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The Strategic Management Process

Why do some organizations succeed while others fail? Strategy

An action managers take to achieve one or more of an organizations goals

Strategic management process

The process by which managers choose a set of strategies that will allow a company to achieve superior performance

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Superior Performance and Competitive Advantage Profitability

A measure of a companys return on its invested capital

Superior performance
One companys profitability relative to that of other companies in the same or similar business or industry

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Profitability
Maximizing returns to shareholders Importance of balancing short-term returns with long-term profitability Pressures to maximize short-term profitability may result in unethical behavior
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Firm-Specific Performance and Profitability

Competitive advantage A firms profitability is greater than the average profitability for all firms in its industry Sustained competitive advantage A firm maintains competitive advantage for a number of years Business model Managements model of how strategy will allow the company to gain competitive advantage and achieve superior profitability
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Levels of Strategic Management

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Main Components of the Strategic Planning Process (This will be on the Exam)

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Mission Statement
A description or declaration of why a company is in operation Provides the framework or context within which strategies are formulated Has 3 main components: Mission or vision Values or guiding standards that drive and shape the actions and behavior of employees Major goals or objectives

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The Mission or Vision

What the company is trying to achieve over the medium to long term The Boeing Company in 2016: People working together as a global enterprise for aerospace leadership Microsoft: To empower people through great software, any time, any place, on any device

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Abells Framework for Defining the Business

Source: D. F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.
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Values
How managers and employees should conduct themselves Organizational culture The set of values, norms, and standards that control how employees work to achieve an organizations mission and goals Often seen as a source of competitive advantage In high-performing organizations, values respect the interests of key organizational stakeholders.
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Strategy as an Emergent Process

Strategy making in an unpredictable world Strategy making by lower-level managers Serendipity (i.e., fortunate good luck) and strategy
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Intended and Emergent Strategies

Intended strategies Strategies an organization plans to put into action Emergent strategies Unplanned strategies Realized strategy The product of whatever intended strategies are actually put into action and of any emergent strategies

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Emergent and Deliberate Strategies

Source: Adapted from H. Mintzberg and A. McGugh, Administrative Science Quarterly, Vol. 30. No. 2, June 1985.

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Strategic Planning in Practice

Scenario Planning Involving Functional Managers Avoiding the ivory tower approach Perceiving procedural justice Strategic Intent Avoiding the fit model, which focuses too much on the current state Setting ambitious goals that stretch a company and finding ways to build to attain those goals

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Strategic Leadership
Vision, eloquence, and consistency Commitment Being well informed Willingness to delegate and empower The astute use of power Emotional intelligence
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Emotional Intelligence

Self-awareness Self-regulation Motivation Empathy Social skills

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Challenges to Strategic Decision Making

Cognitive biases
Prior hypothesis bias Escalating commitment Reasoning by analogy Representativeness Illusion of Control
Hubris hypothesis

Groupthink
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Processes for Improving Decision Making

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