Chapter 1 What is Strategy & the Strategic Management Process?

1. Chapter 1 What is Strategy & the Strategic Management Process?

2. Key Chapter Objectives Have an understanding of: • what is strategic management. • the strategic management process. • what competitive advantage is • why stakeholders are important. • key environmental forces that are creating dynamic fast-paced change. • the need for a hierarchy of goals

3. What is Strategic Management? “The analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages” (Dess & Lumpkin, 2003; p.3). “A pattern in a stream of actions or decisions (Henry Mintzberg).

4. Types of Strategies • Strategy as a Plan • Strategy as a Ploy • Strategy as a Pattern • Strategy as a Perspective • Strategy as a Position

5. Key Attributes of Strategy • Directs organization toward overall goals & objectives. • Includes multiple stakeholders in decision making. • Must incorporate short- & long-term perspectives. • Recognizes trade-offs between efficiency & effectiveness.

6. Challenges of Strategic Managers Short-term GoalsLong-term Goals Profitability Key Stakeholders Network Changing Landscape Long-Term Planning Quarterly Performance Develop Cohesive Organization Diverse Workforce

7. Overall View of the Strategic Management Process Analysis Decisions Actions

8. Mission & Objectives External Analysis Internal Analysis Strategy Formulation Strategy Implementation Feedback Strategic Management Process

9. Strategic Management Process External Analysis Strategic Choice Strategy Implementation Competitive Advantage Objectives Internal Analysis Mission Barney & Hesterly p. 5

10. Analysis: Mission & Objectives • Vision statements are an inspiring, overarching, and long-term statement. • Mission statements encompasses both the purpose of the company and the basis of competition and competitive advantage. • Objectives are developed from the vision and mission statements.

11. Analysis: External & Internal • Analysis of the Firm’s External Environment: • What are the trends in the industry? • What are the trends in the general environment? • What are the competitor’s trends? Analysis of the Firm’s Internal Environment: • What are the firm’s resources? • What are the firm’s capabilities? • What are the firm’s distinctive competencies?

12. Decisions (Strategic Choice) • Strategy Formulation: • Functional-level (HR, Manufacturing, Marketing, etc.) • Business-level (Cost, differentiation, focus, or integrative) • Corporate-level (diversification, restructuring)

13. Actions(Strategy Implementation) • Strategy Implementation through: • Organizational Structure. • Control Systems. • Leadership. • Response to Change.

14. Competitive Advantage • Definition: the ability to create more economic value than competitors

15. Competitive Parity • The firm’s offerings are ‘average’ • People do not have a preference for the • firm’s offering • The firm does not have a cost advantage • over others • Some things that may lead to competitive • parity may still be critical to success • (e.g., telephones)

16. Competitive Disadvantage • People may have an aversion to the firm’s offering. • A firm may have outdated technology/ equipment. • The firm may have a cost disadvantage. • A firm may have a negative reputation.

17. Competitive Advantage Two Types of Difference: • Preference for the firm’s output • people choose the firm’s output over others’ • people are willing to pay a premium • Cost advantage vis-à-vis competitors • lower costs of production/distribution

18. Competitive Advantage Competitive advantage is often temporary: • Competitive advantage typically results in high profits. • Profits attract competition. • Competition limits the duration of competitive advantage in most cases.

19. Competitive Advantage However, may be sustainable if: • Competitors are unable to imitate the source of advantage • No one conceives of a better offering.

20. Measuring Competitive Advantage Two Classes of Measures: • Accounting Measures • ROA, ROS, ROE, etc. that exceed industry averages. • Economic Measures • earning a return in excess of the cost of capital

21. Emergent vs. Intended Strategies • The strategic management process leads managers tointended strategies. However, • Conditions often change or new information becomes available. • Managers respond and adopt emergentstrategies.

22. Stakeholders • Stakeholders are individuals or groups inside or outside the company, that has a stake in and can influence an organization’s performance. • Five primary stakeholder groups: • Customers, 4. the Community • Employees, 5. Owners • Suppliers

23. Strategic Management Process Summary: • This course is not about mere survival, it is about thriving—achieving competitive advantage. • the strategic management process helps managers achieve competitive advantage. • competitive advantage depends on differences. • strategy is about discovering and exploiting these differences.

24. Strategic Management Process Applying Strategy to Your Career: • a solid understanding of strategy concepts will help set you apart from other job candidates. • you can use the process to identify and exploit difference between you and others. • you can use the process to determine if you want to stay with a company.