STRATEGIC

MANAGEMENT

Bùi Đức Tuân, Assoc. Prof., PhD.

NEU Business School
Tel: 09330.23323
Email: [email protected]
 Course Overview
 Designed for BA students in Business
Administration
 Learning methods
 Lectures
 Case studies
 Group assignments (see Guidelines for Industry Analysis)
 Course schedule and Assessment plan (see
syllabus)
 Class rules
 All acts that affect negatively to the teaching and learning process
are strictly prohibited.
 Students who are late for more than 10 minutes after class starting
time will not be allowed to attend the class.
 Laptops, tablets and cell-phones are only allowed for the learning
purpose.
 Textbook: 2
 Hitt, Ireland, and Hoskisson (2016), Strategic Management:
 Course Learning Outcomes

Students will be able to:

 Understand the SM models, the company’s
vision and mission; the LT objectives;
 Analyze external environmental forces that
affect the opportunities and threats to the
business;
 Analyze internal factors of the firm to identify
strengths and weaknesses;
 Describe and develop business level, corporate
level and international strategies
 Describe and develop the means of strategy
implementation and control

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 Course contents

 Chapter 1: Strategic Management and

Strategic Competitiveness
 Chapter 2: The External Environment
 Chapter 3: The Internal Organization
 Chapter 4: Business-Level Strategy
 Chapter 5: Corporate-Level Strategy
 Chapter 6: International Strategy
 Chapter 7: Organizational Structure and
Controls
 Chapter 8: Strategic Leadership

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 CHAPTER 1: STRATEGIC MANAGEMENT
AND STRATEGIC COMPETITIVENESS

 Learning objectives
 Nature of strategy
 Importance of strategy
 Strategy models
 Firm’s Vision and Mission
 Stakeholders and Strategic
Leaders
 Strategic Management Process
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 Leaning Objectives
1. Define strategic competitiveness, strategy, competitive
advantage, etc.
2. Describe the competitive landscape and explain why
firms need strategies.
3. Use the industrial organization (I/O) model and
resource-based model to explain how firms can earn
above-average returns.
4. Describe vision and mission and discuss their value.
5. Define stakeholders and describe their ability to
influence organizations.
6. Describe the work of strategic leaders.
7. Explain the strategic management process.
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 Nature of strategy
 In military theory
 the employment of battles to gain the end of war
 the art of distributing and applying military means to fulfill
the ends of policy

 In game theory
 the rules that a player uses to choose between the
available actionable options

 In management theory
 … determination of the basic LT goals of an enterprise, and
the adoption of courses of action and the allocation of
resources necessary for carrying out these goals [A.
Chandler]
 ... combination of the ends (goals) for which the firm is
striving and the means (policies) by which it is seeking to
get there [M.E. Porter]
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 Twenty-First Century Competition

Rapid
Globalization technological
change

Increasing
importance
The global
Today’s of
economy
knowledge
Competitiv and people
e Markets

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 Importance of strategy

Formulation and
implementation of
a superior value-
creating strategy

Commitments and actions to achieve

above-average performance and returns

What the firm Competitive What the firm

will do advantage will not do

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 Firm’s Vision and Mission

 Vision
 A statement of what the firm wants to
be and expects to achieve
 A dream to be shared to stakeholders
 Guiding light for strategy

 Mission
 A statement of why the firm exists
 Define firm’s businesses

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 Firm’s Vision and Mission (2)

 A successful vision
 An image, NOT a picture
 Ambitious goals for LT
 Firm’s values and aspirations
 Attractive writing

 A good statement of mission

 Businesses in which the firm intends to compete and
customers it intends to serve
 A more concrete, near-term focus on current product
markets and customers than the firm’s vision
 Should be inspiring and relevant to all stakeholders.

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 Stakeholders & Strategic Leaders

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 Stakeholders & Strategic Leaders

Responsibilities of strategic leaders for development

and effective use of the firm’s human capital

Organizational
Education Strategic goals
culture and International
and skills of and global
ethical work assignments
employees standards
environment

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 Strategy models

 Industry Organization (I/O)

model

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 Strategy models (2)

 Resource-Based model

Core
competence
Capability A source of
An integrated competitive
set of resources advantage
Resources
Physical, human, and
organizational capital
(tangible and
intangible)

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 Strategy models (3)

Industry Organization Resource-Based

(I/O) Model Model

Competitive
Strategy
Decision

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 Strategic Management Process

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 CHAPTER 2: THE EXTERNAL ENVIRONMENT

 Learning objectives
 The nature of External Environment
 Dimensions of External Environment
 External Environment Analysis
 Key Success Factors

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 Leaning Objectives

1. Explain the importance of analyzing and understanding the firm’s

external environment.
2. Define and describe the general environment and the industry
environment.
3. Name and describe the general environment’s seven segments.
4. Identify the five competitive forces and explain how they
determine an industry’s profitability potential.
5. Define strategic groups and describe their influence on firms.
6. Describe what firms need to know about their competitors and
different methods used to collect intelligence about them.

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 The nature of External Environment

 Factors coming from the

outside of the firm that affect
its performance
 Factors having impacts on firms
 in different way
 with different level

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 Dimensions of External Environment

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 General Environment

 Dimensions in the broader society that

influence an industry and the firms
within it:
 Political/legal
 Economic
 Sociocultural
 Technological
 Demographic
 Global
 Physical
 …

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 Industry Environment

 The set of factors directly influencing a

firm and its competitive actions and
competitive responses New
Entrants

 Threat of new entrants

Industry
 Power of suppliers Supplier
s
Competitor
s
Buyers

 Power of buyers
 Threat of product substitutes Substitut
e
Products

 Intensity of rivalry among competitors

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 External Environmental Analysis

 General environment
 Focused on the future
 Industry environment
 Focused on factors and conditions
influencing a firm’s profitability within an
industry
 Competitor environment
 Focused on predicting the dynamics of
competitors’ actions, responses and
intentions
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 External Environmental Analysis
 Components of the External Environmental Analysis

Scanning • Identifying early signals of environmental

changes and trends

Monitorin • Detecting meaning through ongoing

g observations of environmental changes
and trends

Forecastin • Developing projections of anticipated

g outcomes based on monitored changes
and trends

Assessing • Determining the timing and importance of

environmental changes and trends for
firms’ strategies and their management
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 External Environmental Analysis

Opportunities Threats

A condition in the A condition in the

general environment general environment
that, if exploited that may hinder a firm’s
effectively, helps a firm efforts to achieve
achieve strategic strategic
competitiveness. competitiveness.

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 General Environmental Segments

 The Economic Segment

 Uncertainty in
 Market growth rates
 Consumer demand
 Inflation and interest rates
 Trade deficits or surpluses
 Budget deficits or surpluses
 Personal and business savings rates
 Gross domestic product

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 General Environmental Segments

 The Political/Legal Segment

 Regulations
 Consumer privacy laws
 Lobbying
 Antitrust, deregulation laws
 Taxation

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 General Environmental Segments

 The Sociocultural Segment

 Changing attitudes and cultural values
 Attitudes and approaches to health care
 Attitudes about quality of worklife
 Diverse and aging workforce
 Women in the workplace
 Concerns about environment
 Shifts in work and career preferences
 Shifts in product and service preferences

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 General Environmental Segments

 The Technological Segment

 Product innovations
 Rapid technological change and the risk of
disruption
 Knowledge application
 Growth of the Internet
 New communication technologies

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 General Environmental Segments

Important Critical
geopolitical global niche
trends markets
Global
Focusing
Growth of
Different
cultural and
the informal institutional
economy attributes

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 Industry Environment Analysis
 Industry Defined
 A group of firms producing
products that are close
substitutes.
 Firms use a rich mix of different
 Competitive strategies to pursue
above-average returns when
competing in a particular
industry.
 An industry’s structural
characteristics influence a firm’s
choice of strategies
 Factors influence all
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 Porter’s 5 forces model

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 Threat of New Entrants

 Barriers to Entry
 Economies of scale
 Product differentiation
 Capital requirements
 Switching costs
 Access to distribution channels
 Cost disadvantages independent of scale
 Government policy

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 Threat of Substitute Products

 The threat of substitute products

increases when:
 Buyers face few switching costs.
 The substitute product’s price is lower.
 Substitute product’s quality and performance
are equal to or greater than the existing
product.
 Differentiated industry products that
are valued by customers reduce this
threat.
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 Bargaining Power of Suppliers

 Supplier power increases when:

 Suppliers are large and few in number.
 Suitable substitute products are not available.
 Individual buyers are not large customers of
suppliers and there are many of them.
 Suppliers’ goods are critical to the buyers’
marketplace success.
 Suppliers’ products create high switching
costs.
 Suppliers pose a threat to integrate forward
into buyers’ industry.
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 Bargaining Power of Buyers

 Buyer power increases when:

 Buyers are large and few in number.
 Buyers purchase a large portion of an
industry’s total output.
 Buyers’ purchases are a significant portion of
a supplier’s annual revenues.
 Buyers’ switching costs are low.
 Buyers can pose threat to integrate backward
into the sellers’ industry.

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 Rivalry Among Competitors

 Industry rivalry increases when:

 There are numerous or equally balanced
competitors.
 Industry growth slows or declines.
 There are high fixed costs or high storage
costs.
 There is a lack of differentiation opportunities
or low switching costs.
 When the strategic stakes are high.
 When high exit barriers prevent competitors
from leaving the industry.
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 Interpreting Industry Analyses

Low entry barriers

Suppliers and buyers

have strong
positions
Unattractive
Strong threats
from substitute
Industry
products

Intense rivalry
(Low profit potential)
among
competitors

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 Interpreting Industry Analyses (2)

High entry
barriers
Suppliers and buyers
have weak positions

Attractive
Few threats from Industry
substitute
products
Moderate rivalry
among (High profit
competitors potential)

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 Strategic Groups

 Strategic Group Defined

 A set of firms emphasizing similar
strategic dimensions and using similar
strategies.
 Intra-strategic group competition is more
intense than is inter-strategic group
competition due to:
 Similar market positions
 Similar products
 Similar strategic actions

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 Competitor Analysis

 Competitor Intelligence
 The ethical gathering of needed
information
and data that provides understanding of:
 What drives the competitor, as shown by its
future objectives.
 What the competitor is doing and can do, as
revealed by its current strategy.
 What the competitor believes about the
industry, as shown by its assumptions.
 What the competitor’s capabilities are, as
shown by its strengths and weaknesses.
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 Competitor Analysis

• How do our goals

Future Objectives
compare with our
competitors’ goals?
• Where will the
emphasis be placed in
the future?
• What is the attitude
toward risk?

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 Competitor Analysis

Future Objectives
• How are we currently
competing?
Current Strategy • Does this strategy
support changes in the
competitive structure?

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 Competitor Analysis

Future Objectives • Do we assume the

future will be volatile?
• Are we operating
Current Strategy
under a status quo?
• What assumptions do
Assumptions our competitors hold
about the industry and
themselves?

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 Competitor Analysis

Future Objectives

Current Strategy
• What are our strengths
Assumptions and weaknesses?
• How do we rate
compared to our
Capabilities competitors?

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 Competitor Analysis

Future Objectives Response

• What will our

Current Strategy
competitors do in the
future?
Assumptions • Where do we hold an
advantage over our
competitors?
Capabilities • How will this change our
relationship with our
competitors?
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 Key Success Factors

 KSF defined
 Important elements required for a company to
compete in its target markets
 Competitive elements that most affect every
strategic group member’s ability to prosper in
the marketplace.
 Examples of KSF:
 Band name
 Service quality
 Innovation
 Leadership
 Etc.

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 External Environmental Analysis

Opportuniti
es and
threats

By studying the external environment,

firms identify what they might choose to
do.
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 CHAPTER 3: THE INTERNAL ORGANIZATION

 Learning objectives
 Competitive advantage
 Resources, Capabilities and Core
Competencies
 Value Chain Analysis
 Strengths, Weaknesses and Strategic
Options
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 Learning objectives
1. Explain why firms need to study and understand their internal
organization.

2. Define value and discuss its importance.

3. Define resources, capabilities and discuss their development.

4. Describe four criteria used to determine whether resources and

capabilities are core competencies.

5. Explain how firms analyze their value chain for the purpose of
determining where they are able to create value when using their
resources, capabilities, and core competencies.

6. Discuss the importance of identifying internal strengths and

weaknesses.

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 Why firms need to understand their
Internal Organization?

Unique resources,
capabilities, and
competencies
(required for
sustainable competitive
advantage)

By studying the internal environment, firms

identify what they can do

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 Internal Organization Analysis

Strengths Weaknesses

something a company is something the company

good at doing or does not have or does
characteristic that gives poorly or a condition that
it an important outs it at a
capability. disadvantageous positions.

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 Competitive Advantage

 Firms achieve strategic

competitiveness and earn above-
average returns when their core
competencies are effectively:
 Acquired.
 Bundled.
 Leveraged.

 Over time, the benefits of any value-

creating strategy can be duplicated
by competitors.
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 Competitive Advantage (2)

 Sustainability of a competitive
advantage is a function of:
 The rate of core competence
obsolescence because of
environmental changes.
 The availability of substitutes for the
core competence.
 The imitability of the core competence

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 Creating Value

 By exploiting their core competencies

or competitive advantages, firms
create value.
 Value is measured by:
 Product performance characteristics
 Product attributes for which customers will
pay
 Firms create value by innovatively
bundling and leveraging their
resources and capabilities.
 Superior
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1
Chapter
2
Chapter
3 value
Chapter
4 5 
Chapter
Above-average
Chapter
6
Chapter
7
Chapter
8
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 Creating Competitive Advantage

 Core competencies, in combination

with product-market positions, are
the firm’s most important sources of
competitive advantage.

 Core competencies of a firm, in

addition to its analysis of its
general, industry, and competitor
environments, should drive its
selection of strategies.
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 Resources, Capabilities
& Core Competencies

 Resources
Competitive
Advantage  Are the source of a
firm’s capabilities.
 Are broad in scope.
Core  Cover a spectrum of
Competencies
individual, social and
Capabilities organizational
phenomena.
 Alone, do not yield a
Resources
• Tangible competitive
• Intangible
advantage.

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 Resources
 Resources  Types of Resources
 Are a firm’s assets,  Tangible resources
including people  Financial resources
and the value of  Physical resources
its brand name  Technological
that represent resources
 Organizational
inputs into a firm’s
resources
production
process:  Intangible
 Capital equipment resources
  Human resources
Skills of employees
  Innovation
Brand names
 resources
Financial resources
 Reputation
 Talented managers
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 Tangible Resources

Financial • The firm’s borrowing capacity

Resources • The firm’s ability to generate internal
funds

Organization • The firm’s formal reporting structure

al Resources

Physical • The sophistication and location of a

Resources firm’s plant and equipment and the
attractiveness of its location
• Distribution facilities
• Product inventory

Technologica • Availability of technology-related

l Resources resources such as copyrights, patents,
trademarks, and trade secrets
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 Intangible Resources

Human • Knowledge
Resources • Trust
• Skills
• Abilities to collaborate with others

Innovation • Ideas
Resources • Scientific capabilities
• Capacity to innovate

Reputational • Brand name

Resources • Perceptions of product quality,
durability, and reliability
• Positive reputation with stakeholders
such as suppliers and customers

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 Capabilities

 Capabilities
Competitive
 Represent the capacity to
Advantage
deploy resources that have
been purposely integrated to
achieve a desired end state
Core
Competencies  Emerge over time through
complex interactions among
tangible and intangible
Capabilities
resources
 Often are based on
Resources developing, carrying and
• Tangible
• Intangible exchanging information and
knowledge through the firm’s
human capital
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 Capabilities

 Capabilities (cont’d)
Competitive  The foundation of
Advantage
many capabilities lies
in:
Core  The unique skills and
Competencies knowledge of a firm’s
employees
Capabilities  The functional
expertise of those
Resources employees
• Tangible
• Intangible  Capabilities are often
developed in specific
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functional areas or as
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part of a functional
5 6 7 8
 Capabilities

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 Resources, Capabilities
& Core Competencies

Competitive  The four criteria for

Advantage determining strategic
capabilities:
Core  Value
Competencies
 Rarity
Capabilities
 Costly-to-imitate
Resources  Nonsubstitutability
• Tangible
• Intangible

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 Core Competencies

Core Competencies
Competitive  Resources and capabilities
Advantage
that are the sources of a
firm’s competitive
Core advantage:
Competencies Distinguish a firm
competitively and reflect its
Capabilities personality.
Emerge over time through an
organizational process of
Resources
• Tangible accumulating and learning
• Intangible how to deploy different
resources and capabilities.

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 Core Competencies

Core Competencies
Competitive
Advantage  Activities that a firm
performs especially well
compared to competitors.
Core
Competencies  Activities through which
the firm adds unique
Capabilities value to its goods or
services over a long
Resources period of time.
• Tangible
• Intangible

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 Resources, Capabilities
& Core Competencies

Sustainable The Four Criteria of

Competitive
Advantage
Sustainable
Competitive
Four Criteria of Advantage
Sustainable
Advantages
 Valuable
capabilities
 Rare capabilities
• Valuable
•
•
Rare
Costly to imitate
 Costly to imitate
• Nonsubstitutable
 Nonsubstituable

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 Competitive Advantage

Sustainable  Valuable
Competitive capabilities
Advantage
 Help a firm
neutralize threats
Four Criteria of
Sustainable or exploit
Advantages opportunities.

• Valuable  Rare capabilities

• Rare
• Costly to imitate  Are not possessed
• Nonsubstitutable
by many others.

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 Building Competitive Advantage

 Costly-to-Imitate
Sustainable
Capabilities
Competitive
Advantage  Historical
 A unique and a valuable
organizational culture or
Four Criteria of brand name
Sustainable
Advantages
 Ambiguous cause
 The causes and uses of
a competence are
•
unclear
Valuable
• Rare  Social complexity
• Costly to Imitate
•  Interpersonal
Nonsubstitutable
relationships, trust, and
friendship among
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managers,
Chapter
suppliers,
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and customers
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 Building Competitive Advantage

Sustainable  Nonsubstitutable
Competitive Capabilities
Advantage
 No strategic
equivalent
Four Criteria of
Sustainable  Firm-specific
Advantages knowledge
 Organizational
• Valuable
culture
• Rare  Superior execution
• Costly to imitate
• Nonsubstitutable of the chosen
business model

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 Value Chain Analysis

Allows a firm to understand the parts

of its operations that create value
and those that do not.
A template that firms use to:
 Understand their cost position.
 Identify multiple means that might be
used to facilitate implementation of a
chosen business-level strategy.

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 Value Chain Analysis

 Primary activities are involved with:

 A product’s physical creation
 A product’s sale and distribution to
buyers
 The product’s service after the sale
 Support Activities
 Provide the assistance necessary for
the primary activities to take place.

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 Value Chain Analysis
Support Activities

Firm Infrastructure

Human Resource Mgmt.

M
ar
gi
Technological Development

n
Procurement

Marketing and Sales

Primary Activities

Operations
Inbound Logistics

Outbound Logistics

Service

M
ar
in g
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 Value Chain Analysis

 Value Chain
 Shows how a product moves from the raw-
material stage to the final customer.
 To be a source of competitive
advantage, a resource or capability
must allow the firm:
 To perform an activity in a manner that is
superior to the way competitors perform
it, or
 To perform a value-creating activity that
competitors cannot complete.
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 Value Chain Analysis: Primary Activities

 Inbound Logistics
 Activities used to receive, store, and
disseminate inputs to a product
 Operations
 Activities necessary to convert the
inputs provided by inbound logistics
into final product form
 Outbound Logistics
 Activities involved with collecting,
storing, and physically distributing the
product to customers
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 Value Chain Analysis: Primary Activities

 Marketing and Sales

 Activities completed to provide the
means through which customers can
purchase products and to induce them
to do so.
 Service
 Activities designed to enhance or
maintain a product’s value
 Each activity should be examined
relative to competitor’s abilities and
rated as superior, equivalent or
1 inferior.
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2
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3
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4
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5
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6
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7
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8
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 Value Chain Analysis: Support Activities

 Procurement
 Activities completed to purchase the
inputs needed to produce a firm’s
products.
 Technological Development
 Activities completed to improve a
firm’s product and the processes used
to manufacture it.
 Human Resource Management
 Activities involved with recruiting,
hiring, training, developing, and
Chapter compensating all personnel.
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1 2 3 4 5 6 7 8
 Value Chain Analysis: Support Activities

 Firm Infrastructure
 Activities that support the work of the
entire value chain (general
management, planning, finance,
accounting, legal, government
relations, etc.)
 Effectively and consistently identify
external opportunities and threats
 Identify resources and capabilities
 Support core competencies
 Each activity should be examined
relative to competitor’s abilities and
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1
rated as superior, equivalent or
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2
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3
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4
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5
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6
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7
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8
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 Outsourcing

 The purchase of a value-creating

activity from an external supplier
 Few organizations possess the
resources and capabilities required to
achieve competitive superiority in all
primary and support activities.
 By performing fewer capabilities:
 A firm can concentrate on those areas
in which it can create value.
 Specialty suppliers can perform
outsourced capabilities more efficiently.
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 Competencies, Strengths,
Weaknesses, and Strategic Decisions

 Cautions and Reminders:

 Never take for granted that core
competencies will continue to provide a
source of competitive advantage.
 Determining what the firm can do through
continuous and effective analyses of its
internal environment will increase the
likelihood of long-term competitive
success.

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 SWOT Analysis

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 Strategic Options

 O/T and S/W combinations

 Options for strategies

 Evaluation of strategic options

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 CHAPTER 4: BUSINESS-LEVEL STRATEGY

 Learning Objectives
 Core Competencies
 Customers and Business-Level Strategies
 Competitive Advantages and Competitive
Scope
 Business-Level Strategy: Generic
Strategies
 Business-Level Strategies: Trade-off
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1
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2
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3
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4
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5
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6
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7
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8
84
 Learning Objectives
1. Define business-level strategy.
2. Discuss the relationship between customers and
business-level strategies in terms of who, what, and
how.
3. Explain the differences among business-level
strategies.
4. Use the five forces of competition model to explain how
above-average returns can be earned through each
business-level strategy.
5. Describe the risks of using each of the business-level
strategies.

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 Business–Level Strategy
 An integrated and coordinated set of
commitments and actions the firm uses
to gain a competitive advantage by
exploiting core competencies in specific
product markets.

 Key question: How to compete

successfully in a given business?

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 Core Competencies &
Strategy

Resources and superior capabilities that

Core
are sources of competitive advantage
Competencies
over a firm’s rivals

An integrated and coordinated set of

Strategy actions taken to exploit core
competencies and gain competitive
advantage

Providing value to customers and

Business-level
Strategy gaining competitive advantage by
exploiting core competencies in
individual product markets

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 Customers: Their Relationship
with Business-Level Strategies

Who will be
served?

Key Issues
in What needs will
Business-level be satisfied?
Strategy

How will those

needs be satisfied?

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 Determining the Customers to Serve

 Market segmentation
 A process used to cluster people with
similar needs into individual and
identifiable groups.

All Customers
Consumer Industrial
Markets Markets

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 Determining Which
Customer Needs to Satisfy

 Customer needs are related to a

product’s benefits and features.
 Customer needs are neither right nor
wrong, good nor bad.
 Customer needs represent desires in
terms of features and performance
capabilities.

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 Determining Core Competencies
Necessary to Satisfy Customer Needs

 Firms must decide:

 Who to serve, what customer needs to
meet, and how to use core competencies
to implement value creating strategies
that satisfy target customers’ needs.
 Only firms with capacity to
continuously improve, innovate and
upgrade their competencies can
expect to meet and/or exceed
customer expectations across time.

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 Business-Level Strategy: Purpose

 Business-Level Strategies
 Are intended to create differences
between the firm’s competitive position
and those of its competitors.

 To position itself, the firm must decide

whether it intends to:
 Perform activities differently or
 Perform different activities as compared to
its rivals.

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 Competitive Advantage: Types

 Achieving lower overall costs than

rivals
 Performing activities differently (reducing
process costs)

 Possessing the capability to

differentiate the firm’s product or
service and command a premium price
 Performing different (more highly valued)
activities.
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 Competitive Scope

 Broad Scope
 The firm competes in
many customer
segments.

 Narrow Scope
 The firm selects a
segment or group of
segments in the
industry and tailors its
strategy to serving
them at the exclusion
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of others.
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 Business-Level Strategies: Types
 Choice of Scope & Competitive
Advantage Basis for Customer Value
Lowest Cost Distinctiveness

Broad Cost Leadership Differentiation

Target
Integrated Cost
Target
Leadership/
Market Differentiation

Narrow Focused Cost Focused

Target Leadership Differentiation

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 Cost Leadership Strategy
 An integrated set of actions taken to
produce goods or services with
features that are acceptable to
customers at the lowest cost, relative
to that of competitors.
 Product Characteristics
 Relatively standardized (commoditized)
products
 Features broadly acceptable to many
customers
 Lowest competitive price
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 Cost Leadership Strategy
 Cost saving actions required by this
strategy:
 Building efficient scale facilities
 Tightly controlling production costs and
overhead
 Minimizing costs of sales, R&D and service
 Building efficient manufacturing facilities
 Monitoring costs of activities provided by
outsiders
 Simplifying production processes
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 Cost Leadership Strategy

 How to obtain a Cost Advantage?

Determine Reconfigure
and control Value Chain
Cost Drivers if needed

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 Cost Leadership Strategy:
Learning Curver

Unitary
cost

Cummulative
quantity

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 Cost Leadership Strategy:
Cost Drivers
 Econimies of Scale
 Larger production quantity
 Smaller marginal cost
 Lower price policy
 Get market share and become leader

 Other drivers
 Effective management
 Innovation (products, process)
 Automation
 Outbound production
 Etc.
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 Cost Leadership Strategy:
Reconfigure Value Chain

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 Cost Leadership Strategy:
Power against competitive forces
Can frighten off new entrants
due to:
Can mitigate suppliers’ power - Their need to enter on a large
New
by: scale in order to be cost
entrant competitive.
- Being able to absorb cost
increases due to low cost
s - The time it takes to move down
Due the
to cost leader’s
industry learning curve.
position. advantageous position:
- Being able to make very large - Rivals hesitate to
purchases, reducing chance of compete on basis of
supplier using power. price.
- Lack of price
competition leads to
Suppliers Rivalry greater profits.
Buyers
among
competitors
Cost leader is well positioned Can mitigate buyers’ power
to: by:
- Lower prices in order to Driving prices far below
maintain its value position. competitors, causing them
- Make investments to add to exit, thus shifting power
Substitut
features unavailable in with buyers (customers)
substitutes. e
back to the firm.
- Buy intellectual property and products
patents developed
Chapter
by potential
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substitutes.
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 Cost Leadership Strategy
 Competitive Risks
 Processes used to produce and distribute
good or service may become obsolete due
to competitors’ innovations.
 Too much focus on cost reductions may
occur at expense of customers’
perceptions of differentiation.
 Competitors, using their own core
competencies, may successfully imitate
the cost leader’s strategy.

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 Differentiation Strategy
 An integrated set of actions taken to
produce goods or services (at an
acceptable cost) that customers
perceive as being different in ways that
are important to them

 Focus is on nonstandardized products

 Appropriate when customers value

differentiated features more than they
value low cost.
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 Differentiation Strategy
 How to obtain a Differentiation
Advantage?
Control Reconfigure
Cost Drivers Value Chain to
if needed maximize

 Lower buyers’ costs

 Raise performance of product or service
 Create sustainability through:
 Customer perceptions of uniqueness
 Customer reluctance to switch to non-
unique product or service
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 Differentiation Strategy:
Reconfigure Value Chain

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 Differentiation Strategy:
Power against competitive forces
Can defend against new entrants
because:
- New products must surpass proven
Can mitigate suppliers’ power New products.
by: entrant - New products must be at least equal to
performance of proven products, but
- Absorbing price increases due s offered at lower prices.
to higher margins.
- Passing along higher supplier Defends against
competitors because
prices because buyers are
customer’s brand loyalty to
loyal to differentiated brand. differentiated product offsets
price competition.

Suppliers Rivalry Buyers

among
competitors
Well positioned relative to Can mitigate buyers’
substitutes because: Brand power because well
loyalty to a differentiated product differentiated products
tends to reduce customers’ reduce customer sensitivity
testing of new products or to price increases.
Substitut
switching brands.
e
products
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 Differentiation Strategy:
Competitive Risks

 The price differential between the

differentiator’s product and the cost
leader’s product becomes too large.
 Differentiation ceases to provide value
for which customers are willing to pay.
 Experience narrows customers’
perceptions of the value of
differentiated features.
 Counterfeit goods replicate the
differentiated features of the firm’s
products.
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 Focus Strategy [Defined]
 An integrated set of actions taken to
produce goods or services that serve
the needs of a particular competitive
segment.
 Particular buyer group—youths or senior
citizens
 Different segment of a product line—
professional craftsmen versus do-it-
yourselfers
 Different geographic markets—Urban area
versus Rural area
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 Focus Strategy: Types
 Types of focused strategies
 Focused cost leadership strategy
 Focused differentiation strategy

 To implement a focus strategy, firms

must be able to:
 Complete various primary and support
activities in a competitively superior
manner, in order to develop and sustain
a competitive advantage and earn
above-average returns.
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 Focus Strategy: Drivers
 Large firms may overlook small niches.
 A firm may lack the resources needed
to compete in the broader market.
 A firm is able to serve a narrow market
segment more effectively than can its
larger industry-wide competitors.
 Focusing allows the firm to direct its
resources to certain value chain
activities to build competitive
advantage.
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 Focus Strategy: Competitive Risks

 A focusing firm may be “outfocused”

by its competitors.
 A large competitor may set its sights
on a firm’s niche market.
 Customer preferences in niche market
may change to more closely resemble
those of the broader market.

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 Business-Level Stratetgies: Trade-off

 Often involves compromises

 Becoming neither the lowest cost nor the
most differentiated firm.

 Becoming “stuck in the middle”

 Lacking the strong commitment and
expertise that accompanies firms following
either a cost leadership or a differentiated
strategy.

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 CHAPTER 5: CORPORATE-LEVEL STRATEGY

 Learning Objectives
 Corporate – Level Strategies: Definition
and Key Issues
 Corporate – Level Strategies:
Diversification
 Resources for Diversification
 Diversification: External Incentives
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 Learning Objectives
1. Define corporate-level strategy and discuss its
purpose.
2. Describe different levels of diversification achieved
using different corporate-level strategies.
3. Explain three primary reasons firms diversify.
4. Describe how firms can create value by using a related
diversification strategy.
5. Explain the two ways value can be created with an
unrelated diversification strategy.
6. Discuss the incentives and resources that encourage
diversification.
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 Corporate-Level Strategy: Defined

 Set of actions taken by the firm to

gain a competitive advantage by
selecting and managing a group of
different businesses competing in
different product markets.

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 Corporate-Level Strategy: Key Questions

 Corporate-level Strategy’s Value

 The degree to which the businesses in the
portfolio are worth more under the
management of the firm than they would
be under other ownership.
 What businesses should
the firm be in?
 How should the corporate
office manage the
group of businesses?
Business Units
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 Corporate-Level Strategy: Diversification

 Diversification strategies play a major

role in the behavior of large firms.
 Product diversification concerns:
 The scope of the industries and markets
in which the firm competes.
 How managers buy, create and sell
different businesses to match skills and
strengths with opportunities presented to
the firm.

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 Diversification: Low Level

Single Business
More than 95% of
revenue comes from a A
single business.

Dominant Business
Between 70% and 95% of
revenue comes from a single
business.
A
B
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 Diversification: Moderate to High Level

Related Constrained Related Linked (mixed

(Vertical Integration) related and unrelated)
 businesses share product,  limited links between
technological and businesses.
distribution linkages.

A A

B C B C
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 Diversification: Very High Level

 Unrelated Diversification
 no common links between businesses.

B C

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 Diversification:
Value-Creating Strategies

High Both Operational and

Related Constrained Corporate
Diversification Relatedness
Operational Vertical Integration (Rare capability that
(Market Power) creates diseconomies of
Relatedness: scope)
Sharing
Activities
between Unrelated Related Linked
Businesses Diversification Diversification
(Financial Economies) (Economies of Scope)
Low

Low High
Corporate Relatedness: Transferring Skills
into Businesses through Corporate Headquarters

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 Related Diversification:
Economies of Scope

 Value is created from economies of

scope through:
 Operational relatedness in sharing
activities
 Corporate relatedness in transferring skills
or corporate core competencies among
units.
 The difference between sharing
activities and transferring
competencies is based on how the
resources are jointly used to create
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1
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2
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3
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4
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5
Chapter
6
Chapter
7
Chapter
8
123
 Related Diversification:
Economies of Scope

 Value is created from economies of

scope through:
 Operational relatedness in sharing
activities
 Corporate relatedness in transferring skills
or corporate core competencies among
units.
 The difference between sharing
activities and transferring
competencies is based on how the
resources are jointly used to create
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1
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2
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3
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4
Chapter
5
Chapter
6
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7
Chapter
8
124
 Sharing Activities

 Operational Relatedness
 Created by sharing either a primary
activity such as inventory delivery
systems, or a support activity such as
purchasing.
 Activity sharing requires sharing strategic
control over business units.
 Activity sharing may create risk because
business-unit ties create links between
outcomes.

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 Transferring Corporate Competencies

 Corporate Relatedness
 Using complex sets of resources and
capabilities to link different businesses
through managerial and technological
knowledge, experience, and expertise.

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 Corporate Relatedness
 Creates value in two ways:
 Eliminates resource duplication in the
need to allocate resources for a second
unit to develop a competence that already
exists in another unit.
 Provides intangible resources (resource
intangibility) that are difficult for
competitors to understand and imitate.
 A transferred intangible resource gives the
unit receiving it an immediate competitive
advantage over its rivals.

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 Related Diversification: Market
Power
 Market power exists when a firm can:
 Sell its products above the existing competitive level
and/or
 Reduce the costs of its primary and support activities
below the competitive level.
 Multipoint Competition
 Two or more diversified firms simultaneously compete
in the same product areas or geographic markets.
 Vertical Integration
 Backward integration—a firm produces its own inputs.
 Forward integration—a firm operates its own
distribution system for delivering its outputs.

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 Related Diversification: Complexity
 Simultaneous Operational Relatedness
and Corporate Relatedness
 Involves managing two sources of
knowledge simultaneously:
 Operational forms of economies of scope
 Corporate forms of economies of scope
 Many such efforts often fail because of
implementation difficulties.

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 Unrelated Diversification
 Financial Economies
 Are cost savings realized through
improved allocations of financial
resources.
 Based on investments inside or outside the
firm
 Create value through two types of
financial economies:
 Efficient internal capital allocations
 Purchase of other corporations and the
restructuring their assets
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 Unrelated Diversification (cont’d)

 Efficient Internal Capital Market

Allocation
 Corporate office distributes capital to
business divisions to create value for
overall company.
 Corporate office gains access to information
about those businesses’ actual and
prospective performance.
 Conglomerate life cycles are fairly short
life cycle because financial economies are
more easily duplicated by competitors
than are gains from operational and
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131
 Unrelated Diversification (cont’d)

 Efficient Internal Capital Market

Allocation
 Corporate office distributes capital to
business divisions to create value for
overall company.
 Corporate office gains access to information
about those businesses’ actual and
prospective performance.
 Conglomerate life cycles are fairly short
life cycle because financial economies are
more easily duplicated by competitors
than are gains from operational and
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132
 Unrelated Diversification:
Restructuring

 Restructuring creates financial

economies
 A firm creates value by buying and
selling other firms’ assets in the external
market.
 Resource allocation decisions may
become complex, so success often
requires:
 Focus on mature, low-technology
businesses.
 Focus on businesses not reliant on a
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 Resources and Diversification
 A firm must have both:
 Incentives to diversify
 The resources required to create value
through diversification—cash and tangible
resources (e.g., plant and equipment)
 Value creation is determined more by
appropriate use of resources than by
incentives to diversify.
 Strategic competitiveness is improved
when the level of diversification is
appropriate for the level of available
resources.
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 Diversification: External Incentives

Anti-trust • Antitrust laws in 1960s and 1970s

Legislatio
discouraged mergers that created
n
increased market power (vertical or
horizontal integration.
• Mergers in the 1960s and 1970s thus
tended to be unrelated.
• Relaxation of antitrust enforcement
results in more and larger horizontal
mergers.
• Early 2000: antitrust concerns seem
to be emerging and mergers now
more closely scrutinized.

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 Diversification: External Incentives

Anti-trust • Antitrust laws in 1960s and 1970s

Legislatio
discouraged mergers that created
n
increased market power (vertical or
horizontal integration.
• Mergers in the 1960s and 1970s thus
tended to be unrelated.
• Relaxation of antitrust enforcement
results in more and larger horizontal
mergers.
• Early 2000: antitrust concerns seem
to be emerging and mergers now
more closely scrutinized.

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 Diversification: External Incentives

Anti-trust • High tax rates on dividends cause

Legislation a corporate shift from dividends to
buying and building companies in
high-performance industries.
Tax Laws
• 1986 Tax Reform Act
 Reduced individual ordinary income
tax rate from 50 to 28 percent.
 Treated capital gains as ordinary
income.
 Created incentive for shareholders to
prefer dividends to acquisition
investments.

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 Diversification: External Incentives

Low • High performance eliminates the

Performanc
e need for greater diversification.
• Low performance acts as
incentive for diversification.
• Firms plagued by poor
performance often take higher
risks (diversification is risky).

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 Diversification: External Incentives

Low
Performanc • Diversification may be
e
defensive strategy if:
Uncertain
Future  Product line matures.
Cash  Product line is threatened.
Flows
 Firm is small and is in
mature or maturing industry.

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 Diversification: External Incentives

Low • Synergy exists when the value

Performance created by businesses working
together exceeds the value created
Uncertain by them working independently
Future Cash • … but synergy creates joint
Flows
interdependence between business
units.
Synergy
and Firm • A firm may become risk averse and
Risk constrain its level of activity sharing.
Reduction • A firm may reduce level of
technological change by operating in
more certain environments.

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 Value-Reducing Diversification:
Managerial Motives to Diversify

 Managerial motives to diversify:

 Managerial risk reduction
 Desire for increased compensation
 Build personal performance reputation

 Effects of inadequate internal firm

governance
 Diversification fails to earn even average
returns
 Threat of hostile takeover
 Self-interest actions of entrenched
1
management
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2
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3
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4
Chapter
5
Chapter
6
Chapter
7
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8
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 CHAPTER 6: INTERNATIONAL STRATEGY

 Learning Objectives
 Int’l Opportunities
 Int’l Strategy Benefits
 Int’l Corporate - Level Strategies
 Int’l Modes of Entry
 Int’l Strategies: Pros & Cons
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 Learning Objectives
1. Explain incentives that can influence firms to use an international
strategy.
2. Identify three basic benefits firms achieve by successfully
implementing an international strategy.
3. Explore the determinants of national advantage as the basis for
international business-level strategies.
4. Describe the three international corporate-level strategies.
5. Discuss environmental trends affecting the choice of international
strategies, particularly international corporate-level strategies.
6. Explain the five modes firms use to enter international markets.
7. Discuss the two major risks of using international strategies.
8. Discuss the strategic competitiveness outcomes associated with
international strategies particularly with an international
diversification strategy.

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 Identifying Int’l Opportunities
 International Strategy
 A strategy through which the firm sells its
goods or services outside its domestic market.
 Incentives to use international strategy
 New market expansion extends product life
cycle.
 Gain access to materials and resources.
 Integration of operations on a global scale
 Better use of rapidly developing technologies
 International markets yield potential new
opportunities.
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 Rationale for Int’l Diversification

 Extend a Product’s Life Cycle

Firm introduces Product demand Foreign

innovation in develops and firm competition
domestic market exports products begins production

Production is standardized
Firm begins
and relocated to low cost
production abroad
countries

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 Int’l. Strategy Benefits

 Increased Market Size

 Domestic market may lack the size to
support efficient scale manufacturing
facilities.
 Economies of Scale (or Learning)
 Expanding size or scope of markets helps
to achieve economies of scale in
manufacturing as well as marketing, R&D
or distribution.
 Can spread costs over a larger sales
base.
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146
1
 Can increase profit per unit.
2 3 4 5 6 7 8
 Int’l. Strategy Benefits

 Location Advantages
 Low cost markets aid in developing
competitive advantage by providing
access to:
 Raw materials
 Transportation
 Lower costs for labor
 Key customers
 Energy

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 Determinants of National Advantage

 Porter’s Diamond Model

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 Determinants of National Advantage

 Factors of production
 The inputs necessary to compete in any
industry
 Labor Land Natural resources
 Capital Infrastructure
 Basic factors
 Natural and labor resources
 Advanced factors
 Digital communication systems and an
educated workforce
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 Determinants of National Advantage

Demand Conditions
 Characterized by the nature and size of
buyers’ needs in the home market for the
industry’s goods or services.
Size of the market segment can lead to scale-
efficient facilities.
Efficiency can lead to domination of the
industry in other countries.
Specialized demand may create opportunities
beyond national boundaries.

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 Determinants of National Advantage

Related and Supporting Industries

 Supporting services, facilities, suppliers and so
on.
Support in design
Support in distribution
Related industries as suppliers and buyers
Firm Strategy, Structure and Rivalry
 The pattern of strategy, structure, and rivalry
among firms.
Common technical training
Methodological product and process improvement
Cooperative and competitive systems

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 Int’l Corporate-Level Strategy
 Focuses on the scope of operations:
 Product diversification
 Geographic diversification
 Required when the firm operates in:
 Multiple industries, and
 Multiple countries or regions
 Headquarters unit guides the strategy
 But business or country-level managers
can have substantial strategic input.

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 Int’l Corporate-Level Strategy

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 Multidomestic Strategy
 Strategy and operating decisions are
decentralized to strategic business units (SBU) in
each country.
 Products and services are tailored to local
markets.
 Business units in one country are independent of
each other.
 Assumes markets differ by country or regions.
 Focus on competition in each market.
 Prominent strategy among European firms due to
broad variety of cultures and marketsMultidomestic
in Europe.
strategy

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 Global Strategy
 Products are standardized across national
markets.
 Business-level strategic decisions are centralized
in the home office.
 Strategic business units (SBU) are assumed to be
interdependent.
 Emphasizes economies of scale.
 Often lacks responsiveness to local markets.
 Requires resource sharing and coordination
across borders (hard to manage).
Global
strategy

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 Transnational Strategy
 Seeks to achieve both global efficiency and local
responsiveness.
 Difficult to achieve because of simultaneous
requirements for:
 Strong central control and coordination to achieve
efficiency
 Decentralization to achieve local market
responsiveness
 Pursuit of organizational learning to achieve
competitive advantage.
Transnational
strategy

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 Environmental Trends
 Liability of Foreignness
 Legitimate concerns about the relative
attractiveness of global strategies
 Global strategies not as prevalent as once
thought
 Difficulty in implementing global
strategies
 Regionalization
 Focusing on particular region(s) rather
than on global markets
 Better understanding of the cultures, legal
and social norms
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 Internationalization: Modes of Entry

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158
 Choice of Int’l Mode of Entry

What’s the best solution?

Situation Optimal Solution
The
Thefirm
firmhas
hasnonoforeign
foreign Exporting
Exporting
manufacturing
manufacturingexpertise
expertise
and
andrequires
requiresinvestment
investment
only
onlyinindistribution.
distribution.

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 Choice of Int’l Mode of Entry

What’s the best solution?

Situation Optimal Solution

The
Thefirm
firmneeds
needsto
to Licensing
Licensing
facilitate
facilitatethe
theproduct
product
improvements
improvements
necessary
necessaryto toenter
enter
foreign
foreignmarkets.
markets.

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160
 Choice of Int’l Mode of Entry

What’s the best solution?

Situation Optimal Solution

The
Thefirm
firmneeds
needsto to Strategic
StrategicAlliance
Alliance
connect
connect withwithanan
experienced
experiencedpartnerpartner
already
alreadyin inthe
thetargeted
targeted
market
market and andtotoreduce
reduce
its
itsrisk
riskthrough
throughthe the
sharing
sharingof of costs.
costs.

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161
 Choice of Int’l Mode of Entry

What’s the best solution?

Situation Optimal Solution

The
Thefirm
firmis
isfacing
facing Strategic
StrategicAlliance
Alliance
uncertain
uncertainsituations
situations
such
suchasasananemerging
emerging
economy
economyin inits
its
targeted
targetedmarket.
market.

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162
 Choice of Int’l Mode of Entry

What’s the best solution?

Situation Optimal Solution

The
Thefirm
firmneeds
needsrapid
rapid Acquisitions
Acquisitions
cross-border
cross-borderaccess
accesstoto
new
new international
international
markets
markets

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163
 Choice of Int’l Mode of Entry

What’s the best solution?

Situation Optimal Solution

The
Thefirm’s
firm’sintellectual
intellectual Wholly-owned
Wholly-owned
property
propertyrights
rightsininan
an Subsidiary
Subsidiary
emerging
emergingeconomy
economyare are
not
not well
well protected,
protected, the
the
number
numberof offirms
firmsininthe
the
industry
industryis isgrowing
growingfast,
fast,
and
andthe
theneed
needfor forglobal
global
integration
integrationis ishigh.
high.

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164
 Risks in an Int’l Environment

 Political Risks  Economic Risks

 Instability in national  Differences and
governments fluctuations in the
 War, both civil and value of different
international currencies
 Potential  Differences in
nationalization of a prevailing wage
firm’s resources rates
 Difficulties in
enforcing property
rights
 Unemployment

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165
 Int’l. Diversification and Returns

 Expanding sales of goods or services

across global regions and countries
and into different geographic locations
or markets:
 May increase a firm’s returns (such firms
usually achieve the most positive stock
returns).
 May achieve economies of scale and
experience, location advantages,
increased market size and opportunity to
stabilize returns.
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 Int’l. Diversification and Innovation

 Expansion sales of goods or services

across global regions and countries
and into different geographic locations
or markets:
 May yield potentially greater returns on
innovations (a larger market).
 Can generate additional resources for
investment in innovation.
 Provides exposure to new products and
processes in international markets;
generates additional knowledge leading to
innovations.
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167
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 Complexity of Managing
Multinational Firms

 Expansion into global operations in

different geographic locations or markets:
 Makes implementing international strategy
increasingly complex.
 Can produce greater uncertainty and risk.
 May result in the firm becoming unmanageable
 May cause the cost of managing the firm to
exceed the benefits of expansion.
 Exposes the firm to possible instability of some
national governments.

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 Limits to Int’l Expansion

 Management Problems
 Cost of coordination across diverse
geographical business units
 Institutional and cultural barriers
 Understanding strategic intent of
competitors
 The overall complexity of competition

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 CHAPTER 7: ORGANIZATIONAL
STRUCTURE AND CONTROL

 Learning Objectives
 Organizational Structure and Control
 Organizational Structure: Types
 Matching Business – Level Strategies and
Structures
 Matching Corporate – Level Strategies and
Structures
 Matching Int’l – Level Strategies and Structures

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 Learning Objectives

1. Define organizational structure and controls and

discuss thedifference between strategic and
financial controls.
2. Describe the relationship between strategy and
structure.
3. Discuss the different functional structures used
to implement business-level strategies.
4. Explain the use of three versions of the
multidivisional (M-form) structure to implement
different diversification strategies.
5. Discuss the organizational structures used to
implement three international strategies.

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 Organizational Structure and
Controls

 Organizational Structure
 Formal reporting relationships, procedures, controls,
and authority and decision-making processes
 Dividing and regrouping
 Delegation of responsibilities
 Coordination mechanisms
 Organizational Controls
 Indicate how to compare actual results with expected
results, and suggest corrective actions to be taken (if
needed)
 Strategic controls
 Financial controls

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 Organizational Structure: Types

 Simple Structure
 the owner-manager makes all major decisions and
monitors all activities, while the staff serves as an
extension of the manager’s
 Functional Structure
 a chief executive officer and a limited corporate
staff, with functional line managers in dominant
organizational areas
 Multidivisional Structure
 a corporate office and operating divisions, each
operating division representing a separate business or
profit center

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 Matching Business-Level Strategies
and Functional Structure
 Cost Leadership Strategy

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174
 Matching Business-Level Strategies
and Functional Structure
 Differentiation Strategy

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175
 Strategies and Multidivisional
Structure
 Differentiation Structure: 3 variations

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176
 Strategies and Multidivisional
Structure
 Related Constrained Strategy

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 Strategies and Multidivisional
Structure
 Related Linked Strategy

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 Strategies and Multidivisional
Structure

 Unrelated Diversification Strategy

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 Matching Int’l Strategies and
Worldwide Structure

 Multidomestic Strategy

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 Matching Int’l Strategies and
Worldwide Structure

 Global Strategy

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181
 Matching Int’l Strategies and
Worldwide Structure

 Transnational Strategy

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182
 CHAPTER 8: STRATEGIC LEADERSHIP

 Learning Objectives
 Strategic Leadership and Mgnt
Process
 Strategic Leadership: Key Actions
 Strategic Leadership: Ethical
Practices
 Strategic Leadership: Balanced
Chapter
1
Chapter
2
Chapter
3
Chapter
4
Chapter
5
Chapter
6
Chapter
7
Chapter
8
183
 Learning Objectives
 Define strategic leadership and describe top-level
managers’ importance.
 Explain what top management teams are and how they
affect firm’s performance.
 Describe the managerial succession process using
internal and external managerial labor markets.
 Discuss the value of strategic leadership in determining
the firm’s strategic direction.
 Describe the importance of strategic leaders in managing
the firm’s resources.
 Explain what must be done for a firm to sustain an
effective culture.
 Describe what strategic leaders can do to establish and
emphasize ethical practices.
 Discuss the importance and use of organizational
controls.
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184
 Strategic Leadership
 Strategic leadership is the ability to
anticipate, envision, maintain
flexibility, and empower others to
create strategic change as necessary

 Strategic leadership involves

managing through others, managing
an entire organization rather than a
functional subunit

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185
 Strategic Leadership and
Strategic Management Process

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186
 Strategic Leadership:
The Role of Top-Level Managers

 Top-level managers’ roles in

verifying that their firm effectively
uses the strategic
management process are complex
and challenging

 Top Management Teams

composed of the individuals who are
responsible for making certain the firm uses the
strategic management process, especially for
the purpose of selecting and implementing
strategies.
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187
 Strategic Leadership: Key Actions

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188
 Strategic Leadership:
Determining Strategic Directions

 Specifying the vision and the strategy

or strategies to achieve this vision
over time

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 Strategic Leadership:
Managing the Firm’s Resource Portfolio

 Firm’s resources are categorized as

financial capital, human capital, social
capital, and organizational capital


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190
 Strategic Leadership:
Managing the Firm’s Resource Portfolio

 Firm’s resources are categorized as

financial capital, human capital, social
capital, and organizational capital
 Exploiting and Maintaining Core
Competencies
 Developing Human Capital and
Social Capital


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191
 Strategic Leadership:
Sustaining an Effective Organizational Culture

 The complex set of ideologies,

symbols,
and core values that are shared
throughout the firm and that influence
how the firm
conducts business
 Entrepreneurial Mind-Set
 Changing the Organizational Culture
and Restructuring

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192
 Strategic Leadership:
Emphasizing Ethical Practices

 Ethical companies encourage and

enable people at all levels to act
ethically when taking actions to
implement strategies
 Typical actions to be taken:
 Establishing and communicating specific goals to
describe the firm’s ethical standards
 Continuously revising and updating the code of
conduct
 Disseminating the code of conduct to all stakeholders
 Developing and implementing methods and
procedures
 Creating and using explicit reward systems
1
 Creating
Chapter Chapter
2 aChapter
3 work environment
Chapter
4
Chapter
5 in Chapter
6which all people
Chapter
7 are
Chapter
8
193
 Strategic Leadership:
Establishing Balanced Organizational Controls

 The “formal, information-based … procedures

used by managers to maintain or alter patterns
in organizational activities”
 Help strategic leaders build credibility,
demonstrate the value of strategies to the firm’s
stakeholders, and promote and support strategic
change
 The Balanced Scorecard
 Financial (growth, profitability, and risk from the shareholders’
perspective)
 Customer (value customers perceive was created by the firm’s
products)
 Internal business processes (focus on the priorities for
various business processes that create customer and
shareholder satisfaction)
1
 Learning
Chapter Chapter
2
Chapter
and
3 growth
Chapter Chapter
4 (firm’s effort
5
Chapter Chapter Chapter
to 6create a 7climate 8that 194
 Establishing Balanced Organizational Controls:
Balanced Scorecard Framework

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195
 Course Summary

Questions & Answers

196