Ch. 1: Creating Competitive Advantages

Strategic Management

What is strategic management?

• Analyses, decisions, and actions to create & sustain competitive advantage

• Simple: Why some companies outperform others

What is the external control perspective?

External forces determine success (economy, market conditions)

What is the romantic view of leadership?

• Leader is the main driver of success (Steve Jobs, Elon Musk)

How can leaders impact performance?

• Be proactive

• Anticipate change

• Refine strategies

• Understand external threats/opportunities

• Understand internal resources/capabilities

• Make strategic management a mindset across the organization

What are the three parts of strategic management?

• Analysis

• Formulation (decisions)

• Implementation (actions)

What is intended strategy?

• Based only on analysis

• Rarely stays unchanged

What is realized strategy?

• Mix of deliberate strategy + unexpected events, constraints, changing preferences

What two questions drive strategy?

• How should we compete?

• How do we create advantages that are unique, valuable, and hard to copy?

Why isn’t operational effectiveness enough?

• It can be easily imitated

• Doesn’t sustain competitive advantage

What are the four key attributes?

• Directs toward goals/objectives

• Includes multiple stakeholders

• Balances short-term & long-term

• Recognizes efficiency vs. effectiveness trade-offs

What are the three levels of goals?

• Vision

• Mission

• Strategic objectives

What must managers analyze externally?

• General environment

• Industry environment

• Competitors

What does internal analysis assess?

• Strengths

• Value chain activities

• Sources of competitive advantage

Why are intellectual assets important?

• Knowledge workers

• Relationships/networks

• Technology that stores & shares knowledge

What are the four levels of strategy formulation?

• Business-level

• Corporate-level

• International

• Entrepreneurial

What does implementation require?

• Strategic controls

• Organizational design

• Coordination with suppliers/customers/partners

• Leadership commitment to ethics & excellence

• Learning & improvement

• Entrepreneurial action

What is corporate governance?

• Relationship among shareholders, management, and board of directors

Who are the primary participants?

• Shareholders

• CEO/Management

• Board of Directors

What must the board ensure?

• Management aligns with owners

• Effective board engagement

• Proper incentives

• External control mechanisms

Stockholders

want dividends + stock value growth

Employees

want wages, benefits, safety, job security

Suppliers

want timely payment + continued relationship

Creditors

want interest + principal repayment

Customers

want value + warranties

Government

wants taxes + compliance

Community

wants good citizenship, jobs, no pollution

What is the zero-sum view?

• Stakeholders compete

• One group’s gain = another group’s loss

What is the symbiosis view?

• Stakeholders depend on each other

• Mutual benefits

What is social responsibility?

Expectation that businesses improve society’s welfare

What is the triple bottom line?

Financial + social + environmental performance (ESG)

Why is empowerment important?

• Strategic management requires integration across all functions

Who are the three leader types?

• Local line leaders (profit & loss responsibility)

• Executive leaders

• Internal networkers

What is the hierarchy of goals?

• Vision → Mission → Strategic objectives

Google example?

• Vision: Access to world’s information in one click

• Mission: Organize and make information accessible

• Strategic objectives: innovation, UX, expansion, sustainability, diversification, social responsibility