Week 4: Strategic management
What is strategy, what is strategic management, and how are they related?
Strategic management (= a type of planning process in which managers establish the organization’s
general direction and objectives, formulate a specific strategy, plan and carry out the strategy’s
implementation, and monitor results and make necessary adjustments)
- Steps
o Determining the firm’s strategic vision (= a view of the firm over the long term that
describes what it should achieve in the future)
Captures its general identity, direction, and level of aspirations
o Formulating the firm’s mission statement (= a statement that articulates the
fundamental purpose of the organization; often contains several components)
Strategic vision vs mission statements: mission statements tend to be much
more specific in terms of the values and the primary focus of the
organization
o Conducting an external environmental analysis
Can significantly affect the strategy a firm might develop, as well as whether
the firm is likely to succeed or fail
o The general environment (= sociocultural, technological, economic, political-legal,
and global forces that can influence the effectiveness of an organization’s strategy)
Sociocultural forces (= forces consisting primarily of the demographics or
cultural characteristics of the societies in which an organization operates)
Demographics
o Example: baby boomers drinking less soft drinks as they age.
US population growth is slowing and much of the growth
comes from immigrants who generally drink less soft drinks
Values
o Example: society is increasingly concerned about pollution
and recycling. Increasing focus on health and the negative
aspects of caffeine, carbonation, and sugar
Technological forces
Basic dimensions
o Product technological changes (= those that lead to new
features and capabilities in existing products or to
completely new products)
o Process technological changes (= alterations in how to make
products or how to manage enterprises)
Example: new ‘canning’ technology makes using recycled aluminum
easier and cheaper. Internet opens up a new means of running
promotion contests and activities
Economic forces
Example: slow economy reduces per-person consumption primarily
due to fewer social occasions (parties) at which soft drinks might be
served. Nearing end of economic downturn and prospects of
economic recovery. Stricter liability for illness caused by beverage
contamination
Political and legal forces
Laws frame what organizations can and cannot do and, as a
consequence, create both challenges and opportunities
Example: new business opportunities
, Global forces
Affect each of the other four general environmental forces
Institutional forces (= the country’s rules, policies, and enforcement
processes that influence individuals’ and organizations’ behaviors
that operate within a country’s borders)
Physical forces (= involve infrastructure that can affect existing and
potential business operations in a country such as roads,
telecommunications, air links, deepwater harbors, etc.)
Example: gradual increase in acceptance of carbonated soft drinks in
other countries, such as India and China
Widely available electricity and increased ability to afford
refrigerators in emerging countries and economies
o The firm’s industry and competitor environment
Porter’s Five Forces: focuses on five industry and competitor forces that can
significantly influence the performance of organizations in an industry
Summary: firms must carefully analyze their external environment. They
cannot afford ‘blind spots’ in the knowledge of current and potential
competitors. If they overlook a competitor, they could end up fighting for
survival
o Internal analysis
Porter’s value chain (= the set of key activities that directly produce or
support the production of a firm’s products and service offered to
customers)
o Integrating internal and external analyzes
SWOT analysis (= an analysis of the firm’s strengths, weaknesses,
opportunities, and threats (SWOT) to its continued operation)
Basic framework for integrating the results of the analyzes that guide
the formulation of an appropriate strategy
o Setting strategic objectives (= objectives that turn the strategic intent and mission of
a firm into concrete and measurable goals)
Important because it facilitates a firm’s ability to allocate resources
appropriately, reach a shared understanding of priorities, delegate
responsibilities, and hold people accountable for results
o Formulating a strategy
Levels
Corporate (= determines the markets in which the firm will compete)
Business-level/competitive strategy (= determines how a firm will
compete in each of these markets)
Functional/unit strategy (= focus on the operations of each function
or unit and their contribution to help the firm achieve a competitive
advantage)
o Strategy implementation
Seven S approach: having an internal organization that is consistent with and
supportive of the strategy
