three themes that are critical to developing competency in the field of strategic management are:
1. firms and industries are dynamic in nature
2. to succeed, the formulation of a good strategy and its implementation should be inextricably connected
3. strategic leadership is essential if a firm is to both formulate and implement strategies that create value
business strategy strategy for competing against rivals within a particular industry or industry segment
corporate strategy strategy for guiding a firms entry and exit from different businesses, for determining how a parent company adds value to
and manages its portfolio of businesses, and for creating value through diversification
strategy formulation process of developing a strategy
strategy implementation process of executing a strategy
the 5 elements of the strategy diamond:
1. arenas where will we be active
2. vehicles how will we get there
3. differentiators how will we win in the marketplace
4. staging and pacing what will be our speed and sequence of moves
5. economic logic how will we obtain our returns
competitive advantage a firms ability to create value in a way that its rivals cannot
three perspectives of competitive advantage:
internal perspective focuses on resources and capabilities as internal sources of uniqueness that allows firms to beat the competition
external perspective focuses on the structure of industries and the ways in which firms can position themselves within them for
dynamic perspective, which bridges the internal and external perspectives, is a third view of competitive advantage; this view helps
explain why competitive advantages do not typically last over long periods of time
Summary of Challenges
1) Understand what strategy is and identify the difference between business-level and corporate-level strategy.
Strategic management is the process by which a firm manages the formulation and implementation of its strategy. A strategy is the central,
integrated, externally oriented concept of how a firm will achieve its objectives. Strategies typically take one of two forms: business strategy or
corporate strategy. The objective of a business strategy is to spell out how the firm plans to compete. This plan integrates choices regarding
arenas (where the firm will be active), vehicles (how it will get there), differentiators (how it will win), staging (the speed and sequence of its
moves), and economic logic (how it obtains its returns). The objective of corporate strategy is to spell out which businesses a firm will compete
in, how ownership by the corporate parent adds value to the business, and how this particular diversification approach helps each business
compete in its respective markets.
2) Understand why we study strategic management.
It should be clear to you by now that strategic management is concerned with firm performance. Strategic management holds clues as to why
firms survive when performance suffers. Strategy helps you to understand which activities are important and why and how a plan, absent good
execution, is perhaps only as valuable as the paper its printed on.
3) Understand the relationship between strategy formulation and implementation.
Strategy formulation is the determination of what the firm is going to do; strategy implementation is how the firm goes about doing it. These
two facets of strategy are linked and interdependent. This interdependence is made strikingly clear by the strategic management process.
4) Describe the determinants of competitive advantage.
Competitive advantage is realized when one firm creates value in ways that the competitors cannot, such that the firm clearly performs better
than its competitors. Advantage is not simply higher relative performance; rather, superior performance signals the ability of a firm to do things
in ways it direct competitors cannot. The two primary views of competitive advantageinternal and externalare complementary and together
are used to formulate effective strategies. The internal view portrays competitive advantage to be a function of unique, firm-specific resources
and capabilities. The external view holds that a firms performance is largely a function of its position in a particular industry or industry
segment given the overall structure of the industry. Profitable industries are considered attractive, and therefore, high firm performance is
attributed to a firms position in the industry relative to the characteristics of the industry or industry segment.
5) Recognize the difference between the fundamental and dynamic views of competitive advantage.
The two fundamental views of competitive advantage are characterized by a largely internal or external orientation toward competitive
advantage, research shows that few firms persist in their dominance over competitors over prolonged periods of time. For most firms, therefore,
competitive advantage is considered to be temporary. The dynamic perspective assumes that a firms current market position is not an accurate
predictor of future performance because position itself is not a competitive advantage. Instead, the dynamic perspective looks at the past for
clues about how the firm arrived at its present position and to the future to divine what the new competitive landscape might look like. It also
holds that its possible for the firm to influence the future state of the competitive landscape.
strategic leadership task of managing an overall enterprise and influencing key organizational outcomes
succession planning process of managing a well-planned and well-executed transition from one CEO to the next with positive outcomes for
all key stakeholders
vision simple statement or understanding of what the firm will be in the future
mission declaration of what a firm is and what it stands forits fundamental values and purpose values the principles that are held dear by members of the organizationguiding principles managers and employees will not compromise
while pursuing the vision and strategic goals
strategic goals are those overarching and results that the organization pursues to accomplish its mission and achieve its vision
goals and objectives combination of a broad indication of organizational intentions (goals) and specific, measurable stems (objectives) for
return on invested capital (ROIC) how effectively a company uses the money (borrowed or owned) invested in its operations
super-ordinate goal overarching reference point for a host of hierarchical sub-goals
balanced scorecard strategic management support system for measuring vision and strategy against business- and operating-unit-level
liaisonmaintain relationships with external stakeholders
leaderemployees and stakeholders look to their authority for motivation and direction
disseminatorcommunicate factual information and value-based information
spokespersonlobbying, public relations and formal reporting
entrepreneurdesigns the firms strategy/authorizes initiatives and supervises implementation
resource allocatorwhere the money/people get assigned
strategic purpose simplified, widely shared mental model of the organization and its future, including anticipated changes in its environment
strategic coherence symmetric co-alignment of the five elements of the firms strategy, the congruence of functional-area policies with these
elements, and the overarching fit of various businesses under the corporate umbrella
stakeholder individual or group with interest in firms ability to deliver intended results and maintain viability of its products and services
ethnocentrism belief in the superiority of ones own ethnic group or, more broadly, the conviction that ones own national, group, or cultural
characteristics are normal
stereotyping relying on a conventional or formulaic conception of another group based on some common characteristic
four personality characteristicslocus of control, need for achievement, tolerance for risk or ambiguity, charisma and emotional intelligence
Summary of Challenges
1) Explain how strategic leadership is essential to strategy formulation and implementation.
Strategic leadership is concerned with the management of an overall enterprise and the ways in which top executives influence key
organizational outcomes, such as performance, competitive superiority, innovation, strategic change, and survival. Leaders typically play three
critical rolesinterpersonal, informational, and decisionalall of which support the firms vision and mission and the implementation of its
strategy. The Level 5 Hierarchy is a model of leadership skills that calls for a wide range of abilities, some of which are hierarchical in nature.
Leaders can be distinguished by personality and demographic differences, and strategic leadership can be exercised either by individuals or
2) Understand the relationships among vision, mission, values, and strategy.
An organizational vision is a simple forward-looking statement or understanding of what the firm will be in the future. A mission is a
declaration of what a firm is and what it stands forits fundamental values and purpose. Together, mission and vision statements expre