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Management, 7eSchermerhorn
Chapter 8 Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc
Schermerhorn - Chapter 8 2
Chapter 8Strategic Management
Planning ahead—study questions– What are the foundations of strategic
competitiveness?– What is the strategic management process?– What types of strategies are used by
organizations?– How are strategies formulated?– What are current issues in strategy
implementation?
Schermerhorn - Chapter 8 3
What are the foundations of strategic competitiveness?
Basic concepts of strategy:
– Competitive advantage—operating in a
successful way that is difficult for competitors
to imitate.
– Sustainable competitive advantage—
consistently dealing with market and
environmental forces better than competitors.
Schermerhorn - Chapter 8 4
What are the foundations of strategic competitiveness?
Basic concepts of strategy:– Strategy—a comprehensive action plan
providing long-term direction and guiding resource utilization to accomplish organizational goals with sustainable competitive advantage.
– Strategic intent—focusing all organizational energies on a unifying and compelling goal.
Schermerhorn - Chapter 8 5
What are the foundations of strategic competitiveness?
Basic concepts of strategy:
– Strategic management—the process of
formulating and implementing strategies to
accomplish long-term goals and sustain
competitive advantage.
Schermerhorn - Chapter 8 6
What are the foundations of strategic competitiveness?
Strategic management goals
– Formulate and implement strategies that yield
long-term, sustainable competitive advantage.
– Create above-average returns for investors.
• Earning above-average returns depends in part on
the organization’s environment.
Schermerhorn - Chapter 8 7
What is the strategic management process?
Strategy implementation
– The process of allocating resources and putting
strategies into action.
– All organizational and management systems
must be mobilized to support the
accomplishment of strategies.
Schermerhorn - Chapter 8 8
What is the strategic management process?
Analysis of values
– Values are broad beliefs about what is or is not
appropriate.
– Organizational culture reflects the dominant
value system of the organization as a whole.
Schermerhorn - Chapter 8 9
What is the strategic management process? Analysis of objectives
– Operating objectives direct activities toward key and specific performance results.
– Typical operating objectives:• Profitability• Market share• Human talent• Financial health• Cost efficiency• Product quality• Innovation• Social responsibility
Schermerhorn - Chapter 8 10
What is the strategic management process?
Analysis of organizational resources and capabilities– Assessing organizational Strengths and Weaknesses
within SWOT analysis– Identifying core competencies
• Technology• Human resources• Manufacturing approaches• Management talent• Financial strength
Schermerhorn - Chapter 8 11
What is the strategic management process?
Analysis of industry and environment– Assessing Opportunities and Threats within
SWOT analysis– Assessment of actual and future environmental
conditions• Macro environment
• Industry environment– Unattractive industry
– Attractive industry
Schermerhorn - Chapter 8 12
What types of strategies are used by organizations?
Levels of strategy– Corporate strategy—directs the organization as
a whole toward sustainable competitive advantage.
– Business strategy—sets the strategic direction for a single business unit or product line.
– Functional strategy—guides the use of resources to implement business strategy, focusing on activities within a specific area of operations.
Schermerhorn - Chapter 8 13
What types of strategies are used by organizations?
Cooperative strategies
– Strategic alliances—two or more organizations
partner to pursue an area of mutual interest.
– Types of strategic alliances:
• Outsourcing alliances
• Supplier alliances
• Distribution alliances
Schermerhorn - Chapter 8 14
How are strategies formulated?
Opportunities for achieving sustainable
competitive advantage:
– Cost and quality
– Knowledge and speed
– Barriers to entry
– Financial resources
Schermerhorn - Chapter 8 15
How are strategies formulated?
Business-level strategy formulation– Focus on finding ways to do a better job of
attracting customers within a given business or industry.
– Helpful planning tools in formulating business-level strategies:
• Porter’s generic strategies
• Product life cycle
Schermerhorn - Chapter 8 16
How are strategies formulated?
Porter’s generic strategies model
– Business-level strategic decisions are driven by:
• Competitive scope
• Source of competitive advantage
– Competitive scope and source of competitive
advantage combine to generate four generic
strategies.
Schermerhorn - Chapter 8 17
How are strategies formulated?
Porter’s generic strategies model
– Generic strategies for gaining competitive
advantage:
• Differentiation strategy
• Cost leadership strategy
• Focused differentiation strategy
• Focused cost leadership strategy
Schermerhorn - Chapter 8 18
How are strategies formulated?
Product life cycle– A series of stages that a product or service goes
through during the life of its marketability.
– Stages of the life cycle:• Introduction
• Growth
• Maturity
• Decline
Schermerhorn - Chapter 8 19
How are strategies formulated?
Product life cycle
– Introduction and growth stages
• Use differentiation and prospector strategies
– Maturity stage
• Use focus and/or cost leadership strategies
– Decline stage
• Use defender or analyzer strategies
Schermerhorn - Chapter 8 20
How are strategies formulated?
Corporate-level strategy formulation
– Key issue is the selection and refinement of the
organization’s mix of businesses.
– Approaches to formulating business-level
strategies:
• Portfolio planning
• Adaptive strategies
Schermerhorn - Chapter 8 21
How are strategies formulated?
Portfolio planning approach
– Designed to help managers decide on investing
scarce organizational resources among
competing business opportunities.
– Useful for multibusiness or multiproduct
situations.