Creating Competitive Advantage

Introduction to Strategic

Management

Strategic

Management (BA 491)

Strategic Imperative

Strategic Imperative

Strategic Management

• Strategic management is the study of why some firms outperform others.

• How to create a competitive advantage in the market place that is unique, valuable, and difficult to copy

• “Total organization” perspective, integrating across functional areas.

• Two perspectives of leadership: romantic view and external control perspective.

• Strategies put together an understanding of the

external environment with an understanding of internal

strengths and weaknesses.

Definition of Strategic Management

Strategic management consists of the analysis, decisions, and actions an organization

undertakes in order to create and sustain competitive advantages (Dess, Lumpkin, &

Eisner, Strategic Management: Creating

Competitive Advantage, 3rd Ed., p. 9).

Definition of Strategic Management

• Analysis

• Strategic goals (vision, mission, strategic objectives)

• Internal and external environment of the firm

• 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

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.

Mintzberg’s Views of Strategy

• Plan - consciously intended course of action

• Ploy - maneuver to outwit opponent

• Pattern - consistency in behavior

• Position - location in environment

• Perspective - way of perceiving the world

Forms of Strategy

• Formal versus informal - associated with size of firm and stage of development. Mintzberg’s

distinction between entrepreneurial and planning mode.

• Intended versus realized - intended strategies are the plans managers develop; realized

strategies are the actions that actually take

place over time.

Forms of Strategy

Source:H. Mintzberg and J. A. Waters, “Of Strategies, Deliberate and

Emergent,” Strategic Management Journal 6 (1985), pp. 257-72.

Strategic Management Process

• Analysis

• Hierarchy of goals

• Analysis of external and internal environments

• Formulation

• What business(es) should we be in?

• For each, what is the basis for competitive advantage (low cost, differentiation, focus)?

• Implementation

• Functional tactics

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

Company vision

Hierarchy of Goals

Company vision Company vision

Coherence in Strategic Direction

Mission statements

• Purpose of the company

• Basis of competition and competitive advantages

• More specific than vision

• Focused on the means by which the firm will compete

Mission statements

Mission statements

Hierarchy of Goals

Company vision Company vision Mission statements Mission statements

Coherence in Strategic Direction

Strategic objectives

• Operationalize the mission statement

• Measurable, specific, appropriate, realistic, timely, challenging, resolve conflicts that arise, and yardstick for rewards and incentives

Strategic objectives

Strategic objectives

Levels of Strategy

Corporate-level

Functional-level Business-level

Manager

Walt DIsney Pictures Touchstone Pictures...

Studio Entertainment

Disneyland...

Parks & Resorts

Disney Stores...

Consumer Products

ABC Network...

Media Networks CEO

DIsney Corporation

Does Strategic Planning Pay Off?

• Original research showed mixed results. Planning might not pay off for firms in static or turbulent

environments or for small firms.

• Miller and Cardinal’s (1994) meta-analysis found that strategic planning affects firm growth and profitability.

In particular, they found that:

• Planning  performance link true for formal and informal planning.

• Planning  performance link even stronger in turbulent environments.

• Firm size unrelated to effectiveness of planning.