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StrategicManagement:

Creating

CompetitiveAdvantages

ChapterOne

McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc. All rights


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Learning Objectives

After reading this chapter, you shouldhave a good understanding of:

LO1.1 The definition of strategic

management and its four key attributes.LO1.2 The strategic managementprocess and its three interrelated andprincipal activities.

LO1.3 The vital role of corporategovernance and stakeholdermanagement as well as how symbiosiscan be achieved among an organizationsstakeholders. 1-2


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Learning Objectives (cont.)

LO1.4 The importance of socialresponsibility, including environmentalsustainability, and how it can enhance a

corporations innovation strategy.LO1.5 The need for greaterempowerment throughout the

organization.LO1.6 How an awareness of a hierarchyof strategic goals can help anorganization achieve coherence in itsstrate ic direction. 1-3


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Two Perspectives ofLeadership

Romantic view

Leader is the key forcein organizations

successExternal control

perspective

Focus is on external

factors that may affectan organizations

success

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QUESTION

A CEO made a lot of mistakes such as committingerrors in assessing the market and competitiveconditions and improperly redesigning theorganization into numerous business units. Sucherrors led to significant performance declines. Thisillustrates the __________ perspective ofleadership.

A. External control

B. Romantic

C. Internal mechanism

D.Operational

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Example: 3M

Elements of Buckleys turnaround

Set clear business goals for the company

Wanted 3M to develop lower-costproducts to compete in emerging markets

Became an outspoken champion for 3M

labs

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What is StrategicManagement?

Strategic

management must

become both a

process and a way ofthinking throughout

the organization

Leaders must be

proactive, anticipate

change, and

continually refinechanges to their

strategies

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Defining StrategicManagement

Strategic management

Analyses, decisions, and actions anorganization undertakes in order to create

and sustain competitive advantages

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Analysis

Strategic goals

Internal and external environment of the firm

Strategic decisions

What industries should we compete in?

How should we compete in those industries?

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Actions

Allocate necessary resources

Design the organization to bring intended

strategies to reality

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Two Fundamental Questions

1. How should we

compete in order to

create competitive

advantages in themarketplace?

2. How can we create

competitive

advantages in the

marketplace that areunique, valuable,

and difficult for rivals

to copy or

substitute?

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Strategic ManagementConcepts

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Exhibit 1.1


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Key Attributes of StrategicManagement

Stakeholders those individuals, groups, and

organizations who have a stake in the

success of the organization, includingowners (shareholders in a publicly heldcorporation), employees, customers,suppliers, the community at large,

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Key Attributes of StrategicManagement

Ambidexterity The challenge managers face of both

aligning resources to take advantage of

existing productmarkets as wellas proactivelyexploring newopportunities

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Ambidextrous Behaviors inIndividuals

They take time andare alert toopportunities

beyond theconfines of theirown jobs

They are brokers,

always looking tobuild internalnetworks

They arecooperative andseek out

opportunities tocombine theirefforts with others

They are

multitaskers whoare comfortablewearing more thanone hat

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Strategic ManagementProcess

Intended strategy

Decisions are determined only by analysis

Realized strategy Decisions are determined by both analysisand unforeseen environmental

developments, unanticipated resource

constraints, and/or changes in managerialpreferences

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Strategic ManagementProcess

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Exhibit 1.2


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Strategic

ManagementProcess

Exhibit 1.3

TheStrategic

Management Process

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Strategic Analysis

Consists of advance work that must be

done in order to effectively formulate and

implement strategies

Starting point

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Strategy Formulation

A firms strategy formulation is developed at

several levels:

Business-level

Corporate level

International

Entrepreneurial

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Strategy Implementation

Ensuring properstrategic controlsand organizational

designs

Establishing effective

means to coordinate

and integrate

activities within thefirm as well as with

suppliers, customers,

and alliance partners

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Corporate Governance andStakeholder Management

Corporate governance

The relationship among various participants

in determining the direction and performance

of corporations Shareholders,

management,

board of directors

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Corporate Governance and


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Corporate Governance andStakeholder Management

(cont.)Board of Directors Elected

representatives of theowners

Ensure interests andmotives ofmanagement arealigned with those of

the owners

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Exhibit 1.4


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Corporate Governance

Three mechanisms ensure effective

corporate governance:

An effective and engaged board of

directors

Shared activism

Proper managerial rewards and incentives

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Stakeholder Management

Zero sum view

Stakeholders compete for attention and

resources of the organization

Gain of one is a loss to the other

Rooted in the traditional conflict between

workers and management

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Stakeholder Management

Stakeholder symbiosis view Stakeholders are dependent upon each

other for their success and well-being

Mutual benefits

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QUESTION

Outback Steakhouse has developed asophisticated quantitative model andfound that there were positive

relationships between employeesatisfaction, customer satisfaction, andfinancial results. This is an example of

__________.

A. Zero-sum relationship amongstakeholdersB. Stakeholder symbiosis

C. Rewarding stakeholdersD. Em hasizin financial returns1-27


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Crowdsourcing

Crowdsourcing

practice wherein the Internet is used to tap a

broad range of individuals and groups to

generate ideas and solve problems. Linux, Amazon, Wikipedia

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Social Responsibility

Social responsibility

The expectation that businesses or

individuals will strive to improve the overall

welfare of society

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Social Responsibility

Triple bottom line

Assessment of a companys performance in

financial, social, and environmental

dimensions

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Example: SocialResponsibility

Starbucks Coffee Company defines CSR as:

Conducting business in ways that produce social,

environmental and economic benefits for the

communities in which we operate and for the

companys stakeholders, including shareholders.

Some tangible benefits include attracting and retaining

our partners, customer loyalty, reducing operating costs,

and creating a sustainable supply chain.

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Strategic ManagementPerspective

All managers and employees must:

Take an integrative, strategic perspective of

issues facing the organization

Assess how functional areas and activities

fit together to achieve goals and objectives

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Three Types of Leaders

Local line leaders

Have significant profit-and-loss responsibility

Executive leaders

Champion and guide ideas, create a learning

infrastructure, establish a domain for taking

action

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Three Types of Leaders(cont.)

Internal networkers

Generate power

through the conviction

and clarity of their

ideas

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Coherence in StrategicDirection

Hierarchy of goals organizational goals ranging from, at

the top, those that are less specific yet

able to evoke powerful and compellingmental images, to, at the bottom, thosethat are more specific and measurable.

Vision, mission statement, strategicobjectives

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A Hierarchy of Goals

Exhibit 1.6

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Organizational

vision

Goal that is

massively inspiring,overarching, and long

term

Represents a

destination that is

driven by and evokes

passion

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Why Do Visions Fail?

The walk doesnt

match the talk

Irrelevance

Too much focus leadsto missed

opportunities

Not the holy grail

An ideal future

irreconciled with the

present

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h i i


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Mission statement Set of goals that include both the purpose of

the organization, its scope of operations, and

the basis of its competitive advantageHas the greatest impact when it reflects an

organizations enduring, overarching strategic

priorities and competitive positioning

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C h i S i


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Strategic objectives

A set of organizational goals that areused to operationalize the mission

statement and that are specific andcover a well-defined time frame.

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