Lecture 01 Fundamentals of Strategic Management 2
The Puzzle of Persistent Performance Differences
Key Question: Why do some firms outperform others?
Evidence of Performance Variations
Performance deconstruction reveals:
Effects Contributing to Variation:
Industry-level effects
Company effects
Business unit effects
Managerial effects
Findings:
Approximately 30% variation due to firm effects
Performance differences largely driven by best and extreme performers.
35-55% of variations remain unexplained, potentially due to luck and unexpected events.
Strategic Management Overview
Definition of Strategy:
Unifying theme providing coherence and direction to organizational decisions.
Definition of Strategic Management:
Analysis, decisions, and actions for creating/sustaining competitive advantages.
Strategic Management Process:
Full set of commitments, decisions, and actions required to create value and achieve above-average returns.
Types of Performance Goals in Strategic Management
Three Performance Goals to Consider:
Financial Performance
Social Performance
Environmental Performance
Note: Focusing on one or two to the exclusion of others may jeopardize overall business viability.
Strategy, Survival, and Success
Ultimate Organizational Goal: Success
Success components:
Achievement of goals
Long term survival
Above average returns/profitability
Role of Strategy:
Primary vehicle for achieving success across various domains including business, politics, sports, etc.
Course Objectives and Future Application
Core Work Focus:
Understand sources of sustained competitive advantage contributing to high performance.