MGSC01H3 Chapter Notes - Chapter 1: Differentiator

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Published on 30 Dec 2011
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Chapter 1 Introducing Strategic Management Notes
Three Overarching Themes
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
What is Strategic Management
strategic management is the process by which a firm manages the formulation and implementation of its strategy
The Strategic Leader’s Perspective
in the business context, the idea of strategy suggests a big-picture perspective on the firm and its context
this holistic view of the organization is called the strategic leader’s perspective
in business settings, a strategy is of little use if it is not well-executed by line managers
a good leader can’t afford to devise a strategy in isolation from the lower-level leaders who are responsible for executing it
the strategic leader’s perspective is the holistic consideration of the business and its environment rather than the myopic focus on a
single functional area
What is Strategy?
strategy is the coordinated means by which an organization pursues its goals and objectives
a strategy thus encompasses the patterns of actions that have been taken and those that are planned to be taken by an organization in
pursuing its objectives
Business Strategy versus Corporate Strategy
business strategy refers to the ways a firm goes about achieving its objectives within a particular industry or industry segment
business strategy focuses on achieving a firm’s objectives within a particular business line
two critical questions that business strategy must address are (1) how the firm will achieve its objectives today, when other
companies may be competing to satisfy the same customers’ needs, and (2) how the firm plans to compete in the future
corporate strategy addresses issues related to three fundamental questions associated with managing a company that operates in more
than one business:
1) In what business will we compete?
2) How can we, as a corporate parent, add value to our various lines of business?
3) How will diversification or our entry into a new industry help us to compete in our other industries?
Strategy Formulation and Implementation
strategy formulation is the process of dividing what to do; strategy implementation is the process of performing all the activities
necessary to do what has been planned
because neither can succeed without the other, the two processes are iterative and interdependent from the standpoint that
implementation should provide information that is used to periodically modify business and corporate strategy
Strategy Formulation
Strategy Implementation Levers
strategy implementation is the process of executing the strategy—of taking the actions that put the strategy into effect and ensure that
organizational decisions are consistent with it
the process of implementation also encompasses the refinement, or change, of a strategy as more information is made available
through early implementation efforts
the goal of implementation is twofold:
to make sure that strategy formulation is comprehensive and well informed
to translate good ideas into actions that can be executed (and sometimes to use execution to generate or identify good ideas)
Strategic Leadership
strategic leadership is responsible for (1) making substantive implementation lever and resource-allocation decisions and (2)
developing support for the strategy from key stakeholders
a successful strategy is not generally formulated just by a single person or a small group of leaders
strategic leadership requires involving the right people in critical decisions because key info may be widely dispersed within the firm
in addition, successful strategy implementation requires active leadership to ensure that what emerges and what is realized are
desirable and that needed changes of course are detected before it is too late
What is Competitive Advantage?
the activities of strategic management are based on the assumption that firms attempt to achieve a position of competitive advantage
over their rivals when serving target customers
competitive advantage is a firm’s ability to create value in a way that its rivals cannot
a firm may achieve relatively high short-term performance levels without gaining any substantial advantage over its rivals, either
because it had an unusually good year or too drastic measures to cut costs (perhaps to unsustainably low levels)
by the same token, a firm may enjoy significant competitive advantage in some lines of business but still perform more poorly than
its competitors because of other underperforming business units or because it chooses to keep prices lower than its competitive
position would otherwise allow
Strategic Analysis
Internal
External
Arenas: Where will we be active (and
with how much emphasis)?
Which product categories?
Which channels?
Which market segments?
Which geographic areas?
Which core technologies?
Which value-creation strategies?
Vehicles: How will we get there?
Internal development?
Joint ventures?
Licensing/franchising?
Alliances?
Acquisitions?
Differentiators: How will we win?
Image?
Customization?
Price?
Styling?
Product reliability?
Speed to market?
Economic logic: How will returns be obtained?
Lowest costs through scale advantages?
Lowest costs through scope and replication
advantages?
Premium prices due to unmatchable service?
Premium prices due to proprietary product
features?
Staging & pacing: What will be our speed and
sequence of moves?
Speed of expansion?
Sequence of initiatives?
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Document Summary

Three overarching themes three themes that are critical to developing competency in the field of strategic management are: Sequence of initiatives? to make sure that strategy formulation is comprehensive and well informed to translate good ideas into actions that can be executed (and sometimes to use execution to generate or identify good ideas) What is competitive advantage? the activities of strategic management are based on the assumption that firms attempt to achieve a position of competitive advantage. Summary of challenges: 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.

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