© 2012 South-Western, a part of Cengage Learning Developing the Competitive Strategic Process Chapter 1 Gareth R. Jones | Charles W.L. Hill Strategic Management Essentials, 3/e

© 2012 South-Western, a part of Cengage Learning What is Strategy? Strategy A set of actions that managers take to increase their company’s performance relative to industry rivals.

© 2012 South-Western, a part of Cengage Learning Successful Strategy = Competitive Advantage A strategy is implemented to create a competitive advantage over other companies A company is said to have a competitive advantage when its profitability is greater than the average profitability for all firms in the industry A competitive advantage is considered sustained when it is maintained for several years

© 2012 South-Western, a part of Cengage Learning Strategic Managers General Managers Bear responsibility for overall performance Functional Managers Supervise a particular function (task, activity, or operation)

© 2012 South-Western, a part of Cengage Learning Strategic Managers In multidivisional companies: Corporate Managers oversee strategy for whole company Business Managers lead the strategy for their self-contained division Functional Managers are responsible for one organizational activity

© 2012 South-Western, a part of Cengage Learning Strategy Making Process Select the corporate mission statement and major goals Analyze the external competitive environment to identify strategic opportunities and threats in the operating environment Analyze the internal competitive environment to pinpoint the strengths and weaknesses of the organization

© 2012 South-Western, a part of Cengage Learning Strategy Making Process (cont’d) Select the strategy- contingent upon findings in steps 1, 2, 3 Implement the strategy at every level of the company The feedback loop helps managers evaluate the success of the strategy. Strategic planning is ongoing.

© 2012 South-Western, a part of Cengage Learning Pitfalls of Planning The formal planning model does not consider: The unpredictability of the real world The role of lower-level managers That success is often unplanned or serendipitous

© 2012 South-Western, a part of Cengage Learning Planning for the Unplanned Emergent Strategy The unplanned responses to unforeseen circumstances Autonomous actions are actions taken by lower-level managers to formulate new strategies and persuade top managers to alter strategic priorities

© 2012 South-Western, a part of Cengage Learning Strategic Planning in Practice It is important to plan for the future competitive environment Scenario Planning Formulating plans that are based on “what if” scenarios about the future Decentralized Planning Incorporating all managers in planning, not just the top level managers Strategic Intent Building new resources and capabilities to create and exploit future opportunities

© 2012 South-Western, a part of Cengage Learning Cognitive Bias Systemic errors in human decision making that arise from the way people process information It has a tendency to fall back on rule of thumb, which leads to systematic errors Cognitive biases lead managers to make bad decisions, even with good information

© 2012 South-Western, a part of Cengage Learning Cognitive Biases The prior hypothesis bias Escalating commitment Reasoning by analogy Representativeness Illusion of control

© 2012 South-Western, a part of Cengage Learning Improving Decision Making Devil’s advocacy- the critical analysis of a plan Dialectic Inquiry- the debate between conflicting plans of action The outside view- an evaluation of the project against prior initiatives

© 2012 South-Western, a part of Cengage Learning Strategic Leadership Leadership skills are important for successful strategic managers A managers key strategic role is to use knowledge, energy, and enthusiasm to provide strategic leadership for subordinates

© 2012 South-Western, a part of Cengage Learning Characteristics of Good Strategic Leaders Vision, Eloquence, and Consistency Commitment Being Well Informed Willingness to Delegate and Empower The Astute Use of Power Emotional Intelligence