Slide strategic management 6e by harrison chapter 1 the strategic management process

• the key elements of important strategic perspectives, including industrial organization economics, the based perspective, and stakeholder theory.. Strategic Management is the process t

Chapter 1 The Strategic Management Process

• the key elements of important strategic perspectives,

including industrial organization economics, the based perspective, and stakeholder theory.

resource-• how a turbulent and interdependent global environment

has increased the importance of innovation in firms.

• the elements of strategic thinking

Strategic Management

is the process through which organizations…

 analyze and learn from their internal and external

environments,

 establish strategic direction,

 create strategies that are intended to help achieve

established goals, and

 execute those strategies….

all in an effort to satisfy key organizational stakeholders.

Direction

Strategy Formulation (corporate and business level)

THE TASK ENVIRONMENT THE BROAD ENVIRONMENT

financial intermediaries

customers competitors

political/legal forces

Broad Environment

The broad environment consists of domestic and global forces such as:

socio-cultural trends (e.g demographics)

technological trends (e.g internet)

political trends (e.g open markets)

economic trends (e.g growing economy)

The broad environment forms the context within which the firm and its task environment exist

Task Environment

The task environment consists of external stakeholders groups or individuals outside the organization that are significantly influenced by or have a major impact

on the organization such as:

Internal Environmental

Analysis

• Internal stakeholders include managers,

employees and the owners and their

representatives (e.g., board of directors)

• Internal analysis includes an evaluation of

internal stakeholders and the organization’s

resources and capabilities

• Purpose of internal analysis to determine

strengths and opportunities for competitive advantage,

and

weaknesses and organizational vulnerabilities that should

be corrected

SWOT Analysis

can lead to a competitive advantage

firm does not possess but that are necessary,

resulting in a competitive disadvantage

environments that allow a firm to take advantage of organizational strengths, overcome organizational

weaknesses, and/or neutralize environmental

threats

environments that may stand in the way of

organizational competitiveness or the achievement

of stakeholder satisfaction

Strategic Leadership

• Strategic leaders have a large impact on the

strategies and performance of their firms

High impact leaders like Sam Walton of Walmart, Jack

Welch of General Electric or, more recently, Akio

Toyoda of Toyota or Sam Palmisano of IBM.

One of the most important responsibilities of a strategic

leader is to establish strategic direction

Strategic Direction

Strategic direction involves

• setting long-term goals and objectives

• defines the purposes for which an organization exists and operates

business ethics pertain to the moral obligations of

businesses to individuals, groups (such as stakeholders)

and society as a whole

values define what matters when making decisions and

what is rewarded and reinforced

Strategic direction may be contained, in part, in

a firm's mission and vision statements

Strategy Formulation

• Strategy is an organizational plan of action intended to

accomplish goals

• Corporate strategy formulation refers to domain

definition, or the choice of business areas Usually

decided by the CEO and the board of directors

and navigation, or how to compete in a given area

Usually decided by division heads and business unit

managers

• Functional strategy formulation contains the details of how the functional areas such as marketing, operations, finance, and research should work together to achieve the business-level strategy Decisions made by functional

level managers

Strategy Implementation and

Control

• Strategy implementation involves creating the

functional strategies, systems, structures, and

processes needed by the organization in achieving

strategic ends

• Strategic control refers to the processes that lead to

adjustments in strategic direction, strategies, or the

implementation plan when necessary

• Strategic restructuring involves a renewed emphasis

on what an organization does well, combined with a

variety of tactics to revitalize the organization and

strengthen its competitive position

Alternative Perspectives on

Strategy Development

Industrial Organization Economics

• Environmental determinism – the most competitive strategy is

determined by the environment It involves adapting to

environmental, technical and human forces

• Structure-conduct-performance model – the performance of an industry is dependent on the conduct of the firms it contains, which

is dependent on industry structure

• Research – suggests industry is important to performance, but not primary determinant

• Enactment – firms can, in part, create their environments.

• Combination – organizations typically involved in adaptation and enactment.

Resource-based View

• Organization is a bundle of resources – financial, physical, human,

knowledge and learning, and general organizational (structure, systems, culture, reputation, relationships with stakeholders).

• Sustainable competitive advantage – comes from a resource that is

valuable in the market, possessed by only a small number of firms (rare), and costly or difficult to imitate in the short term.

• Effective development or acquisition of organizational resources – may

be the most important reason that some organizations are more successful than others.

Alternative Perspectives on

Strategy Development

Stakeholder Perspective

external constituencies that have a strong interest in the activities and outcomes of the firm and upon whom the organization relies to achieve its objectives.

• Stakeholder analysis

› identifying and prioritizing key stakeholders

› assessing their needs

› collecting ideas from them

› integrating this knowledge into the strategic management process

• Stakeholder management

› communicating with stakeholders

› negotiating and contracting with stakeholders

› managing relationships with them

› motivating them to behave in ways that are beneficial to the organization and its other stakeholders

Alternative Perspectives on

Strategy Development

Managing for Stakeholders and Value

Creation

Potential for Value Creation

Primary

Stakeholders

Nature of Relationships

Trusting Respectful

Mutually Beneficial

Fewer Negative Actions Less Risk

Excellent Reputation More Attractive to Stakeholders Ability to Obtain Better

Resources Ability to Obtain Valuable

Information Greater Ability to Plan Strategic Flexibility

• Traditional/contemporary perspective – firms should adapt to

forces in the external environment when it is unreasonable to try

to change them, while being proactive in other areas Also,

strategy making is a combination of planning and learning The approach also draws from organizational economics, especially pertaining to industry analysis

• Resource-based perspective – internal analysis leading to

identification of sources of sustainable competitive advantage

• Stakeholder perspective – part of external analysis and alliance formation

• Global perspective – integrated throughout all aspects of strategic management

A Combined Approach to Strategic

Management

The world's markets are becoming increasingly globalized

A Turbulent Global Environment

and services, knowledge and financial capital across

borders

 Interdependencies make business environment complicated.

 Economic interconnections even more problematic during crises.

many industries

 Hypercompetition – intense competition among firms, often

associated with technological innovation.

These factors make continuous innovation important!

Entrepreneurship is the process through which

individuals, groups or firms pursue opportunities to create new value

 Recognizing or creating an opportunity

 Assembling needed resources

 Managing resources to bring new venture into

being

Strategic Thinking

Strategic thinking is the term used to describe the

creative aspects of strategic management

 Focus on strategic intent