12-Aug-20

STRATEGIC MANAGEMENT
Strategic management is the study of why some firms
outperform others.
STRATEGIC MANAGEMENT
How to create a competitive advantage in the market place
that is unique, valuable, and difficult to copy

Strategies put together an understanding of the

external environment with an understanding of
internal strengths and weaknesses.

DEFINITION OF STRATEGIC MANAGEMENT

Three--Stage Process
Three
Strategic management consists of:
analysis,
decisions, and Strategy Formulation
actions
an organization undertakes in order to create
and sustain competitive advantages.
Strategy Implementation
-Dess, Lumpkin, & Eisner

Strategy Evaluation

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assess Strategy formulation Strategy implementation Strategy Formulation

environmental
factors
Vision & Mission

Identify
Conduct
Develop
Opportunities & Threats
competitive
current specific
analysis: carry out maintain
mission strategies:
•strengths strategic strategic Strengths & Weaknesses
and •corporate
•weakness plans control
strategic •business
•opportunity
goals •functional
•threats
Long-Term Objectives

Alternative Strategies
assess
organisational
factors
Strategy Selection
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Strategy Implementation
STRATEGY FORMULATION
Issues include:
Annual Objectives
What new businesses to enter
What businesses to abandon Policies

How to allocate resources

Expand operations or diversify Employee Motivation

Enter international markets

Resource Allocation
Merge or form joint venture
Avoidance of hostile takeover

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Strategy Evaluation
STRATEGY IMPLEMENTATION

Internal Review

Action Stage of strategic management:

External Review
Most difficult stage
Mobilizing employees and managers
Performance Measurement
Interpersonal skills are critical
Consensus on pursuing goals Corrective Action

STRATEGY EVALUATION

Final stage of strategic management:

All strategies subject to future modification
Success today is no guarantee of success tomorrow
Success creates new and different problems
Complacency leads to demise

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INTEGRATING INTUITION AND

ANALYSIS

The strategic management process attempts to

organize quantitative and qualitative
INTEGRATING INTUITION AND ANALYSIS information under conditions of uncertainty.

INTEGRATING INTUITION AND INTEGRATING INTUITION AND

ANALYSIS ANALYSIS
Intuition based on: Intuition and judgment
Past experiences Management at all levels
Judgment Analyses are influenced
Feelings
Analytical thinking and intuitive thinking
Useful for decision making Complement each other
Conditions of great uncertainty
Conditions with little example

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ADAPTATION TO CHANGE ADAPTATION TO CHANGE

Change is ….
Organizations must monitor events
Good On-going process
Internal and external events
Or Timely changes

Bad

video

ADAPTATION TO CHANGE ADAPTATION TO CHANGE

Rate and magnitude of changes Key strategic-management questions:
Increasing dramatically What kind of business should we become?
Are we in the right fields?
E-commerce
Should we reshape our business?
Demographics
What new competitors are entering our industry?
Technology What strategies should we pursue?
Merger-mania How are our customers changing?

Effective Adaptation
Long-run focus

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KEY TERMS KEY TERMS

Strategists
Most responsible for success or failure of an organization
Various job titles:
Vision Statement
Chief executive officer What do we want to become?
President

Owner

Chair of the Board Mission Statement

Executive Director
What is our business?
Entrepreneur

KEY TERMS KEY TERMS

External Opportunities and Threats Internal Strengths and Weaknesses
Controllable activities performed especially well or poorly.
Significantly benefit or harm the organization in the
future. Arise in functional areas of the business:
Management
Marketing
Include the following trends:
Finance/accounting
Economic
Production/operations
Social
Research & development
Cultural
Computer Information Systems
Demographic Environmental

Political, legal, governmental

Technological

Competitive trends

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KEY TERMS KEY TERMS

Long-term objectives: Strategies:
Means by which long-term objectives will be achieved.
Mission-driven pursuit of specific results more than one-
year out. May include:
Geographic expansion, diversification
Essential for organizational success Acquisition
State direction Product development, market penetration
Aid in evaluation Retrenchment, divestiture

Create synergy Liquidation, joint venture

Focus coordination

Basis for planning, motivating and controlling

KEY TERMS KEY TERMS

Annual Objectives: Policies:

Short-term milestones that organizations must achieve to Means by which annual objectives will be achieved.
reach long-term objectives.

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FORMS OF STRATEGY

HENRY MINTZBERG’S EMERGENT STRATEGIES

MODEL Formal versus informal - associated with
size of firm and stage of development.

Strategy was and is often viewed as a ‘plan’ of action Intended versus realized -
designed to achieve a long-term goal.
Intended
Strategy: A pattern in a stream of decisions. Realized Strategy
Strategy

Intended Strategy: What the leadership planned and

intended.
Realized Strategy: What the organization actually did.

MINTZBERG’S VIEWS OF STRATEGY

FORMS OF STRATEGY
Plan - consciously intended course of
action
Ploy - plot to outwit opponent
Pattern - consistency in behavior
Position - location in environment
Perspective - way of perceiving the world

Source:H. Mintzberg and J. A. Waters, “Of Strategies,

Deliberate and Emergent,” Strategic Management Journal 6
(1985), pp. 257-72.

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STRATEGY AS PLANNED EMERGENCE STRATEGIC INITIATIVES AND SERENDIPITY

Strategic Initiative Japan Railways

Google 50% of the firm's new products come from
the "20% rule" (one day a week on own ideas) Constructing a bullet train through the
mountains north of Tokyo, which
required many tunnels
Mintzberg Planned Emergence Persistent flooding

Complex engineering plans to drain the water

Strategy can come from top or bottom:
Some intended strategies drop off in the process Maintenance worker suggested that the fresh water off the
mountains should not be drained, but rather should be bottled
Allows for new emerging ideas to become realized
Resource allocation process 1,000 vending machines on 1,000 railroad platforms in and
around Tokyo, and home delivery of water, juices, and coffee
Serendipity can have dramatic effects
followed.

The employee’s proposal had turned this “bottom-up” strategy

into a multi-million dollar business.

Mintzberg’s Planning Framework

Strategy as
Strategy as Process
Design

Many decision makers

Planning and
responding to multitude of
rational choice
external and internal
forces

INTENDED
EMERGENT
STRATEGY
STRATEGY

REALIZED STRATEGY

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EXAMPLE -1 EXAMPLE -2
Intended Strategy Emergent Strategy Realized Strategy
Emergent
Intended Strategy Realized Strategy
Strategy
The company When father and son
David McConnell The perfumes changed its name to team Scott and Don
aspired to be a writer. McConnell gave out Avon in 1939, and its As the network ESPN is now billed as
Rasmussen were fired
When his books with his books were direct marketing became successful, the worldwide leader in
from the New
weren’t selling he popular, inspiring the system remained ESPN has branched sports, owning several
England Whalers,
decided to give out foundation of the popular for decades. out beyond the local ESPN affiliates as well
they envisioned a
perfume as a California Perfume Avon is now available softball games and as production of ESPN
cable television
gimmick. Company. online and in retail demolition derbies magazine, ESPN radio,
network that focused
outlets worldwide. that were first and broadcasting for
on sports events in
broadcasted. ABC.
the state of
Connecticut.

FEDEX – FAILED EMERGENT STRATEGY

EXAMPLE -3 Emergent strategy has also played a role at Federal Express. An emergent
strategy is an unplanned strategy that arises in response to unexpected
opportunities and challenges. Sometimes emergent strategies result in
Intended Strategy Emergent Strategy Realized Strategy disasters.

In 1977, a cash- In the mid-1980s, FedEx deviated from its intended strategy’s focus on
An idea emerged. Soon package delivery to capitalize on an emerging technology: facsimile (fax)
strapped advertiser Today the Home
the radio station machines. The firm developed a service called ZapMail that involved
gave a radio station Shopping Network has documents being sent electronically via fax machines between FedEx offices
featured a regular and then being delivered to customers’ offices. FedEx executives hoped that
managed by Lowell evolved into a retail
show called “Suncoast ZapMail would be a success because it reduced the delivery time of a
Paxson 112 electric powerhours. The document from overnight to just a couple of hours.
Bargaineers.” In 1982,
can openers to pay off company sells tens of
Paxson and a partner
an overdue bill. The thousands of products Unfortunately, however, the ZapMail system had many technical problems
launched the Home that frustrated customers. Even worse, FedEx failed to anticipate that many
can openers were on television channels
Shopping Club on local businesses would simply purchase their own fax machines.
offerend over the air in several countries
cable television in
for $9.95 and quickly and over the internet. ZapMail was shut down before long, and FedEx lost hundreds of millions of
Florida.
sold out. dollars following its failed emergent strategy. In retrospect, FedEx had made
a costly mistake by venturing outside of the domain that was central to its
intended strategy: package delivery (Funding Universe).

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12-Aug-20

SOUTHERN BLOOMER-SUCCESSFUL STRATEGY HIGHLIGHT “It’s Not What We Do!”

EMERGENT STRATEGY
Emergent strategies can also lead to tremendous success. Southern Bloomer
Manufacturing Company was founded to make underwear for use in prisons and mental
•Starbucks
hospitals. Many managers of such institutions believe that the underwear made for retail
markets by companies such as Calvin Klein and Hanes is simply not suitable for the
people under their care. Instead, underwear issued to prisoners needs to be sturdy and Autonomous action of mid-level manager
durable to withstand the rigors of prison activities and laundering. To meet these needs,
Southern Bloomers began selling underwear made of heavy cotton fabric.
Tenacity and persistence of a store manager in
An unexpected opportunity led Southern Bloomer to go beyond its intended strategy of Southern California
serving institutional needs for durable underwear. Just a few years after opening,
Southern Bloomer’s performance was excellent. It was servicing the needs of about 125 Risk of failure
facilities, but unfortunately, this was creating a vast amount of scrap fabric. An attempt to
use the scrap as stuffing for pillows had failed, so the scrap was being sent to landfills.
This was not only wasteful but also costly. Possible career-limiting action
One day, cofounder Don Sonner visited a gun shop with his son. Sonner had no interest in

guns, but he quickly spotted a potential use for his scrap fabric during this visit. The Organization must be willing to accept new ideas
patches that the gun shop sold to clean the inside of gun barrels were of poor quality.
According to Sonner, when he “saw one of those flimsy woven patches they sold that
unraveled when you touched them, I said, ‘Man, that’s what I can do’” with the scrap Frappuccino was born!
fabric. Unlike other gun-cleaning patches, the patches that Southern Bloomer sold did not
give off threads or lint, two by-products that hurt guns’ accuracy and reliability. The Contributing 20% of the $11billion in revenues for Starbucks
patches quickly became popular with the military, police departments, and individual gun
enthusiasts. Before long, Southern Bloomer was selling thousands of pounds of patches in 2010.
per month. A casual trip to a gun store unexpectedly gave rise to a lucrative emergent
strategy (Wells, 2002).

DISCUSSION QUESTION
What kind of strategies do you think Samsung
Electronics and Apple, two of the world’s leading
IT companies, are taking?

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