Management by hitt back porter CH06

Chapter 6
Strategic
Management

PowerPoint slides by
R. Dennis Middlemist
Colorado State University


Learning Objectives
After studying this chapter, you should be
able to:
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Define strategy
Explain the role of environmental analysis in
strategy formulation
Explain the strategic planning process
Utilize strategic planning tools, such as the
product life cycle model, portfolio matrix, and
SWOT analysis.

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Learning Objectives
After studying this chapter, you should be
able to:




3

Describe strategy implementation tools such
as the Seven S Model.
Describe the differences between intended
and emergent strategies.

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Competitive Advantage
 Competitive advantage
 The ability of a firm to win consistently over

the long term in a competitive situation.
 Competitive advantage is created through
the achievement of five qualities
 Superiority

 Non-substitutability

 Inimitability

 Appropriability

 Durability

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Five Qualities that Lead to
Competitive Advantage
Superiority

Superiority
 Are you significantly better

than your competitors?
 At what things are you
better?

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Five Qualities that Lead to
Competitive Advantage
Superiority

Inimitability

 Managers must create

Inimitability

barriers that make it hard
for others to copy their
superiority advantages
 Culture
 Product

design
 Marketing strategy
 And others

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Five Qualities that Lead to
Competitive Advantage
Superiority
Inimitability
Durability

Durability (long lasting)
 Legally protected
 Patents
 Copyrights
 Brand names

 Well-established
 Brand

image
 Reputation for quality

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Five Qualities that Lead to
Competitive Advantage
Superiority

Non-substitutability
 Can the customer’s need

Inimitability
Durability
Non-substitutability

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that you fulfill can be met
by alternative means?
 Encyclopedias

vs.
information availability on
the Internet
 Movie theater entertainment
vs. concert band
entertainment


Five Qualities that Lead to
Competitive Advantage
Superiority

Appropriability
 Can you actually capture

Inimitability
Durability

the profits that can be
made in the business?
 Supernormal returns
 Profits

Non-substitutability
Appropriability
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that are above the

average for a comparable
set of firms
 Primarily a function of
greater‑than‑average
cost‑price margins


Strategic Management Process:
Setting Direction
Strategic management process is a
planning process in which managers
1. Set the organization's general direction and

objectives
2. Formulate a specific strategy
3. Plan and carry out the strategy’s
implementation
4. Monitor results and make necessary
adjustments
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Strategic
Management
Process

Determine
strategic intent

Define
organizational mission

Analyze environment

Set objectives

Determine
requirements

Assess
resources

Develop action plans

Implement plans
Strategic
Planning
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Monitor outcomes

Feedback
Adapted from Exhibit 6.1: Strategic Management Process


Strategic Management Process:
Setting Direction

Strategic Intent

Strategic intent: what the organization
ultimately wants to be and do
 General identity, direction, and level of

aspirations of the organization
 A key objective is to inspire
 Should paint a general picture of aspiration
and engender a strong emotional response in
just a few words
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Strategic Management Process:
Setting Direction
Mission

Mission statement articulates the fundamental
purpose of the organization
 Company philosophy
 Company identity, or self-concept
 Principal products or services
 Customers and markets
 Geographic focus
 Obligations to shareholders
 Commitment to employees
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Mission Statement for the
Internal Revenue Service
The IRS mission is to “provide America’s taxpayers
top quality service by helping them
understand and meet their tax responsibilities
and by applying the tax law with
integrity and fairness to all.”

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Adapted from Exhibit 6.2 Mission Statement for the Internal Revenue Service


Strategic Management Process:
Setting Direction
Strategic Objectives

Strategic objectives translate the
strategic intent and mission of the firm into
concrete and measurable goals
 Facilitates a firm's ability to
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Allocate resources appropriately
Reach a shared understanding of priorities
Delegate responsibilities
Hold people accountable for results

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Strategic Management Process:
Setting Direction
Strategic Objectives
 Strategic objectives address many issues,

such as

 Revenue growth
 Profitability
 Customer satisfaction
 Market share
 Financial returns (e.g.,

return on equity, return
on assets)

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 Technological

leadership
 Cash flow
 Operating efficiency
(e.g., costs per unit,
expense per
employee)


Strategic Management Process:
Formulating a Strategy
 Competitive strategy: determining how

the company is going to compete and
achieve its strategic objectives, mission,
and ultimate strategic intent
 Generic strategies
 Techniques and tools

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Strategic Management Process:
Formulating a Strategy
 Generic strategies

 Cost leadership
 Differentiation
 Scope

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Cost Leadership

General player whose product or
service features command industry
average prices but whose costs are
significantly below the industry
average.

Niche player with average prices
and below-average costs that
focuses on a segment of
customers or a specific
geography.

Example: Wal-mart

Example: Columbia Sports

Differentiation

Strategy

Generic Strategies and Scope

General player whose product or
service features command
premium prices and whose costs
are at the industry average.

Niche player with average costs
but commanding premium prices
that focuses on the high end and
customers in a general or specific
geography.

Example: Sony

Example: Morgan Motors

General

Focused

Scope
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Adapted from Exhibit 6.3: Generic Strategies and Scope

Strategic Management Process:
Formulating a Strategy
 Internal and external analysis
 Tools and concepts
 Environmental analysis
 Value proposition
 Organizational analysis
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Value chain
Five primary activities
Four support activities


Value Proposition for Three
Car Companies
High
Company C

Equal
value line

Company B

Reliability

Company A

Best Value
Low
Low

High

Price
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Adapted from Exhibit 6.4: Value Proposition for Three Companies


Support Activities

The Value Chain
Firm infrastructure (e.g., Finance, Planning)
Human resource management
Technology development
Procurement
Inbound
logistics

Operations Outbound
logistics

Marketing
and sales

After-sale
service

Primary Activities
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Adapted from Exhibit 6.5: The Value Chain


Strategic Management Process:
Formulating a Strategy
 Leveraging the value chain
 Determine where in your value chain you
have the potential to add the greatest value
 Segment business activities, see the
important linkages and make adjustments
 Resource-based approach
 Recognize and exploit internal strengths of

the company

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Strategic Management Process:
Formulating a Strategy
 Core competencies
 Are interrelated sets of activities that deliver

competitive advantages in the short-term and longterm
 Provide access to a wide variety of markets
 Significantly contribute to perceived customer
benefits of the end products or services
 Are difficult for competitors to imitate

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Integrating Internal and
External Analyses

Product Life Cycle

Birth

Growth

Maturity

Decline

High

Low
Time
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Adapted from Exhibit 6.6: Product Life Cycle