1. The Strategic Management Process1
The Strategic Management Process

2. Why do some organizations succeed while others fail?
Strategy
An action managers take to achieve one or more of an organization’s goals
Strategic management process
The process by which managers choose a set of strategies that will allow a company to achieve superior performance
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3. Superior Performance and Competitive Advantage
Profitability
A measure of a company’s return on its invested capital
Superior performance
One company’s profitability relative to that of other companies in the same or similar business or industry
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4. Firm-Specific Performance and Profitability
Competitive advantage
A firm’s profitability is greater than the average profitability for all firms in its industry
Sustained competitive advantage
A firm maintains competitive advantage for a number of years
Business model
Management’s model of how strategy will allow the company to gain competitive advantage and achieve superior profitability
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5. Industry Structure and Profitability
Return on Invested Capital in Selected Industries,
Data Source: Value Line Investment Survey
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6. Performance in Nonprofit Enterprises
Government agencies, universities, charities
Are not “in business” to make a profit
Should use their resources efficiently and effectively
Set performance goals unique to the organization
Set strategies to achieve goals and compete with other nonprofits for scarce resources
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7. Strategic Managers General managers Functional managers
Responsible for overall company performance or divisional performance
Functional managers
Responsible for supervising a particular task or operation
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8. Levels of Strategic Management
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9. The Strategic Planning Process
Select the corporate mission and major corporate goals
Analyze the external competitive environment to identify opportunities and threats
Analyze the organization’s internal environment to identify its strengths and weaknesses
Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats
Implement the strategy
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10. Main Components of the Strategic Planning Process
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11. Mission Statement
A description or declaration of why a company is in operation
Provides the framework or context within which strategies are formulated
Has 3 main components:
Mission or vision
Values or guiding standards that drive and shape the actions and behavior of employees
Major goals or objectives
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12. The Mission or Vision
What the company is trying to achieve over the medium to long term
The Boeing Company in 2016:
“People working together as a global enterprise for aerospace leadership”
Microsoft:
“To empower people through great software, any time, any place, on any device”
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13. Abell’s Framework for Defining the Business
Source: D. F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.
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14. Values How managers and employees should conduct themselves
Organizational culture
The set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals
Often seen as a source of competitive advantage
In high-performing organizations, values respect the interests of key organizational stakeholders.
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15. Values at Nucor
“Management is obligated to manage Nucor in such a way that employees will have the opportunity to earn according to their productivity.”
“Employees should be able to feel confident that if they do their jobs properly, they will have a job tomorrow.”
“Employees have the right to be treated fairly and must believe that they will be.”
“Employees must have an avenue of appeal when they believe they are being treated unfairly.”
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16. Values at Texas Instruments
Source: Accessed 10/25/02. Copyright © Texas Instruments Incorporated. All rights reserved. Reprinted by permission.
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17. Major Goals and Objectives
Goal: A desired future state or objective
Four main characteristics of well-constructed goals:
Precise and measurable
Address crucial issues
Challenging but realistic
Specify a time period
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18. Profitability Maximizing returns to shareholders
Importance of balancing short-term returns with long-term profitability
Pressures to maximize short-term profitability may result in unethical behavior
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19. External and Internal Analysis
External analysis
Identify strategic opportunities and threats
Industry environment
National environment
Socioeconomic or macroenvironment
Internal analysis
Identify organizational strengths and weaknesses
Sources of competitive advantage: superior efficiency, quality, innovation, and responsiveness to customers
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20. SWOT Analysis and the Business Model
Identifying strategies to align a company’s resources and capabilities to its environment in order to create and sustain a competitive advantage
Functional-level strategy
Business-level strategy
Global strategy
Corporate-level strategy
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21. Strategy Implementation
After choosing strategies, managers must put them into action.
The feedback loop—strategy is ongoing. Managers must monitor and reevaluate for the next round of strategy formulation and implementation.
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22. Strategy as an Emergent Process
Strategy making in an unpredictable world
Strategy making by lower-level managers
Serendipity and strategy
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23. Intended and Emergent Strategies
Intended strategies
Strategies an organization plans to put into action
Emergent strategies
Unplanned strategies
Realized strategy
The product of whatever intended strategies are actually put into action and of any emergent strategies
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24. Emergent and Deliberate Strategies
Source: Adapted from H. Mintzberg and A. McGugh, Administrative Science Quarterly, Vol. 30. No. 2, June 1985.
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25. Strategic Planning in Practice
Scenario Planning
Involving Functional Managers
Avoiding the ivory tower approach
Perceiving procedural justice
Strategic Intent
Avoiding the fit model, which focuses too much on the current state
Setting ambitious goals that stretch a company and finding ways to build to attain those goals
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26. Strategic Leadership Vision, eloquence, and consistency Commitment
Being well informed
Willingness to delegate and empower
The astute use of power
Emotional intelligence
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27. Emotional Intelligence
Self-awareness
Self-regulation
Motivation
Empathy
Social skills
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28. Challenges to Strategic Decision Making
Cognitive biases
Prior hypothesis bias
Escalating commitment
Reasoning by analogy
Representativeness
Illusion of Control
Hubris hypothesis
Groupthink
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29. Processes for Improving Decision Making
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