Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Strategic Management: Creating Competitive Advantages chapter 1

Two Perspectives of Leadership  Leader is the key force in the organization’s success i.e. Steve Jobs  External forces determine the organization’s success i.e. economic downturns Romantic View External Control Perspective 1-2 OR?

Defining Strategic Management  Strategic Management involves Analysis Strategic goals (vision, mission, strategic objectives) Internal and external environment Decisions What industries should we compete in? How should we compete in those industries? Actions Allocate necessary resources Design the organization to bring intended strategies to reality 1-3

Two Fundamental Questions 1. How should we compete in order to create competitive advantages in the marketplace? 2. How can we create competitive advantages in the marketplace that are unique, valuable, and difficult for rivals to copy or substitute? NOTE: Operational effectiveness is not enough to sustain a competitive advantage. 1-4

Strategic Management  Key Attributes of strategic management Directs the organization toward overall goals and objectives. Includes multiple stakeholders in decision making. Needs to incorporate short-term and long- term perspectives. Recognizes trade-offs between efficiency and effectiveness. 1-5

1-6 Strategic Management Trade-offs  Focusing on short-term efficiency  Aligning resources to take advantage of existing product markets  Focusing on long- term effectiveness  Expanding product-market scope by proactively exploring new opportunities Managers need to be ambidextrous While also

Intended vs Realized Strategies  Organizational decisions are determined only by analysis  Intended strategy rarely survives in its original form  Decisions are determined by both analysis (deliberate) & unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences (emergent) Intended Strategy Realized Strategy 1-7 The Business Environment is far from predictable. versus

Strategic Management Process 1-8 Exhibit 1.3 The Strategic Management Process

Strategy Analysis  Starting point in the strategic management process  Precedes effective formulation and implementation of strategies  Involves careful analysis of the overarching goals of the organization  Requires a thorough analysis of the organization’s external and internal environment 1-9

Strategy Formulation  Based on strategy analysis  Developed at several levels  Involves decisions that can create and sustain competitive advantage Investment decisions Commitment of resources Operational synergies Recognizing viable opportunities 1-10

Strategy Implementation  Implements the formulated strategy Ensures proper strategic control systems Establishes an appropriate organizational design - coordinates & integrates activities within the firm Coordinates activities with suppliers, customers, alliance partners Leadership ensures organizational commitment to excellence & ethical behavior Promotes learning & continuous improvement Acts entrepreneurially in creating new opportunities 1-11

Corporate Governance & Stakeholder Management  Corporate Governance: the relationship among various participants in determining the direction and performance of corporations.  Primary participants: The shareholders The management (led by the Chief Executive Officer) The Board of Directors (BOD) 1-12

Stakeholder Management 1-13 Exhibit 1.5 An Organization’s Key Stakeholders & the Nature of Their Claims

Social Responsibility  Social responsibility: the expectation that businesses or individuals will strive to improve the overall welfare of society. Firms have multiple stakeholders and must go beyond a focus solely on financial results Firms must create shared value – identify & expand connections between societal & economic progress Firms can measure a triple bottom line Assessing financial, social, AND environmental performance Embracing environmental sustainability. 1-14

Coherence in Strategic Direction  Organizations express priorities best through stated goals & objectives that form a hierarchy of goals Vision – evokes powerful & compelling mental images of a shared future Mission – encompasses the organization’s current purpose, basis of competition, & competitive advantage Strategic objectives – operationalize the mission statement with specific yardsticks 1-15

Coherence in Strategic Direction Exhibit 1.6 A Hierarchy of Goals 1-16