Chapter 9 – Strategic Management
Competitive advantage — operating with an attribute or set of attributes that allows
an organization to outperform its rivals
Sustainable Competitive Advantage - One that is different for a competitor to imitate
What is strategy?
Strategy - a comprehensive action plan guiding resource allocation to achieve long
Strategic Intent - focusing all organizational energies on a unifying and compelling
Strategic management - the process of formulating and implementing strategies to
accomplish long-term goals and sustain competitive advantage.
Looking ahead, understanding the external environment (consumers), effectively
positioning the company for competitive advantage
Strategic management goals
Ultimate goal for any business should be superior profitability; Creates above-
average returns for investors (based on the competitive environment of the company)
Monopoly (specialty company)
o Only one player and no competition.
o Creates absolute competitive advantage.
Oligopoly (breakfast cereals – Kellogg’s, General Mills and Quaker Oats)
o Few players not directly competing against each other.
o Long-term competitive advantage in defined market segment.
Hypercompetition (fast food chains)
o Several players directly competing against each other.
o Any competitive advantage is only temporary.
THE STRATEGIC MANAGEMENT PROCESS
Strategic management process has two responsibilities:
1. Strategy Formulation
o The process of creating strategy.
o Involves assessing existing strategies (mission, objectives), organization, and
environment to develop new strategies and strategic plans capable of
delivering future competitive advantage.
2. Strategy Implementation
o The process of allocating resources and putting strategies into action.
o All organizational and management systems must be mobilized to support
and reinforce the accomplishment of strategies.
www.notesolution.com o Identify organizational mission and objectives, asses current performance vis-
à-vis mission and objectives, create strategic plans to accomplish purpose and
objectives, implement the strategic plans, evaluate results; change strategic
plans and/or implementation processes as necessary.
Analysis of Mission, Values and Objectives
Mission: Reason for an organization’s existence.
o Good mission statements identify: customers, products and/or services,
location, underlying philosophy
o An important test of the mission is how well it serves the organization’s
Core Value: Values are broad beliefs about what is or is not appropriate.
o Strong core values for an organization helps build institutional identity, gives
character to an organization, and it backs up the mission statement.
o Organizational culture reflects the dominant value system of the
organization as a whole.
o Through organizational culture the values of managers and other members
are shaped and pointed in common directions
Objectives: Operating objectives direct activities toward key and specific
o Typical operating objectives (allows for progress and continuous
Profitability – net profit
Market share – gaining and holding a specific market share
Human talent – recruiting and maintain high- quality workforce
Financial health – earning positive returns
Cost efficiency – using resources to operate at a lower cost
Product quality – producing high-quality goods
Innovation – developing new products
Social responsibility – positive contributions to society
Analysis of Organizational Resources and Capabilities
SWOT Analysis Strengths, Weaknesses, Opportunities, Threats
Analysis of Industry and Environment
Porter’s model of five strategic forces affecting industry competition:
o Industry competitors: intensity of rivalry among firms in the industry
o New entrants: threats of new competition
o Suppliers – bargaining power of suppliers
o Buyers – bargaining power of buyers
o Substitutes – threats of substitute products or services
*if the industry is unattractive (a lot of competition) five forces are
**if the industry is unattractive (minimal competition) five forces are
STRATEGIES USED BY ORGANIZATIONS
www.notesolution.com Strategies are formulated and implemented at the organizational or corporate
level, business level and functional level.
Levels of strategy
o Sets long-term direction for the whole enterprise
o How the company intends compete across multiple industries and
o Identifies how a division or strategic business unit will compete in its
product of service domain
o For smaller companies the business strategy is the corporate strategy
o Guides activities within specific area of operations
Growth and Diversification Strategies
Growth Strategies: Seek an increase in size and the expansion of current
opeoaticoncentration strategies (growth within the same business area – fast
o Diversification strategies (growth through investment in new business
ares) Related diversification: entering business area that are related in
what they do (Tropicana and Pepsi, both expertise in the
Unrelated diversification: entering business areas different from
what one already does
Vertical integration: acquiring suppliers (backwards) or
Restructuring and Divestiture Strategies
Retrenchment Strategy: Change of operations to correct weaknesses
o Most extreme form - Liquidation: business ceases and assets are sold
o Less extreme and more common - Restructuring: making major
changes to reduce the scale and/or mix of operations (gain short term
efficiency and gain time in preparing in strategies)
Downsizing: decreases the size of operations, reduces cost and
improves operating efficiency. Downsizing with a strategic focus
is called rightsizing
Divestiture: selling off parts of the organization to refocus
attention of core business areas (for those organizations that
become over-diversified and find problems in managing these
www.notesolution.com Globalization Strategy: World is one large market; standardize products and