Strategic Management:

Creating Competitive Advantages

Chapter One

McGraw-Hill/Irwin
 Learning Objectives
After reading this chapter, you should have a good
understanding of:
LO1 The definition of strategic management and its four
key attributes.
LO2 The strategic management process and its three
interrelated and principal activities.
LO3 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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 The Important of Leadership

• Consider …
• Maintaining competitive success or even surviving
over long periods of time is difficult for companies
of any size.
• SO how much credit (or blame) does a leader
deserve?
 Two Perspectives of Leadership
• Romantic or
omnipotent view
 Leader is the key force
in organization’s
success
• External control or
symbolic perspective
 Focus is on external
factors that affect an
organization’s success

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 Leaders Can Make a Difference

• Be proactive — anticipate change.

• Refine strategies continually.
• Be aware of external opportunities and threats.
• Understand thoroughly the firm’s resources and
capabilities.
• Make strategic management both a process and
a way of thinking throughout the organization.
 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 control
B. Romantic
C. Internal mechanism
D. Operational
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 Defining Strategic Management
• Strategic management
 Analyses, decisions, and actions an organization
undertakes in order to create and sustain competitive
advantages
• Strategy
 The ideas, decisions, and actions that enable a firm to
succeed
• Competitive advantage
 A firm’s resources and capabilities that enable it to
overcome the competitive forces in its industry (ies).

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 Two Fundamental Questions
 What industry should  How can we create
we compete in? competitive
 How should we advantages in the
compete in order to marketplace that are
create competitive unique, valuable, and
advantages in the difficult for rivals to
marketplace? copy or substitute?

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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?
• Actions
 Allocate necessary resources
 Design the organization to bring intended
strategies to reality
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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-level
• Corporate level
• International
• Entrepreneurial

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 Strategy Implementation
• Ensuring proper • Establishing effective
strategic controls and means to coordinate
organizational and integrate
designs activities within the
firm as well as with
suppliers, customers,
and alliance partners

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 Strategic
Management
Process

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 Key Attributes of Strategic
Management
1. Directs the organization toward overall
goals and objectives
2. Includes multiple stakeholders in decision
making
3. Needs to incorporate short-term and
long-term perspectives
4. Recognizes trade-offs between efficiency
and effectiveness

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 Strategic Management Trade-offs

• Managers need to be ambidextrous.

• Focus on long-term effectiveness.
 Expand product-market scope by proactively
exploring new opportunities.
• At the same time:
 Focus on short-term efficiency.
 Align resources to take advantage of existing
product markets.
 Strategy and Operations
Strategic Management Operational Management
Organisation-wide, holistic Routinised 运营管理
整体的
Conceptualisation of Techniques and actions
issues
Creating new directions Operating within existing
strategy
Developing new Managing existing
resources resources
Ambiguous/uncertain Operationally specific
Long term Day to day issues
 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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 Question

• According to Henry Mintzberg, the realized

strategies of a firm
A. are a combination of deliberate and emergent
strategies.
B. are a combination of deliberate and
differentiation strategies.
C. must be based on a company’s strategic plan.
D. must be kept confidential for competitive
reasons.
 Corporate Governance and Stakeholder
Management
• Corporate governance 公司治理
 The relationship among various participants
in determining the direction and performance
of corporations

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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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 Corporate Governance
Three mechanisms ensure effective
corporate governance:
• An effective and engaged board of
directors
• Shareholder activism
• Proper managerial rewards and incentives
• Establish external control mechanisms.

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 Stakeholder Management
•
Exhibit 1.5 An Organization’s Key Stakeholders
and the Nature of Their Claims.
Stakeholder Group Nature of Claim
Stockholders Dividends, capital appreciation
Employees Wages, benefits, safe working environment, job security

Suppliers Payment on time, assurance of continued relationship

Creditors Payment of interest, repayment of principal

Customers Value , warranties

Government Taxes, compliance with regulations

Community Good citizenship behavior such as charities, employment,

not polluting the environment
 Stakeholder Management
• Zero sum view
 Stakeholders compete for attention and
resources of the organization
 Gain of one is a loss to the other

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 Stakeholder Management
• Stakeholder symbiosis 共生 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 stakeholders
B. Stakeholder symbiosis
C. Rewarding stakeholders
D. Emphasizing financial returns

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 Question

• P&G created a cleaning product that led to a

change in consumer shopping habits and also a
revolution in industry supply chain economics.
According to the text, this is an example of
A. zero-sum relationship among stakeholders.
B. stakeholder symbiosis.
C. rewarding stakeholders.
D. emphasizing financial returns.
 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 三重底线
 Assessment of a company’s performance in
financial, social, and environmental
dimensions

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 Coherence in Strategic Direction
• Hierarchy of goals
 Goals ranging from those that are less
specific yet able to evoke powerful and
compelling mental images those that are
more specific and measurable
• Vision, mission statement, strategic
objectives

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A Hierarchy of Goals

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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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 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
 Goals that are used to operationalize the
mission statement
 Specific, measurable, appropriate, realistic,
timely

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