Strategic Management (MGMT481)

Dr. Mohammed Ouakouak

Email: [email protected]
Office Location: N1-216

Textbook:

Volberda, H., Morgan, R., Reinmoeller, P., Hitt, M., Ireland, R.D. &
Hoskisson, R. (2011), “Strategic Management: Competitiveness and
Globalization: Concepts and Cases”. Cengage Learning Press, ISBN
978-1-4080-4875-7.
 Chapter 1

Strategic Management and Strategic

Competitiveness

PART 1 STRATEGIC MANAGEMENT INPUTS

© 2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Learning Objectives

Studying this chapter should provide you with the strategic management
knowledge needed to:

1. Define strategy and competitive advantage.

2. Describe the strategic management process.

3. Describe vision, mission, objectives, and core values.

4. Define stakeholders and describe their ability to influence organizations.

 OPENING CASE

STARBUCKS IS A NEW ECONOMY MULTINATIONAL

Thinking point:

Think about a strategic action taken by a company

operating in Kuwait.
- Was this action good or bad? Explain?
 Introduction

Managers of all types of organizations (Family-owned businesses, entrepreneurial firms,

international corporations, and not-for profit organizations, such as community interest

companies, state-owned enterprises and co-operatives) face or should answer the same three

central questions:

1) What is our present situation?

 Answering this question helps you to understand both internal and external
environments.

2) Where do we want to go from here?

 Answering this question helps you to think about the future of the company.

3) How are we going to get there?

 Answering this question helps you to understand the means, approaches, and ways
to use to reach the desired future.
 Introduction

Definition of Strategy:

 An integrated and coordinated set of decisions and actions designed to exploit core
competencies and gain a competitive advantage.
 A theory about how to gain a competitive advantage.
 Strategy is about competing differently – doing what rivals do not do or what rivals cannot
do –
 “ …. being different means deliberately choosing a different set of activities to deliver
a unique mix of value” (M. Porter)

- Basically all actions which support the achievement of the long-term objectives can be summarized as
a strategy.

- A organization’s strategy provides direction and guidance, in terms of not only what the organization
should do but also what it should not do. Making the wrong strategic moves will prove a distraction
and a waste of organization’s resources.
Video: What is strategy?
https://www.youtube.com/watch?v=3Hd88eBgkw0
 Introduction

Figure. Elements of a Company’s Strategy

What separates a powerful strategy from a weak

one is:
“management’s ability to forge a series of moves,
Video: Simon Sinek on How to Improve Strategic Thinking
both in the marketplace and internally, that makes
https://www.youtube.com/watch?v=bnwvd_TtWmw
the company distinctive.”
 CASE STUDY

MCDONALD’S STRATEGY IN THE QUICK-SERVICE

RESTAURANT INDUSTRY
 Competitive advantage

 Definition of Competitive advantage

 Anything that a firm does especially well compared to its competitors. (Ex: Higher product
quality, innovative products, lower operating cost, better customer service, better brand, etc.)

 It is a set of qualities that give businesses leverage over their competitors. It allows businesses to
offer their target market a product or service with higher value than competitors.

 Key resources/capabilities (core competencies) are the value creation engine that forms the
foundation for building competitive advantages.

 Competitive advantage can be understood as the specific feature, which helps the firm to outrun
its rivals. On the contrary, core competence is defined as the set of skills and strengths that
results in competitive advantage.

 In the short term:  In the long term:

- Competitors can fail to imitate. - No competitive advantage is permanent
- Companies can imitate each other over time.

Video: Sustainable Competitive Advantages

https://www.youtube.com/watch?v=K9nIH-F0Sjc
 Competitive advantage

Table - Quotations about strategy and competitive advantage:

“If you don’t have a competitive advantage, don’t compete.” (Jack Welch, Chairman, GE)

“We have the best customer satisfaction record, …… So you’re not just getting low fares, you’re also getting
wonderful customer service.” (Herb Kelleher, former CEO of Southwest Airlines)

“To succeed in business, you must build a brand and never destroy it….” (Aliko Dangote)

“The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to
their employees will have the edge in this area.” (Bill Gates).

“The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.”
(Rupert Murdoch)

“Don’t try to be all things to all people. Concentrate on selling something unique that you know there is a
need for, offer competitive pricing and good customer service.” (Lilian Vernon)

“Our business practices are no different than those of our competitors. But we are bigger, and thus more
visible, so we get more flack.” (Philip Knight)
Competitive advantage
 What Makes a Good Strategy?

Three tests can be applied to determine whether a strategy has the potential to be a winning strategy:

1. The Fit Test: How well does the strategy fit the company?

- A good strategy should be well matched to environment conditions

- Also, a winning strategy has to be tailored to the company’s resources and capabilities

Unless a strategy exhibits good fit with both external and internal aspects, it is likely to underperform and
fall short of producing the desired results.

2. The Competitive Advantage Test: Can the strategy help the company achieve a sustainable competitive
advantage?

- A good strategy enables a company to achieve a competitive advantage over key rivals that is long-
lasting.

3. The Performance Test: Is the strategy producing good organizational performance?

- The mark of a good strategy is strong organizational performance (positive return, high profit,
profitability, high market share, etc.). All these performance indicators are signs of a good strategy.
 Strategic Management Process

 Although it is usually difficult to know for sure that a firm is pursuing the best strategy, it is possible to
reduce the likelihood that mistakes are being made.

 The best way to do this for a firm is to choose its strategy carefully and systematically and to follow the
strategic management process.

Strategic management process:

Strategic management process is a sequential set of analyses and choices that can increase the likelihood that
a firm will choose a good strategy; that is, a strategy that generates competitive advantages.

 It consists of three stages: Strategy formulation, strategy implementation, and strategy evaluation

1. Strategy Formulation: Refers to the process of carrying out the following activities:
- Developing/reviewing vision and mission statements
- Identifying external opportunities and threats
- Determining internal strengths and weaknesses
- Establishing long-term goals
- Generating alternative strategies, and
- Choosing particular strategies to pursue
 Strategic Management Process

2. Strategy Implementation: The process of allocating resources so that formulated strategies

can be executed. It includes:
- Developing a supportive culture Video: What Is Strategy Execution?
- Adopting an effective structure https://www.youtube.com/watch?v=iEfH4y-XzK0

- Hiring the right people

- Developing, motivating, involving, and engaging employees
- Developing coordination, information, communication, controlling systems
- Having good leadership team
- Budgeting system, etc….

Strategy implementation is a process by which strategies are put into action through the
development of programs, budgets, and procedures.

Strategy implementation is a process that covers the entire managerial activities that are
necessary to turn strategy into reality.
 Strategic Management Process

3. Strategy Evaluation: the process of evaluating and controlling whether plans are well
executed and goals are well reached.

 Strategy-evaluation activities :

(1) Reviewing external and internal factors that are bases for current strategies

(2) Measuring performance, and

(3) Taking corrective actions/decisions

 Strategic Management Process

Figure: The Strategy-making, Strategy-Executing, Strategy-Evaluation process

Strategy Strategy Strategy

Formulation Execution Evaluation

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6

Crafting a Monitoring
strategy to developments,
Developing Strategic achieve the evaluating performance,
Executing
a mission, analyses Setting objectives and and initiating corrective
the
vision, and (External & objectives move the adjustments
strategy
core values Internal) company along
the intended
path

Revise as needed in light of the company’s actual performance,

changing conditions, new opportunities, and new ideas.
 Mission statement

Mission statement:
- It reflects the essential purpose of the organization, and ideally captures why it is in existence.
- A one-sentence statement describing the reason your organization exists.

Company Mission
Linkedin “To connect the world’s professionals to make them more productive and
successful.”.
Facebook “To give people the power to share and make the world more open and
connected.”
Tesla “To accelerate the world's transition to sustainable energy.”

Google “To organize the world’s information and make it universally accessible and
useful.”

 The vision, mission and values are usually established when the organization was first set up. However, they
are to be adapted or changed over time.

Read document on the portal: Examples_mission, vision_values

 Vision statement

Vision Statement:
- It describes what the company is to become in the long-term future.
- A description of what an organization wants to achieve in the future.
- A one-sentence statement describing what an organization would like to be or to achieve in
long-term future.

Company Vision

Ethiopian Air “To become the most competitive and leading aviation group in
Africa.”

McDonald’s “To be the world’s best quick service restaurant experience.”

Adidas “To be the leading sports brand in the world”.

Sony “To be the most comprehensive entertainment company in the

world.”
 Values statement

Values statement: (Core values)

- A value statement documents the expected collective norms and standards of behavior for an
organization’s managers and employees.
- An organization's values are its guiding principles which apply across the organization and underpin
how its work is carried out. An organization's values are its basic beliefs about what really matters,
which guide how things should be done within the organization.

Example values statement:

"Our work will be guided and informed by our beliefs and commitments to:
- Inclusiveness - we respect people, value diversity and are committed to equality.
- Participation - we value and recognize the contribution of volunteers within organizations and
communities.
- Quality - we strive for excellence through continuous improvement.
- Openness - we are committed to a culture of teamwork and collaboration.”

 See the following document (Importance of Mission, Vision, and Values) on the portal for more
examples.
Video: Mission, Vision & Values: The Foundation of Every Great Company
https://www.youtube.com/watch?v=6Mjbk0pTJYI
 Objectives

Long-Term Objectives:

Long-term objectives are statements that drill down a level below the vision and describe how you plan to
achieve them. These goals are usually set for around three to five years, directly aligning with the mission and
vision statements.

Short-Term Objectives:

 Long-term objectives need to be broken down into short-term objectives for the organization’s separate
businesses, product lines, functional departments, and individual work units. It is extremely important to set
objectives at all organizational levels.

 Each long-term objective should have a few one-year objectives. Each objective should be as SMART as
possible: Specific, Measurable, Achievable, Realistic, and Time-based.

Objective-setting is thus generally a top-down process that must extend throughout the organization, which
means that each organizational unit must take care of setting its own objectives which fit with the long-term
objectives of the organization.

Video: Goals, Objectives, Strategies & Tactics: What's the Video: 56 Strategic Objective Examples
difference?
https://www.clearpointstrategy.com/56-strategic-
https://www.youtube.com/watch?v=voZI75TyeHI objective-examples-for-your-company-to-copy/
 Stakeholders

Figure: The Three Stakeholders Groups

 Stakeholder Management

Stakeholder management is the process by which you organize, monitor and improve your
relationships with your stakeholders. It involves systematically identifying stakeholder; analyzing their
needs and expectations; and planning and implementing various tasks to engage with them.

Video 2: Shareholders vs. Stakeholders -- Friedman vs.

Video 1: What is Stakeholder Theory? - R. Edward Freeman
Freeman Debate - R. Edward Freeman
https://www.youtube.com/watch?v=bIRUaLcvPe8&t=63s
https://www.youtube.com/watch?v=_sNKIEzYM7M
END CHAPTER 1