Chapter 9

Strategic Management and

Strategic Competitiveness

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Foundations of strategic competitiveness

Basic concepts of strategy:

– Competitive advantage—operating in a

successful way that is difficult for competitors

to imitate.

– Sustainable competitive advantage—

consistently dealing with market and

environmental forces better than competitors.

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Definitions

Strategy—a comprehensive action plan providing long-term direction and guiding resource utilization to accomplish organizational goals with sustainable competitive advantage.

Strategic intent—focusing all organizational energies on a unifying and compelling goal.

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Basic concepts of strategy:

Strategic management—the process of

formulating and implementing strategies to

accomplish long-term goals and sustain

competitive advantage.

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Strategic management goals

– Formulate and implement strategies that yield

long-term, sustainable competitive

advantage.

– Create above-average returns for investors.

• Earning above-average returns depends in part on

the organization’s environment.

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What is the strategic management process?

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.

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The strategy formulation process (Drucker)

Ask these questions:

• What is our business mission?

• Who are our customers?

• What do our customers consider value?

• What have been our results?

• What is our plan?

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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

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Here is a sample mission statement from Vanguard

• To provide a broad range of superior-performing mutual funds and related financial services that meets the needs of individual and institutional investors, with unmatchable excellence and at the lowest reasonable cost, through the efforts, experiences, talents, and dedication of a diverse crew.

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Analysis of core values

– Values are broad beliefs about what is or is not

appropriate.

– Organizational culture reflects the dominant

value system of the organization as a whole.

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Analysis of objectives

Typical operating objectives:• Profitability• Market share• Human talent• Financial health• Cost efficiency• Product quality• Innovation• Social responsibility

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Analysis of organizational resources and capabilities

Assessing organizational Strengths and Weaknesses within SWOT analysis

Identifying core competencies• Technology• Human resources• Manufacturing approaches• Management talent• Financial strength

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Analysis of industry and environmentAssessing Opportunities and Threats

within SWOT analysisMichael Porter’s 5 competitive forces

Competitive rivalryThreat of new entrantsPower of suppliersPower of buyersSubstitute products

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Levels of strategy

Corporate strategy—directs the organization toward sustainable competitive advantage.

Business strategy—sets direction for a single business unit or product line.

Functional strategy—guides the use of resources, focusing on activities within a specific area of operations.

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What types of strategies are used by organizations?

Growth and diversification strategies– Growth strategies—seek an increase in size

and the expansion of current operations.– Concentration strategies—growth occurs

through expansion in the same business area.– Diversification strategies—growth occurs

through acquisition of or investment in new and/or different business areas.

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Types of strategies

Restructuring and divestiture strategies– Liquidation

– Restructuring

– Divestiture

Cooperative strategies strategic alliances

two or more organizations partner to pursue an area of

mutual interest.

E-business strategies

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Porter’s model

– Generic strategies for gaining

competitive advantage:

• Differentiation strategy

• Cost leadership strategy

• Focused differentiation strategy

• Focused cost leadership strategy

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Product life cyclestrategy

– Introduction and growth stages

• Use differentiation and prospector strategies

– Maturity stage

• Use focus and/or cost leadership strategies

– Decline stage

• Use defender or analyzer strategies

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How are strategies formulated?

Corporate-level strategy formulation

– Key issue is the selection and refinement of

the organization’s mix of businesses.

– Approaches to formulating business-level

strategies:

• Portfolio planning

• Adaptive strategies

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How are strategies formulated?

Types of adaptive strategies:– Prospector strategy

• Appropriate in dynamic, high-potential environments

– Defender strategy• Appropriate in stable or declining environments

– Analyzer strategy• Following leading competitors in high-potential environments

– Reactor strategy• Following competitors as a last resort regardless of

environment

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How are strategies formulated?

Incrementalism

– Modest and incremental changes in strategy

occur as managers learn from experience.

Emergent strategies

– Develop progressively over time in the

streams of decisions that managers make.

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What are current issues in strategy implementation?

Strategic leadership

– Strategic management is a leadership

responsibility.

– The capability to get people to successfully

engage in the continuous change, refinement,

and implementation of strategies.

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What are current issues in 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.

Questions?

For next class, please read chapter 10