Strategic Imperative

Strategic Management (BA 491)

Introduction to Strategic Management

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

STRATEGIC MANAGEMENT McGraw-Hill/Irwin

Strategic Management
Strategic management is the study of why some firms outperform others.
How to create a competitive advantage in the market place that is unique, valuable, and difficult to copy

Total organization perspective, integrating across functional areas.

Two perspectives of leadership: romantic view and external control perspective.

Strategies put together an understanding of the external environment with an understanding of internal strengths and weaknesses.
Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Definition of Strategic Management

Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages (Dess, Lumpkin, & Eisner, Strategic Management: Creating Competitive Advantage, 3rd Ed., p. 9).

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Definition of Strategic Management

Analysis
Strategic goals (vision, mission, strategic objectives)
Internal and external environment of the firm

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
Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Attributes of Strategic Management

Directs the organization toward overall goals and objectives. Includes multiple stakeholders in decision making.

Needs to incorporate short-term and long-term perspectives.

Recognizes trade-offs between efficiency and effectiveness.

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Mintzbergs Views of Strategy

Plan - consciously intended course of action Ploy - maneuver to outwit opponent

Pattern - consistency in behavior

Position - location in environment Perspective - way of perceiving the world

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Forms of Strategy
Formal versus informal - associated with size of firm and stage of development. Mintzbergs distinction between entrepreneurial and planning mode. Intended versus realized - intended strategies are the plans managers develop; realized strategies are the actions that actually take place over time.

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Forms of Strategy

Source:H. Mintzberg and J. A. Waters, Of Strategies, Deliberate and Emergent, Strategic Management Journal 6 (1985), pp. 257-72.

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Management Process

Analysis
Hierarchy of goals Analysis of external and internal environments

Formulation
What business(es) should we be in? For each, what is the basis for competitive advantage (low cost, differentiation, focus)?

Implementation
Functional tactics Culture and organization structure

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Coherence in Strategic Direction

Company vision
Massively inspiring
Overarching Long-term Company vision

Driven by and evokes passion

Fundamental statement of the organizations
Values
Aspiration Goals
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Hierarchy of Goals

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Coherence in Strategic Direction

Mission statements
Purpose of the company
Basis of competition and competitive advantages More specific than vision Focused on the means by which the firm will compete Hierarchy of Goals
Company vision Mission statements

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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Coherence in Strategic Direction

Strategic objectives
Operationalize the mission statement
Measurable, specific, appropriate, realistic, timely, challenging, resolve conflicts that arise, and yardstick for rewards and incentives
Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Company vision Mission statements Strategic objectives

Hierarchy of Goals

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Levels of Strategy

CEO DIsney Corporation

Corporate-level

Studio Entertainment

Parks & Resorts

Consumer Products

Media Networks

Business-level
Walt DIsney Pictures Touchstone Pictures... Disneyland... Disney Stores... ABC Network...

Manager

Functional-level
Operations Marketing Finance...

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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Does Strategic Planning Pay Off?

Original research showed mixed results. Planning might not pay off for firms in static or turbulent environments or for small firms. Miller and Cardinals (1994) meta-analysis found that strategic planning affects firm growth and profitability. In particular, they found that:
Planning performance link true for formal and informal planning. Planning performance link even stronger in turbulent environments. Firm size unrelated to effectiveness of planning.

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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