Chapter 7: Strategy and Strategic
What is strategy?
A comprehensive action plan that identifies longterm direction for an organization and
guides resources utilization to accomplish goals with sustainable competitive advantage.
Have to understand competitive advantage.
The process of FORMULATING AND IMPLEMENTING strategies to accomplish long
term goals and sustain competitive advantage
• Strategic formulation
The process of creating strategy. It involves assessing existing strategies,
organization, and environment to develop new strategies capable of delivering
future competitive advantage.
• Strategy implementation
The process of allocating resources and putting strategies into action
First step of the strategic management process is the process of ANALYZING THE
ORGANIZATION, THE ENVIORNMENT AND THE ORGANIZAIONS COMPETIVE
POSITION AND CURRENT STRATEGIES.
When an organization has a competitive advantage it is operating with an attribute or set
of attributes that allows an organization to outperform its rivals.
Typical sources of competitive advantages include:
• Cost and quality
o Customers will rather pay $5 more than buying it at Dollar store if the
product was going to break with the first use, but also customers don’t
want to buy a good product for a high price not knowing the quality of the
• Knowledge and speed
• Barriers to entry
• Financial resources
Sustainable competitive advantage – difficult for competitors to imitate.
Strategic Intent – all organizational energies are directed toward a unifying and
compelling target or goal.
THREE LEVELS OF STRATEGY 1. Corporate Strategy
Directs the organization as a whole toward sustainable competitive advantage
2. Business strategy
Strategic direction for a single business unit or product lines.
Strategic Business Unit (SBU) – a component that operates with a separate
mission within a larger business enterprise
• Product/service mix, facilities locations, new technologies, etc.
3. Functional strategy
Guides the use of resources to implement business strategy; this level of strategy
focuses on activities within a specific functional area of operations
• Operating efficiency
• Product or service quality
• Customer services, or
MISSION AND VALUES
Mission – reason for existence
Stakeholders – the individuals and groups who are directly affected by the organizations
and its strategic development
Strategic constituencies analysis – review the interests of each stakeholder along with
the organizations record in responding to their interests
Core values broad beliefs about what is or is not appropriate
Reflects the predominant value system of the organization as a whole
• Helps build organizational identity
• Gives character to the organization
• Backs up the mission statement
• Guides the behavior of organizational members
COMMON OPERATING OBJETIVES
Profitability – operating with a net profit
Financial Health – acquiring capital and earning positive returns
Cost Efficiency – using resources well to operate at low cost
Customer Service – meeting customer needs and maintaining loyalty
Product Quality – producing highquality goods or services
Market share – gaining a specific share of possible customers
Human Talent – recruiting and maintaining a highquality workforce Innovation developing new products and processes
Social responsibility making appositive contribution to society
The organization Strengths – S Weaknesses – W
1. Existing brand 1. Brand pe