Strategic

Management
 Competitive Advantage
 Competitive advantage
– The ability of a firm to win consistently over the
long term in a competitive situation.
– Competitive advantage is created through the
achievement of five qualities

 Superiority  Non-substitutability
 Inimitability  Appropriability
 Durability
 Five Qualities that Lead to
Competitive Advantage
Superiority Superiority
– Are you significantly
better than your
competitors?
– At what things are
you better?
 Five Qualities that Lead to
Competitive Advantage
Superiority Inimitability
– Managers must create
Inimitability barriers that make it
hard for others to
copy their superiority
advantages
 Culture
 Product design
 Marketing strategy
 And others
 Five Qualities that Lead to
Competitive Advantage
Superiority Durability (long lasting)
– Legally protected
Inimitability  Patents

 Copyrights

Durability  Brand names

– Well-established
 Brand image
 Reputation for quality
 Five Qualities that Lead to
Competitive Advantage
Superiority Non-substitutability
– Can the customer’s need
that you fulfill can be
Inimitability met by alternative
means?
Durability  Encyclopedias vs.
information availability on
the Internet
Non-substitutability  Movie theater
entertainment vs. concert
band entertainment
 Five Qualities that Lead to
Competitive Advantage
Superiority Appropriability
– Can you actually capture
Inimitability the profits that can be
made in the business?
– Supernormal returns
Durability  Profits that are above the
average for a comparable
Non-substitutability set of firms
 Primarily a function of
greater‑than‑average
Appropriability cost‑price margins
 Strategic Management Process:
Setting Direction
Strategic management process is a
planning process in which managers
1. Set the organization's general direction
and objectives
2. Formulate a specific strategy
3. Plan and carry out the strategy’s
implementation
4. Monitor results and make necessary
adjustments
 Determine
strategic intent Strategic
Define Management
organizational mission
Process
Analyze environment

Set objectives

Determine Assess
requirements resources

Develop action plans

Implement plans

Strategic
Planning Feedback
Monitor outcomes
Adapted from Exhibit 6.1: Strategic Management Process
 Strategic Management Process:
Setting Direction
Strategic Intent

Strategic intent: what the

organization ultimately wants to be
and do
– General identity, direction, and level of
aspirations of the organization
– A key objective is to inspire
– Should paint a general picture of
aspiration and engender a strong
emotional response in just a few words
 Strategic Management Process:
Setting Direction
Mission

Mission statement articulates the

fundamental purpose of the organization
– Company philosophy
– Company identity, or self-concept
– Principal products or services
– Customers and markets
– Geographic focus
– Obligations to shareholders
– Commitment to employees
 Strategic Management Process:
Setting Direction
Strategic Objectives

Strategic objectives translate the

strategic intent and mission of the firm
into concrete and measurable goals
– Facilitates a firm's ability to
 Allocate resources appropriately
 Reach a shared understanding of priorities
 Delegate responsibilities
 Hold people accountable for results
 Strategic Management Process:
Setting Direction
Strategic Objectives
 Strategic objectives address many
issues, such as

 Revenue growth
 Technological leadership
 Profitability
 Cash flow
 Customer satisfaction
 Operating efficiency
 Market share
(e.g., costs per unit,
 Financial returns (e.g.,
expense per
return on equity, return employee)
on assets)
 Strategic Management Process:
Formulating a Strategy
 Competitive strategy: determining
how the company is going to
compete and achieve its strategic
objectives, mission, and ultimate
strategic intent
– Generic strategies
– Techniques and tools
 Strategic Management Process:
Formulating a Strategy
 Generic strategies
– Cost leadership
– Differentiation
– Scope
 Generic Strategies and Scope
General player whose product or Niche player with average prices
Cost Leadership

service features command industry and below-average costs that

average prices but whose costs are focuses on a segment of
significantly below the industry customers or a specific
Strategy

average. geography.
Example: Wal-mart Example: Columbia Sports

General player whose product or Niche player with average costs

Differentiation

service features command but commanding premium prices

premium prices and whose costs that focuses on the high end and
are at the industry average. customers in a general or specific
geography.
Example: Sony Example: Morgan Motors
General Focused
Scope
Adapted from Exhibit 6.3: Generic Strategies and Scope
 Strategic Management Process:
Formulating a Strategy
 Internal and external analysis
 Tools and concepts
– Environmental analysis
 Value proposition
– Organizational analysis
 Value chain
 Five primary activities
 Four support activities
Value Proposition for Three Car
Companies
High
Company C
Equal
Company B
Reliability

value line
Company A

Best Value

Low
Low High
Price

Adapted from Exhibit 6.4: Value Proposition for Three Companies

 The Value Chain
Support Activities

Firm infrastructure (e.g., Finance, Planning)

Human resource management

Technology development

Procurement

Inbound Operations Outbound Marketing After-sale

logistics logistics and sales service

Primary Activities

Adapted from Exhibit 6.5: The Value Chain

 Strategic Management Process:
Formulating a Strategy
 Leveraging the value chain
– Determine where in your value chain you
have the potential to add the greatest
value
– Segment business activities, see the
important linkages and make
adjustments
 Resource-based approach
– Recognize and exploit internal strengths
of the company
 Strategic Management Process:
Formulating a Strategy
 Core competencies
– Are interrelated sets of activities that deliver
competitive advantages in the short-term and
long-term
– Provide access to a wide variety of markets
– Significantly contribute to perceived customer
benefits of the end products or services
– Are difficult for competitors to imitate
Integrating Internal and External
Analyses
Product Life Cycle
Birth Growth Maturity Decline
High

Low
Time
Adapted from Exhibit 6.6: Product Life Cycle
Integrating Internal and External
Analyses
Product Life Cycle

High
Sales

Low
Time
Adapted from Exhibit 6.7: International Product Life Cycles
Integrating Internal and External
Analyses
Portfolio Analysis
High
Market Attractiveness

BCG
Matrix

Low High
Relative Market Share
Adapted from Exhibit 6.8: BCG Matrix
Integrating Internal and External
Analyses
Portfolio Analysis
High
Market Attractiveness

BCG
Matrix

Low High
Our
Relative
Ability
Market
To Compete
Share
Adapted from Exhibit 6.9: International Matrix
 Porter’s Five Forces:
 Rivalry

 Threat of Substitute
 Buyer Power

 Supplier Power

 Threat of Entry
Integrating Internal and External
Analyses
 Internal
SWOT Analysis
environment
Internal Environment
– Strengths
– Weaknesses
– Tools

SW
 Core competencies
framework
 Resource analysis
framework
 Value chain framework
Integrating Internal and External
Analyses
SWOT Analysis
 External environment
– Opportunities
– Threats
– Tools
 Product
analysis
life cycle

 Portfolio analysis
SWOT
 Five forces framework
External Environment
 Strategic Management Process:
Strategy Implementation
Strategy

Seven S’s Structure

1. Strategy
 Plan or course of action
 Allocation of firm’s resources to
reach goals
2. Structure
 Basic grouping of reporting relationships and
activities
 Linking of separate organizational entities

Adapted from Exhibit 6.10: Seven S Model

 Strategic Management Process:
Strategy Implementation
Strategy

Seven S’s Structure

Shared

3. Shared Values values

Systems
 Significant meanings or guiding
concepts
4. Systems
 Formal processes and procedures
 Management control systems
 Performance measurement and reward systems
 Planning and budgeting systems
 The ways people relate to them
Adapted from Exhibit 6.10: Seven S Model
 Strategic Management Process:
Strategy Implementation
Strategy

Seven S’s Skills Structure

Shared

5. Skills values

Systems
 Organizational competencies
Style

 Other capabilities residing in the

organization
6. Style
 Leadership style of management
 Operating style of the organization
 Reflection of the norms people act upon

Adapted from Exhibit 6.10: Seven S Model

 Strategic Management Process:
Strategy Implementation
Strategy

Seven S’s Skills Structure

Shared

7. Staff values

Staff Systems
 Recruitment
Style

 Selection
 Development
 Socialization
 Advancement of people in the
organization

Adapted from Exhibit 6.10: Seven S Model