Strategic management

o Integrative management field that combines analysis,

formulation, and implementation in the quest for competitive
advantage
Strategy
o A set of goal-directed actions a firm takes to gain and sustain
superior performance relative to competitors
A good strategy consists of three elements:
o A diagnosis of the competitive challenge, which is accomplished
through analysis of the firms external and internal environments
o A guiding policy to address the competitive challenge, which is
accomplished through strategy formulation
o A set of coherent actions to implement a firms guiding policy,
which is accomplished through strategy implementation
Competitive advantage
o When a firm achieves superior performance relative to other
competitors in the same industry or the industry average
Sustainable competitive advantage
o When a firm is able to outperform its competitors or the industry
average over a prolonged period of time
Competitive disadvantage
o Firm underperforms its rivals or the industry average
Competitive parity
o Two or more firms perform at the same level
Strategic positioning
o A unique position within an industry that allows the firm to
provide value to customers while controlling costs
o The greater the difference between value creation and cost, the
greater the firms economic contribution and more likely it will
gain competitive advantage
o Requires trade-offs
o The key to successful strategy is to combine a set of activities to
stake out a unique position with an industry
What is not strategy
o Grandiose statements
o A failure to face a competitive challenge
o Operational effectiveness, competitive benchmarking, or other
tactical tools
Industry effects
o Describe the underlying economic structure of the industry
o 20% of a firms profitability depends on the industry its in
Firm effects
o Attribute firm performance to the actions managers take

o Up to 55% of a firms performance can be attributed to its

strategy
o Other 25% are other effects like business cycle effects and
unexplained variance
Black Swan
o Incidents that describe highly improbable by high-impact events
Stakeholders
o Organizations, groups, and individuals that can affect or are
affected by a firms actions
o External
Customers
Suppliers
Alliance partners
Creditors
Unions
Communities
Governments
Media
o Internal
Employees
Stockholders
Board members
Stakeholder strategy
o An integrative approach to managing a diverse set of
stakeholders effectively in order to gain and sustain a
competitive advantage
Stakeholder impact analysis
o A decision tool which managers can recognize, prioritize, and
address the needs of different stakeholders, enabling the firm to
achieve competitive advantage while acting as a good corporate
citizen
o Stakeholders have power over a company when it can get the
company to do something that it would otherwise not do
o Stakeholders have legitimate claims when it is perceived to be
legally valid or otherwise appropriate
o Stakeholders have urgent claims when it requires a companys
immediate attention and response
o 5 step process for stakeholder impact analysis
Identify stakeholders
Who are our stakeholders
Identify stakeholders interests
What are our stakeholders interests and claims
Identify opportunities and threats

What opportunities and threats do our stakeholders

present
Identify social responsibilities
What economic, legal, ethical, and philanthropic
responsibilities do we have to our stakeholders
Corporate social responsibility
o A framework that helps recognize and address
the economic, legal, social, and philanthropic
expectations that society has of the business
enterprise at a given point in time
o Economic
The business enterprise is first and
foremost an economic institution
o Legal
Laws and regulations are a societys
codified ethics, embodying notions of
right and wrong
o Ethical
Embody the full scope of expectations,
norms, and values of its stakeholders
beyond its legal responsibilities
o Philanthropic responsibilities
Voluntarily giving back to society
Address stakeholders concerns
What should we do to effectively address any
stakeholder concerns
AFI Framework
A model that links three interdependent strategic
management tasks that together, help managers
plan and implement a strategy that can improve
performance and result in competitive advantage
Analyze the external and internal environments
o Strategic leadership and strategy process
What roles do strategic leaders play
What are the firms vision, mission, and
values
What is the firms process for creating
strategy and how does strategy come
about
o External analysis
What effects do forces in the external
environment have on a firms potential to
gain and sustain a competitive
advantage

How should the firm deal with them

o Internal analysis
What effects do internal resources,
capabilities and core competencies have
on the firms potential to gain and
sustain a competitive advantage
How should the firm leverage them for
competitive advantage
o Competitive advantage, firm performance, and
business models
How does the firm make money
How can one assess and measure
competitive advantage
What is the relationship between
competitive advantage and a firms
performance
Formulate an appropriate business and corporate
strategy
o Business strategy
How should the firm compete: cost
leadership, differentiation, or value
innovation
o Corporate strategy
Where should the firm compete: industry,
markets, and geography
o Global strategy
How and where should the firm compete
Local, regional, national, or
international
Implement the formulated strategy through
structure, culture, and controls
o Organizational design:
How should the firm organize to turn the
formulated strategy into action
o Corporate governance and business ethics
What type of corporate governance is
most effective
How does the firm anchor strategic
decisions in business ethics