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Chapter 1

Chapter 1. Strategic Management: Creating Competitive Advantage. Learning From Mistakes - Ford. Success – Taurus Mistakes – Letting the Taurus die (design, ads) Thunderbird GM – 3.1 vs. 3.8 engine; Aztec; Grand Am UAW. Perspectives of Leadership. Leaders can make a difference

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Chapter 1

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  1. Chapter 1 Strategic Management: Creating Competitive Advantage

  2. Learning From Mistakes - Ford • Success – Taurus • Mistakes – • Letting the Taurus die (design, ads) • Thunderbird • GM – 3.1 vs. 3.8 engine; Aztec; Grand Am • UAW

  3. Perspectives of Leadership • Leaders can make a difference • Must be aware of opportunities and threats faced in external environment • Must have thorough understanding of the firm’s resources and capabilities • Are given much credit under the “romantic view of leadership.” • There is also the external view…

  4. Idea of Strategic Management What is the goal of strategy (strategic management)?

  5. Strategic Planning Objectives • Generating long term return for shareholders through competitive advantage is the primary objective of strategic planning.

  6. What is Strategy? • Large-scale, future-oriented plan for interacting with competitive environment to achieve objectives • Company’s “game plan” • Framework for managerial decisions

  7. Strategic Management • Strategic management is the (study) action process of why some firms outperform others • How to compete in order to create competitive advantages in the marketplace • Unique and valuable • Difficult for competitors to copy or substitute

  8. Strategic Management • Analysis • Strategic goals (vision, mission, strategic objectives) • Internal and external environment of the firm • Strategic decisions • What industries should we compete in? • How should we compete in those industries? • Actions • Allocate necessary resources • Design the organization to bring intended strategies to reality • Control – insuring that the strategy is implemented

  9. Strategic Management Concepts Definition: Strategic management consists of the analysis, decisions, actions and control an organization undertakes in order to create and sustain competitive advantages. Key attributes of strategic management • Directs the organization toward overall goals and objectives. • Includes multiple stakeholders in decision making • Needs to incorporate short-term and long-term perspectives • Recognizes trade-offs between efficiency and effectiveness

  10. What Strategy is NOT About • Short term (or any) actions designed to manipulate a stock price! • A series of small incremental changes to manage the business.

  11. Key Questions • What businesses will we compete in? • How will we outperform competition?

  12. Additional Concepts • Product Champions • Product Managers • “Make the numbers or else!”

  13. Textbook Layout - Logic • First section = Analysis • Introduction • External Environment • Internal Environment • Intellectual Assets

  14. Textbook Layout - Logic • Second section = Strategy Formulation • Business level strategy • Corporate level strategy • International strategy • Entrepreneurial strategy

  15. Textbook Layout - Logic • Third section = Strategy Implementation • Control and governance • Organization designs • Learning & ethics • Motivating innovation and entrepreneurship

  16. Operational Effectiveness • Michael Porter – “Strategy is all about being different from someone else.” • Effectiveness – doing the right things (transformational leadership) • Efficiency – doing things right (transactional leadership)

  17. Corporate Governance and Stakeholder Management • Corporate governance: the relationship among various participants in determining the direction and performance of corporations • Shareholders • Management (led by the CEO) • Board of directors

  18. Corporate Governance and Stakeholder Management • Board of directors • Elected represent- atives of the owners • Ensure interests and motives of man- agement are aligned with those of the owners • Proper managerial rewards and incentives

  19. Stakeholder Management • Who are stakeholders? • Insiders? • Outsiders?

  20. Stakeholder Management • Two views of stakeholder management • Zero sum • Stakeholders compete for attention and resources of the organization • Gain of one is a loss to the other • Symbiosis • Stakeholders are dependent upon each other • Mutual benefits

  21. Social Responsibility • Social responsibility: the expectation that businesses or individuals will strive to improve the overall welfare of society • Managers must take active steps to make society better • Socially responsible behavior changes over time • Triple bottom line

  22. Strategic Management Perspective • Integrative view of the organization • Assess how functional areas and activities “fit together” to achieve goals and objectives • All managers and employees must take and integrative, strategic perspective of issues facing the organization

  23. Strategic Management Perspective • Key driving forces increasing the need for strategic perspective and involvement • Globalization • Technology • Intellectual capital • These forces are • Interrelated • Accelerating the rate of change and uncertainty

  24. Local Line Leaders Enhancing Employee Involvement • Have significant profit and loss responsibility

  25. Local Line Leaders Executive Leaders Enhancing Employee Involvement • Champion and guide ideas • Create a learning infrastructure • Establish a domain for taking action

  26. Local Line Leaders Executive Leaders Internal Networkers Enhancing Employee Involvement • Have little positional power and formal authority • Generate their power through the conviction and clarity of their ideas

  27. Hierarchy of Goals Coherence in Strategic Direction Company vision • Massively inspiring • Overarching • Long-term • Driven by and evokes passion • Fundamental statement of the organization’s • Values • Aspiration • Goals Company vision

  28. Company vision Hierarchy of Goals Coherence in Strategic Direction Mission statements • Purpose of the company • Basis of competition and competitive advantages • More specific than vision: has 3 or 4 parts: target market(s), product(s), channel(s) of sale. • Focused on the means by which the firm will compete Mission statements

  29. Company vision Mission statements Hierarchy of Goals Coherence in Strategic Direction Strategic objectives • Operationalize the mission statement • Provides measurement goals for results • More specific • Cover a more well-defined time frame Strategic objectives

  30. Company vision Mission statements Strategic objectives Hierarchy of Goals Coherence in Strategic Direction • Measurable • Specific • Appropriate • Realistic • Timely • Challenging • Resolve conflicts that arise • Yardstick for rewards and incentives Strategic objectives

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