STRATEGIC

MANAGEMENT
Strategy and Change
• There are four components that describe the
nature of change in the environment:
• Stability
• complexity,
• resource scarcity, and
• uncertainty
Practice Question
• The cash-strapped Cuban government cut back deliveries of high-octane
gasoline in April 2017. Cuba depends on crisis-racked ally Venezuela for
about 70 percent of its fuel needs, including oil for refining and re-
exports. Better-off Cubans scrambled to locate fuel and to wait in long
lines to fill up their cars. A Miami car dealer came to the rescue, offering
to sell electric vehicles shipped from the United States. The dealer's
strategy is shaped by

• Resource scarcity
• The uncertainty in the environment
• The complex environment
Environments and Strategic Management
• Step One: Strategic Objectives and Analysis
• Step Two: Strategic Formulation
• Step Three: Strategic Implementation
• Step Four: Strategic Evaluation and Control
 PESTEL Methodology (Eg., Walmart)
Factor Analysis of External Environment

Minimum wage pressure

Political Working conditions of international suppliers (child labor)

GDP growth forecasts are modest

Economic Low interest rates, but Fed signaling increases

Aging population
Social Large millennial demographic

Technological Growth of online shopping (greater consumer acceptance)

Environmental Impact of emissions standards on truck fleet
Legal Healthcare regulation impact on large part-time workforce
 SWOT Analysis Example
Strengths
Weaknesses
 Low-cost supply chain  E-commerce presence one-fifth the size of
 Large network of brick and mortar Amazon’s
stores
 Negative PR—employee wages
 Large fleet of commercial trucks  Low brand acceptance among millennials
 Exceptional logistics
 Database of consumer shopping habits

Opportunities
 Improvement in HR practices
 Increase investment in technology
 Online shopping growth
 Improve quality standards
Threats
 Aggressive competition (Amazon)
 Ease of entry to online selling
 Intense price competition
The Role of Strategy in Management
• Competitive Advantage
• Is there a particular characteristic or quality that you associate with
each of them?
• Porsche
• Volvo
• Hyundai
• Toyota
• Ford
 Creating Competitive Advantage
Company How Company Creates Distinction
Research and development: creates new or improved
Apple products with leading-edge technology
Nike Marketing: uses celebrity endorsements to create a
powerful brand image
Supply chain management: created a highly integrated
Walmart system to keep supplier costs low and keep products that
customers buy on the shelf
Zappos Customer service: strives to deliver “Wow!” in the
customer’s experience
UPS Logistics: integrates package delivery with customer needs
Zara Rapid responsiveness: quickly gets the latest styles into
stores
 Strategy and Competitive Advantage
• When firms beat their competitors it means they can finance
more research and development to improve their products or
services;
• they can spend more on advertising and promotions to attract
customers;
• they can donate to charities to improve community relations; and
• they can provide greater profits to their owners.
• In short, competitive advantage is the means to meeting
organizational goals.
Practice Question
• Competitive advantage can be summarized best by
which of the following?
• The negotiating power a supplier or buyer can exert over
a company
• A product or service that is perceived as having a higher
value relative to competitive offerings
• The additional profit realized when a firm sells products
or services at an above market price
The Value Proposition
• A value proposition is a statement that a company
uses to convince customers that its product or service
provides more value to them than a competitor’s
product or service.
• The value proposition communicates to the customer
the main reason a product or service is the one best
suited to their needs.
• An excellent example is the value statement for the Apple
MacBook.
• It shows an edge-on image of a MacBook with the caption
“MacBook: Light. Years ahead.” This very cleverly conveys the
important distinctions of the MacBook.
• First, it’s a really slick design. In the edge-on view the computer
almost disappears.
• Second, it is light. In the laptop market, weight is important. Both the
image and the statement emphasize that the MacBook is easy to
carry around.
• Finally, it emphasizes MacBook’s advanced technology, “Light years
ahead.” In a very small space, Apple conveys the main differentiators
for the MacBook—its weight and its advanced technology.
Practice Questions
Which statement best captures the meaning of a value
proposition?
1. It is a comprehensive list of product features basically
the same thing as an advertisement or sales pitch
2. It explains why the customer would choose the firm’s
product over alternatives or no product at all
3. It is a sales pitch or promotion designed to prompt an
immediate purchase
Digit is a personal finance app that connects to users’ bank
accounts, analyzes their regular spending habits, and automatically
deposits money into a savings account for them. Users can just
install the app, set it up, and start saving money. Digit’s value
proposition is “Save money, without thinking about it.” What does
this statement emphasize in the effort to differentiate Digit from
its competitors?
1. Digit offers the best interest rates on savings accounts
2. Digit offers the best user interface among personal
finance apps
3. Digit makes it easier to save money than other tools
Strategic Management
• Strategic management is the process of integrating all the functions
and activities in an organization into a coherent whole.
For example, when Tom’s of Maine introduced a new deodorant that
disappointed customers, company founder Tom Chappell pulled the
product from the market and reimbursed the customers who had
purchased it. The company lost the money it had put into developing
and producing the product, as well as the reimbursement cost. But it
reinforced the core values of fairness and honesty that the company
espoused, and demonstrated that quality and customer satisfaction
were the company’s competitive advantage.
In another example, Southwest Airlines’ management implemented the
“Walk a Mile” program in which managers and executives pitch in to help
front-line employees. Executives clean planes, load luggage, and attend
gates. Flight attendants were surprised when Herb Kelleher, the company
chairman, showed up to help them provision a plane. This program
reinforces the family culture at Southwest, where everyone is valued and
considered equal. It also emphasizes the company’s focus on customer
service by demonstrating that everyone has to support activities that
directly affect the customer.
Practice Question
From the inception of his electric car company, Tesla, Elon Musk has emphasized
innovation and quality above all else. Part of the company’s strategy is to never discount
products, a policy that extends to all levels of the company. Upon hearing that some
salespeople were offering promotional discounts in 2016, Musk sent an email to all
Tesla employees that stated, “There can never—and I mean never—be a discount on a
new car coming out of the factory in pristine condition. This is why I always pay full price
when I buy a car and the same applies to my family friends, celebrities, no matter how
famous or influential." Why did Musk feel the need to remind the entire company about
the policy rather than just disciplining the offending salespeople?
• Musk knew the media would eventually get a copy of the email, and he
wanted to remind the public that Teslas are never discounted
• Musk wanted to protect the business’s overall strategy, and he recognized that
all employees needed to be reminded of the company’s luxury/performance
vehicle positioning
• Musk wanted to avoid singling out certain sales people