Creating Competitive Advantage

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Introduction to Strategic

Management

Strategic

Management (BA 491)

Strategic Imperative

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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.

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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).

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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

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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.

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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

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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.

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Forms of Strategy

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

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

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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

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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

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Hierarchy of Goals

Company vision Company vision

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

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Hierarchy of Goals

Company vision Company vision Mission statements Mission statements

Strategic objectives

• Operationalize the mission statement

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

Strategic objectives

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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

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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.