Introduction to Strategic Management

Prepared by: Alexander G. Cortez

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 What is strategy?
• a plan of action or policy designed to
achieve a major or overall aim.
• Strategy is all about gaining or at least
attempting to gain, a position of
advantage over competitors.

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 What is Strategic Management?
“The analysis, decisions, and actions
an organization undertakes in order to
create and sustain competitive
advantages” (Dess & Lumpkin, 2003;
p.3).

“A pattern in a stream of actions or

decisions (Henry Mintzberg).

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 Types of Strategies
• Plan - deliberately and consciously chosen course of action.
• Ploy - designed to mislead or distract a key player, such as a
business competitor.
• Pattern - takes us to the result of plans that turn into action,
decisions that are having some result or impact.
• Position - the location of an organization in its environment. This
may be a geographic intention like expanding internationally, or
the position of a business in a particular industry.
• Perspective- trategy may be a perspective in the sense of a
persistent mindset regarding the world in which the organization
operates. This worldview shows in the intentions and/or the actions
of members, as individuals bound by common thinking and
behaving.

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 Challenges of Strategic Managers

Short-term Goals Long-term Goals

Key Stakeholders Profitability

Network
Changing Landscape
Long-Term Planning
Quarterly Performance
Develop Cohesive
Organization
Diverse Workforce

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 Overall View of the Strategic Management
Process
Strategic Management involves
•Analysis
• Strategic goals (vision, mission, strategic objectives)
• Internal and external environment
•Decisions
• What industries should we compete in?
• How should we compete in those industries?
•Actions
• Allocate necessary resources
• Design the organization to bring intended strategies
to reality

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 Strategic Management Process

Mission External Internal Strategy Strategy

& Analysis Analysis Formulation Implementation
Objectives

Feedback

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 Strategic Management Process

External
Analysis

Strategic Strategy Competitive

Objectives
Choice Implementation Advantage

Internal
Analysis

Mission
Barney & Hesterly p. 5

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 Analysis: Mission & Objectives
• Organizations express priorities best through stated goals &
objectives that form a hierarchy of goals
• Vision – evokes powerful & compelling mental images of a
shared future
• Mission – encompasses the organization’s current purpose, basis
of competition, & competitive advantage
• Strategic objectives – operationalize the mission statement with
specific yardsticks

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 Analysis: External & Internal
Analysis of the Firm’s External Environment:
What are the trends in the industry?
What are the trends in the general environment?
What are the competitor’s trends?
Analysis of the Firm’s Internal Environment:
What are the firm’s resources?
What are the firm’s capabilities?
What are the firm’s distinctive competencies?

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 Decisions (Strategic Choice)
Strategy Formulation
• Developed at several levels
• Strategy Formulation:
• Functional-level (HR, Manufacturing, Marketing, etc.)
• Business-level (Cost, differentiation, focus, or integrative)
• Corporate-level (diversification, restructuring)
• Involves decisions that can create and sustain competitive
advantage
• Investment decisions
• Commitment of resources
• Operational synergies
• Recognizing viable opportunities

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 Actions
(Strategy Implementation)
• Implements the formulated strategy
• Ensures proper strategic control systems
• Establishes an appropriate organizational design -
coordinates & integrates activities within the firm
• Coordinates activities with suppliers, customers,
alliance partners
• Leadership ensures organizational commitment to
excellence & ethical behavior
• Promotes learning & continuous improvement
• Acts entrepreneurially in creating new opportunities

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 Competitive Advantage
• The ability to create more economic value than
competitors.
Competitive parity
• A defensive strategy that can help a business
protect its brand or product's competitive
position in the marketplace without
overspending. Also called defensive budgeting.

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 Competitive Disadvantage
• People may have an aversion/dislike to the
firm’s offering.
• A firm may have outdated technology/
equipment.
• The firm may have a cost disadvantage.
• A firm may have a negative reputation.

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 Competitive Advantage
Two Types of Difference:
• Preference for the firm’s output
• people choose the firm’s output over others’
• people are willing to pay a premium

• Cost advantage vis-à-vis competitors

• lower costs of production/distribution

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 Strategic Management Trade-offs

Managers need to be ambidextrous

• Focusing on short- • Focusing on long-term
While
term efficiency effectiveness
also
• Aligning resources to • Expanding product-
take advantage of market scope by
existing product proactively exploring
markets new opportunities

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 Intended vs Realized Strategies

The Business Environment is far from predictable.

Intended Strategy Realized Strategy

• Organizational decisions • Decisions are determined by
are determined only by both analysis (deliberate) &
analysis unforeseen environmental
versus developments,
• Intended strategy rarely unanticipated resource
survives in its original constraints, and/or changes
form in managerial preferences

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 Stakeholders
• Stakeholders - are those individuals or groups that
depend on an organization to fulfil their own goals
and on whom, in turn, the organization depends.
• A stakeholder can be defined as an individual or
group, inside or outside the company, that has a
stake in or claim and can influence an
organization’s performance
• Stakeholder Management - a firm’s strategy for
recognizing and responding to the interests of all
its salient stakeholders.

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 Stakeholder Management

Exhibit 1.5 An Organization’s Key Stakeholders & the Nature of Their Claims

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 Coherence in Strategic Direction

Exhibit 1.6 A Hierarchy of Goals

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 Assignment
1) Describe the role and responsibilities of
the board of directors in corporate
governance
2) Understand how the composition of a
board can affect its operation
3) Discuss trends in corporate governance
4) Explain how executive leadership is an
important part of strategic management

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