Strategic Management

Chapter 1- Strategic management, creating competitive advantage

Strategic management consists of the analysis, decisions and actions of an organisation in order to create and sustain competitive advantage.

2 main elements of strategy

i.ongoing process of analysis, decisions and actions

ii.to study why some firms outperform others.

Michael Porter argues that sustainable competitive advantage cannot be achieved through operational effectiveness alone.

4 key attributes of strategic management

i.direction toward overall organisational goals and objectives - "organisational versus individual rationality"

ii.management includes multiple stakeholders in decision making

iii.management requires incorporating both short term and long term perspectives - "creative tension"

iv.management involves the recognition of trade off's between effectiveness and efficiency - "doing the right thing" versus "doing things right".

Henry Mintzberg- in his view, the business environment is far from predictable, thus limiting out ability for analysis. Further, decisions in an organisation are seldom based on optimal rationality alone, given the political processes that occur in all organisations.

Therefore, there are 'intended/ deliberate strategies', 'unrealised strategies' and 'emergent strategies'.

2 alternative perspectives to stakeholder management

i.'Zero-sum'- looks upon various stakeholders as competing for attention an resources of the organisation. This perspective is rooted, in part, in the traditional conflict between workers and management.

ii.Symbiosis- organisations can achieve mutual benefits when recognising that stakeholders are dependent

upon each other for their success and well-being.

Intellectual capital- knowledge has become the direct source of competitive advantage for companies selling ideas and relationships as well as indirect sources of competitive advantage for all companies trying to differentiate themselves from rivals by how they create value for their customers.

Enhancing employee involvement in the strategic management process- develop and mobilise people and other assets in the organisations, leaders are needed throughout the organisation.

benefits of a good mission statement

i.help channel employees behaviour

ii.challenges help motivate

iii.help resolve conflict between departments

iv.provide a yardstick for rewards and incentives

Lecture notes

A.P. Sloan- strategy is all about positioning

A.D. Chandler- structure follows strategy

I Ansoff- strategy as planning

Chapter 2- Analysing the external environment of the firm

environmental monitoring- tracks the evolution of environmental trends, sequences of events or streams of activities.

Competitive intelligence- helps firms define and understand their industry and identify rivals' strengths and weaknesses.

A danger of using these tools and others for forecasting is that managers may view uncertainty as black and white and ignore important grey areas. The problem is that underestimating uncertainties can lead to strategies that neither defend against threats nor take advantages of opportunities.

6 segments of the general environmental

i.demographic * Could use PESTEL

ii.sociocultural

iii.political/ legal

iv.technological

v.economic

vi.global

The competitive environment- Porter's five forces

1.threat of new entrants- barriers to entry

2.bargaining power of buyers- high if purchase sin large volumes or products substitutable

3.bargaining power of suppliers- high if few suppliers and products not substitutable

4.threat of substitutes

5.intensity of rivalry among competitors

a few problems with the five forces

i.the five forces analysis implicitly assumes a zero sum game, determining how a firm can enhance its position relative to the forces.

ii.Its a static analysis.

In an industry analysis no two firms are totally different but no two are exactly the same. Classifying an industry into strategic groups involves judgement. It is useful as an analytical tool, but one must exercise caution in deciding what dimensions to use.

However, classifying is still useful.

i.Strategic grouping helps identify barriers to mobility that protect a group from attacks

ii.it helps identify groups whose competitive position may be marginal or tenuous

iii.it helps chart the future decisions of the firm

iv.it helps in thinking through the implications of each industry trend.

Lecture notes

the four perspectives on strategy

i.classical model (planning model) - no reason why realised strategy should not closely mirror intended strategy.

ii.The processional approach - Minztberg- strategy as a stream of decisions. It is continuous and iterative.

iii.Evolutionary approach- focus should be on short term survival looking at cost control