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C H A P T E R

Strategic
Management
Lecture Outline

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E I G H T

Introduction
The Importance of Strategic
Management
What Is Strategic Management?
Why Is Strategic Management
Important?
The Strategic Management Process
Step 1: Identifying the Organizations
Current Mission, Goals, and
Strategies
Step 2: Doing an External Analysis
Step 3: Doing an Internal Analysis
Step 4: Formulating Strategies
Step 5: Implementing Strategies
Step 6: Evaluating Results
Types of Organizational Strategies
Corporate Strategy
Growth
Stability
Renewal
Corporate Portfolio Analysis
Business or Competitive Strategy
The Role of Competitive
Advantage
Quality As a Competitive
Advantage
Sustaining Competitive
Advantage
Competitive Strategies
The Rule of Three
Functional Strategy
Strategic Management in Todays
Environment
Strategic Flexibility
New Directions in Organizational
Strategies

Mergers.

Strategic
alliances.
Downsizing. Spin-offs. Global expansion.
Todays news is filled with examples of
changing organizational strategies. In
the chapter-opening A
Managers
Dilemma, students learn about the
important
challenge
facing
Kevin
Planks company, Under Armour. Filling
the need for light, comfortable clothing
for male athletes in a variety of sports,
Under Armour now offers not only
clothing, but also equipment for
different climates and environments.
With the companys success comes the
opportunity to expand its products to
women and children.
In this chapter, we examine the strategic
management process as it relates to the
planning function. Kevin Plank must
design effective strategies to attract an
expanding customer base and to
compete successfully with larger, wellestablished companies in the athletic
wear industry. In this opening case,
students
are
asked
to
imagine
themselves in Kevins role and to
consider the value of using SWOT
analysis in planning effective strategies
that will lead to high performance and
continued success for Under Armour.
How can the principles of strategic
management guide Kevin Plank as he
develops this new strategy?

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Many PowerPoint Slides, including both original text art and newly
created images,
have been developed and are available for you to coordinate with
Chapter Eight materials presentation.
ANNOTATED OUTLINE
1.

INTRODUCTION
Effective managers recognize the role that strategic
management plays in their organizations performance.
Throughout this chapter, students discover that good strategies
can lead to high organizational performance.

NOTES

2.

Q&A

Materials I Plan to Use:

THE IMPORTANCE OF STRATEGIC MANAGEMENT


Managers must carefully consider their organizations internal
and external environments as they develop strategic plans. They
should have a systematic means of analyzing the environment,
assessing their organizations strengths and weaknesses,
identifying opportunities that would give the organization a
competitive advantage, and incorporating these findings into
their planning. The value of thinking strategically has an
important impact on organization performance.
8.1 How is strategic management related to the planning function?

NOTES

A.

NOTES

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What Is Strategic Management?


1.
Strategic management is what managers do to
develop the organizations strategies.
2.
Strategic management involves all four of the basic
management
functionsplanning,
organizing,
leading, and controlling.
Materials I Plan to Use:

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B.

NOTES

Why Is Strategic Management Important?


1.
Strategic management has a significant impact on
how well an organization performs.
2.
In todays business world, organizations of all types
and sizes must manage constantly changing
situations.
3.
Todays companies are composed of diverse
divisions, units, functions, and work activities that
must be coordinated.
4.
Strategic management is involved in many of the decisions that
managers make.
Materials I Plan to Use:

Self-Assessment Library

Exercise in Handling Ambiguity

Managers have always had to deal with changes taking place inside
and outside of their organizations. Often, complete information is not
available. Self-Assessment #I.A.4 How Well Do I Handle Ambiguity?
will contribute to students understanding of their own personal
characteristics.
Students may want to reflect on the following
questions:
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3.

What did you discover about yourself in doing this exercise? Did
anything surprise you about your assessment?
How can you use this information in helping you to strategically
plan your career?
How do you think this information will help you as a manager?
THE STRATEGIC MANAGEMENT PROCESS
The strategic management process is a six-step process that
encompasses
strategic
planning,
implementation,
and
evaluation. (See Exhibit 8-1 and PowerPoint slide 8-8.)
A.
Step 1: Identifying the Organizations Current Mission,
Objectives, and Strategies
1. Every organization needs a mission, which is a
statement of the purpose of an organization. The
mission statement addresses the question: What is the
organizations reason for being in business? (See
Exhibit 8-2 and PowerPoint slide 8-10.)

NOTES

Materials I Plan to Use:

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Q&A

8.2 Does a companys mission have to be written to be useful and


effective?

2.

NOTES

B.

NOTES

The organization must identify


objectives and strategies, as well.

its

current

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Step 2: External Analysis


1.
Managers in every organization need to conduct an
external analysis. Influential factors such as
competition, pending legislation, and labor supply
are included in the external environment.
2.
After
analyzing
the
external
environment,
managers must assess what they have learned in
terms of opportunities and threats. Opportunities
are positive trends in external environmental
factors;
threats
are
negative
trends
in
environmental factors.
3.
Because of different resources and capabilities, the
same
external
environment
can
present
opportunities to one organization and pose threats
to another.
Materials I Plan to Use:

Practical Interactive Skills Modules

PRISM #3

Ask students go the Web and complete PRISM on


environmental scanning.
Q&A

8.3 Where can you get information on whats happening in the various
components of the external environment?

C.

Step 3: Internal Analysis


1.
Internal analysis should lead to a clear assessment
of the organizations resources and capabilities.
2.
Any activities the organization does well or any
unique resources that it has are called strengths.

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3.
4.

NOTES

Q&A

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8.4 Whats the difference between an organizations core competencies and


its competitive advantage?

4.

NOTES

Q&A

Weaknesses are activities the organization does


not do well or resources it needs but does not
possess.
The organizations major value-creating skills and
capabilities that determine its competitive weapons
are the organizations core competencies.

Organizational culture is important in internal


analysis; the companys culture can promote or
hinder its strategic actions.

Materials I Plan to Use:

8.5 What role does an organizations culture play in its strategy?

5.
NOTES

D.

NOTES

SWOT analysis is an analysis of the organizations


strengths, weaknesses, opportunities, and threats.

Materials I Plan to Use:

Step 4: Formulating Strategies


1.
After the SWOT, managers develop and evaluate
strategic alternatives and select strategies that are
appropriate.
Materials I Plan to Use:

Self-Assessment Library

Exercise in Creativity
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Creativity and innovation are important elements in strategic planning.


Self-Assessment Library #I.A.5 How Creative Am I? gives your
students an opportunity to obtain feedback on their own levels of
creativity.
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Q&A

What did you discover about yourself in doing this exercise? Did
anything surprise you about your assessment?
How can you use this information in helping you in generating
alternative career paths?
How do you think this information will help you as a manager?

8.6 How is SWOT analysis used in the formulation of appropriate strategies?

2.

NOTES

Strategies need to be established for corporate,


business, and functional levels.

Materials I Plan to Use:

Thinking Critically About


Ethics

Providing False Information

When organizations provide information about themselves, products, or services to


the general public, what and how much information to provide is a critical question.
Any information made available to the general public through the companys Web site
is available to the organizations competitors as well.
Present the following questions to students in a class discussion:

In an intensely competitive industry, would it be wrong for a company to


include misleading, or even false information on its Web site?

Why or why not?

Suppose that the organizations industry is not intensely competitive.


Would you feel differently?
Encourage students to decide what information needs to be provided and what
information should be held within the organization. In addition, explore with students
what constitutes misleading, false, or acceptable information.

Managing Your Career

Doing a Personal SWOT


Analysis
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Conducting a personal SWOT analysis can be a valuable tool to help students assess
their own skills and preferences in preparation for the job search process. In fact,
doing an individual SWOT analysis is an excellent introduction to SWOT, since
students will be familiar with the subject of the analysis and the process will be
personalized.
After your class has studied and discussed Managing Your Career: Doing a Personal
SWOT Analysis in the text, talk with your students about developing their own
personal SWOT analysis. Devote a portion of this class period to giving students an
opportunity to consider and write about their own personal strengths and weaknesses.
In order to encourage their critical thinking and writing, you will want to assure
students that they will have discretion about whether or not their SWOT analysis will
be shared with anyone else. You may want to allow some time during subsequent
class sessions for students to work on their personal SWOT analysis and to ask
questions about the process.

E.

NOTES

Q&A

Step 6: Evaluating Results


1.
How effective have the strategies been?
adjustments necessary?
8.8 How often should a company change its strategies?

NOTES

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8.7 I understand how strategies are formulated, but how are they
implemented?

F.

Q&A

Step 5: Implementing Strategies


1.
A strategy is only as good as its implementation.

Materials I Plan to Use:

Managing IT

ITs Role in Company


Strategy

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Are

Since a number of students in your class will likely have employment


experience, ask students to use their past or present job environments as a
basis for thinking about the importance of IT to the strategies used in a
business.
Invite students to share their real-world experiences in a business setting
where an organization has invested in IT and has benefited by its
implementation. Ask for specific examples showing how production of goods
and/or services has been enhanced in that business by the use of IT.
Next, ask students to tell their classmates about experiences in the business
world where they think IT investment may not have been the best strategy.
Again, ask for specific examples from their own work experience, so that
students can relate to the real-life challenges and opportunities presented by IT
in the workplace.

4.

TYPES OF ORGANIZATIONAL STRATEGIES


Strategic planning takes place on three different and distinct
levels: corporate, business, and functional. (See Exhibit 8-4
and PowerPoint slide 8-16).
A.
Corporate Strategy
Corporate strategy is an organizational strategy that
determines what businesses a company is in, should be
in, or wants to be in, and what it wants to do with those
businesses.
1.
There are three main types of corporate strategies:
a. A growth strategy is a corporate strategy that
is used
when an organization wants to grow
and does so by expanding the number of
products offered or markets served, either
through its current business(es) or through new
business(es).
b. A stability strategy is a corporate strategy
characterized by an absence of significant
change in what the organization is currently
doing.
c. A renewal strategy is a corporate strategy
designed to address organizational weaknesses
that are leading to performance declines. Two
such strategies are retrenchment strategy and
turnaround strategy.
2.
Corporate Portfolio Analysis is used when an
organizations corporate strategy involves a
number of businesses. Managers can manage this
portfolio of businesses using a corporate portfolio
matrix, such as the BCG matrix.
a. The BCG matrix is a strategy tool that guides
resource allocation decisions on the basis of
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market share and growth rate of SBUs. (See


Exhibit 8-5 and PowerPoint slide 8-23.)
NOTES

B.

NOTES

Materials I Plan to Use:

Business (Competitive) Strategy


A business strategy (also known as a competitive
strategy) is an organizational strategy focused on how the
organization will compete in each of its businesses.
1.
The Role of Competitive Advantage.
A
competitive advantage is what sets an
organization apart, that is, its distinctive edge. An
organizations competitive advantage can come
from its core competencies.
2.
Quality as a Competitive Advantage.
If
implemented properly, quality can be one way for
an organization to create a sustainable competitive
advantage.
Materials I Plan to Use:

Passport

Passport Part 3 Scenario 1


Have students complete Passport Part 3 Scenario 1 on quality
programs.

3.

NOTES

Sustaining
Competitive
Advantage.
An
organization must be able to sustain its competitive
advantage; it must keep its edge despite
competitors action and regardless of major
changes in the organizations industry.

Materials I Plan to Use:

4.

Michael Porters work explains how managers can


create and sustain a competitive advantage that
will give a company above-average profitability.
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a.

NOTES

Industry analysis is an important step in


Porters framework. He says there are five
competitive forces at work in an industry;
together, these five forces determine
industry attractiveness and profitability. (See
Exhibit 8-6 and PowerPoint slide 8-29).
Porter proposes that the following five
factors can be used to assess an industrys
attractiveness:
1)
Threat of new entrants. How likely is it
that new competitors will come into
the industry? Managers should assess
barriers to entry, which are factors
that determine how easy or difficult it
would be for new competitors to enter
the industry.
2)
Threat of substitutes. How likely is it
that products of other industries could
be substituted for a companys
products?
3)
Bargaining power of buyers. How
much bargaining power do buyers
(customers) have?
4)
Bargaining power of suppliers. How
much
bargaining
power
do
a
companys suppliers have?
5)
Current rivalry. How intense is the
competition among firms that are
currently in the industry?

Materials I Plan to Use:

5.

According to Porter, managers must choose a


strategy that will give their organization a
competitive advantage. Porter identifies three
generic competitive strategies. Which strategy
managers select depends on the organizations
strengths and core competencies and the particular
weaknesses of its competitor(s).
a.
A cost leadership strategy is a business
or competitive strategy in which the
organization competes on the basis of having
the lowest costs in its industry.
b.
A differentiation strategy is a business or
competitive strategy in which a company
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c.

NOTES

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6.

7.

NOTES

C.

NOTES

5.

offers unique products that are widely valued


by customers.
A focus strategy is a business or
competitive strategy in which a company
pursues a cost or differentiation advantage
in a narrow industry segment.

An organization that has been not been able to


develop either a low cost or a differentiation
competitive advantage is said to be stuck in the
middle.
Subsequent research indicates that it is possible,
though very difficult, for organizations that are
stuck in the middle to achieve high performance.

Materials I Plan to Use:

Functional Strategy
Functional strategy is the strategies used by an
organizations various functional departments to support
the business or competitive strategy.
Materials I Plan to Use:

STRATEGIC MANAGEMENT IN TODAYS ENVIRONMENT


A.
The Rule of Three. Competitive forces in an industry, if
kept relatively free from government interference or other
special circumstances, will inevitably create a situation
where three companies dominate any given market.

NOTES

Materials I Plan to Use:

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Self-Assessment Library

Exercise in Turbulent Change

Dealing with turbulent change is a critical success skill for effective


strategic planning. Self-Assessment Library #III.C.1 How Well Do I
Respond to Turbulent Change? gives your students the opportunity to
get feedback about their own effectiveness in responding to change.
What did you discover about yourself in doing this exercise? Did
anything surprise you about your assessment?
How can you use this information in helping you in generating
alternative career paths?
How do you think this information will help you as a manager?

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B.

NOTES

New Directions in Organizational Strategies


1.
E-Business Strategies. Using the Internet,
companies have created knowledge bases
that employees can tap into anytime,
anywhere. E-business as a strategy can be
used to develop a sustainable competitive
advantage; it can also be used to establish a
basis for differentiation or focus.
Materials I Plan to Use:

Focus on Leadership

Strategic Leadership: Its


All About Vision . . . and
More

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After you and your students have discussed the six responsibilities of an
effective strategic leader, give your students an opportunity to consider the
importance of the first responsibility listed in the text: An effective strategic
leader determines the organizations purpose or vision. Ask students for other
words that come to mind when they hear the word vision. Provide a dictionary
and ask one student to look up and read the appropriate definition of vision to
the class.
Lead a discussion in which you ask your students to describe the difference
between the terms mission and vision. You may want to pose the following
questions for further discussion:

Why is having and communicating a clear


vision vital to the success of a leader in influencing members of an
organization to follow?
What skills and qualities should a manager
have in order to communicate his/her vision to employees of the
organization?
What skills and qualities should a manager
have in order to communicate his/her vision for the organization to
external stakeholders?
How does the leader of our university
communicate his/her vision to internal and external stakeholders?
Does our university have a written mission
statement? Is it an integral part of the universitys Web site?
Do I have a personal mission statement? If not,
what benefits could I derive from writing one?

2.

NOTES

Materials I Plan to Use:

3.

NOTES

Customer Service Strategies. These strategies give


customers
what
they
want,
communicate
effectively with them, and provide employees with
customer service training.

Innovation Strategies. These strategies focus on


breakthrough products and can include the
application of existing technology to new uses. An
organization that is first to bring a product
innovation to the market or to use a new process
innovation is called a first mover.

Materials I Plan to Use:

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Answers to Thinking About Management


Issues

1.

Perform a SWOT analysis on a local business you think you


know well. What, if any, competitive advantage does this
organization have?
You may want to assign this question to teams of students.
Encourage your students to cover each area of the SWOT
thoroughly. Be sure to talk with the class about different sources
of information for doing a SWOT analysis so that they will be
equipped to work on this assignment.

2.

How
might
the
processes
of
strategy
formulation,
implementation, and evaluation differ for (a) large businesses,
(b) small businesses, (c) not-for-profit organizations, and (d)
global businesses?
After studying this chapter, students should recognize that the
processes of strategy formulation, implementation, and
evaluation do not differ significantly among these different types
of organizations; rather, the content of the processes is likely to
differ.

3.

The concept of competitive advantage is as important for notfor-profit organizations as it is for for-profit organizations. Do
you agree or disagree with this statement? Explain, using
examples to make your case.
In their study of Chapter Eight, students should learn that
although not-for-profit organizations do not attempt to make a
profit, they must be highly motivated to achieve their goals and
to remain productive. The appropriate strategy is as crucial to
accomplishing the objectives and mission of a not-for-profit
organization as it is in a for-profit company. In fact, not-for-profit
organizations face major challenges as the number of worthy
causes and competitors increases.

4.

Should ethical considerations be included in the analyses of an


organizations internal and external environments? Why or why
not?
Ethical considerations should permeate every activity of an
organization. Ask your students what they think these ethical
considerations should be.

5.

How could the Internet be helpful to managers as they follow


the steps in the strategic management process?
The Internet provides voluminous information conveniently and
quickly about competitors, environmental factors, and
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customers. This information improves the managers ability to


make sound strategic management decisions as he/she faces
continuously changing environmental conditions.
6.

Find examples of five different organizational mission


statements. Using the mission statements, describe what types
of corporate and business strategies each organization might
use to fulfill its mission statement. Explain your rationale for
choosing each strategy.
Students can be expected to select a wide range of companies
and mission statements as they work in teams to answer this
question. This exercise gives an excellent opportunity for
students to differentiate between corporate and business
strategies. In order to provide exposure to corporate strategy in
this activity, be sure that each team explores at least one
corporation in their analysis.

WORKING
Exercise

TOGETHERTeam-Based

This exercise asks students to work in small groups of three to four


individuals to find examples of different types of strategies used by
companies featured in news stories in the business and popular press.
Students should find examples of five different organizational
strategies and determine whether the examples illustrate corporate,
business, or functional strategies.
This exercise should be used as an out-of-class assignment.
Answers to Case Application Questions

Higher and Higher


1.

What competitive advantage(s) do you think the Haier Group


has? What competitive strategy does the company appear to be
following? Explain your choices.
The Haier Group enjoys the benefits of having several
competitive advantages, including continuous innovation. As
CEO Zhang Ruimin says, Continuous innovation is the soul of
Haiers corporate culture. Additional competitive advantages
include strong brand name recognition in China (the countrys
third most popular brand); manufacturing facilities in 13
countries and 18 R&D centers around the globe; worldwide
recognition of its quality products; and visionary leadership. The
company is implementing a differentiation strategy as it
competes in the global marketplace, offering quality products
that are widely valued by its customers around the world.

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2.

What strategic goals does Zhang have for Haier? Do the


companys strategies appear to be helping it reach these goals?
Zhang is striving to build on the competitive advantages of
Haier in order to meet his strategic goals of worldwide
leadership in his industry. His actions as CEO support his
strategic goal of leading the Haier Group to become a truly
global brand. Given the rapid growth and success of Haier since
its inception, the companys strategies appear to be helping
Zhang and his employees to reach their strategic goals.

3. How might SWOT analysis be useful to Zhang Ruimin?


In order to compete effectively in a global market, Zhang Ruimin
must be alert to changes in opportunities and threats in the
external environment; be equipped to take advantage of internal
strengths; and be cognizant and realistic about Haiers internal
weaknesses. Conducting a SWOT analysis is a valuable tool in
achieving these objectives.
4.

What other strategic management concepts might Zhang use to


help him continue managing the Haier Group for successful
performance?
Since competition in his industry is keen, Zhang might use
Michael Porters models and studies of competitive strategies to
help in growing the Haier Group in a global arena. As his
company continues to grow over time, the BCG matrix might be
used by Zhang to assess the viability of its product lines and
businesses within the corporation.

5.

What strategic leadership characteristics does Zhang Ruimin


exhibit?
Explain.
Zhang Ruimin demonstrates a number of characteristics of an
effective strategic leader, including the possession of a strong
vision and sense of mission for the company and the ability to
communicate them to his followers and stakeholders. In
addition, he exploits and maintains the core competencies of
Haier and upholds a strong corporate culture of innovation.

ADDITIONAL CHAPTER INFORMATION


The Strategy + Business Web site features valuable sources for
strategic management applications.
This Web site is located at
[www.strategy-business.com].

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