STRATEGIC

MANAGEMENT
AN INTRODUCTION
Dr. ANTON WACHIDIN WIDJAJA

COMPETITIVE ADVANTAGES

The fundamental question in the field of strategic

management is how firms achieve and sustain
competitive advantage (Teece, Pisano, and
Shuen: 1997).
The field of strategic management focuses on
explanations of competitive advantage on the
reasons why companies experience above- and
below- normal rates of returns and on the ways
that firms can exploit the limits of perfect
competition (Carpenter and Sanders, 2009).
Strategy --- the quest for competitive advantage
(Thompson, Strickland, and Gamble, 2012).

CORE
CORE CONCEPT
CONCEPT
A
A companys
companys strategy
strategy explains
explains why
why the
the
company
company matters
matters in
in the
the marketplace
by
marketplace by
specifying
specifying an
an approach
approach to
to creating
creating superior
superior
value
value for
for customers
customers and
and determining
determining how
how
capabilities
capabilities and
and resources
resources will
will be
be utilized
utilized to
to
deliver
deliver the
the desired
desired value
value to
to customers.
customers.

1-4

THE END OF COMPETITIVE

ADVANTAGE

THE END OF COMPETITIVE

ADVANTAGE
Strategy for Transient Advantage:
1) Think about arenas, not industries
2) Set broad themes, and then let people experiment
3) Adopt metrics that support entrepreneurial growth
4) Focus on experiences and solutions to problems
5) Build strong relationships and networks
6) Avoid brutal restructuring: learn healthy
disengagement
7) Get systematic about early-stage innovation
8) Experiment, iterate, learn

Strategy is about
Positioning an organization for
competitive advantage
Deciding what to do and what NOT to do
Which industries to participate in
What products and services to offer
How to allocate resources, add value
Creating value for shareholders and other
stakeholders by providing value to
customers

Strategy
Differs from Tactics:
Forces trade-offs and should focus on
differentiation from rivals
Focuses on value creation
Allows for learning and adaptation
Takes a long-term perspective
Responds to the needs of all
stakeholders

Strategy is about
making choices
Who will you target as customers
and who will you not?
What will you offer these customers
and what will you not offer them?
How will you do all this? What
activities will you perform; which
will you not?

What is Strategy?

Strategy and the Quest for

Competitive Advantage
Gaining

a sustainable competitive
advantage requires:
Choosing to compete differently by

doing what rivals dont do or cant do.

Appealing to buyers in ways that

set the firm apart from its rivals.

Staking out a market position that

is not crowded with strong rivals.

1-11
1-11

DETERMINANTS OF RELATIVE PERFORMANCE

Operational

Strategic

Effectiveness

Positioning

* Assimilating, attaining, and

extending best practice

Attaining and extending

the World productivity

frontier
Copyrigth 2003 Prof. M.E. Porter

Creating a unique and

sustainable competitive
position

Definition of Strategy
Strategy: A firms theory about how to gain
competitive advantage

Eisners theory may have been:

People will pay a premium price for extraordinary
entertainment. We have the necessary resources to
create extraordinary entertainment. Therefore, lets
redeploy our resources in a different way and offer
something extraordinary to people.

The Strategic Management Process

External
Analysis

Mission

Strategic
Choice

Objectives

Internal
Analysis

Strategy
Implementation

Competitive
Advantage

The Strategic Management Process

External
Analysis
Strategic
Choice

Objectives

Internal
Analysis

Mission

Strategy
Implementation

Competitive
Advantage

The Strategic Management Process

Strategic Choice
Internal
Analysis

External
Analysis
Strategic
Choice

Corporate
Level
which
businesses?

Business
Level
positioning
a business
Example: Black & Decker

The Strategic Management Process

Strategy Implementation
how strategies are carried out
who will do what
organizational structure and control
who reports to whom
how does the firm hire, promote, pay, etc.

The Strategic Management Process

Strategy Implementation
every strategic choice has strategy implementation
implications
strategy implementation is just as important as
strategy formulation

A Strategy Is Only As Good As Its Implementation

Example: Gen. Lee at Gettysburg

The Strategic Management Process

Competitive Advantage
Definition: the ability to create more economic value
than competitors
External
Analysis
Mission

Objectives
Internal
Analysis

Strategic
Choice

Strategy
Implementation

Competitive
Advantage

all other elements of the strategic management

process are aimed at achieving competitive advantage

Competitive Advantage
The Ability to Create More Economic
Value Than Competitors
there must be something different about a firms
offering vis--vis competitors offerings
if all firms strategies were the same, no firm
would have a competitive advantage
competitive advantage is the result of doing
something different and/or better than competitors

Competitive Advantage
Two Types of Difference
1) Preference for the firms output
people choose the firms output over others
people are willing to pay a premium
Example: Nordstrom
2) Cost advantage vis--vis competitors
lower costs of production/distribution
Example: Wal-Mart

Competitive Advantage
The Strategic Management Process
External
Analysis
Internal
Analysis

Strategic
Choice

Strategy
Competitive
Implementation Advantage

identify and exploit differences that may lead

to competitive advantage
Example: Apples iPod

Competitive Advantage
Economic Models
Imperfect Competition

Perfect Competition

ATC
MC

ATC
MC

MR
Q

(D=MR=Price)
Competitive Advantage

THE STRATEGIC
MANAGEMENT
PROCESS

Strategic
analyses
Internal

External

Strategy
Vision and
mission

Fundamental
organizational
purpose

Organizational
values

Arenas
Vehicles
Differentiators
Staging
Economic logic

The central,
integrated, externally
oriented concept of
how a firm will
achieve its objectives

Implementatio
n levers
and
Strategic
leadership

24

BUSINESS STRATEGY DIAMOND

Arenas
Where will we be active? ( and
with how much emphasis?)
Which product categories?
Which channels?
Which market segments?
Which geographic areas?
Which core technologies
Which value-creation
strategies?

Arenas

Staging

What will be our speed

and sequence of moves?
Speed of expansion?
Sequence of initiatives

Staging

Economic
logic

Vehicles

Vehicles

How will we get there?

Economic logic

How will returns be

obtained?
Lowest costs through scale
advantages?
Lowest costs through
scope and replication
advantages
Premium prices due to
unmatchable service?
Premium prices due to

Differentiators

Internal development?
Joint ventures?
Licensing/franchising?
Experimentation?
Acquisitions?

Differentiators

How will we win?

Image?
Customization?
Price?
Styling?
Product reliability?
Speed to market?

25

Strategic Management Defined

(David, 2011)

Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve
its objectives

Strategic Management is
Gaining and Maintaining
Competitive Advantage

Anything that a firm does especially

well compared to rival firms

Copyright 2011 Pearson Education, Inc.

Publishing as Prentice Hall

ARTHUR A. THOMPSON, JR
A.J. STRICKLAND III
THE TERMS STRATEGIC MANAGEMENT REFERS
TO THE MANAGERIAL PROCESS OF FORMING A
STRATEGIC VISION, SETTING OBJECTIVES,
CRAFTING A STRATEGY, IMPLEMENTING AND
EXECUTING THE STRATEGY, AND THEN OVER
TIME INITIATING WHATEVER CORRECTIVE
ADJUSTMENT IN THE VISION, OBJECTIVES,
STRATEGY, AND EXECUTION ARE DEEMED
APPROPRIATE

THOMAS L. WHEELEN
J. DAVID HUNGER
STRATEGIC MANAGEMENT IS THAT SET
OF MANAGERIAL DECISIONS AND
ACTIONS THAT DETERMINES THE LONG
RUN PERFORMANCE OF A CORPORATION
BUSINESS POLICY, IN CONTRAST, HAS A
GENERAL MANAGEMENT ORIENTATION
AND TENDS PRIMARILY TO LOOK INWARD
WITH ITS CONCERN FOR PROPERLY
INTEGRATING THE CORPORATIONS
MANY FUNCTIONAL ACTIVITIES

Basic Model of
Strategic Management
Four Basic Elements

Strategic Management Model

Environmental

Strategy
Formulation

Scanning

Evaluation
and
Control
and Control

Mission

External
Societal
Environment
General Forces

Strategy
Implementation

Reason for
existence

Task
Environment
Industry Analysis

Internal
Structure
Chain of Command
Culture
Beliefs, Expectations,
Values

Objectives
What results
to
accomplish
by when

Strategies
Plan to
achieve the
mission &
objectives

Policies
Broad
guidelines for
decision
making

Programs
Activities
needed to
accomplish
a plan

Resources
Assets, Skills
Competencies,
Knowledge

Budgets
Cost of the
programs

Procedures
Sequence
of steps
needed to
do the job

Process
to monitor
performance
and take
corrective
action

Performance

Feedback/Learning

Wheelen & Hunger

31

Fig. 1-3: Strategic

Management Model

Company mission &

social responsibility

External Environment

Possible?

Internal analysis
Desired?

Long-term objectives

Short-term
objectives; reward
system

Generic & grand strategies

Functional tactics

Policies that empower action

Restructuring, reengineering & refocusing the organization

Legend
Major impact
Minor impact

Strategic control & continuous improvement

Feedback

Feedback

Strategic analysis & choice

Strategic
Inputs

Chapter 2
External
Environment

Strategic Intent
Strategic Mission

Chapter 3
Internal
Environment

Strategic
Outcomes

Strategic
Actions

Strategy Formulation

The Strategic
Management
Process
Strategy Implementation

Chapter 4
Business-Level
Strategy

Chapter 5
Competitive
Dynamics

Chapter 6
Corporate-Level
Strategy

Chapter 10
Corporate
Governance

Chapter 11
Structure
& Control

Chapter 7
Acquisitions &
Restructuring

Chapter 8
International
Strategy

Chapter 9
Cooperative
Strategies

Chapter 12
Strategic
Leadership

Chapter 13

Feedback

Strategic
Competitiveness
Above Average
Returns

Entrepreneurship

& Innovation

Hitt et all

21st CENTURY COMPETITIVE

LANDSCAPE
THE GLOBAL ECONOMY IS
CHANGING
People, goods, services
and ideas move freely across
geographic boundaries
New opportunities emerge in
multiple global markets
Markets and industries
become more
internationalized

Traditional sources of
competitive advantage
no longer guarantee
success
New keys to success
include :
Flexibility
Innovation
Speed
Integration

COST OF A PAIR OF NIKE SHOES

$ 90

Retailer Profit : $ 45.00

Nike Profit : $ 22.50
Factory Profit : $ 1.12
Overhead : $ 3.41
Labor : $ 3.37
Materials : $ 14.6

Source : http://www.nike.com/faq/faq.html
International marketing, Michael R.Czinkota & Ilkka A. Ronkainen, 2001

21st CENTURY COMPETITIVE

LANDSCAPE
Fundamental nature of
competition is changing
Rapid technological
changes
Rapid technology diffusions
Dramatic changes in
information and
communication technologies
Increasing importance of
knowledge

The pace of change is

relentless.
and increasing

Traditional industry
boundaries are blurring,
such as :
computer
telecommunications

Hierarchy of Strategy
Corporate Strategy
Business
(Division Level)
Strategy

Functional
Strategy

37

DELIBERATE
STRATEGY
UNREALIZED
STRATEGY

Why a Firms Strategy Evolves over Time

Managers modify strategy in response to:

Changing market conditions

Advancing technology
Fresh moves of competitors
Shifting buyer needs
Emerging market opportunities
New ideas for improving the strategy

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

139

The Evolving Nature of a Firms Strategy

Realized (current) strategy is a blend of:

Proactive (deliberate) strategy elements that

include both continued and new initiatives.

Reactive (emergent) strategy elements that

are required due to unanticipated competitive
developments and fresh market conditions.

Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

140

THE STRATEGIC
MANAGEMENT PROCESS
INVOLVES THE FULL SET OF :
1.
COMMITMENTS
2.
DECISIONS
3.
ACTIONS
WHICH ARE REQUIRED FOR FIRMS TO
ACHIEVE :
1.
2.
3.

STRATEGIC COMPETITIVENESS
SUSTAINED COMPETITIVE ADVANTAGES
ABOVE AVERAGE RETURNS

KONSEP-KONSEP
STRATEGIC COMPETITIVENESS

ACHIEVED WHEN A FIRM SUCCESSFULLY FORMULATES AND

IMPLEMENTS A VALUE CREATING STRATEGY

SUSTAINED COMPETITIVE ADVANTAGE

OCCURS WHEN A FIRM DEVELOPS A STRATEGY THAT

COMPETITORS ARE NOT SIMULTANEOUSLY IMPLEMENTING
PROVIDES BENEFITS WHICH CURRENT AND POTENTIAL
COMPETITORS ARE UNABLE TO DUPLICATE

ABOVE AVERAGE RETURNS

RETURNS IN EXCESS OF WHAT AN INVESTOR EXPECT TO EARN

FROM OTHER INVESTMENT WITH SIMILAR RISK

RESOURCE BASED MODEL

OF SUPERIOR RETURNS
THE RESOURCE BASED MODEL SUGGESTS
THAT ABOVE AVERAGE RETURNS FOR
ANY FIRM ARE LARGELY DETERMINED
BY CHARACTERISTIC INSIDE THE FIRM
THIS MODEL FOCUSES ON DEVELOPING
OR OBTAINING VALUABLE RESOURCES
AND CAPABILITIES WHICH ARE
DIFFICULT OR IMPOSSIBLE FOR RIVALS
TO IMITATE

I/O MODEL OF SUPERIOR

RETURNS
THE INDUSTRIAL ORGANIZATION MODEL
SUGGEST THAT ABOVE AVERAGE RETURNS
FOR ANY FIRM ARE LARGELY DETERMINED
BY CHARACTERISTICS OUTSIDE THE FIRM.
THIS MODEL LARGELY FOCUSES ON
INDUSTRY STRUCTURE OR ATTRACTIVE
NESS OF THE EXTERNAL ENVIRONMENT
RATHER THAN INTERNAL
CHARACTERISTICS OF THE FIRM.

Alternative Models of Superior Returns

Industrial Organization

Resource-Based

Model

Model

The External Environment

Resources

An Attractive Industry

Capability

Strategy Formulation

Competitive Advantage

Assets and Skills

An Attractive Industry

Strategy Implementation

Strategy Implementation

Superior Returns

Superior Returns

DIMENSIONS OF STRATEGIC
DECISIONS
1.
2.
3.
4.
5.
6.

REQUIRE TOP MANAGEMENT DECISIONS

REQUIRE LARGE AMOUNT OF THE
FIRMS RESOURCES
OFTEN AFFECT THE FIRMS LONG TERM
PROSPERITY
FUTURE ORIENTED
USUALLY HAVE MULTIFUNCTIONAL OR
MULTIBUSINESS CONSEQUENCES
REQUIRE CONSIDERING THE FIRMS
EXTERNAL ENVIRONMENT

THE BASIC FOR GOOD

STRATEGIC DECISIONS
INTUITION + ANALYSIS

EFFECTIVE STRATEGIC DECISIONS

VISION VS MISSION
MISSION STATEMENT
ANSWER THE QUESTION

VISION STATEMENT
ANSWER THE QUESTION

WHAT IS OUR
BUSINESS?

WHAT DO WE
WANT TO
BECOME?

Prime Task of
Strategic Management

Peter Drucker: Think through the

overall mission of a business. Ask
the key question:
What is our Business?

Copyright 2011 Pearson Education, Inc.

Publishing as Prentice Hall

Ch 1 -49

KOMPONEN MISI
1.

2.

3.

THE DEFINITION OF BUSINESS

INTERNAL AND EXTERNAL
ENVIRONMENT
STAKEHOLDERS (INSIDE AND
OUTSIDE)

MISSION

FUNDAMENTAL PURPOSE

STRATEGIC POSTURE

PRIMARY
CONSIDERATIONS

WHY IS A MISSION
STATEMENT IMPORTANT?

TO INSURE UNANIMITY OF PURPOSE

TO PROVIDE A BASIS FOR ALLOCATING
RESOURCES
TO SERVE AS A FOCAL POINT FOR INDIVIDUAL
TO RECONCILE DIFFERENCES AMONG
STAKEHOLDERS
TO RESOLVE DIVERGENT VIEWS AMONG
MANAGERS
TO AROUSE POSITIVES FEELING ABOUT THE FIRM
TO PROVIDE A BASIS FOR GOALS AND STRATEGIES
TO PROVIDE DIRECTIONS

Vision: To Be World Class National Energy

Company.
Mission: To carry out integrated business
core in oil, gas, renewable and new energy
based on strong commercial principles.

CORPORATE VALUES
CLEAN
COMPETITIVE
CONFIDENT
CUSTOMER FOCUS
COMMERCIAL
CAPABLE

Our vision
To be the largest low cost airline in Asia and serving the 3
billion people who are currently underserved with poor
connectivity and high fares.
Our mission
To be the best company to work for whereby employees are
treated as part of a big family
Create a globally recognized ASEAN brand
To attain the lowest cost so that everyone can fly with
AirAsia
Maintain the highest quality product, embracing technology
to reduce cost and enhance service levels

Our values
Safety: Adopting a zero tolerance to unsafe practices and strive
for zero accidents through proper training, work practices, risk
management and adherence to safety regulations at all times.
Valuing our People: Committing to our peoples development
and well-being and treating them with respect, dignity and
fairness.
Customer Focused: We care and treat everyone in the same
manner that we want to be treated.
Integrity: Practicing highest standards of ethical behaviour and
demonstrate honesty in all our lines of work in order to command
trust and mutual respect.
Excellence in Performance: Setting goals beyond the best and
reinforcing high quality performance standards and achieving
excellence through implementing best practices.

STRATEGIC MISSION AND

STRATEGIC INTENT
STRATEGIC MISSION :
IS THE STATEMENT OF FIRMS UNIQUE
PURPOSE AND THE SCOPE OF ITS
OPERATIONS
STRATEGIC INTENT :
IS THE LEVERAGING OF A FIRMS INTERNAL
RESOURCES, CAPABILITIES, AND CORE
COMPETENCIES TO ACCOMPLISH THE
FIRMS GOALS IN THE COMPETITIVE
ENVIRONMENT

Stakeholders:

Groups who are affected by a firms

performance and who have claims on its
wealth

The firm must maintain

performance at an adequate level in
order to maintain the participation
of key stakeholders

Firm
Product Market
Primary Customers
Suppliers

Capital Market

Stock market/Invest
Debt suppliers/Bank

Organizational
Employees
Managers
Non-Managers