Important

1. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin


2. Chapter
One
Strategic Management:
Creating Competitive
Advantages

3. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

After studying 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
• why stakeholder management is so critical in the strategic
management process and how “symbiosis” can be
achieved among an organization’s stakeholders
• the key environmental forces that are creating more
unpredictable change and requiring greater empowerment
throughout the organization
• how an awareness of a hierarchy of strategic goals can
help an organization to achieve coherence in its strategic
direction
Learning
Objectives
TRANSPARENCY-3

4. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

Definition: “Strategic management consists of the analysis,
decisions, and actions an organization undertakes in
order to create and sustain competitive advantages.”
Key Attributes of Strategic Management:
 Directs the organization toward overall goals and
objectives.
 Involves the inclusion of multiple stakeholders in
decision making.
 Needs to incorporate short-term and long-term
perspectives.
 Recognizes tradeoffs between efficiency and
effectiveness.
Strategic Management Concepts
Exhibit 1.1
TRANSPARENCY-4

5. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

The Strategic Management Process
Chapter 1
Analyzing Goals
and Objectives
Chapter 2
Analyzing the
External
Environment
Chapter 3
Analyzing the
Internal
Environment
Chapter 4
Assessing Intellectual
Capital
Chapter 5
Formulating Business-Level
Strategies
Chapter 7
Formulating
International
Strategies
Chapter 6
Formulating
Corporate-Level
Strategies
Chapter 8
Formulating Internet
Strategies
Chapter 9
Implementation:
Strategic Controls
Chapter 10
Implementation:
Organization Design
Chapter 11
Strategic Leadership:
Excellence, Ethics, and
Change
Chapter 12
Strategic Leadership:
Fostering Entrepreneurship
Strategy Analysis
Strategy Formulation Strategy Implementation
Chapter 13
Case Analysis
Exhibit 1.2
TRANSPARENCY-5

6. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

Excellent versus Poor Boards of Directors
Fortune magazine recently pinpointed some of the key attributes of some excellent and poor boards of
directors.
Hall of Fame
A good board is hard to find, but a few draw raves
year after year.
Coca-Cola This feisty board isn’t afraid to make waves,
nixing CEO’s Doug Daft’s plan to acquire Quaker Oats
last year.
Intel Its big-name directors regularly assess one
another’s performance, a rarity in the boardroom.
Pfizer This year the Wharton School named this board—
packed with heavy hitters—the second best in the nation.
Target The proof is in the performance. This unflashy
board has presided over years of solid returns.
Texas Instruments Deadly serious about good
governance, TI’s board had near-perfect attendance in
2000.
Hall of Shame
Entrenched, clubby, blind to shareholder
concerns: These boards just don’t get it.
Advanced Micro Devices Talk about weak: This
board slavishly kowtows to omnipotent
founder/CEO Jerry Sanders.
Archer Daniels Midland As the stock falls near
ten-year lows, the family-controlled board
twiddles its thumbs.
Maxxam With loads of common and preferred
stock, CEO/Chairman Charles Hurwitz has most
of the voting power.
Occidental Petroleum Its board pays CEO Ray
Irani obscene amounts even as the company
underperforms its peers.
Warnaco This board, dominated by
Chairman/CEO Linda Wachner, seems to exist
solely to redefine excessive CEO pay.
Source: Boyle, M. 2001. The dirty half-dozen: America’s worst boards. Fortune, May 14: 250. With permission.
Exhibit 1.3
TRANSPARENCY-6

7. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

Social Responsibility at McDonald’s:
Some Elements
• Supporting more than 200 Ronald McDonald Houses in 19 countries
(providing comfort and care to children and their families)
• Eliminating 150,000 tons of recycled products and more than one
million tons of corrugated cardboard in the U.S. over a ten-year period
• As part of their diversity program, more than 30 percent of their
franchisees are now women or minority and in 1999, McDonald’s
purchased approximately $3 billion worth of goods and services from
women and minority suppliers
• Providing about $5 million in educational assistance through a variety
of scholarships
• Partnered with Chicago’s Field Museum to restore Sue—the largest
Tyrannosaurus Rex fossil ever discovered in a laboratory for public
viewing
Source: McDonald’s Corporation 1999 Annual Report, page 6.
Exhibit 1.4
TRANSPARENCY-7

8. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

Brainpower Weighs In
PRODUCT PRICE WEIGHT
in pounds
PRICE
per pound
Pentium III 800MHz microprocessor $851.00 0.01984 $42,893.00
Viagra (tablet) $8.00 0.00068 $11,766.00
Gold (ounce) $301.70 0.0625 $4,827.20
Hermès scarf $275.00 0.14 $1,964.29
Palm V $449.00 0.26 $1,726.92
Saving Private Ryan on DVD $34.99 0.04 $874.75
Cigarettes (20) $4.00 0.04 $100.00
Who Moved My Cheese? by Spencer Johnson $19.99 0.49 $40.80
Mercedes-Benz E-class four-door sedan $78,445.00 4,134.00 $18.98
The Competitive Advantage of Nations by Michael Porter $40.00 2.99 $13.38
Chevrolet Cavalier four-door sedan $17,770.00 2,630.00 $6.76
Hot-rolled steel (ton) $370.00 2,000.00 $0.19
Source: Colvin, G. 2000. We’re worth our weight in Pentium Chips. Fortune, March 20: 68.
Exhibit 1.5
TRANSPARENCY-8

9. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

Comparing Wellpoint Health Network’s
Vision and Mission
Vision
WELLPOINT will redefine our industry:
Through a new generation of consumer-friendly
products that put individuals back in control of their
future.
Mission
The WELLPOINT companies provide health security by
offering a choice of quality branded health and related
financial services designed to meet the changing
expectations of individuals, families and their sponsors
throughout a lifelong relationship.
Source: Company Records
Exhibit 1.6
TRANSPARENCY-9

10. CHAPTER 1
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin

Strategic Objectives
Strategic Objectives (Financial)
• Increase sales growth 6 to 8 percent and accelerate core net earnings per share growth
to 13 to 15 percent in each of the next five years (Procter & Gamble)
• Generate Internet-related revenue of $1.5 billion. (Automation)
• Increase the contribution of Banking Group earnings from investments, brokerage and
insurance from 16 percent to 25 percent (Wells Fargo)
• Cut corporate overhead costs by $30 million per year (Fortune brands)
Exhibit 1.7
Strategic Objectives (Nonfinancial)
• Capitalize on e-commerce (Federal Express)
• We want a majority of our customers,when surveyed, to say they consider Wells
Fargo the best financial institution in the community (Wells Fargo)
• We want to operate 6,000 stores by 2010—up from 3000 in the year 2000
(Walgreen’s)
• Develop a smart card strategy that will help us play a key role in shaping online
payments (American Express)
• Reduce greenhouse gases by 10 percent (from a 1990 base) by 2010 (BP Amoco)
Source: Company
Documents and Annual
Reports
TRANSPARENCY-10