG MATRIX
FIGURE 6.6. The BCG
matrix. Matrix growth is
divided into two
categories, low and high.
Market share also is
divided into low and high.
Thus, in this matrix,
“stars” are business
unites that are highly
desirable (high growth,
high market share),
compared to “dogs,”
which are not so desirable
(low growth, low market
share).

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 THE DIVERSIFICATION STRATEGY

• Companies generally diversify to either grow

revenue or reduce risk.
• They grow revenue because the company now
has new products and services to sell.

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 ESTABLISHING BUSINESS-LEVEL STRATEGY

• Porter’s Five Competitive Forces

• Porter’s Four Competitive Strategies
• An Executive’s Approach toward Strategy
Development

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 PORTER’S FIVE COMPETITIVE FORCES

Porter contends that business-level strategies

originate in five primary competitive forces in the
firm’s environment:
1. Threat of new entrants
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threats of substitute products or services
5. Rivalry among competitors

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 PORTER’S FOUR COMPETITIVE STRATEGIES

• Cost-Leadership Strategy: Keeping costs and

prices low for a wide market
• Differentiation Strategy: Offering unique and
superior value for a wide market
• Cost-Focus Strategy: Keeping costs and prices
low for a narrow market
• Focused-Differentiation Strategy: Offering unique
and superior value for a narrow market

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 AN EXECUTIVE’S APPROACH TOWARD STRATEGY
DEVELOPMENT

• What does the playing field look like now?

• What has the competition been up to?
• What have you been up to?
• What’s around the corner?
• What’s your winning move?

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 STRATEGIC IMPLEMENTATION: CREATING, EXECUTING, AND CONTROLLING
FUNCTIONAL-LEVEL STRATEGIES

Strategic Implementation: Creating, Executing, and

Controlling Functional-Level Strategies

Execution: Getting Things Done

The Three Core Processes of Business: People,

Strategy, and Operations

Execution Roadblocks

Maintaining Strategic Control

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 STRATEGIC IMPLEMENTATION: CREATING, EXECUTING, AND
CONTROLLING FUNCTIONAL-LEVEL STRATEGIES

• Higher-level corporate- and business-level

strategies flow down to the functional strategy.
• This is similar to goal cascading, which ensures
that higher-level goals are communicated and
aligned with the goals at the next levels down in
the organizational hierarchy.
• Typical functional areas include marketing,
finance, human resources, operations,
information technology, and distribution.

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 EXECUTION: GETTING THINGS DONE
FIGURE 6.7. An
example of
strategic
implementation
at Kroger.

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 THE THREE CORE PROCESSES OF BUSINESS: PEOPLE,
STRATEGY, AND OPERATIONS

A company’s overall ability to execute is a function

of effectively executing according to three
processes: people, strategy, and operations.
1. The First Core Process—People: “You need to
consider who will benefit you in the future.”
2. The Second Core Process—Strategy: “You need to
consider how success will be accomplished.”
3. The Third Core Process—Operations: “You need to
consider what path will be followed.”

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 EXECUTION ROADBLOCKS

Execution doesn’t always go smoothly and

managers may face obstacles to strategic
implementation for many different reasons.
• Overcoming roadblocks in the C-suite
• Overcoming roadblocks down the hierarchy

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 MAINTAINING STRATEGIC CONTROL

• Engage people.
• Keep it simple.
• Stay focused.
• Keep moving.

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 CAREER CORNER: MODEL OF CAREER READINESS
FIGURE 6.8. Career readiness competencies.

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 CAREER CORNER:
MANAGING YOUR CAREER READINESS

Understand the business.

• Understand a potential or current employer’s business and
strategies.
• Extend your knowledge by networking, seeking mentoring,
participating in a job rotation, and attend cross-functional or
business meetings.
Broaden your task and functional knowledge.
• Make connections between concepts, ideas, people, and events.

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 End of Main Content

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