Strategic Management:  Creating Competitive Advantages Chapter One Copyright   © 2010 by The McGraw-Hill Companies, Inc. A...
Learning Objectives <ul><li>After reading this chapter, you should have a good understanding of: </li></ul><ul><li>LO1   T...
Learning Objectives (cont.) <ul><li>LO4   The importance of social responsibility, including environmental sustainability,...
Two Perspectives of Leadership <ul><li>Romantic view </li></ul><ul><ul><li>Leader is the key force in organization’s succe...
QUESTION <ul><li>A CEO made a lot of mistakes such as committing errors in assessing the market and competitive conditions...
Example: E*Trade <ul><li>Elements of Caplan’s turnaround </li></ul><ul><li>Cut costs by reducing the advertising budget an...
What is Strategic Management? <ul><li>Strategic management  must become both a process and a way of thinking throughout th...
Defining Strategic Management <ul><li>Strategic management  </li></ul><ul><ul><li>Analyses, decisions, and actions an orga...
Defining Strategic Management <ul><li>Analysis   </li></ul><ul><ul><li>Strategic goals </li></ul></ul><ul><ul><li>Internal...
Defining Strategic Management <ul><li>Actions </li></ul><ul><ul><li>Allocate necessary resources </li></ul></ul><ul><ul><l...
Two Fundamental Questions <ul><li>How should we compete in order to create  competitive advantages  in the marketplace? </...
Key Attributes of Strategic Management <ul><li>Directs the organization toward overall goals and objectives </li></ul><ul>...
Key Attributes of Strategic Management (cont.) <ul><li>Needs to incorporate short-term and long-term perspectives </li></u...
Key Attributes of Strategic Management <ul><li>Ambidexterity   </li></ul><ul><ul><li>The challenge managers face of both a...
Ambidextrous Behaviors in Individuals <ul><li>They take time and are alert to opportunities beyond the confines of their o...
Strategic Management Process <ul><li>Intended strategy  </li></ul><ul><ul><li>Decisions are determined only by analysis </...
Strategic Management Process Adapted from Exhibit 1.2 Realized Strategy and Intended Strategy: Usually Not the Same Source...
Strategic Management Process 1-
Strategic Analysis <ul><li>Consists of “ advance work ” that must be done in order to effectively formulate and implement ...
Strategy Formulation <ul><li>A firm’s strategy formulation is developed at several levels:  </li></ul><ul><li>Business-lev...
Strategy Implementation <ul><li>Ensuring proper strategic controls and organizational designs </li></ul><ul><li>Establishi...
Corporate Governance and Stakeholder Management <ul><li>Corporate governance </li></ul><ul><ul><li>The relationship among ...
Corporate Governance and Stakeholder Management (cont.) <ul><li>Board of Directors </li></ul><ul><ul><li>Elected represent...
Corporate Governance <ul><li>Three mechanisms ensure effective corporate governance: </li></ul><ul><li>An effective and en...
Stakeholder Management <ul><li>Zero sum view </li></ul><ul><ul><li>Stakeholders compete for attention and resources of the...
Stakeholder Management <ul><li>Stakeholder symbiosis view </li></ul><ul><ul><li>Stakeholders are dependent upon each other...
QUESTION <ul><li>Outback Steakhouse has developed a sophisticated quantitative model and found that there were positive re...
Crowdsourcing <ul><li>Crowdsourcing   </li></ul><ul><ul><li>Tapping of the “latent of the online crowd” </li></ul></ul><ul...
Social Responsibility <ul><li>Social responsibility </li></ul><ul><ul><li>The expectation that businesses or individuals w...
Social Responsibility <ul><li>Triple bottom line  </li></ul><ul><ul><li>Assessment of a company’s performance in financial...
Example: Social Responsibility <ul><li>Starbucks Coffee Company  defines CSR as:  </li></ul><ul><ul><li>Conducting busines...
Strategic Management Perspective <ul><li>All managers and employees must: </li></ul><ul><li>Take an integrative, strategic...
Three Types of Leaders <ul><li>Local line leaders  </li></ul><ul><ul><li>Have significant profit-and-loss responsibility <...
Three Types of Leaders (cont.) <ul><li>Internal networkers  </li></ul><ul><ul><li>Generate power through the conviction an...
Coherence in Strategic Direction <ul><li>Hierarchy of goals  </li></ul><ul><ul><li>Goals ranging from those that are less ...
A Hierarchy of Goals 1-
Coherence in Strategic Direction <ul><li>Organizational vision  </li></ul><ul><ul><li>Goal that is “massively inspiring, o...
Why Do Visions Fail? <ul><li>The walk doesn’t match the talk </li></ul><ul><li>Irrelevance </li></ul><ul><li>Too much focu...
Coherence in Strategic Direction <ul><li>Mission statement </li></ul><ul><ul><li>Set of goals that include both the purpos...
Coherence in Strategic Direction <ul><li>Strategic objectives  </li></ul><ul><ul><li>Goals that are used to operationalize...
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  • Leaders can make a difference Must be aware of opportunities and threats faced in external environment Must have thorough understanding of the firm’s resources and capabilities
  • Answer: B - romantic See previous slide
  • Strategic management is the study of why some firms outperform others How to compete in order to create competitive advantages in the marketplace How to create competitive advantages in the market place Unique and valuable Difficult for competitors to copy or substitute
  • Analysis Strategic goals (vision, mission, strategic objectives) Internal and external environment of the firm Strategic decisions What industries should we compete in? How should we compete in those industries?
  • Operational effectiveness – performing similar activities better than rivals
  • Ambidexterity - The challenge managers face of both aligning resources to take advantage of existing product markets as well as proactively exploring new opportunities
  • They take time and are alert to opportunities beyond the confines of their own jobs They are cooperative and seek out opportunities to combine their efforts with others They are brokers, always looking to build internal networks They are multi-taskers who are comfortable wearing more than one hat How does one become a more ambidextrous leader? Consider the following questions: Do you meet your numbers? Do you help others? What do you do for your peers? When you manage up, do you bring problems – or problems with possible solutions? Are you transparent? Are you developing a group of senior managers who know you and are willing to back your original ideas with resources?
  • Starting point in the strategic management process Analyzing organizational goals and objectives – Ch 1 Analyzing the external environment of the firm – Ch 2 Assessing the internal environment of the firm – Ch 3 Assessing a firm’s intellectual assets – Ch 4
  • Business level strategy Addresses the issue of how to compete in a given business to attain competitive advantage Corporate-level strategy What businesses should we be in? How can businesses be managed to achieve synergy? International strategy What is the appropriate entry strategy? How do we go about attaining competitive advantage in international markets? Entrepreneurial strategy How do we recognize viable opportunities? How do we formulate an effective strategy? Formulating business level strategy – Ch 5 Formulating corporate level strategy – Ch 6 Formulating international strategy – Ch 7 Entrepreneurial strategy and competitive dynamics – Ch 8
  • Strategic control and corporate governance – Ch 9 Creating effective organizational designs – Ch 10 Creating a learning organization and an ethical organization – Ch 11 Fostering corporate entrepreneurship – Ch 12
  • Corporate governance The relationship among various participants in determining the direction and performance of corporations Shareholders Management (led by the CEO) Board of Directors
  • Answer: B – stakeholder symbiosis. See the previous slide
  • Social responsibility The expectation that businesses or individuals will strive to improve the overall welfare of society Managers must take active steps to make society better
  • Triple bottom line Assessment of a company’s performance in financial, social, and environmental dimensions Failure to account for the environmental and social costs of doing business poses risks to the company and its community
  • Starbucks Coffee Company Managing CSR Starbucks continues to evolve and strengthen the way CSR is managed internally. We have created structures to ensure that emerging issues are identified, prioritized and addressed in a more systematic and integrated manner throughout the company; and that company policies and procedures are upheld and followed. Our Emerging Issues Council, CSR Executive Committee and Policy Governance Council serve these functions respectively. Throughout the company, there is a strong sense of shared accountability for CSR. In fiscal 2007, we took both a centralized and decentralized organizational approach to managing CSR. At the Starbucks Support Center, our global headquarters located in Seattle, there was a dedicated CSR group, reporting to the senior vice president of CSR, for the day-to-day management of specific CSR-related initiatives. This group often serves as the catalyst for new CSR programs, which may end up being managed and implemented at the business unit, division or department level. Once implemented, the CSR team provided broad oversight and served as an ongoing resource. Currently there is not a committee of the board dedicated to CSR. Source: http://www.starbucks.com/aboutus/csrreport/csr.htm
  • Managers must make a major effort to effect transformational change Involves extensive communication, incentives, training and development
  • Hierarchy of goals 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, mission statement, strategic objectives
  • Mission statement Set of goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage Incorporates the concept of stakeholder management Has the greatest impact when it reflects an organization’s enduring, overarching strategic priorities and competitive positioning
  • Help channel employees’ efforts toward common goals Help inspire employees to higher levels of commitment and effort
  • Chap001

    1. 1. Strategic Management: Creating Competitive Advantages Chapter One Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
    2. 2. Learning Objectives <ul><li>After reading this chapter, you should have a good understanding of: </li></ul><ul><li>LO1 The definition of strategic management and its four key attributes . </li></ul><ul><li>LO2 The strategic management process and its three interrelated and principal activities. </li></ul><ul><li>LO3 The vital role of corporate governance and stakeholder management as well as how “symbiosis” can be achieved among an organization’s stakeholders. </li></ul>1-
    3. 3. Learning Objectives (cont.) <ul><li>LO4 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy. </li></ul><ul><li>LO5 The need for greater empowerment throughout the organization. </li></ul><ul><li>LO6 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction. </li></ul>1-
    4. 4. Two Perspectives of Leadership <ul><li>Romantic view </li></ul><ul><ul><li>Leader is the key force in organization’s success </li></ul></ul><ul><li>External control perspective </li></ul><ul><ul><li>Focus is on external factors that affect an organization’s success </li></ul></ul>1-
    5. 5. QUESTION <ul><li>A CEO made a lot of mistakes such as committing errors in assessing the market and competitive conditions and improperly redesigning the organization into numerous business units. Such errors led to significant performance declines. This illustrates the __________ perspective of leadership.  </li></ul><ul><li>A.   External control B.   Romantic C.  Internal mechanism D.  Operational </li></ul>1-
    6. 6. Example: E*Trade <ul><li>Elements of Caplan’s turnaround </li></ul><ul><li>Cut costs by reducing the advertising budget and selling unrelated businesses </li></ul><ul><li>Changed the firm’s culture and instilled more discipline </li></ul><ul><li>Refocused the firm on its core banking operations </li></ul>1-
    7. 7. What is Strategic Management? <ul><li>Strategic management must become both a process and a way of thinking throughout the organization </li></ul><ul><li>Leaders must be proactive, anticipate change , and continually refine changes to their strategies </li></ul>1-
    8. 8. Defining Strategic Management <ul><li>Strategic management </li></ul><ul><ul><li>Analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages </li></ul></ul>1-
    9. 9. Defining Strategic Management <ul><li>Analysis </li></ul><ul><ul><li>Strategic goals </li></ul></ul><ul><ul><li>Internal and external environment of the firm </li></ul></ul><ul><li>Strategic decisions </li></ul><ul><ul><li>What industries should we compete in? </li></ul></ul><ul><ul><li>How should we compete in those industries? </li></ul></ul>1-
    10. 10. Defining Strategic Management <ul><li>Actions </li></ul><ul><ul><li>Allocate necessary resources </li></ul></ul><ul><ul><li>Design the organization to bring intended strategies to reality </li></ul></ul>1-
    11. 11. Two Fundamental Questions <ul><li>How should we compete in order to create competitive advantages in the marketplace? </li></ul><ul><li>How can we create competitive advantages in the marketplace that are unique, valuable, and difficult for rivals to copy or substitute? </li></ul>1-
    12. 12. Key Attributes of Strategic Management <ul><li>Directs the organization toward overall goals and objectives </li></ul><ul><li>Includes multiple stakeholders in decision making </li></ul>1-
    13. 13. Key Attributes of Strategic Management (cont.) <ul><li>Needs to incorporate short-term and long-term perspectives </li></ul><ul><li>Recognizes trade-offs between efficiency and effectiveness </li></ul>1-
    14. 14. Key Attributes of Strategic Management <ul><li>Ambidexterity </li></ul><ul><ul><li>The challenge managers face of both aligning resources to take advantage of existing product markets as well as proactively exploring new opportunities </li></ul></ul>1-
    15. 15. Ambidextrous Behaviors in Individuals <ul><li>They take time and are alert to opportunities beyond the confines of their own jobs </li></ul><ul><li>They are cooperative and seek out opportunities to combine their efforts with others </li></ul>1-
    16. 16. Strategic Management Process <ul><li>Intended strategy </li></ul><ul><ul><li>Decisions are determined only by analysis </li></ul></ul><ul><li>Realized strategy </li></ul><ul><ul><li>Decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences </li></ul></ul>1-
    17. 17. Strategic Management Process Adapted from Exhibit 1.2 Realized Strategy and Intended Strategy: Usually Not the Same Source: H. Mintzberg and J. A. Waters, “Of Strategies, Deliberate and Emergent,” Strategic Management Journal 6 (1985), pp. 257-72. 1-
    18. 18. Strategic Management Process 1-
    19. 19. Strategic Analysis <ul><li>Consists of “ advance work ” that must be done in order to effectively formulate and implement strategies </li></ul><ul><li>Starting point </li></ul>1-
    20. 20. Strategy Formulation <ul><li>A firm’s strategy formulation is developed at several levels: </li></ul><ul><li>Business-level </li></ul><ul><li>Corporate level </li></ul><ul><li>International </li></ul><ul><li>Entrepreneurial </li></ul>1-
    21. 21. Strategy Implementation <ul><li>Ensuring proper strategic controls and organizational designs </li></ul><ul><li>Establishing effective means to coordinate and integrate activities within the firm as well as with suppliers, customers, and alliance partners </li></ul>1-
    22. 22. Corporate Governance and Stakeholder Management <ul><li>Corporate governance </li></ul><ul><ul><li>The relationship among various participants in determining the direction and performance of corporations </li></ul></ul>1-
    23. 23. Corporate Governance and Stakeholder Management (cont.) <ul><li>Board of Directors </li></ul><ul><ul><li>Elected representatives of the owners </li></ul></ul><ul><ul><li>Ensure interests and motives of management are aligned with those of the owners </li></ul></ul>1-
    24. 24. Corporate Governance <ul><li>Three mechanisms ensure effective corporate governance: </li></ul><ul><li>An effective and engaged board of directors </li></ul><ul><li>Shared activism </li></ul><ul><li>Proper managerial rewards and incentives </li></ul>1-
    25. 25. Stakeholder Management <ul><li>Zero sum view </li></ul><ul><ul><li>Stakeholders compete for attention and resources of the organization </li></ul></ul><ul><ul><li>Gain of one is a loss to the other </li></ul></ul>1-
    26. 26. Stakeholder Management <ul><li>Stakeholder symbiosis view </li></ul><ul><ul><li>Stakeholders are dependent upon each other for their success and well-being </li></ul></ul><ul><ul><li>Mutual benefits </li></ul></ul>1-
    27. 27. QUESTION <ul><li>Outback Steakhouse has developed a sophisticated quantitative model and found that there were positive relationships between employee satisfaction, customer satisfaction, and financial results. This is an example of __________.  A.  Zero-sum relationship among stakeholders B.  Stakeholder symbiosis C.  Rewarding stakeholders D.   Emphasizing financial returns </li></ul>1-
    28. 28. Crowdsourcing <ul><li>Crowdsourcing </li></ul><ul><ul><li>Tapping of the “latent of the online crowd” </li></ul></ul><ul><li>Linux, Amazon, Wikipedia </li></ul>1-
    29. 29. Social Responsibility <ul><li>Social responsibility </li></ul><ul><ul><li>The expectation that businesses or individuals will strive to improve the overall welfare of society </li></ul></ul>1-
    30. 30. Social Responsibility <ul><li>Triple bottom line </li></ul><ul><ul><li>Assessment of a company’s performance in financial, social, and environmental dimensions </li></ul></ul>1-
    31. 31. Example: Social Responsibility <ul><li>Starbucks Coffee Company defines CSR as: </li></ul><ul><ul><li>Conducting business in ways that produce social, environmental and economic benefits for the communities in which we operate and for the company’s stakeholders, including shareholders. </li></ul></ul><ul><li>Some tangible benefits include attracting and retaining our partners, customer loyalty, reducing operating costs, and creating a sustainable supply chain. </li></ul>1-
    32. 32. Strategic Management Perspective <ul><li>All managers and employees must: </li></ul><ul><li>Take an integrative, strategic perspective of issues facing the organization </li></ul><ul><li>Assess how functional areas and activities “fit together” to achieve goals and objectives </li></ul>1-
    33. 33. Three Types of Leaders <ul><li>Local line leaders </li></ul><ul><ul><li>Have significant profit-and-loss responsibility </li></ul></ul><ul><li>Executive leaders </li></ul><ul><ul><li>Champion and guide ideas, create a learning infrastructure, establish a domain for taking action </li></ul></ul>1-
    34. 34. Three Types of Leaders (cont.) <ul><li>Internal networkers </li></ul><ul><ul><li>Generate power through the conviction and clarity of their ideas </li></ul></ul>1-
    35. 35. Coherence in Strategic Direction <ul><li>Hierarchy of goals </li></ul><ul><ul><li>Goals ranging from those that are less specific yet able to evoke powerful and compelling mental images those that are more specific and measurable </li></ul></ul><ul><li>Vision, mission statement, strategic objectives </li></ul>1-
    36. 36. A Hierarchy of Goals 1-
    37. 37. Coherence in Strategic Direction <ul><li>Organizational vision </li></ul><ul><ul><li>Goal that is “massively inspiring, overarching, and long term” </li></ul></ul><ul><ul><li>Represents a destination that is driven by and evokes passion </li></ul></ul>1-
    38. 38. Why Do Visions Fail? <ul><li>The walk doesn’t match the talk </li></ul><ul><li>Irrelevance </li></ul><ul><li>Too much focus leads to missed opportunities </li></ul><ul><li>Not the holy grail </li></ul><ul><li>An ideal future irreconciled with the present </li></ul>1-
    39. 39. Coherence in Strategic Direction <ul><li>Mission statement </li></ul><ul><ul><li>Set of goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage </li></ul></ul><ul><li>Has the greatest impact when it reflects an organization’s enduring, overarching strategic priorities and competitive positioning </li></ul>1-
    40. 40. Coherence in Strategic Direction <ul><li>Strategic objectives </li></ul><ul><ul><li>Goals that are used to operationalize the mission statement </li></ul></ul><ul><ul><li>Specific, measurable, appropriate, realistic, timely </li></ul></ul>1-
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