The Strategic Management Process

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



Types of competitive advantage Cost and quality Knowledge and speed Barriers to entry Financial resources



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



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


Figure 9.1 Three levels of strategy in organizations- corporate, business, functional strategies



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


Figure 9.2 Strategy formulation and implementation in the strategic management process



Strategic Management Process: Strategy formulation

the process of crafting strategies to guide allocation of resources

Strategy implementation putting strategies into action



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



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


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



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


Figure 9.3 How external stakeholders can be valued as strategic constituencies of organizations



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



Analysis of objectives: Operating objectives direct activities toward

key and specific performance results




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





SWOT Analysis Examination of an organization’s current

position by looking at Internal strengths and weaknesses Environmental opportunities and threats


Figure 9.4 SWOT analysis of strengths, weaknesses, opportunities, and threats



Porter’s Model of Five Strategic Forces Affecting Competition:


Figure 9.5 Porter’s model of five strategic forces affecting industry competition


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



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


Figure 9.6 The BCG matrix approach to corporate strategy formulation



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



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



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



Types of growth strategies continued Diversification strategies

Grow by acquiring or investing in new and different business areas

Related diversification Unrelated diversification Vertical integration



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



Types of retrenchment and restructuring strategies Liquidation

Business closes and sells assets to pay creditors

Downsizing Decreases size of

operations



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



Global strategies:



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



Co-opetition – working with rivals on projects of mutual benefit


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?”



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


Figure 9.7 Porter’s competitive strategies framework: soft-drink industry examples



Porter’s generic strategies for gaining competitive advantage: Differentiation strategy Cost leadership strategy Focused differentiation strategy Focused cost leadership strategy


Study Question 5: What are the foundations for strategy implementation?

Strategy implementation Must be supported in every aspect of

management Planning Controlling Organizing Leading



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



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



Strategic control Makes sure strategies are well implemented

and that poor strategies are scrapped or modified



Strategic leadership Inspires people to continually change, refine,

and improve strategies and their 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


Chapter 9 Case

Sony Corporation: An Evolution of Technology

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The Strategic Management Process

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