Chapter 1 What is Strategy

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Chapter 1 What is Strategy the Strategic
Management Process?
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Key Chapter Objectives

• Have an understanding of
• what is strategic management.
• the strategic management process.
• what competitive advantage is
• why stakeholders are important.
• key environmental forces that are creating
  dynamic fast-paced change.
• the need for a hierarchy of goals

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What is Strategic Management?

• The analysis, decisions, and actions an
  organization undertakes in order to create and
  sustain competitive advantages (Dess Lumpkin,
  2003 p.3).
• A pattern in a stream of actions or decisions
  (Henry Mintzberg).

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Types of Strategies

• Strategy as a Plan
• Strategy as a Ploy
• Strategy as a Pattern
• Strategy as a Perspective
• Strategy as a Position

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Key Attributes of Strategy

• Directs organization toward overall goals
  objectives.
• Includes multiple stakeholders in decision
  making.
• Must incorporate short- long-term perspectives.
• Recognizes trade-offs between efficiency
  effectiveness.

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Challenges of Strategic Managers
Short-term Goals Long-term Goals
Profitability
Key Stakeholders
Network
Changing Landscape
Long-Term Planning
Quarterly Performance
Develop Cohesive Organization
Diverse Workforce
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Overall View of the Strategic Management Process
Analysis
Decisions
Actions
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Strategic Management Process
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Strategic Management Process
External Analysis
Strategic Choice
Strategy Implementation
Competitive Advantage
Objectives
Internal Analysis
Mission
Barney Hesterly p. 5
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Analysis Mission Objectives

• Vision statements are an inspiring, overarching,
  and long-term statement.
• Mission statements encompasses both the purpose
  of the company and the basis of competition and
  competitive advantage.
• Objectives are developed from the vision and
  mission statements.

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Analysis External Internal

• Analysis of the Firms External Environment
• What are the trends in the industry?
• What are the trends in the general environment?
• What are the competitors trends?
• Analysis of the Firms Internal Environment
• What are the firms resources?
• What are the firms capabilities?
• What are the firms distinctive competencies?

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Decisions (Strategic Choice)

• Strategy Formulation
• Functional-level (HR, Manufacturing, Marketing,
  etc.)
• Business-level (Cost, differentiation, focus, or
  integrative)
• Corporate-level (diversification, restructuring)

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Actions(Strategy Implementation)

• Strategy Implementation through
• Organizational Structure.
• Control Systems.
• Leadership.
• Response to Change.

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Competitive Advantage

• Definition the ability to create more economic
  value than competitors

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Competitive Parity

• The firms offerings are average

• People do not have a preference for the
• firms offering

• The firm does not have a cost advantage
• over others

• Some things that may lead to competitive
• parity may still be critical to success
• (e.g., telephones)

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Competitive Disadvantage

• People may have an aversion to the firms
  offering.
• A firm may have outdated technology/ equipment.
• The firm may have a cost disadvantage.
• A firm may have a negative reputation.

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Competitive Advantage

• Two Types of Difference
• Preference for the firms output
• people choose the firms output over others
• people are willing to pay a premium
• Cost advantage vis-à-vis competitors
• lower costs of production/distribution

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Competitive Advantage

• Competitive advantage is often temporary
• Competitive advantage typically results in high
  profits.
• Profits attract competition.
• Competition limits the duration of competitive
  advantage in most cases.

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Competitive Advantage

• However, may be sustainable if
• Competitors are unable to imitate the source of
  advantage
• No one conceives of a better offering.

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Measuring Competitive Advantage

• Two Classes of Measures
• Accounting Measures
• ROA, ROS, ROE, etc. that exceed industry
  averages.
• Economic Measures
• earning a return in excess of the cost of capital

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Emergent vs. Intended Strategies

• The strategic management process leads managers
  to intended strategies.
• However,
• Conditions often change or new information
  becomes available.
• Managers respond and adopt emergent strategies.

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Stakeholders

• Stakeholders are individuals or groups inside or
  outside the company, that has a stake in and can
  influence an organizations performance.
• Five primary stakeholder groups
• Customers, 4. the Community
• Employees, 5. Owners
• Suppliers

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Strategic Management Process

• Summary
• This course is not about mere survival, it is
  about thrivingachieving competitive advantage.
• the strategic management process helps managers
  achieve competitive advantage.
• competitive advantage depends on differences.
• strategy is about discovering and exploiting
  these differences.

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Strategic Management Process

• Applying Strategy to Your Career
• a solid understanding of strategy concepts will
  help set you apart from other job candidates.
• you can use the process to identify and exploit
  difference between you and others.
• you can use the process to determine if you want
  to stay with a company.