This document outlines the key concepts and learning objectives of strategic management. It discusses the strategic management process, which includes strategic analysis, formulation, and implementation. Strategic analysis involves assessing the internal and external environment. Strategy formulation determines the firm's business strategy, corporate strategy, and international strategy. Implementation covers organizational structure, strategic alliances, and ensuring strategic goals are achieved. The document emphasizes the importance of corporate governance, stakeholder management, social responsibility, and maintaining coherence across strategic goals.

2. Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
M. Kamrul Hasan Rasel
M.B.A
Chittagong University
1
Strategic Management:
Creating Competitive Advantages

3. 1 - 3
Learning Objectives
After reading this chapter, you should have a good
understanding of:
 The definition of strategic management and its four key attributes.
 The strategic management process and its three interrelated and
principal activities.
 The vital role of corporate governance and stakeholder management as
well as how “symbiosis” can be achieved among an organization’s
stakeholders.
 The importance of social responsibility, including environmental
sustainability, and how it can enhance a corporation’s innovation
strategy.
 The need for greater empowerment throughout the organization.
 How an awareness of a hierarchy of strategic goals can help an
organization achieve coherence in its strategic direction.

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Two Perspectives of Leadership
• Romantic view
‾ Leader is the key force in organization’s success
• External control perspective
‾ Focus is on external factors that affect an organization’s
success
• 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

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• 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?
• Actions
‾ Allocate necessary resources
‾ Design the organization to bring intended strategies to
reality
Strategic Management

6. 1 - 6
Strategic Management
• 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
o Unique and valuable
o Difficult for competitors to copy or substitute

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Key Attributes
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

8. 1 - 8
Question
• The final realized strategy of a firm is a combination
of:
a) Intended and unrealized strategies
b) Unrealized and emergent strategies
c) Emergent and deliberate strategies
d) Deliberate and unrealized strategies

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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.

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Strategic Analysis
• Starting point in the
strategic management
process
• Precedes effective
formulation and
implementation of
strategies

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Strategic Analysis (cont.)
• Clear goals and objectives permit effective allocation
of resources
• Hierarchy of goals
- Vision
- Mission
- Strategic objectives
• Analyzing external environments
- Managers must scan the environment and analyze
competitors
- General environment
- Industry environment

12. 1 - 12
Strategic Analysis (cont.)
• Frameworks for analyzing a firm’s internal
environment
- Strengths
- Weaknesses
• Analyzing strengths can uncover potential sources of
competitive advantage

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Strategic Analysis (cont.)
• Intellectual assets are drivers of
- Competitive advantage
- Wealth creation
• Networks and relationships among
- Employees
- Customers
- Suppliers
- Alliance partners

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Strategy Formulation
• Business level strategy:
- Successful firms develop bases for competitive
advantage
• Cost leadership
• Differentiation
• Focusing on narrow or industry-wide market segments
- Sustainability
- Industry life cycle

15. 1 - 15
Strategy Formulation (cont.)
Corporate-level strategy addresses:
• Firm’s portfolio or group of businesses
- What business(es) should we be in?
- How can we create synergies among the businesses?
• Diversification
- Related
- Unrelated

16. 1 - 16
Strategy Formulation (cont.)
• International Strategy
- Appropriate entry strategies for foreign markets
- Sustain competitive advantage in global markets
• Effective strategies for entrepreneurial initiatives

17. 1 - 17
Strategy Implementation
• Informational control
- Monitor and scan the environment
- Respond effectively to threats and opportunities
• Behavioral control
• Effective corporate governance
- Interests of managers and owners of the firm
• Organizational structure and design

18. 1 - 18
Strategy Implementation (cont.)
• Organizational boundaries
- Flexible
- Permeable
• Strategic Alliances
• Develop organization that is committed to
- Excellence
- Ethical behavior

19. 1 - 19
Strategy Implementation (cont.)
• Learning organization responsive to
- Rapid and unpredictable change
• Corporate entrepreneurship and innovation
- New opportunities
- Enhance innovative capacity
- Autonomous entrepreneurial behavior
- Product champions

20. 1 - 20
Corporate Governance and Stakeholder
Management
• Corporate governance: the relationship among various
participants in determining the direction and
performance of corporations
- Shareholders
- Management (led by the CEO)
- Board of Directors

21. 1 - 21
Question
• Briefly describe the role of board of directors in
corporate governance.

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Corporate Governance and Stakeholder
Management (cont.)
• Board of Directors
- Elected representatives of the
owners
- Ensure interests and motives of
management are aligned with
those of the owners
• Effective and engaged Board of
Directors
• Shareholder activism
• Proper managerial rewards and
incentives

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Example: New Rules for Directors
In light of numerous corporate scandals, the role and
rules for board of directors are being redefined. Few
areas of focus :
- Numbers Knowledge
- Strategy Focus
- Time & Understanding
- Watchdog
Source: Tipsheet, Business Week, January 22, 2007

24. 1 - 24
Stakeholder Management
• Two views of stakeholder management
- Zero sum
• Stakeholders compete for attention and resources of the
organization
• Gain of one is a loss to the other
- Symbiosis
• Stakeholders are dependent upon each other
• Mutual benefits

25. 1 - 25
Social Responsibility
• 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
‾ Socially responsible behavior changes over time
‾ Triple bottom line

26. 1 - 26
Example: Social Responsibility
Starbucks Coffee Company
 Corporate social responsibility is embedded throughout the
organization.
 The following are some of the commitments they have
made to be socially responsible:
• Commitment to origins
• Helping protect the environment
• Starbucks in your community
• Commitment to partners
Source: www.starbucks.com

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Strategic Management Perspective
• Integrative view of the organization
• Assess how functional areas and activities “fit
together” to achieve goals and objectives
• All managers and employees must take and
integrative, strategic perspective of issues facing the
organization

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Enhancing Employee Involvement
• Have significant profit and loss
responsibilityLocal Line
Leaders

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Enhancing Employee Involvement
• Champion and guide ideas
• Create a learning
infrastructure
• Establish a domain for
taking action
Executive
Leaders
Local Line
Leaders

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Enhancing Employee Involvement
• Have little positional
power and formal
authority
• Generate their power
through the conviction and
clarity of their ideas
Executive
Leaders
Local Line
Leaders
Internal
Networkers

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Coherence in Strategic Direction
• Company vision
- Massively inspiring
- Overarching
- Long-term
- Driven by and evokes
passion
- Fundamental statement of
the organization’s
• Values
• Aspiration
• Goals
Hierarchy of Goals
Company visionCompany vision

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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 visionCompany vision
Mission statementsMission statements

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Coherence in Strategic Direction
• Strategic objectives
- Operationalize the mission
statement
- Provide guidance on how
the organization can fulfill
or move toward the “higher
goals”
- More specific
- Cover a more well-defined
time frame
Hierarchy of Goals
Company visionCompany vision
Mission statementsMission statements
Strategic objectivesStrategic objectives

34. 1 - 34
Coherence in Strategic Direction
• Strategic objectives
- Measurable
- Specific
- Appropriate
- Realistic
- Timely
- Challenging
- Resolve conflicts that arise
- Yardstick for rewards and
incentives
Hierarchy of Goals
Company visionCompany vision
Mission statementsMission statements
Strategic objectivesStrategic objectives