stratgic management

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McGraw-Hill/Irwin Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin


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Strategic Management:

Creating CompetitiveAdvantages


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After studying this chapter, you should havea good understanding of:

the definition o

fstrategic management and its

four keyattributes

the strategic management process and its three interrelatedand principal activities

why stakeholder management is so critical in the strategic

management process and how symbiosis can beachieved among an organizations stakeholders

the key environmental forces that are creating moreunpredictable change and requiring greater empowermentthroughout the organization

how an awareness ofa hierarchy ofstrategic goals canhelp an organization to achieve coherence in its strategicdirection

LearningObjectives

TRANSPARENCY-3


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Definition: Strategic management consists of the analysis,

decisions, and actions an organization undertakes inorder to create and sustain competitive advantages.

Key Attributes of Strategic Management:

Directs the organization toward overall goals andobjectives.

Involves the inclusion ofmultiple stakeholders indecision making.

Needs to incorporate short-term and long-termperspectives.

Recognizes tradeoffs between efficiency andeffectiveness.

Strategic Management ConceptsExhibit 1.1TRANSPARENCY-4


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The Strategic Management Process

Chapter 1

Analyzing Goals

and Objectives

Chapter 2

Analyzing the

External

Environment

Chapter 3

Analyzing the

Internal

Environment

Chapter 4

Assessing Intellectual

Capital

Chapter 5

Formulating Business-Level

Strategies

Chapter 7

Formulating

InternationalStrategies

Chapter 6

Formulating

Corporate-LevelStrategies

Chapter 8

Formulating Internet

Strategies

Chapter 9

Implementation:

Strategic Controls

Chapter 10

Implementation:

OrganizationDesign

Chapter 11

Strategic Leadership:

Excellence, Ethics, and

Change

Chapter 12

Strategic Leadership:

Fostering Entrepreneurship

Strategy Analysis

Strategy Formulation Strategy Implementation

Chapter 13

Case Analysis

Exhibit 1.2TRANSPARENCY-5


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Excellent versus Poor Boards ofDirectors

Fortune maga

zine recently pinpointed some of the key attributes of some excellent and poor boards ofdirectors.

Hall of Fame

A good board is hard to find, but a few draw raves

year after year.

Coca-Cola This feisty board isnt afraid to make waves,

nixing CEOsD

ougD

afts plan to acquire Quaker Oatslast year.

Intel Its big-name directors regularly assess one

anothers performance, a rarity in the boardroom.

Pfizer This year the Wharton School named this board

packed with heavy hittersthe second best in the nation.

Target The proof is in the performance. This unflashy

board has presided over years ofsolid returns.

Texas Instruments Deadly serious about good

governance, TIs board had near-perfect attendance in

2000.

Hall of Shame

Entrenched, clubby, blind to shareholder

concerns: These boards just dont get it.

Advanced Micro Devices Talk about weak: This

board slavishly kowtows to omnipotentfounder/CEO Jerry Sanders.

Archer Daniels Midland As the stockfalls near

ten-year lows, the family-controlled board

twiddles its thumbs.

Maxxam With loads ofcommon and preferred

stock, CEO/Chairman Charles Hurwitz has most

of the voting power.

Occidental Petroleum Its board pays CEO Ray

Irani obscene amounts even as the company

underperforms its peers.

Warnaco This board, dominated by

Chairman/CEO Linda Wachner, seems to exist

solely to redefine excessive CEO pay.

Source: Boyle, M. 2001. The dirty half-dozen: Americas worst boards. Fortune, May 14: 250. With permission.



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Social Responsibility at McDonalds:Some Elements

Supporting more than 200 Ronald McDonald Houses in 19 countries(providing comfort and care to children and theirfamilies)

Eliminating 150,000 tons of recycled products and more than onemillion tons ofcorrugated cardboard in the U.S. over a ten-year period

As part of their diversity program, more than 30 percent of their

franchisees are now women or minority and in 1999, McDonaldspurchased approximately $3 billion worth ofgoods and services from

women and minority suppliers

Providing about $5 million in educational assistance through a varietyofscholarships

Partnered with Chicagos Field Museum to restore Suethe largestTyrannosaurus Rex fossil ever discovered in a laboratory for public

viewing

Source: McDonalds Corporation 1999 Annual Report, page 6.



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Brainpower Weighs In

PRODUCT PRICE WEIGHTin pounds

PRICEper pound

Pentium III 800MHz microprocessor $851.00 0.01984 $42,893.00

Viagra (tablet) $8.00 0.00068 $11,766.00

Gold (ounce) $301.70 0.0625 $4,827.20

Herms scarf $275.00 0.14 $1,964.29

Palm V $449.00 0.26 $1,726.92

Saving Private Ryan on DVD $34.99 0.04 $874.75

Cigarettes (20) $4.00 0.04 $100.00

Who Moved My Cheese? by Spencer Johnson $19.99 0.49 $40.80

Mercedes-Benz E-class four-door sedan $78,445.00 4,134.00 $18.98

The Competitive Advantage of Nationsby Michael Porter $40.00 2.99 $13.38

Chevrolet Cavalierfour-door sedan $17,770.00 2,630.00 $6.76

Hot-rolled steel (ton) $370.00 2,000.00 $0.19

Source: Colvin, G. 2000. Were worth our weight in Pent ium Chips. Fortune, March 20: 68.



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Comparing Wellpoint Health NetworksVision and Mission

Vision

WELLPOINT will redefine our industry:

Through a new generation ofconsumer-friendly

products that put individuals back in control of their

future.

Mission

The WELLPOINT companies provide healthsecurityby

offering a choice ofquality branded health and relatedfinancial services designedto meet the changing

expectations of individuals, families and their sponsors

throughout a lifelongrelationship.

Source: Company Records



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Strategic Objectives

Strategic Objectives (Financial)

Increase sales growth 6 to 8 percent and accelerate core net earnings per share growth

to 13 to 15 percent in each of the next five years (Procter & Gamble)

Generate Internet-related revenue of$1.5 billion. (Automation)

Increase the contribution ofBanking Group earnings from investments, brokerage and

insurance from 16 percent to 25 percent (Wells Fargo)

Cut corporate overhead costs by $30 million per year (Fortune brands)

Exhibit 1.7

Strategic Objectives (Nonfinancial)

Capitalize on e-commerce (Federal Express)

We want a majority ofour customers,when surveyed, to say they consider Wells

Fargo the best financial institution in the community (Wells Fargo)

We want to operate 6,000 stores by 2010up from 3000 in the year 2000

(Walgreens)

Develop a smart card strategy that will help us play a key role in shaping online

payments (American Express)

Reduce greenhouse gases by 10 percent (from a 1990 base) by 2010 (BP Amoco)

Source: Company

Documents and Annual

Reports

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