,Chapter 1: Strategic Management: Creating Competitive Advantages
Part 1 Strategic Analysis
Chapter 1
Strategic Management: Creating Competitive Advantages... 1-2
What Is Strategic Management? .............................................................. 1-5
Defining Strategic Management ......................................................................................1-5
The Four Key Attributes of Strategic Management ......................................................... 1-5
The Strategic Management Process......................................................... 1-7
....................................................................................................................
Intended versus Realized Strategies ................................................................................1-7
Strategy Analysis .............................................................................................................1-7
Strategy Formulation.......................................................................................................1-8
Strategy Implementation.................................................................................................. 1-8
The Role of Corporate Governance
and Stakeholder Management.................................................................. 1-9
Alternative Perspectives of Stakeholder Management ....................................................1-11
Social Responsibility and Environmental Sustainability:
Moving Beyond the Immediate Stakeholders .................................................................. 1-12
The Strategic Management Perspective:
An Imperative throughout the Organization .......................................... 1-15
Ensuring Coherence in Strategic Direction ............................................ 1-16
Organizational Vision .....................................................................................................1-17
Mission Statements ..........................................................................................................1-18
Strategic Objectives......................................................................................................... 1-19
Issue for Debate ......................................................................................... 1-20
Reflecting on Career Implications ........................................................... 1-22
Summary .................................................................................................... 1-24
End-of-Chapter Teaching Notes............................................................... 1-27
Connect Resources ..................................................................................... 1-33
,Chapter 1: Strategic Management: Creating Competitive Advantages
Chapter 1
Strategic Management:
Creating Competitive Advantages
Summary/Objectives
PowerPoint Slide 2: Learning Objectives
At the heart of strategic management is the question: “How and why do some firms outperform
others?” The challenge to managers is to develop and implement strategies that will provide
competitive advantages that will be sustainable over time. This chapter is divided into five
sections.
1. The first section addresses the broad question: “What is strategic management?”
Here, we define strategic management as “consisting of the analysis, decisions, and
actions an organization undertakes to create and sustain competitive advantages.” We
also address the four key attributes of strategic management: concern with overall
objectives; involvement of multiple stakeholders; incorporation of short- and long-
term perspectives; and recognition of tradeoffs between effectiveness and efficiency.
We also introduce the concept of “ambidextrous behaviors”—the need to combine
alignment and adaptability.
2. The second section discusses the strategic management process. Here, we present the
three processes—analysis, formulation, and implementation—that provide the
framework for the overall organization of the thirteen chapters of the book.
3. The third section focuses on the vital role of corporate governance, which is essential
to ensuring that the actions of a firm’s management are consistent with the goals of its
owners—the shareholders. We also address stakeholder management. It must be
taken into account throughout the strategic management process. Although the
interests of stakeholders may, at times, conflict, we discuss how firms are able to
achieve “symbiosis” among stakeholders wherein various interests are considered
interdependent and can be attained simultaneously. We address the importance of
social responsibility, including environmental sustainability, as well as challenges
associated with making the case for sustainability initiatives.
4. The fourth section addresses today’s greater need for a strategic management
perspective throughout the organization. With the emergence of the knowledge of
economy and globalization, leaders must mobilize people throughout the
organization.
5. The fifth section discusses the need for organizations to attain consistency in their
vision, mission, and strategic objectives. Collectively, they form a hierarchy of goals.
, Chapter 1: Strategic Management: Creating Competitive Advantages
Lecture/Discussion Outline
We begin the chapter in LEARNING FROM MISTAKES with a clever quote from Arthur
Martinez, Sears’s former chairman: “Today’s peacock is tomorrow’s feather duster” to help
illustrate the rapid turnover among the Fortune 500 firms over a period of time. With rapid
changing technologies and intensified global competition success can be temporary, and new
entrants can shake up long-standing industries.
The SUPPLEMENT below, from a website provides an interesting perspective on the
digital economy.
Extra Example: The Digital Disruption Has Already Happened
World’s largest taxi company owns no taxis. (Uber)
Largest accommodation provider owns no real estate. (Airbnb)
Largest phone companies own no telco infrastructure. (Skype, WeChat)
Most popular media owner owns no content. (Facebook)
World’s largest movie house owns no cinemas. (Netflix)
Largest software vendors don’t write the apps. (Apple and Google)
Source: www.ibmforentreprenuers.com .
Discussion Question 1: What are the implications for your careers? (This is a rather
general question, but it might help remind students that they must be sensitive to changes
in industry dynamics that could provide new opportunities—as well as, perhaps, erode
opportunities that they may have thought they had in a particular industry.)
Teaching Tip: By raising the “career implications” question, you will have the
opportunity to briefly introduce the concept of the sustainability of competitive
advantage(s), i.e., the criteria of rare, valuable, difficult to copy (imitate and substitute)
that we will address at length in Chapters 3 and 5. The point that can be made is that
students should strive to develop skills and capabilities that satisfy these four criteria to
enjoy greater career success. This helps to illustrate some very practical implications of
strategy concepts and heighten student interest.
The opening case is about a company, Luckin Coffee, which failed because of (1)
misguided strategic actions as well as weak corporate governance and (2) strong competition
from established coffee chains such as Starbucks which have a significant competitive
advantage. Thus, it helps to illustrate both the romantic view as well as the external control view
of leadership, respectively.
Discussion Question 2: Given that public accounting firms such as Ernst & Young may
be unable to uncover financial misconduct at foreign firms, what kind of due diligence
should U.S. investors undertake before investing in Chinese tech companies?
Response Guidelines: This question should result in some interesting perspectives,
especially from students who aspire to work for an accounting firm such as Ernst & Young.
Instructors may want to point out that accounting firms are dependent on effective country-level
Part 1 Strategic Analysis
Chapter 1
Strategic Management: Creating Competitive Advantages... 1-2
What Is Strategic Management? .............................................................. 1-5
Defining Strategic Management ......................................................................................1-5
The Four Key Attributes of Strategic Management ......................................................... 1-5
The Strategic Management Process......................................................... 1-7
....................................................................................................................
Intended versus Realized Strategies ................................................................................1-7
Strategy Analysis .............................................................................................................1-7
Strategy Formulation.......................................................................................................1-8
Strategy Implementation.................................................................................................. 1-8
The Role of Corporate Governance
and Stakeholder Management.................................................................. 1-9
Alternative Perspectives of Stakeholder Management ....................................................1-11
Social Responsibility and Environmental Sustainability:
Moving Beyond the Immediate Stakeholders .................................................................. 1-12
The Strategic Management Perspective:
An Imperative throughout the Organization .......................................... 1-15
Ensuring Coherence in Strategic Direction ............................................ 1-16
Organizational Vision .....................................................................................................1-17
Mission Statements ..........................................................................................................1-18
Strategic Objectives......................................................................................................... 1-19
Issue for Debate ......................................................................................... 1-20
Reflecting on Career Implications ........................................................... 1-22
Summary .................................................................................................... 1-24
End-of-Chapter Teaching Notes............................................................... 1-27
Connect Resources ..................................................................................... 1-33
,Chapter 1: Strategic Management: Creating Competitive Advantages
Chapter 1
Strategic Management:
Creating Competitive Advantages
Summary/Objectives
PowerPoint Slide 2: Learning Objectives
At the heart of strategic management is the question: “How and why do some firms outperform
others?” The challenge to managers is to develop and implement strategies that will provide
competitive advantages that will be sustainable over time. This chapter is divided into five
sections.
1. The first section addresses the broad question: “What is strategic management?”
Here, we define strategic management as “consisting of the analysis, decisions, and
actions an organization undertakes to create and sustain competitive advantages.” We
also address the four key attributes of strategic management: concern with overall
objectives; involvement of multiple stakeholders; incorporation of short- and long-
term perspectives; and recognition of tradeoffs between effectiveness and efficiency.
We also introduce the concept of “ambidextrous behaviors”—the need to combine
alignment and adaptability.
2. The second section discusses the strategic management process. Here, we present the
three processes—analysis, formulation, and implementation—that provide the
framework for the overall organization of the thirteen chapters of the book.
3. The third section focuses on the vital role of corporate governance, which is essential
to ensuring that the actions of a firm’s management are consistent with the goals of its
owners—the shareholders. We also address stakeholder management. It must be
taken into account throughout the strategic management process. Although the
interests of stakeholders may, at times, conflict, we discuss how firms are able to
achieve “symbiosis” among stakeholders wherein various interests are considered
interdependent and can be attained simultaneously. We address the importance of
social responsibility, including environmental sustainability, as well as challenges
associated with making the case for sustainability initiatives.
4. The fourth section addresses today’s greater need for a strategic management
perspective throughout the organization. With the emergence of the knowledge of
economy and globalization, leaders must mobilize people throughout the
organization.
5. The fifth section discusses the need for organizations to attain consistency in their
vision, mission, and strategic objectives. Collectively, they form a hierarchy of goals.
, Chapter 1: Strategic Management: Creating Competitive Advantages
Lecture/Discussion Outline
We begin the chapter in LEARNING FROM MISTAKES with a clever quote from Arthur
Martinez, Sears’s former chairman: “Today’s peacock is tomorrow’s feather duster” to help
illustrate the rapid turnover among the Fortune 500 firms over a period of time. With rapid
changing technologies and intensified global competition success can be temporary, and new
entrants can shake up long-standing industries.
The SUPPLEMENT below, from a website provides an interesting perspective on the
digital economy.
Extra Example: The Digital Disruption Has Already Happened
World’s largest taxi company owns no taxis. (Uber)
Largest accommodation provider owns no real estate. (Airbnb)
Largest phone companies own no telco infrastructure. (Skype, WeChat)
Most popular media owner owns no content. (Facebook)
World’s largest movie house owns no cinemas. (Netflix)
Largest software vendors don’t write the apps. (Apple and Google)
Source: www.ibmforentreprenuers.com .
Discussion Question 1: What are the implications for your careers? (This is a rather
general question, but it might help remind students that they must be sensitive to changes
in industry dynamics that could provide new opportunities—as well as, perhaps, erode
opportunities that they may have thought they had in a particular industry.)
Teaching Tip: By raising the “career implications” question, you will have the
opportunity to briefly introduce the concept of the sustainability of competitive
advantage(s), i.e., the criteria of rare, valuable, difficult to copy (imitate and substitute)
that we will address at length in Chapters 3 and 5. The point that can be made is that
students should strive to develop skills and capabilities that satisfy these four criteria to
enjoy greater career success. This helps to illustrate some very practical implications of
strategy concepts and heighten student interest.
The opening case is about a company, Luckin Coffee, which failed because of (1)
misguided strategic actions as well as weak corporate governance and (2) strong competition
from established coffee chains such as Starbucks which have a significant competitive
advantage. Thus, it helps to illustrate both the romantic view as well as the external control view
of leadership, respectively.
Discussion Question 2: Given that public accounting firms such as Ernst & Young may
be unable to uncover financial misconduct at foreign firms, what kind of due diligence
should U.S. investors undertake before investing in Chinese tech companies?
Response Guidelines: This question should result in some interesting perspectives,
especially from students who aspire to work for an accounting firm such as Ernst & Young.
Instructors may want to point out that accounting firms are dependent on effective country-level
