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3. Definition of Strategic Management Strategic management is a process through which: ›Organizations analyze and learn from their internal and external environments, ›Establish strategic direction, ›Create strategies that are intended to move the organization in that direction, and ›Implement those strategies All in an effort to satisfy key stakeholders Strategic management is a process through which: ›Organizations analyze and learn from their internal and external environments, ›Establish strategic direction, ›Create strategies that are intended to move the organization in that direction, and ›Implement those strategies All in an effort to satisfy key stakeholders

4. Three Perspectives on Strategic Management Traditional Perspective ›Origin ¤Economics, other business disciplines, and consulting firms ›View of Firm ¤An economic entity ›Approach to Strategy Formulation ¤Situation analysis of internal and external environments leading to formulation of mission and strategies ›Source of Competitive Advantage ¤Best adapting the organization to its environment by taking advantage of strengths and opportunities and overcoming weaknesses and threats Traditional Perspective ›Origin ¤Economics, other business disciplines, and consulting firms ›View of Firm ¤An economic entity ›Approach to Strategy Formulation ¤Situation analysis of internal and external environments leading to formulation of mission and strategies ›Source of Competitive Advantage ¤Best adapting the organization to its environment by taking advantage of strengths and opportunities and overcoming weaknesses and threats

5. Traditional Strategic Management Process StrategicDirection (mission & goals) Strategy Formulation (take advantage of strengths/overcome weaknesses & threats) Strategy Implementation (development & execution of implementation plans) Situation Analysis (external environment)

6. Strategy Fundamentals Traditional View ›Environmental determinism (the best strategy is determined by the environment) ›Firms should adapt to the environment ›Strategy is deliberate (intended) Traditional View ›Environmental determinism (the best strategy is determined by the environment) ›Firms should adapt to the environment ›Strategy is deliberate (intended) Contemporary View ›Enactment (firms can influence their environments) ›A firm should pursue actions to make the environment more hospitable ›Strategy emerges from a stream of decisions as firms learn

7. Three Perspectives on Strategic Management Resource-based View ›Origin ¤Economics, distinctive competencies and general management capability ›View of Firm ¤A collection of resources, skills and abilities ›Approach to Strategy Formulation ¤Analysis of organizational resources, skills and abilities. Acquisition of superior resources, skills and abilities ›Source of Competitive Advantage ¤Possession of resources skills and abilities that are valuable, rare and difficult to imitate by competitors Resource-based View ›Origin ¤Economics, distinctive competencies and general management capability ›View of Firm ¤A collection of resources, skills and abilities ›Approach to Strategy Formulation ¤Analysis of organizational resources, skills and abilities. Acquisition of superior resources, skills and abilities ›Source of Competitive Advantage ¤Possession of resources skills and abilities that are valuable, rare and difficult to imitate by competitors

8. The Organization as a Bundle of Resources Organizational OrganizationalKnowledge and Learning General Organizational General OrganizationalResources Firm ReputationFirm Reputation Brand Names and PatentsBrand Names and Patents ContractsContracts Stakeholder RelationshipsStakeholder Relationships Physical Resources Plants and EquipmentPlants and Equipment Organizational LocationsOrganizational Locations Access to Raw MaterialsAccess to Raw Materials Human Resources Human Resources Skills, Background and Training of Managers and EmployeesSkills, Background and Training of Managers and Employees Organization StructureOrganization Structure Financial Resources Internal and External Sources of FinancingInternal and External Sources of Financing Financial StrengthFinancial Strength

9. Three Perspectives on Strategic Management Stakeholder View ›Origin ¤Business ethics and social responsibility ›View of Firm ¤A network of relationships among the firm and its stakeholders ›Approach to Strategy Formulation ¤Analysis of the economic power, political influence, rights and demands of various stakeholders ›Source of Competitive Advantage ¤Superior linkages with stakeholders leading to trust, goodwill, reduced uncertainty, improved business dealings and ultimately higher firm performance Stakeholder View ›Origin ¤Business ethics and social responsibility ›View of Firm ¤A network of relationships among the firm and its stakeholders ›Approach to Strategy Formulation ¤Analysis of the economic power, political influence, rights and demands of various stakeholders ›Source of Competitive Advantage ¤Superior linkages with stakeholders leading to trust, goodwill, reduced uncertainty, improved business dealings and ultimately higher firm performance

10. A Typical Stakeholder Map The Organization The Organization Owners/Board of Directors ManagersEmployees FinancialIntermediaries Government Agencies and Administrators LocalCommunities Competitors SuppliersCustomers ActivistGroups Unions The Media

11. Can External Stakeholders Be Managed? Internal Stakeholder Management ›Nature of Relationship ¤Contractual ›Physical Location ¤Predominantly inside organization structure, sometimes geographically diverse ›Motivation to Perform ¤Regular payments, retention, bonuses, common purpose, persuasion ›Direct Control ¤Schedules, plans, sometimes direct supervision Internal Stakeholder Management ›Nature of Relationship ¤Contractual ›Physical Location ¤Predominantly inside organization structure, sometimes geographically diverse ›Motivation to Perform ¤Regular payments, retention, bonuses, common purpose, persuasion ›Direct Control ¤Schedules, plans, sometimes direct supervision External Stakeholder Management ›Nature of Relationship ¤Contractual, legal or informal ›Physical Location ¤Predominantly outside organizational structure; sometimes included ›Motivation to Perform ¤Regular payments, retention, incentives, bonuses, common purpose, persuasion ›Direct Control ¤Schedules, plans, less often direct supervision

12. The Strategic Management Process EstablishStrategicDirection (Ch. 4) Formulate Strategies Business-Unit (Ch. 5) Corporate-Level (Ch. 6) Entrepreneurship (Ch. 9) Implement Strategies & Establish Controls (Chs. 7 & 8) Analyze the Environment, Stakeholders and Organizational Resources (Chs. 2 & 3)

13. Strategy Formulation in a Multibusiness Organization Entire Corporation (Corporate Level: Domain Definition) Business 2 (Business Level: Domain Direction/Navigation) Business 1 (Business Level: Domain Direction/Navigation) Marketing Finance Operations Research Human Resources (Functional Level: Implementation and Execution)

14. Why Go Global More favorable climate for foreign business ›Trade barriers falling ›Newly industrializing countries ›Worldwide shift towards market economies ›Easier to exchange capital in foreign markets ›Communication systems are worldwide ›English universally spoken ›Technical standards universal Domestic markets saturated Sometimes foreign markets more profitable Acquire state-of-the-art resources Lower cost for goods and services Acquire technical knowledge More favorable climate for foreign business ›Trade barriers falling ›Newly industrializing countries ›Worldwide shift towards market economies ›Easier to exchange capital in foreign markets ›Communication systems are worldwide ›English universally spoken ›Technical standards universal Domestic markets saturated Sometimes foreign markets more profitable Acquire state-of-the-art resources Lower cost for goods and services Acquire technical knowledge

15. Strategic Planning Process vs. Strategic Thinking The strategic planning process is often rigid and unimaginative, with detailed instructions pertaining to every aspect of the process Strategic thinking leads to creative solutions and new ideas The best firms use both! The strategic planning process is often rigid and unimaginative, with detailed instructions pertaining to every aspect of the process Strategic thinking leads to creative solutions and new ideas The best firms use both!

16. Elements of Strategic Thinking Intent Focused ›Strategic intent--a managerial vision of where the firm is going Comprehensive ›A “systems” perspective. Envisions the firm as a part of a larger system of value creation. Opportunistic ›Seizes unanticipated opportunities Long-term Oriented ›Looks several years into the future at what the firm will become Built on Past and Present ›learns from the past and builds on a foundation of the realities of the present Hypothesis Driven ›Creative ideas are then critically evaluated. Takes risks Intent Focused ›Strategic intent--a managerial vision of where the firm is going Comprehensive ›A “systems” perspective. Envisions the firm as a part of a larger system of value creation. Opportunistic ›Seizes unanticipated opportunities Long-term Oriented ›Looks several years into the future at what the firm will become Built on Past and Present ›learns from the past and builds on a foundation of the realities of the present Hypothesis Driven ›Creative ideas are then critically evaluated. Takes risks

17. The Hospitality Industry – Foodservice Players Consists of institutional providers, food contractors, and restaurants The US restaurant industry has 870,000 restaurants and sales of $426 billion The restaurant industry can be divided into two main segments, quick-service and full- service Consists of institutional providers, food contractors, and restaurants The US restaurant industry has 870,000 restaurants and sales of $426 billion The restaurant industry can be divided into two main segments, quick-service and full- service

18. The Hospitality Industry – Lodging Players The US lodging industry has over 42,000 hotels, 4.4 million guestrooms, and sales of about $103 billion Is composed of five segments: Luxury (upper upscale) Upscale Midscale with food and beverage Midscale without food and beverage Economy Hotels can be owned, franchised and operated by a variety of different players in business relationships The US lodging industry has over 42,000 hotels, 4.4 million guestrooms, and sales of about $103 billion Is composed of five segments: Luxury (upper upscale) Upscale Midscale with food and beverage Midscale without food and beverage Economy Hotels can be owned, franchised and operated by a variety of different players in business relationships

19. Major Concepts in Chapter 1 The strategic management process involves analysis of the environment and organization, creation of strategic direction, strategy formulation, strategy implementation and strategic control Strategic thinking is a creative process that should be encouraged The strategic management model used in this book is built on three perspectives: traditional, resource-based and stakeholder. These perspectives complement each other. The strategic management process involves analysis of the environment and organization, creation of strategic direction, strategy formulation, strategy implementation and strategic control Strategic thinking is a creative process that should be encouraged The strategic management model used in this book is built on three perspectives: traditional, resource-based and stakeholder. These perspectives complement each other.

20. Major Concepts in Chapter 1 Organizations should learn from and adapt to aspects of their environment that would be difficult or too expensive to change, but can influence (enact) other aspects of their environments Strategy is part deliberate and part emergent Superior organizational resources lead to superior organizational performance Organizations sit at the center of a network of stakeholders. Effective stakeholder management can lead to acquisition of superior resources and other positive outcomes Organizations should learn from and adapt to aspects of their environment that would be difficult or too expensive to change, but can influence (enact) other aspects of their environments Strategy is part deliberate and part emergent Superior organizational resources lead to superior organizational performance Organizations sit at the center of a network of stakeholders. Effective stakeholder management can lead to acquisition of superior resources and other positive outcomes

21. Major Concepts in Chapter 1 Globalization continues to increase as foreign environments become more hospitable to investment and organizations search for world-class opportunities and resources Strategic thinking involves intuition and creativity. It is intent focused, comprehensive, opportunistic, long-term oriented, built on past and present, and hypothesis driven. Organizations should encourage this kind of thinking. Globalization continues to increase as foreign environments become more hospitable to investment and organizations search for world-class opportunities and resources Strategic thinking involves intuition and creativity. It is intent focused, comprehensive, opportunistic, long-term oriented, built on past and present, and hypothesis driven. Organizations should encourage this kind of thinking.