Strategic Management

An Overview

What is Strategic Management

Strategic Management is what managers do to develop the organization’s strategies.

Strategies are the plans for how the organization will do whatever its in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goal.

Stephen P. Robbins and Mary Coulter, “Management Eleventh Edition”, 2012

Why is Strategic Management Important?

There are three reasons The most significant one is that it can make a

difference in how well an organization performs The fact that managers in organizations of all

types and sizes faces continually changing situations

Organizations are complex and diverse

Strategic Management Process

Identify the organization’s

current mission, goals, and strategies

External Analysis

• Opportunities

• Threats

InternalAnalysis• Strengths• Weaknesse

s

Formulate Strategies

Implement Strategies

Evaluate ResultsSWOT Analysis

Components of a Mission Statement

Components Questions

Customers Who are the firm’s customers?

Markets Where does the firm compete geographically?

Concern for survival, growth, and profitability

Is the firm committed to growth and financial stability?

Philosophy What are the firm’s beliefs, values, and ethical priorities?

Concern for public image

How responsive is the firm to societal and environmental concerns?

Products or services What are the firm’s major products or services?

Technology Is the firm technologically current?

Self-concept What are the firm’s major competitive advantage and core competencies?

Concern for employees Are employees a valuable asset of the firm?

Corporate Strategies

Corporate Strategy is one that determines what business a company is in or wants to be in, and what it wants to do with those businesses.

Types of Organizational Strategies

Functional

Competitive

CorporateMultibusines

s Corporation

Strategic Business

Unit 1

Strategic Business

Unit 2

Research and

Development

Manufacturing Marketing Human

Resources Finance

Strategic Business

Unit 3

What are the Types of Corporate Strategy?

The three main types of corporate strategies are: Growth Stability Renewal

How Are Corporate Strategies Managed?

Stars

Cash Cows

Question Marks

Dogs

Market Share

High Low

Anti

cipate

d G

row

th R

ate

Hig

hLo

w

Competitive Strategies

A competitive strategy is a strategy for how an organization will compete in its business(es).

When an organization is in several different business, those single business that are independent and that have their own competitive strategies are referred to as strategic business units (SBUs)

The Role of Competitive Advantage

Competitive advantage is what sets an organization apart – that is, its distinctive edge.

That distinctive edge can come from the organization’s core competencies by doing something that others cannot do or doing it better that others can do it.

Quality as a Competitive Advantage

Emphasis on quality is still important today

If implemented properly, quality can be a way for an organization to create a sustainable competitive advantage

That’s why many organizations apply quality management concepts

Sustaining Competitive Advantage

Every organization has resources (assets) and capabilities (how work gets done)

Not every organization is able to effectively exploit its resources and to develop the core competencies that can provide it with a competitive advantage

It’s not enough simply to create a competitive advantage

The organization must be able to sustain that advantage

Five Forces Model

Intensity of Rivalry Among Current

Competitors

New Entrants

Buyers

Substitutes

Suppliers

Threat of New

EntrantsBargaining Power of Buyers

Threat of Substitutes

Bargaining Power of Suppliers

Choosing a Competitive Strategy

Cost Leadership Strategy is when an organization competes on the basis of having the lowest costs (costs or expenses, not prices) in its industry

Differentiation Strategy is when an organization competes by offering unique products that are widely valued by customers

Focus Strategy involves a cost advantage (cost focus) or a differentiation advantage (differentiation focus) in a narrow segment or niche

Stuck in the middle is what happened if an organization can’t develop a cost or a differentiation advantage

Functional Strategy is the strategy used by an organization’s various functional departments to support the competitive strategy

The Need for Strategic Leadership

Strategic Leadership is the ability to anticipate, envision, maintain flexibility, think strategically, and work with others in the organization to initiate changes that will create a viable and valuable future for the organization

Effective Strategic Leadership

Effective Strategic

Leadership

Determining the organization’s purpose or vision

Creating and maintaining organizational relationships

Exploiting and maintaining the organization’s core

competencies

Developing the organization’s human

capital

Creating and sustaining a strong organizational

culture

Establishing appropriately balanced organizational

controls

Emphasizing ethical organizational decisions

and practicesReframing prevailing views

by asking penetrating questions and questioning

assumptions

J.P.Wallman, 2010

The Need for Strategic Flexibility

Strategic Flexibility is the ability to recognize major external changes, to quickly commit resources, and to recognize when a strategic decision isn’t working

Developing Strategic Flexibility

Encourage leadership unity

Keep resources fluid

Have the right mindset

Monitoring and measuring results

Open about disclosing and sharing negative information

Have multiple alternatives

Lear from mistakes

Y.L. Doz and M. Kosonen, 2010

Important Organizational Strategies for Today’s

Environment

Three strategies that are important in today’s environment:

E-Business Strategies

Customer Service Strategies

Innovation Strategies

E-Business Strategies

Use e-business strategies to develop a sustainable competitive advantage

A cost leader can use e-business to lower cost in a variety ways

A differentiator needs to offer products or services that customers perceive and value as unique

A focuser targets a narrow market segment with customized products and common interest

A clicks-and-bricks strategy is an important e-business strategy

Customer Service Strategies

Having effective customer communication system is an important customer service strategy

An organization’s culture is important to providing excellent customer service

Innovation Strategies

The organization is going to focus their innovation efforts on basic scientific research, product development, or process improvement

Two types of innovation strategies Innovation emphasis, is focus on process development Innovation timing, is focus on becoming first mover

First mover is an organization that’s first to bring a product innovation to the market or to use a new process innovation

First-Mover

Advantages Disadvantages

Reputation for being innovative and industry leader

Uncertainty over exact direction technology and market will go

Cost and learning benefits Risk of competitors imitating innovations

Control over scarce resources and keeping competitors from having access to them

Financial and strategic risks

Opportunity to begin building customer relationships and customer loyalty

High development costs