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Introduction to Management 11e
John Schermerhorn
Chapter 9Chapter 9
The Strategic Management ProcessThe Strategic Management Process
Planning Ahead — Chapter 9 Study Questions
1. What is strategic management?
2. What are the essentials of strategic analysis?
3. What are corporate-level strategies, and how
are they formulated?
4. What are business-level strategies and how
are they formulated?
5. What are the foundations for strategy
implementation?
Management 11e Chapter 9 2
Study Question 1: What is strategic management?
 Basic concepts of strategy:
 Competitive advantage — operating with an
attribute or set of attributes that allows an
organization to outperform its rivals
 Sustainable competitive advantage — one
that is difficult for competitors to imitate
Management 11e Chapter 9 3
Study Question 1: What is strategic management?
 Types of competitive advantage
 Cost and quality
 Knowledge and speed
 Barriers to entry
 Financial resources
Management 11e Chapter 9 4
Study Question 1: What is strategic management?
 Basic concepts of strategy
 Strategy
 a comprehensive action plan that identifies long-
term direction for an organization and guides
resource utilization to accomplish organizational
goals with sustainable competitive advantage
 Strategic intent
 focusing all organizational energies on a unifying
and compelling goal
Management 11e Chapter 9 5
Study Question 1: What is strategic management?
 Levels of strategies
 Corporate
 Sets long-term direction for the total enterprise
 Business
 How a division or strategic business unit will
compete in its product or service domain
 Functional
 Guides activities within one specific area of
operations
Management 11e Chapter 9 6
Figure 9.1 Three levels of strategy in organizations- corporate,
business, functional strategies
Management 11e Chapter 9 7
Study Question 1: What is strategic management?
 Strategic Management Process:
 Strategic management
 the process of formulating and implementing
strategies to accomplish long-term goals and
sustain competitive advantage
 Strategic analysis
 process of analyzing the organization, the
environment, its competitive position and current
strategies
Management 11e Chapter 9 8
Figure 9.2 Strategy formulation and implementation in the strategic
management process
Management 11e Chapter 9 9
Study Question 1: What is strategic management?
 Strategic Management Process:
 Strategy formulation
 the process of crafting strategies to guide
allocation of resources
 Strategy implementation
 putting strategies into action
Management 11e Chapter 9 10
Study Question 1: What is strategic management?
 Strategy formulation
 The process of creating strategy
 Involves assessing existing strategies,
organization, and environment to develop
new strategies and strategic plans capable of
delivering future
competitive advantage
Management 11e Chapter 9 11
Study Question 1: What is strategic management?
 Strategy implementation
 The process of allocating resources and
putting strategies into action
 All organizational and management systems
must be mobilized to support and reinforce
the accomplishment of strategies
Management 11e Chapter 9 12
Study Question 2: What are the essentials of strategic analysis?
Management 11e Chapter 9 13
Study Question 2: What are the essentials of strategic analysis?
 Analysis of mission:
 The reason for an organization’s existence
 Good mission statements identify:
 Customers
 Products and/or services
 Location
 Underlying philosophy
 An important test of the mission is how well it
serves the organization’s stakeholders
Management 11e Chapter 9 14
Study Question 2: What are the essentials of strategic analysis?
 Stakeholders
 Individuals and groups directly affected by
the organization and its strategic
accomplishments
 An important test of the mission is how well it
serves the organization’s stakeholders
Management 11e Chapter 9 15
Figure 9.3 How external stakeholders can be valued as strategic
constituencies of organizations
Management 11e Chapter 9 16
Study Question 2: What are the essentials of strategic analysis?
 Analysis of Core values:
 Broad beliefs about what is
or is not appropriate
 Organizational culture
reflects the dominant value
system of the organization as
a whole
Management 11e Chapter 9 17
Study Question 2: What are the essentials of strategic analysis?
 Analysis of objectives:
 Operating objectives direct activities toward
key and specific performance results
Management 11e Chapter 9 18
Study Question 2: What are the essentials of strategic analysis?
Management 11e Chapter 9 19
Study Question 2: What is the strategic management process?
 Analysis of organizational resources and
capabilities:
 Core competency is a special strength that
gives an organization competitive advantage
 Important goal of assessing core
competencies
Management 11e Chapter 9 20
Study Question 2: What is the strategic management process?
Management 11e Chapter 9 21
Study Question 2: What is the strategic management process?
 SWOT Analysis
 Examination of an organization’s current
position by looking at
 Internal strengths and weaknesses
 Environmental opportunities and threats
Management 11e Chapter 9 22
Figure 9.4 SWOT analysis of strengths, weaknesses, opportunities,
and threats
Management 11e Chapter 9 23
Study Question 2: What is the strategic management process?
 Porter’s Model of Five Strategic Forces Affecting
Competition:
Management 11e Chapter 9 24
Figure 9.5 Porter’s model of five strategic forces affecting industry
competition
Management 11e Chapter 9 25
Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Corporate-level strategy formulation
 Strategic portfolio planning:
 Portfolio planning seeks the best mix of
investments among alternative business
opportunities
 BCG Matrix analyzes business opportunities according
to market growth rate and market share
Management 11e Chapter 9 26
Study Question 3: What are corporate-level strategies and how are
they formulated?
 BCG matrix
 Ties strategy formulation to analysis of
business opportunities according to …
 Industry or market growth rate
 Low versus high
 Market share
 Low versus high
Management 11e Chapter 9 27
Figure 9.6 The BCG matrix approach to corporate strategy
formulation
Management 11e Chapter 9 28
Study Question 3: What are corporate-level strategies and how are
they formulated?
 BCG matrix — business conditions and
related strategies:
 Stars
 High share/high growth businesses
 Preferred strategy — growth
 Cash cows
 High share/low growth businesses
 Preferred strategy — stability or modest growth
Management 11e Chapter 9 29
Study Question 3: What are corporate-level strategies and how are
they formulated?
 BCG matrix—business conditions and
related strategies (cont.):
 Question marks
 Low share/high growth businesses
 Preferred strategy — growth for promising
question marks and restructuring or divestiture for
others
 Dogs
 Low share/low growth businesses
 Preferred strategy — retrenchment by divestiture
Management 11e Chapter 9 30
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Growth strategies
 Seek an increase in size and the expansion of
current operations
 Types of growth strategies:
 Concentration strategies
 Grow within the same business area
Management 11e Chapter 9 31
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Types of growth strategies continued
 Diversification strategies
 Grow by acquiring or investing in new and
different business areas
 Related diversification
 Unrelated diversification
 Vertical integration
Management 11e Chapter 9 32
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Retrenchment and restructuring
strategies:
 Readjusting operations when an organization
is in trouble
 Chapter 11 bankruptcy
 Protects a firm from creditors while
management re-organizes to
restore solvency
Management 11e Chapter 9 33
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Types of retrenchment and
restructuring strategies
 Liquidation
 Business closes and sells assets to pay
creditors
 Downsizing
 Decreases size of
operations
Management 11e Chapter 9 34
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Types of retrenchment and restructuring
strategies
 Divestiture
 Sells off parts of the organization to refocus
attention on core business areas
 Turnaround Strategy
 Tries to fix specific performance problems
Management 11e Chapter 9 35
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Global strategies:
Management 11e Chapter 9 36
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Cooperative strategies
 Strategic alliances — two or more
organizations partner to pursue an area of
mutual interest
 Types of strategic alliances:
 Outsourcing alliances
 Supplier alliances
 Distribution alliances
Management 11e Chapter 9 37
Study Question 3: What are corporate-level strategies and how are
they formulated?
 Co-opetition – working with rivals on
projects of mutual benefit
Management 11e Chapter 9 38
Study Question 4: What are business-level strategies and how are
they formulated?
 Business-level strategy formulation
 Good strategies help achieve above average
returns
 Key question is “How can we best compete
for customers in our market and with our
products or services?”
Management 11e Chapter 9 39
Study Question 4: What are business-level strategies and how are
they formulated?
 Porter’s competitive strategies model
 Business-level strategic decisions are driven
by:
 Market scope
 Source of competitive advantage
 Market scope and source of competitive
advantage combine to generate four generic
strategies
Management 11e Chapter 9 40
Figure 9.7 Porter’s competitive strategies framework: soft-drink
industry examples
Management 11e Chapter 9 41
Study Question 4: What are business-level strategies and how are
they formulated?
 Porter’s generic strategies for gaining
competitive advantage:
 Differentiation strategy
 Cost leadership strategy
 Focused differentiation strategy
 Focused cost leadership strategy
Management 11e Chapter 9 42
Study Question 5: What are the foundations for strategy
implementation?
 Strategy implementation
 Must be supported in every aspect of
management
 Planning
 Controlling
 Organizing
 Leading
Management 11e Chapter 9 43
Study Question 5: What are the foundations for strategy
implementation?
 Strategic planning failures that hinder
strategy implementation:
 Failures of substance
 Inadequate attention to major strategic planning
elements
 Failures of process
 Poor handling of strategy implementation
 Lack of participation error
 Goal displacement error
Management 11e Chapter 9 44
Study Question 5: What are the foundations for strategy
implementation?
 Corporate governance:
 System of control and performance
monitoring of top management
 Done by boards of directors and other major
stakeholder representatives
 Controversies regarding roles of inside
directors and outside directors
 Increasing emphasis on corporate
governance in contemporary businesses
Management 11e Chapter 9 45
Study Question 5: What are the foundations for strategy
implementation?
 Strategic control
 Makes sure strategies are well implemented
and that poor strategies are scrapped or
modified
Management 11e Chapter 9 46
Study Question 5: What are the foundations for strategy
implementation?
 Strategic leadership
 Inspires people to continually change, refine,
and improve strategies and their
implementation
Management 11e Chapter 9 47
Study Question 5: What are the foundations for strategy
implementation?
 Critical tasks of strategic leadership
 Be a guardian of trade-offs
 Create a sense of urgency
 Ensure that everyone understands the
strategy
 Be a teacher
 Be a great communicator
Management 11e Chapter 9 48
Chapter 9 Case
 Sony Corporation: An Evolution of
Technology

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The Strategic Management Process

  • 1. Introduction to Management 11e John Schermerhorn Chapter 9Chapter 9 The Strategic Management ProcessThe Strategic Management Process
  • 2. Planning Ahead — Chapter 9 Study Questions 1. What is strategic management? 2. What are the essentials of strategic analysis? 3. What are corporate-level strategies, and how are they formulated? 4. What are business-level strategies and how are they formulated? 5. What are the foundations for strategy implementation? Management 11e Chapter 9 2
  • 3. Study Question 1: What is strategic management?  Basic concepts of strategy:  Competitive advantage — operating with an attribute or set of attributes that allows an organization to outperform its rivals  Sustainable competitive advantage — one that is difficult for competitors to imitate Management 11e Chapter 9 3
  • 4. Study Question 1: What is strategic management?  Types of competitive advantage  Cost and quality  Knowledge and speed  Barriers to entry  Financial resources Management 11e Chapter 9 4
  • 5. Study Question 1: What is strategic management?  Basic concepts of strategy  Strategy  a comprehensive action plan that identifies long- term direction for an organization and guides resource utilization to accomplish organizational goals with sustainable competitive advantage  Strategic intent  focusing all organizational energies on a unifying and compelling goal Management 11e Chapter 9 5
  • 6. Study Question 1: What is strategic management?  Levels of strategies  Corporate  Sets long-term direction for the total enterprise  Business  How a division or strategic business unit will compete in its product or service domain  Functional  Guides activities within one specific area of operations Management 11e Chapter 9 6
  • 7. Figure 9.1 Three levels of strategy in organizations- corporate, business, functional strategies Management 11e Chapter 9 7
  • 8. Study Question 1: What is strategic management?  Strategic Management Process:  Strategic management  the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage  Strategic analysis  process of analyzing the organization, the environment, its competitive position and current strategies Management 11e Chapter 9 8
  • 9. Figure 9.2 Strategy formulation and implementation in the strategic management process Management 11e Chapter 9 9
  • 10. Study Question 1: What is strategic management?  Strategic Management Process:  Strategy formulation  the process of crafting strategies to guide allocation of resources  Strategy implementation  putting strategies into action Management 11e Chapter 9 10
  • 11. Study Question 1: What is strategic management?  Strategy formulation  The process of creating strategy  Involves assessing existing strategies, organization, and environment to develop new strategies and strategic plans capable of delivering future competitive advantage Management 11e Chapter 9 11
  • 12. Study Question 1: What is strategic management?  Strategy implementation  The process of allocating resources and putting strategies into action  All organizational and management systems must be mobilized to support and reinforce the accomplishment of strategies Management 11e Chapter 9 12
  • 13. Study Question 2: What are the essentials of strategic analysis? Management 11e Chapter 9 13
  • 14. Study Question 2: What are the essentials of strategic analysis?  Analysis of mission:  The reason for an organization’s existence  Good mission statements identify:  Customers  Products and/or services  Location  Underlying philosophy  An important test of the mission is how well it serves the organization’s stakeholders Management 11e Chapter 9 14
  • 15. Study Question 2: What are the essentials of strategic analysis?  Stakeholders  Individuals and groups directly affected by the organization and its strategic accomplishments  An important test of the mission is how well it serves the organization’s stakeholders Management 11e Chapter 9 15
  • 16. Figure 9.3 How external stakeholders can be valued as strategic constituencies of organizations Management 11e Chapter 9 16
  • 17. Study Question 2: What are the essentials of strategic analysis?  Analysis of Core values:  Broad beliefs about what is or is not appropriate  Organizational culture reflects the dominant value system of the organization as a whole Management 11e Chapter 9 17
  • 18. Study Question 2: What are the essentials of strategic analysis?  Analysis of objectives:  Operating objectives direct activities toward key and specific performance results Management 11e Chapter 9 18
  • 19. Study Question 2: What are the essentials of strategic analysis? Management 11e Chapter 9 19
  • 20. Study Question 2: What is the strategic management process?  Analysis of organizational resources and capabilities:  Core competency is a special strength that gives an organization competitive advantage  Important goal of assessing core competencies Management 11e Chapter 9 20
  • 21. Study Question 2: What is the strategic management process? Management 11e Chapter 9 21
  • 22. Study Question 2: What is the strategic management process?  SWOT Analysis  Examination of an organization’s current position by looking at  Internal strengths and weaknesses  Environmental opportunities and threats Management 11e Chapter 9 22
  • 23. Figure 9.4 SWOT analysis of strengths, weaknesses, opportunities, and threats Management 11e Chapter 9 23
  • 24. Study Question 2: What is the strategic management process?  Porter’s Model of Five Strategic Forces Affecting Competition: Management 11e Chapter 9 24
  • 25. Figure 9.5 Porter’s model of five strategic forces affecting industry competition Management 11e Chapter 9 25 Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).
  • 26. Study Question 3: What are corporate-level strategies and how are they formulated?  Corporate-level strategy formulation  Strategic portfolio planning:  Portfolio planning seeks the best mix of investments among alternative business opportunities  BCG Matrix analyzes business opportunities according to market growth rate and market share Management 11e Chapter 9 26
  • 27. Study Question 3: What are corporate-level strategies and how are they formulated?  BCG matrix  Ties strategy formulation to analysis of business opportunities according to …  Industry or market growth rate  Low versus high  Market share  Low versus high Management 11e Chapter 9 27
  • 28. Figure 9.6 The BCG matrix approach to corporate strategy formulation Management 11e Chapter 9 28
  • 29. Study Question 3: What are corporate-level strategies and how are they formulated?  BCG matrix — business conditions and related strategies:  Stars  High share/high growth businesses  Preferred strategy — growth  Cash cows  High share/low growth businesses  Preferred strategy — stability or modest growth Management 11e Chapter 9 29
  • 30. Study Question 3: What are corporate-level strategies and how are they formulated?  BCG matrix—business conditions and related strategies (cont.):  Question marks  Low share/high growth businesses  Preferred strategy — growth for promising question marks and restructuring or divestiture for others  Dogs  Low share/low growth businesses  Preferred strategy — retrenchment by divestiture Management 11e Chapter 9 30
  • 31. Study Question 3: What are corporate-level strategies and how are they formulated?  Growth strategies  Seek an increase in size and the expansion of current operations  Types of growth strategies:  Concentration strategies  Grow within the same business area Management 11e Chapter 9 31
  • 32. Study Question 3: What are corporate-level strategies and how are they formulated?  Types of growth strategies continued  Diversification strategies  Grow by acquiring or investing in new and different business areas  Related diversification  Unrelated diversification  Vertical integration Management 11e Chapter 9 32
  • 33. Study Question 3: What are corporate-level strategies and how are they formulated?  Retrenchment and restructuring strategies:  Readjusting operations when an organization is in trouble  Chapter 11 bankruptcy  Protects a firm from creditors while management re-organizes to restore solvency Management 11e Chapter 9 33
  • 34. Study Question 3: What are corporate-level strategies and how are they formulated?  Types of retrenchment and restructuring strategies  Liquidation  Business closes and sells assets to pay creditors  Downsizing  Decreases size of operations Management 11e Chapter 9 34
  • 35. Study Question 3: What are corporate-level strategies and how are they formulated?  Types of retrenchment and restructuring strategies  Divestiture  Sells off parts of the organization to refocus attention on core business areas  Turnaround Strategy  Tries to fix specific performance problems Management 11e Chapter 9 35
  • 36. Study Question 3: What are corporate-level strategies and how are they formulated?  Global strategies: Management 11e Chapter 9 36
  • 37. Study Question 3: What are corporate-level strategies and how are they formulated?  Cooperative strategies  Strategic alliances — two or more organizations partner to pursue an area of mutual interest  Types of strategic alliances:  Outsourcing alliances  Supplier alliances  Distribution alliances Management 11e Chapter 9 37
  • 38. Study Question 3: What are corporate-level strategies and how are they formulated?  Co-opetition – working with rivals on projects of mutual benefit Management 11e Chapter 9 38
  • 39. Study Question 4: What are business-level strategies and how are they formulated?  Business-level strategy formulation  Good strategies help achieve above average returns  Key question is “How can we best compete for customers in our market and with our products or services?” Management 11e Chapter 9 39
  • 40. Study Question 4: What are business-level strategies and how are they formulated?  Porter’s competitive strategies model  Business-level strategic decisions are driven by:  Market scope  Source of competitive advantage  Market scope and source of competitive advantage combine to generate four generic strategies Management 11e Chapter 9 40
  • 41. Figure 9.7 Porter’s competitive strategies framework: soft-drink industry examples Management 11e Chapter 9 41
  • 42. Study Question 4: What are business-level strategies and how are they formulated?  Porter’s generic strategies for gaining competitive advantage:  Differentiation strategy  Cost leadership strategy  Focused differentiation strategy  Focused cost leadership strategy Management 11e Chapter 9 42
  • 43. Study Question 5: What are the foundations for strategy implementation?  Strategy implementation  Must be supported in every aspect of management  Planning  Controlling  Organizing  Leading Management 11e Chapter 9 43
  • 44. Study Question 5: What are the foundations for strategy implementation?  Strategic planning failures that hinder strategy implementation:  Failures of substance  Inadequate attention to major strategic planning elements  Failures of process  Poor handling of strategy implementation  Lack of participation error  Goal displacement error Management 11e Chapter 9 44
  • 45. Study Question 5: What are the foundations for strategy implementation?  Corporate governance:  System of control and performance monitoring of top management  Done by boards of directors and other major stakeholder representatives  Controversies regarding roles of inside directors and outside directors  Increasing emphasis on corporate governance in contemporary businesses Management 11e Chapter 9 45
  • 46. Study Question 5: What are the foundations for strategy implementation?  Strategic control  Makes sure strategies are well implemented and that poor strategies are scrapped or modified Management 11e Chapter 9 46
  • 47. Study Question 5: What are the foundations for strategy implementation?  Strategic leadership  Inspires people to continually change, refine, and improve strategies and their implementation Management 11e Chapter 9 47
  • 48. Study Question 5: What are the foundations for strategy implementation?  Critical tasks of strategic leadership  Be a guardian of trade-offs  Create a sense of urgency  Ensure that everyone understands the strategy  Be a teacher  Be a great communicator Management 11e Chapter 9 48
  • 49. Chapter 9 Case  Sony Corporation: An Evolution of Technology