MANA CH 1

Assessing the Internal Environment of the Firm

Analyzing strengths & relationships among activities that constitute a firm's value chain -Can uncover potential sources of competitive advantage

Stakeholders

individuals, groups, and organizations who have a stake in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, and the community at large

Incremental Management

making a series of small minor changes to improve the efficiency of their firms operations

How leaders can make a difference through strategic management

These steps are independent and do not have to proceed in order -analysis -decisions also called formulation -actions also called implementation

Triple Bottom Line

assessment of a firms financial, social, and environmental performance

Two opposing ways of looking at the role of stakeholder management

- zero sum - symbiosis

Actions - Implementation

-Allocate necessary resources -Design the organization to bring intended strategies to reality

Example: Failure of Intended Strategy

-BORDERS bookstore focused on its intended strategy - a physical retail presence. -Sticking to what you know best can be very dangerous. -BORDERS found the consumer shift away from brick & mortar book stores to online book buying and digital books an overwhelming environmental force against which they had few defenses. Internet -Unanticipated developments can often have very negative consequences for businesses regardless of how well formulated their strategies are. Nokia, Radio Shack

Key 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 (doing things right) and effectiveness (doing the right things).

Strategic Management Trade-offs (Managers need to be ambidextrous)

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

Two Fundamental Questions in Decision Making

-How should we compete in order to create competitive advantage in the marketplace -How can we create competitive advantage in the marketplace that are unique, valuable, and different for rivals to copy or substitute

Assessing a Firm's Intellectual Assets

-Knowledge workers & other intellectual assets drive competitive advantage & wealth creation -Networks & relationships plus technology enhances collaboration, accumulates & stores knowledge

Leaders can make a difference

-Must be proactive - anticipate change -Continually refine strategies -Be aware of external opportunities and threats -Thoroughly understand their firm's resources and capabilities -Make strategic management both a process and a way of thinking throughout the organization

Strategy Analysis

-Starting point in the strategic management process -Precedes effective formulation and implementation of strategies -Involves careful analysis of the overarching goals of the organization -Requires a thorough analysis of the organization's external and internal environment

Analysis

-Strategic goals (vision, mission, strategic objectives) -Internal and external environment

Decisions - Formulation

-What industries should we compete in? -How should we compete in those industries?

How the World is Changing and What are the Major Trends

-demographics and social change -shift in global economic power -rapid urbanization -climate change and resource scarcity -technology

Key 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

Effectiveness

-doing the right thing -tailoring actions to the needs of an organization rather than wasting effort

Efficiency

-doing things right -performing actions at a low cost relative to a benchmark

For objectives to be meaningful they must be

-measurable -specific -appropriate -realistic -timely

Two Perspectives of Leadership

-romantic view -external control perspective

External Control View of Leadership

-situations in which external forces where the leader has limited influence determine the organizations success -External forces determine the organization's success -i.e. economic downturns

Romantic View of Leadership

-situations in which the leader is the key force determining the organizations success or lack thereof -Leader is the key force in the organization's success -i.e. Steve Jobs

Reason Visions Fail (Pg 47)

-the walk doesn't match the talk -irrelevance -not the holy grail -too much focus leads to missed opportunities -an ideal future irreconciled with the present

Two Fundamental Questions

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

Competitive Advantage

A firms resources and capabilities that enable it to overcome the competitive forces in its industry

Strategy Implementation

Actions made by firms that carry our the formulated strategy, including strategic controls organizational design, and leadership

Analyzing Organizational Goals & Objectives

Establish a hierarchy of goals -Vision -Mission -Strategic Objectives

Analyzing the External Environment of the Firm

Managers must monitor & scan the environment as well as analyze competitors -The General Environment -The Industry Environment

Operational Effectiveness

Performing similar activities better than rivals; sustainable competitive advantage is possible only by performing different activities from rivals, or performing similar activities in different ways.

Defining Strategic Management

Strategic Management involves 1.analysis 2.decisions - formulation 3.actions - implementation

Strategy

The ideas, decisions, and actions that enable a firm to succeed

Corporate Governance

The relationship among various participants in determining the direction and performance of corporations. *The primary participants are: 1. the shareholders 2. the management (led by he chief executive officer) 3. the board of directors

Stakeholder Management

a firms strategy for recognizing and responding to the interests of all its salient stakeholders

Strategic Objectives

a set of organizational goals that are used to operationalize the mission statement and that are specific and cover a well defined time frame

Mission Statment

a set of organizational goals that include both he purpose of the organization, its scope of operations, and the basis of its competitive advantage

Strategy Formulation

decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage -Based on strategy analysis -Developed at several levels -Involves decisions that can create and sustain competitive advantage ---Investment decisions ---Commitment of resources ---Operational synergies ---Recognizing viable opportunities

Hierarchy of Goals

organizational goals ranging from, at the top those that are less specific yet able to evoke powerful and compelling mental images, to at the bottom, those that are more specific and measurable

Vision

organizational goals that evoke powerful and compelling mental images

Shared Value

policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in which it operates

Symbiosis

recognizes that stakeholders are dependent upon each other for their success and well being

Strategic Management Process

strategy analysis, strategy formulation, and strategy implementation

Realized Strategy

strategy in which organizational decision are determined by both analysis (deliberate) and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences (emergent)

Intended Strategy

strategy in which organizational decisions are determined only by analysis -Intended strategy rarely survives in its original form

Operational effectiveness is not enough to

sustain a competitive advantage

Strategic Management

the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantage -Strategic management is the study of why some firms outperform others. Strategy = the ideas, decisions, and actions that enable a firm to succeed

Ambidexterity

the challenge managers face of both aligning resources to take advantage of existing product markets as well as proactively exploring new opportunities

Social Responsibility

the expectation that businesses or individuals will strive to improve the overall welfare of society

Zero Sum

the various stakeholders compete for the organizations resources: the gain of one individual or group is the loss of another individual or group

Henry Mintzberg, a management scholar at McGill University, argues that viewing the strategic management process as one in which

which analysis is followed by optimal decisions and their subsequent meticulous implementation neither describes the strategic management process accurately nor prescribes ideal practice. He sees the business environment as far from predictable, thus limiting our ability for analysis. For a variety of reasons, the intended strategy rarely survives in its original form. Unforeseen environmental developments, unanticipated resource constraints, or changes in managerial preferences may result in at least some parts of the intended strategy remaining unrealized. Thus, the final realized strategy of any firm is a combination of deliberate and emergent strategies.