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Chapter 1 What is Strategy

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Chapter 1 What is Strategy & the Strategic Management Process? Key Chapter Objectives Have an understanding of: what is strategic management. the strategic management ... – PowerPoint PPT presentation

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Title: Chapter 1 What is Strategy


1
Chapter 1 What is Strategy the Strategic
Management Process?
2
Key Chapter Objectives
  • Have an understanding of
  • what is strategic management.
  • the strategic management process.
  • what competitive advantage is
  • why stakeholders are important.
  • key environmental forces that are creating
    dynamic fast-paced change.
  • the need for a hierarchy of goals

3
What is Strategic Management?
  • The analysis, decisions, and actions an
    organization undertakes in order to create and
    sustain competitive advantages (Dess Lumpkin,
    2003 p.3).
  • A pattern in a stream of actions or decisions
    (Henry Mintzberg).

4
Types of Strategies
  • Strategy as a Plan
  • Strategy as a Ploy
  • Strategy as a Pattern
  • Strategy as a Perspective
  • Strategy as a Position

5
Key Attributes of Strategy
  • Directs organization toward overall goals
    objectives.
  • Includes multiple stakeholders in decision
    making.
  • Must incorporate short- long-term perspectives.
  • Recognizes trade-offs between efficiency
    effectiveness.

6
Challenges of Strategic Managers
Short-term Goals Long-term Goals
Profitability
Key Stakeholders
Network
Changing Landscape
Long-Term Planning
Quarterly Performance
Develop Cohesive Organization
Diverse Workforce
7
Overall View of the Strategic Management Process
Analysis
Decisions
Actions
8
Strategic Management Process
9
Strategic Management Process
External Analysis
Strategic Choice
Strategy Implementation
Competitive Advantage
Objectives
Internal Analysis
Mission
Barney Hesterly p. 5
10
Analysis Mission Objectives
  • Vision statements are an inspiring, overarching,
    and long-term statement.
  • Mission statements encompasses both the purpose
    of the company and the basis of competition and
    competitive advantage.
  • Objectives are developed from the vision and
    mission statements.

11
Analysis External Internal
  • Analysis of the Firms External Environment
  • What are the trends in the industry?
  • What are the trends in the general environment?
  • What are the competitors trends?
  • Analysis of the Firms Internal Environment
  • What are the firms resources?
  • What are the firms capabilities?
  • What are the firms distinctive competencies?

12
Decisions (Strategic Choice)
  • Strategy Formulation
  • Functional-level (HR, Manufacturing, Marketing,
    etc.)
  • Business-level (Cost, differentiation, focus, or
    integrative)
  • Corporate-level (diversification, restructuring)

13
Actions(Strategy Implementation)
  • Strategy Implementation through
  • Organizational Structure.
  • Control Systems.
  • Leadership.
  • Response to Change.

14
Competitive Advantage
  • Definition the ability to create more economic
    value than competitors

15
Competitive Parity
  • The firms offerings are average
  • People do not have a preference for the
  • firms offering
  • The firm does not have a cost advantage
  • over others
  • Some things that may lead to competitive
  • parity may still be critical to success
  • (e.g., telephones)

16
Competitive Disadvantage
  • People may have an aversion to the firms
    offering.
  • A firm may have outdated technology/ equipment.
  • The firm may have a cost disadvantage.
  • A firm may have a negative reputation.

17
Competitive Advantage
  • Two Types of Difference
  • Preference for the firms output
  • people choose the firms output over others
  • people are willing to pay a premium
  • Cost advantage vis-à-vis competitors
  • lower costs of production/distribution

18
Competitive Advantage
  • Competitive advantage is often temporary
  • Competitive advantage typically results in high
    profits.
  • Profits attract competition.
  • Competition limits the duration of competitive
    advantage in most cases.

19
Competitive Advantage
  • However, may be sustainable if
  • Competitors are unable to imitate the source of
    advantage
  • No one conceives of a better offering.

20
Measuring Competitive Advantage
  • Two Classes of Measures
  • Accounting Measures
  • ROA, ROS, ROE, etc. that exceed industry
    averages.
  • Economic Measures
  • earning a return in excess of the cost of capital

21
Emergent vs. Intended Strategies
  • The strategic management process leads managers
    to intended strategies.
  • However,
  • Conditions often change or new information
    becomes available.
  • Managers respond and adopt emergent strategies.

22
Stakeholders
  • Stakeholders are individuals or groups inside or
    outside the company, that has a stake in and can
    influence an organizations performance.
  • Five primary stakeholder groups
  • Customers, 4. the Community
  • Employees, 5. Owners
  • Suppliers

23
Strategic Management Process
  • Summary
  • This course is not about mere survival, it is
    about thrivingachieving competitive advantage.
  • the strategic management process helps managers
    achieve competitive advantage.
  • competitive advantage depends on differences.
  • strategy is about discovering and exploiting
    these differences.

24
Strategic Management Process
  • Applying Strategy to Your Career
  • a solid understanding of strategy concepts will
    help set you apart from other job candidates.
  • you can use the process to identify and exploit
    difference between you and others.
  • you can use the process to determine if you want
    to stay with a company.
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