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Strategic Management:
Creating Competitive Advantages
 Learning Objectives
 The definition of strategic management and its four key attributes.

 The strategic management process and its three interrelated and principal
activities.

 The vital role of corporate governance and stakeholder management as

well as how “symbiosis” can be achieved among an organization’s
stakeholders.

 The importance of social responsibility, including environmental

sustainability, and how it can enhance a corporation’s 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.
 Defining Strategic Management

• Strategic management is the process of analyzing,

deciding, and implementing an organizational goals
to achieve and sustain competitive advantage.
 Strategic Management Process
• Analysis
‾ Strategic goals (vision, mission, strategic objectives)
‾ Internal and external environment of the firm

• Strategic decisions
‾ What industries should we compete in?
‾ How should we compete in those industries?

• Actions/ Implementations
‾ Allocate necessary resources
‾ Design the organization to bring intended strategies to reality
4 Key Attributes of Strategic Management

• Strategic management is directed toward achieving

overall organizational goals and objectives

• Strategic management includes multiple stakeholders in

decision making

• Strategic management incorporates the short-term and

long-term perspectives of the organization, and

• Strategic management recognizes the trade-off between

effectiveness and efficiency
Strategic Management Process
 Strategy Analysis
• Clear goals and objectives permit effective allocation of
resources
• Hierarchy of goals
– Vision
– Mission
– Strategic objectives
• Analyzing external environments
– Managers must scan the environment and analyze
competitors
– General environment
– Industry environment
• Frameworks for analyzing a firm’s internal environment
– Strengths
– Weaknesses

• Analyzing strengths can uncover potential sources of

competitive advantage

• Intellectual assets are drivers of

– Competitive advantage
– Wealth creation

• Networks and relationships among

– Employees
– Customers
– Suppliers
– Alliance partners
 Strategy Formulation

• Business level strategy:

– Successful firms develop bases for competitive advantage

• Cost leadership
• Differentiation
• Focusing on narrow or industry-wide market segments

– Sustainability

– Industry life cycle

Corporate-level strategy:
• Firm’s portfolio or group of businesses
– What business(es) should we be in?
– How can we create synergies among the businesses?

• Diversification
– Related

• International Strategy:
– Appropriate entry strategies for foreign markets
– Sustain competitive advantage in global markets
 Strategy Implementation
• Informational control
– Monitor and scan the environment
– Respond effectively to threats and opportunities

• Behavioral control

• Effective corporate governance

– Interests of managers and owners of the firm

• Organizational structure and design

• Strategic Alliances

• Develop organization that is committed to

– Excellence
– Ethical behavior

• Learning organization responsive to

– Rapid and unpredictable change

• Corporate entrepreneurship and innovation

– New opportunities
– Enhance innovative capacity
– Autonomous entrepreneurial behavior
– Product champions
Corporate Governance and Stakeholder
Management
• Corporate governance: the relationship among
various participants in determining the direction and
performance of corporations
– Shareholders
– Management (led by the CEO)
– Board of Directors
• Board of Directors
– Elected representatives
of the owners
– Ensure interests and
motives of
management are
aligned with those of
the owners
• Effective and engaged
Board of Directors
• Shareholder activism
• Proper managerial
rewards and incentives
 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
 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
 Coherence in Strategic Direction

• Company vision
– Massively inspiring Company vision
– Overarching
– Long-term
– Driven by and evokes
passion
– Fundamental statement of
the organization’s
• Values Hierarchy of Goals
• Aspiration
• Goals
• Mission statements
– Purpose of the company Company vision
– Basis of competition and
competitive advantages Mission statements
– More specific than vision
– Focused on the means by
which the firm will
compete Hierarchy of Goals
• Strategic objectives
– Operationalize the mission Company vision
statement
– Provide guidance on how Mission statements
the organization can fulfill
or move toward the
Strategic objectives
“higher goals”
– More specific Hierarchy of Goals
– Cover a more well-defined
time frame
Strategic Objectives should be SMART

• Strategic objectives Company vision

– Specific
Mission statements
– Measurable
– Appropriate
Strategic objectives
– Realistic
– Timely Hierarchy of Goals