Post on 26-Dec-2015
Strategic Management:
Creating Competitive Advantages
Chapter One
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should have a good understanding of:LO1.1 The definition of strategic management and its four key attributes.LO1.2 The strategic management process and its three interrelated and principal activities.LO1.3 The vital role of corporate governance and stakeholder management as well as how “symbiosis” can be achieved among an organization’s stakeholders.
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Learning Objectives (cont.)
LO1.4 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.LO1.5 The need for greater empowerment throughout the organization.LO1.6 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
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Two Perspectives of Leadership
Romantic view Leader is the key force
in organization’s success
External control perspective Focus is on external
factors that may affect an organization’s success
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QUESTION
A CEO made a lot of mistakes such as committing errors in assessing the market and competitive conditions and improperly redesigning the organization into numerous business units. Such errors led to significant performance declines. This illustrates the __________ perspective of leadership.
A. External controlB. RomanticC. Internal mechanismD.Operational
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Example: 3M
Elements of Buckley’s turnaroundSet clear business goals for the companyWanted 3M to develop lower-cost
products to compete in emerging marketsBecame an outspoken champion for 3M
labs
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What is Strategic Management?
Strategic management must become both a process and a way of thinking throughout the organization
Leaders must be proactive, anticipate change, and continually refine changes to their strategies
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Defining Strategic Management
Strategic management Analyses, decisions, and actions an
organization undertakes in order to create and sustain competitive advantages
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Defining Strategic Management
Analysis Strategic goals Internal and external environment of the firm
Strategic decisions What industries should we compete in? How should we compete in those industries?
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Defining Strategic Management
Actions Allocate necessary resources Design the organization to bring intended
strategies to reality
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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?
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Strategic Management Concepts
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Exhibit 1.1
Key Attributes of Strategic Management
Stakeholders those individuals, groups, and organizations who
have a “stake” in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, the community at large,
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Key Attributes of Strategic Management
Ambidexterity The challenge managers face of both aligning
resources to take advantage of existing product markets as well as proactively exploring new opportunities
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Ambidextrous Behaviors in Individuals
They take time and are alert to opportunities beyond the confines of their own jobs
They are brokers, always looking to build internal networks
They are cooperative and seek out opportunities to combine their efforts with others
They are multitaskers who are comfortable wearing more than one hat
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Strategic Management Process
Intended strategy Decisions are determined only by analysis
Realized strategy Decisions are determined by both analysis
and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences
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Strategic Management Process
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Exhibit 1.2
Strategic Management
Process
Exhibit 1.3
The Strategic Management
Process
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Strategic Analysis
Consists of “advance work” that must be done in order to effectively formulate and implement strategies
Starting point
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Strategy Formulation
A firm’s strategy formulation is developed at several levels:
Business-levelCorporate levelInternational Entrepreneurial
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Strategy Implementation
Ensuring proper strategic controls and organizational designs
Establishing effective means to coordinate and integrate activities within the firm as well as with suppliers, customers, and alliance partners
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Corporate Governance and Stakeholder Management
Corporate governance The relationship among various participants
in determining the direction and performance of corporations
Shareholders, management, board of directors
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Corporate Governance and Stakeholder Management (cont.)
Board of Directors Elected
representatives of the owners
Ensure interests and motives of management are aligned with those of the owners
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Exhibit 1.4
Corporate Governance
Three mechanisms ensure effective corporate governance:
An effective and engaged board of directors
Shared activismProper managerial rewards and incentives
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Stakeholder Management
Zero sum view Stakeholders compete for attention and
resources of the organization Gain of one is a loss to the other Rooted in the traditional conflict between
workers and management
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Stakeholder Management
Stakeholder symbiosis view Stakeholders are dependent upon each other for
their success and well-being Mutual benefits
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QUESTION
Outback Steakhouse has developed a sophisticated quantitative model and found that there were positive relationships between employee satisfaction, customer satisfaction, and financial results. This is an example of __________. A. Zero-sum relationship among stakeholdersB. Stakeholder symbiosisC. Rewarding stakeholdersD. Emphasizing financial returns
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Crowdsourcing
Crowdsourcing practice wherein the Internet is used to tap a
broad range of individuals and groups to generate ideas and solve problems.
Linux, Amazon, Wikipedia
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Social Responsibility
Social responsibility The expectation that businesses or
individuals will strive to improve the overall welfare of society
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Social Responsibility
Triple bottom line Assessment of a company’s performance in
financial, social, and environmental dimensions
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Example: Social Responsibility
Starbucks Coffee Company defines CSR as: Conducting business in ways that produce social,
environmental and economic benefits for the communities in which we operate and for the company’s stakeholders, including shareholders.
Some tangible benefits include attracting and retaining our partners, customer loyalty, reducing operating costs, and creating a sustainable supply chain.
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Strategic Management Perspective
All managers and employees must:Take an integrative, strategic perspective of
issues facing the organizationAssess how functional areas and activities
“fit together” to achieve goals and objectives
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Three Types of Leaders
Local line leaders Have significant profit-and-loss responsibility
Executive leaders Champion and guide ideas, create a learning
infrastructure, establish a domain for taking action
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Three Types of Leaders (cont.)
Internal networkers Generate power
through the conviction and clarity of their ideas
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Coherence in Strategic Direction
Hierarchy of goals organizational goals ranging from, at the top,
those that are less specific yet able to evoke powerful and compelling mental images, to, at the bottom, those that are more specific and measurable.
Vision, mission statement, strategic objectives
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A Hierarchy of Goals
Exhibit 1.6
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Coherence in Strategic Direction
Organizational vision Goal that is
“massively inspiring, overarching, and long term”
Represents a destination that is driven by and evokes passion
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Why Do Visions Fail?
The walk doesn’t match the talk
IrrelevanceToo much focus leads
to missed opportunities
Not the holy grailAn ideal future
irreconciled with the present
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Coherence in Strategic Direction
Mission statement Set of goals that include both the purpose of
the organization, its scope of operations, and the basis of its competitive advantage
Has the greatest impact when it reflects an organization’s enduring, overarching strategic priorities and competitive positioning
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Coherence in Strategic Direction
Strategic objectives A set of organizational goals that are used to
operationalize the mission statement and that are specific and cover a well-defined time frame.
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