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Strategic Thinking

• Strategy– Is a comprehensive plan for accomplishing an

organization’s goals.

• Strategic Management– Involves formulating and implementing strategies to

take advantage of business opportunities and meet competitive challenges.

• Effective Strategies– Promote superior alignment between an organization,

its environment, and its goals.

5–2

The Components of Strategy

Distinctive Competence

CompetitiveScope

Resource Deployment

Components of Effective Strategies

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Types of Strategic Alternatives

Market A Market B

Corporate-level strategy

Business-level strategy

Functional-level strategy

Operations-level strategy

Business-level strategy

Functional-level strategy

Operations-level strategy

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Strategy Formulation and Implementation

• Strategy Formulation– The set of processes involved in creating or

determining the organization’s strategies; it focuses on the content of strategies.

• Strategy Implementation– The methods by which strategies are operationalized

or executed within the organization; it focuses on the processes through which strategies are achieved.

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Types of Strategies

• Deliberate Strategy– A plan, chosen and implemented to support specific

goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation.

• Emergent Strategy– A pattern of action that develops over time in the

absence of goals or missions, or despite goals and missions.

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SWOT Analysis and Strategy

• Evaluating Organizational Strengths– Organizational strengths

• are skills and abilities enabling an organization to conceive of and implement strategies.

– Common organizational strengths• are organizational capabilities possessed

by numerous competing firms.

– Distinctive competencies• are useful for competitive advantage and superior

performance.

– Imitation of distinctive competencies• removes the competitive advantage of the competency.

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SWOT Analysis and Strategy (cont’d)

• Evaluating Organizational Strengths (cont’d)– Sustained competitive advantage

• occurs when a distinctive competence cannot be easily duplicated.

• is what remains after all attempts at strategic imitations cease.

– Strategic imitation of a distinctive competence is difficult when:

• it is based on unique historical circumstances.• it is difficult for competitors to understand its nature or

character.• it is based on a complex phenomenon (e.g., organizational

culture).

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SWOT Analysis and Strategy (cont’d)

• Evaluating Organizational Weaknesses– Organizational weaknesses

• Skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.

– Weaknesses can be overcome by:• investments to obtain the strengths needed.• modification of the organization’s mission so it can be

accomplished with the current workforce.

– Competitive disadvantage• occurs when an organization fails to implement strategies

being implemented by competitors.

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SWOT Analysis and Strategy (cont’d)

• Evaluating an Organization’s Opportunities and Threats– Organizational opportunities

• are areas in the organization’s environment that may generate high performance.

– Organizational threats• are areas in the organization’s environment that make it

difficult for the organization to achieve high performance.

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© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Michael Porter’s “Five Forces” Model

5–11

Power of Suppliers

Threat of Substitutes

Threat of New Entrants

Internal Competitive

Market Rivalry

Power of Customers

The Creative Process

Preparation

Incubation

Insight

Verification

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Managing Innovation

• Innovation– The managed effort of an organization to develop new

products or services or new uses for existing products or services.

Incremental Innovation

Managerial Innovation

Process Innovation

Forms of Innovation

Radical Innovation

Technical Innovation

Product Innovation

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Organization Culture

• Organization Culture

– Is the set of values, beliefs, symbols that help guide its behavior.

– Can be used to support innovative activity if it is strong and appropriately focused.

– Can communicate a sense that innovation is valued and will be rewarded and that occasional failure in the pursuit of new ideas is not only acceptable but expected.

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Managing Change

• Organization Change

– Any substantive modification to some part of the organization (e.g., work schedules, machinery, employees).

• What Causes Organizations to Change?

– External forces in an organization’s general and task environments can force it to change how it competes.

– Internal forces inside the organization cause it to change its structure and strategy; some internal forces are responses to external pressures.

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Planned Versus Reactive Change

• Planned Change– Is designed and implemented in

an orderly and timely fashion in anticipation of future events.

• Reactive Change– Is a piecemeal response to

events and circumstances as they develop.

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Understanding Resistance to Change

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Threats to self-interests and power and influence.

Uncertainty about the extent and effects of change.

Fear of loss of social networks, power, security, and familiar procedures.

Different perceptions of change effects and outcomes

The Change Process

Overcoming Resistance to Change

• Techniques for overcoming resistance:– Encourage active participation in change process.

– Provide education and communication about change process.

– Facilitate change process by:

• Making only necessary changes

• Announcing changes in advance

• Allowing time to adapt to change.

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© 2014 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Managing Risk

• Risk– Is uncertainty about future events.

• Risk management– Is the process of protecting the firm and its assets by

reducing the potential consequences of risky future events.

• Risk propensity– Is the degree to which an individual is willing to take

chances and make risky decisions.

5–19

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Options for Managing Risk

5–20

Factors Affecting a Manager’s Choices for Managing Risk

Understanding one’s own risk propensity

Understanding potential costs and benefits of outcomes

Reducing the consequences of risk

Sharing risk by working with others