Slide 1What is Strategic Management?Learning ObjectivesTwo Perspectives of LeadershipExample: What’s In a Leader?The Nature of Strategic ManagementStrategic ManagementSlide 8Slide 9QuestionKey AttributesSlide 12Slide 13Strategic Management ProcessSlide 15Strategic AnalysisStrategic Analysis (cont.)Example: Sony’s MoveStrategy FormulationStrategy Formulation (cont.)Slide 21Resource-Based View of the FirmSlide 23Slide 24Types of Resources: Tangible ResourcesSlide 26Slide 27Types of Resources: Intangible ResourcesSlide 29Example: McDonald’s InnovationTypes of Resources: Organizational CapabilitiesDell’s Resources and CapabilitiesFirm Resources and Sustainable Competitive AdvantagesSlide 34Slide 35Slide 36Slide 37Slide 38Slide 39Criteria for Sustainable Competitive AdvantagesMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 1 What is Strategic What is Strategic Management?Management?Learning ObjectivesLearning ObjectivesAfter reading this chapter, you should have a good understanding of:The definition of strategic management and its four key attributes.The strategic management process and its three interrelated and principal activities.The resource-based view of the firm and the different types of tangible and intangible resources, as well as organizational capabilities.The four attributes that a firm’s resources must possess to maintain a sustainable advantage1-3Two Perspectives of LeadershipTwo Perspectives of LeadershipRomantic viewLeader is the key force in organization’s successExternal control perspectiveFocus is on external factors that affect an organization’s successLeaders can make a differenceMust be aware of opportunities and threats faced in external environment Must have thorough understanding of the firm’s resources and capabilities1-4Example: Example: What’s In a Leader?Always emphasized the importance of innovative and flexible leadership that is adept at adjusting to changing times and circumstances In 1989, CEO of Ford Motor received Chief Executive magazine's CEO of the Year Award Fred Smith started Federal Express in 1971 on a premise that was found to be highly improbable by one of his business school professors www.forbes.com/leadership/2007/08/07/ceo-management-personalities-lead-cz_ek_0807topceo.html1-5The Nature of Strategic ManagementThe Nature of Strategic ManagementToday must do more than set long-term strategies and hope for the bestMust go beyond “incremental management”Making minor changesToday’s pace of change is acceleratingManager’s must make major and minor changes in strategic directionLeaders must be:ProactiveAnticipate changeContinually refine and make strategic changes1-6Strategic Management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantagesStrategic ManagementStrategic Management1-7Analysis Strategic goals (vision, mission, strategic objectives)Internal and external environment of the firmStrategic decisionsWhat industries should we compete in?How should we compete in those industries?ActionsAllocate necessary resourcesDesign the organization to bring intended strategies to realityStrategic ManagementStrategic Management1-8Strategic ManagementStrategic ManagementStrategic management is the study of why some firms outperform othersHow to compete in order to create competitive advantages in the marketplaceHow to create competitive advantages in the market placeUnique and valuableDifficult for competitors to copy or substitute1-9QuestionQuestionWhich of the following is not a key attribute of strategic management?a) Recognizes trade-offs between efficiency and effectivenessb) Directs management in making proper decisions to benefit firmc) Directs the organization toward overall goals and objectivesd) Needs to incorporate short-term and long-term perspectives1-10Key AttributesKey AttributesKey Attributes of strategic management:Directs the organization toward overall goals and objectivesIncludes multiple stakeholders in decision making1-11Key AttributesKey AttributesKey Attributes of strategic management:Needs to incorporate short-term and long-term perspectivesPeter Senge refers to this needs as a “creative tension”Must maintain a vision for the future of the organization and focus on its present operating needsRecognizes trade-offs between efficiency and effectiveness1-12QuestionQuestionThe final realized strategy of a firm is a combination of:a) Intended and unrealized strategiesb) Unrealized and emergent strategiesc) Emergent and deliberate strategiesd) Deliberate and unrealized strategies 1-13Strategic Management ProcessStrategic Management ProcessHenry Mintzberg, management scholar at McGill UniversityBusiness environment far from predictableDecisions seldom based on optimal rationality aloneDecisions following analysis constitute intended strategyFinal realized strategy of any firm is a combination of deliberate and emergent strategies1-14Strategic Management ProcessStrategic Management Process1-15Strategic AnalysisStrategic AnalysisStarting point in the strategic management processPrecedes effective formulation and implementation of strategies1-16Strategic Analysis Strategic Analysis (cont.)(cont.)Frameworks for analyzing a firm’s internal environmentStrengthsWeaknessesAnalyzing strengths can uncover potential sources of competitive advantageAnalyzing external environmentsCompetitorsGeneral environmentIndustry environment1-17Example: Sony’s MoveExample: Sony’s MoveVideo game leader strugglesHistorical industry leader Nintendo had drifted down to thirdSony Vs. Microsoft and NintendoSlashed price of its PlayStation 3 console Simplest option is to just come up with a copy-cat version of Nintendo’s Wii controllerwww.forbes.com/leadership/2007/08/01/sony-games-innovation-lead-cz_cc_0802christensen.html1-18Strategy FormulationStrategy FormulationBusiness level strategy: Successful firms develop bases for competitive advantageCost leadershipDifferentiationFocusing on narrow or industry-wide market segmentsSustainabilityIndustry life cycle1-19Strategy Formulation Strategy Formulation (cont.)(cont.)Corporate-level strategy addresses:Firm’s portfolio or