Ch 1 Strategic Management: Creating Competitive Advantages

Romantic view examples

+ Steve Jobs & Apple - Borders' leaders +- HP's CEO's

Strategic Management requires:

-An integrative view of Org -All functional areas & activities fit together to achieve goals & objectives -Leaders throughout the strategic management process (3 types): -Local line leaders - have profit & loss responsibilities - Executive leaders - champion & guide ideas, create learning infrastructure, establish domain for taking action - Internal networkers - hold little positional power, but have conviction & clarity of ideas - Top-level executives set tone for empowerment of employees -extensive communication, incentives, training, development -Whirlpool: encouraged innovation

Zero Sum

-Stakeholders compete for attention & resources - Gain of one is loss to other

3 Ongoing processes involved in strategic management

1) Analyses - goals (vision, mission, strategic objectives) - internal & external environment of org 2) Decisions - address 2 questions: 1. What industries to compete in? 2. How? 3) Actions -implement strategies - allocate necessary resources & make strategies reality

4 Analyses of Strategy Analysis

1) Analyzing Org'sl goals & objectives 2) Analyzing the external environment of the firm (2 frameworks): -General Environment -Industry Environment 3) Assessing the Internal Environment of the Firm 4) Assessing Firm's Intellectual Assets

4 Key Attributes of Strategic Management

1) Directs Org toward goals & objectives 2) Includes multiple stakeholders in decision making 3) Incorporates ST & LT perspectives 4) Recognizes trade-offs btw efficiency & effectiveness

3 Internal Control Mechanisms of Corporate Governance

1) Effective & engaged BOD 2) Shareholder activism 3) Proper managerial rewards & incentives

4 Levels of Development of Strategy Formulation

1) Formulating Business- Level Strategy 2) Formulating Corporate-Level Strategy 3) Formulating International Strategy 4) Entrepreneurial Strategy & Competitive Dynamics

2 Perspectives of leadership

1) Romantic 2) External control

Key Elements/Primary Participants of Corporate Governance

1) Shareholders 2) Management 3) Board of Directors

4 Actions of Strategy Implementation

1) Strategic Control (2 types) & Corporate Governance -Informational control -Behavioral control 2) Creating Effective Organizational Designs 3) Creating a Learning Org & Ethical Org 4) Fostering Corporate Entrepreneurship

Two views of Stakeholder Management

1) Zero Sum 2) Symbiosis

Strategic management - Essentially study of why some firms outperform others Managers need to determine how a firm is to compete so they can obtain advantages sustainable over long term --> 2 fundamental questions:

1. How should we position ourselves in order to create competitive advantages in marketplace? 2. How can we create sustainable competitive advantages in the marketplace that are unique, valuable, & difficult for rivals to copy or substitute?

External control view

Situations in which external forces (where leader has limited influence) affect organization's success

Romantic view

Situations in which leader = key force in determining organization's success/lack of success

Crowdsourcing

A way stakeholders can fulfill multiple roles Internet is used to tap broad range of individuals/groups to generate ideas & solve problems

Corporate Governance

Group of people determining direction & performance of corporation

Strategy

Ideas, decisions, & actions that enable a firm to succeed

Stakeholder

Individual or group, inside/outside the company Has a stake in & can influence an Org's performance

Incremental Management

Series of small changes implemented to improve efficiency of operations

Mission Statement

Set of org goals Current purpose, scope of operations, basis of competition & competitive advantage

Strategic Objectives

Set of org goals that are used to operationalize the mission statement, are specific, & cover a well-defined time frame

3 Key Processes: Strategic Management

1. Strategy analysis 2. Strategy formulation 3. Strategy implementation

Strategy Implementation

Actions made by firms that carry out the formulated strategy: - strategic controls - organizational design - leadership - coordinates activities w/ suppliers, customers, alliance partners - promotes learning & continuous improvement - acts entrepreneurially in creating new opportunities

Strategic management

Analyses, decisions, & actions an organization undertakes to create & sustain competitive advantages -Be proactive, anticipate change, continually refine, make changes to strategies when necessary

Triple Bottom Line

Assessment of Org's financial, social, & environmental performance

Ambidexterity

Challenge managers face of 1) Aligning resources to take advantage of existing product markets 2) Proactively exploring new opportunities

Strategy Formulation

Decisions made by firms regarding investments, commitments, & other operational aspects that create & sustain competitive advantage - Involves (investment) decisions that can create & sustain competitive advantage - Commitment of resources - Operational synergies - Recognizing viable opportunities

External control examples

Economic downturns, governmental regulations, major conflict, natural disasters; unanticipated events, bank bailouts, oil spill, etc.

External Control Mechanisms of Corporate Governance

Ex: auditors, banks, analysts, active financial press, threat of hostile takeovers

Social Responsibility

Expectation that businesses/individuals will strive to improve overall welfare of society

Competitive advantage

Firm's resources & capabilities that enable it to overcome the competitive forces in its industry

Stakeholder Management

Firm's strategy for recognizing & responding to interests of all its important stakeholders

According to economist Milton Friedman, the overall purpose of a public corporation is to...

Maximize the LT return to the shareholders/owners

Successful executives are often able to...

Navigate around difficult circumstances faced

Vision

Org goal(s) that evokes powerful & compelling mental images of a shared future

Hierarchy of Goals

Org goals ranging from: at the top-those that are less specific yet able to evoke powerful & compelling mental images at the bottom-those that are more specific & measurable

How to achieve sustainable competitive advantage?

Perform different activities from rivals or similar activities in different ways - operational effectiveness - strategy = being different

Operational effectiveness

Performing similar activities better than rivals

Shared Value

Policies & operating practices that enhance competitiveness of Org, while advancing economic & social conditions

SRI (socially responsible investing)

Recognizes corporate responsibility & societal concerns are considerations in investment decisions Investors have opportunity to put their $ to work to build a more sustainable world while earning competitive returns

Symbiosis

Stakeholders dependent upon each other for success & well-being (mutual benefits)

Strategy Analysis

Study of firms' external & internal environments & their fit w/ Org vision & goals - starting point in strategic management process

Intended vs Realized Strategies

because business environment is far from predictable ... Intended strategy -Org decisions determined only by analysis -rarely survives in its original form Realized Strategy - Org decisions determined by both analysis (deliberate) & unforeseen environmental developments, unanticipated resource constraints, &/or changes in managerial preferences (emergent) - final realized strategy = combination of deliberate & emergent strategies Intended strategy --deliberate strategy --> realized strategy Emergent strategy --> realized strategy Intended strategy -->unrealized strategy