Ch.1 + Lc.1

Definition of Strategic Management

the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

What does Strategic Management involve?

• Analysis

• Decisions

• Actions

What does Analysis focus on in Strategic Management?

• Strategic goals (vision, mission)

• Internal and external environment

What does Decisions focus on in Strategic Management?

Formulation

EX] What industries should we compete in? How should we compete in those industries?

What does Actions focus on in Strategic Management?

Implementation of strategy

EX] allocate necessary resources, design org to bring strategies to reality

What are the two fundamental questions in Strategic Management?

1. How should we compete in order to create a competitive advantage 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.

Definition of Operational Effectiveness

performing similar activities better than rivals.

Examples of Operational Effectiveness?

Total quality, just-in-time, benchmarking, business process reengineering, outsourcing

What are key attributes of Strategic Management?

• Directs the organization toward overall goals and objectives

• Includes multiple stakeholders in decision making

• Incorporates short-term and long-term perspectives

• Recognizes trade-offs between efficiency and effectiveness

Definition of Stakeholders

individuals, groups, and organizations that have a stake in the success of the organization.

EX] employees, customers, suppliers, owners, or the community at large

Effectiveness VS. Efficiency

“doing the right thing” VS. “doing things right”

What are three Strategic Management Trade-Offs?

1. Managers need to be ambidextrous

2. Focus on long-term effectiveness

3. Focus on short-term efficiency

What is a focus of long-term effectiveness?

Expand product-market scope by proactively exploring new opportunities

What is a focus of short-term efficiency?

Align resources to take advantage of existing product markets

Definition of Ambidexterity

the challenge managers face of both aligning resources to take advantage of existing product markets and proactively exploring new opportunities.

Definition of Intended Strategy

strategy in which organizational decisions are determined only by analysis.

Important detail about Intended Strategy

They rarely survive in the original form

Why does Intended Strategy rarely survive in the original form?

Because of unforeseen environmental developments, unanticipated resource constraints, changes in managerial preferences

Definition of Realized Strategy

organizational decisions are determined by both analysis (deliberate) and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences (emergent)

Definition of Strategy Analysis

study of firms’ external and internal environments, and their fit with organizational vision and goals.

What is the starting point in the Strategic Management process?

Strategy Analysis

What consists of analyzing organizational goals and objectives in Strategy Analysis?

Establishing a hierarchy of goals (vision, mission, strategic objectives)

What consists of analyzing the external environment of the firm in Strategy Analysis?

Managers must monitor and scan the environment as well as analyze competitors

• General environment

• Industry environment

What consists of assessing the internal environment of the firm in Strategy Analysis?

Analyze strengths and relationships among activities that makes a firm’s value chain.

• Can uncover potential sources of competitive advantages

Definition of Strategy Formulation

decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.

Strategy Formulation is developed at which levels?

• Business-level strategy

• Corporate-level strategy

• International strategy

• Entrepreneurial initiatives

What entails Formulating Business-Level Strategy in Strategy Formulation?

Developing bases for sustainable competitive advantage through…

• Cost leadership

• Differentiation

• Focusing on a narrow or industrywide market segment

What entails Formulating Corporate-Level Strategy in Strategy Formulation?

Addressing a firm’s portfolio (or group) of business

Examples of Formulating International Strategy in Strategy Formulation

• What is the appropriate entry strategy?

• How do we attain competitive advantage in international markets?

Examples of Entrepreneurial Strategy and Competitive Dynamics in Strategy Formulation

• How do we recognize viable opportunities?

• How do we formulate effective strategies?

Definition of Strategy Implementation

actions made by firms that carry out the formulated strategy

EX] strategic controls, organizational design, and leadership.

What consists of Strategic Control & Corporate Governance in Strategy Implementation?

• Information control

  • EX] respond effectively to threats plus opportunities

• Behavioral control

  • EX] proper balance of rewards plus incentives, appropriate cultures & boundaries

• Effective corporate governance

What consists of Creating Effective Organizational Designs in Strategy Implementation?

• Organizational structures must be consistent w/ strategy

• Organizational boundaries must be flexible & permeable

What consists of Creating A Learning & An Ethical Organization in Strategy Implementation?

• Effective leaders

  • EX] set a direction, develop org committed to excellence & ethical behavior

• Benefit from individual and collective talents

Definition of Corporate Governance

the relationship among various participants in determining the direction and performance of corporations

Who are the primary participants of Corporate Governance?

• Shareholders

• Management led by Chief Executive Officer

• The Board of Directors

How does the Board of Directors form?

Elected by the shareholders to represent their interest

What do the Board of Directors do?

Ensure their interests & motives of management are aligned with those of the shareholders

• Address shareholder activism

• Establish external control mechanisms

What are the two views of Stakeholder Management?

1. Zero sum

2. Symbiosis

Definition of Stakeholder Management

a firm’s strategy for recognizing and responding to the interests of all its stakeholders.

What consists of Zero Sum in Stakeholder Management?

• Stakeholders compete for attention & resources

• The gain of one is a loss to the other

What consists of Symbiosis in Stakeholder Management?

• Stakeholders are dependent upon each other for success & well-being

• Stakeholders receive mutual benefits

Definition of Social Responsibility

the expectation that businesses or individuals will strive to improve the overall welfare of society.

Definition of Triple Bottom Line

assessment of a firm’s financial, social, and environmental performance.

Definition of 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.

How do organizations express priorities best?

Through stated goals & objectives that form a hierarchy of goals

Definition of Vision

Evokes powerful & compelling mental images of a shared future

Definition of Mission

Encompasses the organizations current purpose, basis of competition, and competitive advantage

Definition of Strategic Objectives

Operationalize the mission statement with specific yardsticks

What are the two perspectives of leadership?

1. External control perspective

2. Romantic view

What is the External Control Perspective of leadership?

External forces determine the organization’s success

What is the Romantic View of leadership?

A leader is the key force in the organization’s success