Management, 7e
Schermerhorn
Chapter 8
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc
Chapter 8
Strategic Management
 Planning ahead—study questions
– What are the foundations of strategic
competitiveness?
– What is the strategic management process?
– What types of strategies are used by
organizations?
– How are strategies formulated?
– What are current issues in strategy
implementation?
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What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
– Competitive advantage—operating in a
successful way that is difficult for competitors
to imitate.
– Sustainable competitive advantage—
consistently dealing with market and
environmental forces better than competitors.
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What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
– Strategy—a comprehensive action plan
providing long-term direction and guiding
resource utilization to accomplish
organizational goals with sustainable
competitive advantage.
– Strategic intent—focusing all organizational
energies on a unifying and compelling goal.
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What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
– Strategic management—the process of
formulating and implementing strategies to
accomplish long-term goals and sustain
competitive advantage.
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What are the foundations of strategic
competitiveness?
 Strategic management goals
– Formulate and implement strategies that yield
long-term, sustainable competitive advantage.
– Create above-average returns for investors.
• Earning above-average returns depends in part on
the organization’s environment.
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What is the strategic management
process?
 Strategy implementation
– The process of allocating resources and putting
strategies into action.
– All organizational and management systems
must be mobilized to support the
accomplishment of strategies.
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What is the strategic management
process?
 Analysis of values
– Values are broad beliefs about what is or is not
appropriate.
– Organizational culture reflects the dominant
value system of the organization as a whole.
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What is the strategic management
process?
 Analysis of objectives
– Operating objectives direct activities toward key and
specific performance results.
– Typical operating objectives:
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•
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Profitability
Market share
Human talent
Financial health
Cost efficiency
Product quality
Innovation
Social responsibility
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What is the strategic management
process?
 Analysis of organizational resources and
capabilities
– Assessing organizational Strengths and Weaknesses
within SWOT analysis
– Identifying core competencies
• Technology
• Human resources
• Manufacturing approaches
• Management talent
• Financial strength
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What is the strategic management
process?
 Analysis of industry and environment
– Assessing Opportunities and Threats within
SWOT analysis
– Assessment of actual and future environmental
conditions
• Macro environment
• Industry environment
– Unattractive industry
– Attractive industry
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What types of strategies are used by
organizations?
 Levels of strategy
– Corporate strategy—directs the organization as
a whole toward sustainable competitive
advantage.
– Business strategy—sets the strategic direction
for a single business unit or product line.
– Functional strategy—guides the use of
resources to implement business strategy,
focusing on activities within a specific area of
operations.
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What types of strategies are used by
organizations?
 Cooperative strategies
– Strategic alliances—two or more organizations
partner to pursue an area of mutual interest.
– Types of strategic alliances:
• Outsourcing alliances
• Supplier alliances
• Distribution alliances
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How are strategies formulated?
 Opportunities for achieving sustainable
competitive advantage:
– Cost and quality
– Knowledge and speed
– Barriers to entry
– Financial resources
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How are strategies formulated?
 Business-level strategy formulation
– Focus on finding ways to do a better job of
attracting customers within a given business or
industry.
– Helpful planning tools in formulating businesslevel strategies:
• Porter’s generic strategies
• Product life cycle
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How are strategies formulated?
 Porter’s generic strategies model
– Business-level strategic decisions are driven by:
• Competitive scope
• Source of competitive advantage
– Competitive scope and source of competitive
advantage combine to generate four generic
strategies.
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How are strategies formulated?
 Porter’s generic strategies model
– Generic strategies for gaining competitive
advantage:
• Differentiation strategy
• Cost leadership strategy
• Focused differentiation strategy
• Focused cost leadership strategy
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How are strategies formulated?
 Product life cycle
– A series of stages that a product or service goes
through during the life of its marketability.
– Stages of the life cycle:
• Introduction
• Growth
• Maturity
• Decline
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How are strategies formulated?
 Product life cycle
– Introduction and growth stages
• Use differentiation and prospector strategies
– Maturity stage
• Use focus and/or cost leadership strategies
– Decline stage
• Use defender or analyzer strategies
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How are strategies formulated?
 Corporate-level strategy formulation
– Key issue is the selection and refinement of the
organization’s mix of businesses.
– Approaches to formulating business-level
strategies:
• Portfolio planning
• Adaptive strategies
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How are strategies formulated?
 Portfolio planning approach
– Designed to help managers decide on investing
scarce organizational resources among
competing business opportunities.
– Useful for multibusiness or multiproduct
situations.
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