Strategic Management:

Creating Competitive Advantages

Chapter One

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
 Two Perspectives of Leadership
• Romantic view
 Leader is the key
force in organization’s
success
• External control
perspective
 Focus is on external
factors that affect an
organization’s
success

1-2
 Defining Strategic Management
• Strategic management
 Analyses, decisions, and actions an
organization undertakes in order to create
and sustain competitive advantages

1-3
 Defining Strategic Management
• Analysis
 Strategic goals
 Internal and external environment of the firm
• Strategic decisions
 What industries should we compete in?
 How should we compete in those industries?

1-4
 Defining Strategic Management
• Actions
 Allocate necessary resources
 Design the organization to bring intended
strategies to reality

1-5
 Two Fundamental Questions
1. How should we 2. How can we create
compete in order to competitive
create competitive advantages in the
advantages in the marketplace that are
marketplace? unique, valuable,
and difficult for rivals
to copy or
substitute?

1-6
 Key Attributes of Strategic
Management
1. Directs the organization toward overall
goals and objectives
2. Includes multiple stakeholders in decision
making

1-7
 Key Attributes of Strategic
Management (cont.)
3. Needs to incorporate short-term and
long-term perspectives
4. Recognizes trade-offs between efficiency
and effectiveness

1-8
 Strategic Management Process
• Intended strategy
 Decisions are determined only by analysis
• Realized strategy
 Decisions are determined by both analysis
and unforeseen environmental
developments, unanticipated resource
constraints, and/or changes in managerial
preferences

1-9
 Corporate Governance
Three mechanisms ensure effective
corporate governance:
• An effective and engaged board of
directors
• Shared activism
• Proper managerial rewards and incentives

1-10
 Three Types of Leaders
• Local line leaders
 Have significant profit-and-loss responsibility
• Executive leaders
 Champion and guide ideas, create a learning
infrastructure, establish a domain for taking
action

1-11
 Three Types of Leaders (cont.)
• Internal networkers
 Generate power through the conviction and
clarity of their ideas

1-12
 Coherence in Strategic Direction
• Hierarchy of goals
 Goals ranging from those that are less
specific yet able to evoke powerful and
compelling mental images those that are
more specific and measurable
• Vision, mission statement, strategic
objectives

1-13
A Hierarchy of Goals

1-14
 Coherence in Strategic Direction
• Organizational
vision
 Goal that is
“massively inspiring,
overarching, and long
term”
 Represents a
destination that is
driven by and evokes
passion

1-15