PREFACE PREFACE Strategic Management is all about managing the enterprise to achieve superior performance. Strategic Management is all about managing the enterprise to achieve superior performance. The essence of Strategic Management is to identify the sources of profit available to the business enterprise and to formulate and implement strategies that exploit these sources. The essence of Strategic Management is to identify the sources of profit available to the business enterprise and to formulate and implement strategies that exploit these sources.

Fundamental questions Fundamental questions At the most basic level, strategy making extends beyond questions of resource deployment and market position to address fundamental questions such as: At the most basic level, strategy making extends beyond questions of resource deployment and market position to address fundamental questions such as: What is our business? What is our business? What are we trying to achieve? What are we trying to achieve? What is our identity as an organization? What is our identity as an organization?

Chapter 1 The CONCEPT of STRATEGY Chapter 1 The CONCEPT of STRATEGY Strategy is about winning! Strategy is about winning! Strategy is not detailed plan or program of instructions Strategy is not detailed plan or program of instructions Strategy is a unifying theme that gives coherence and direction to the actions and decisions of an individual or an organization Strategy is a unifying theme that gives coherence and direction to the actions and decisions of an individual or an organization

The Role of Strategy in Success Four common factors in successful strategies : Four common factors in successful strategies : Goals that are simple, consistent, and long term Goals that are simple, consistent, and long term Profound understanding of the competitive environment Profound understanding of the competitive environment Objective appraisal of resources Objective appraisal of resources Effective implementation Effective implementation

The Role of Strategy in Success Whether we look at warfare, politics, sport, or business, the success of individuals and organizations is seldom the outcome of a purely random process. Strategies that build on the basis four elements almost always play an influential role. Success has gone to those who managed their careers most effectively– typically by combining the four strategic factors. They are goal focused; their career goals have taken primacy over the multitude of lifes goals – friendship, love, leisure, spiritual fulfillment, etc Whether we look at warfare, politics, sport, or business, the success of individuals and organizations is seldom the outcome of a purely random process. Strategies that build on the basis four elements almost always play an influential role. Success has gone to those who managed their careers most effectively– typically by combining the four strategic factors. They are goal focused; their career goals have taken primacy over the multitude of lifes goals – friendship, love, leisure, spiritual fulfillment, etc

The Role of Strategy in Success While focusing on a few career goals is conducive to outstanding career success, such success may be matched by dismal failure in other areas of life. Many people who have achieved remarkable success in their careers have led lives scarred by poor relationship with friends and families and stunted personal development. These include John Paul Getty in business, Richard Nixon and Charles de Gaulle in politics, Marilyn Monroe and Elvis Presley in entertainment, Bobby Fisher in chess. While focusing on a few career goals is conducive to outstanding career success, such success may be matched by dismal failure in other areas of life. Many people who have achieved remarkable success in their careers have led lives scarred by poor relationship with friends and families and stunted personal development. These include John Paul Getty in business, Richard Nixon and Charles de Gaulle in politics, Marilyn Monroe and Elvis Presley in entertainment, Bobby Fisher in chess.

The Role of Strategy in Success These same ingredients of successful strategies– clear goals, understanding the competitive environment, resource appraisal, and effective implementation-form the key components of our analysis of business strategy. These same ingredients of successful strategies– clear goals, understanding the competitive environment, resource appraisal, and effective implementation-form the key components of our analysis of business strategy. These Principles are not new. Over 2,000 years ago, Sun Tzu wrote: These Principles are not new. Over 2,000 years ago, Sun Tzu wrote: Know the other and know yourself: Triumph without peril Know the other and know yourself: Triumph without peril Know Nature and know the Situation: Triumph completely! Know Nature and know the Situation: Triumph completely!

A Framework for Analyzing Business Strategy Strategy is forming a link between the firm and its external environment Strategy is forming a link between the firm and its external environment The firm embodies three sets of key characteristics: The firm embodies three sets of key characteristics: Its goals and values Its goals and values Its resources and capabilities Its resources and capabilities Its organizational structure and system Its organizational structure and system

The Industry Environment The external environment of the firm comprises the whole range of economic, social,political, and technological factors that influence a firms decisions and its performance.For most strategy decisions, the core of the firms external environment is its industry environment: The external environment of the firm comprises the whole range of economic, social,political, and technological factors that influence a firms decisions and its performance.For most strategy decisions, the core of the firms external environment is its industry environment: Competitors Competitors Customers Customers Suppliers Suppliers

Military strategy and Business strategy: common concepts Strategy is the overall plan for deploying resources to establish a favorable position. Strategy is the overall plan for deploying resources to establish a favorable position. Tactic is a scheme for a specific action. Whereas tactics are concerned with the actions necessary to win battles, strategy is concerned with winning the war. Tactic is a scheme for a specific action. Whereas tactics are concerned with the actions necessary to win battles, strategy is concerned with winning the war.

Military strategy and Business strategy: common concepts Strategic decisions, whether in the military or the business sphere, share three common characteristics: Strategic decisions, whether in the military or the business sphere, share three common characteristics: They are important They are important They involve a significant commitment of resources They involve a significant commitment of resources They are not easily reversible They are not easily reversible

Differences between Business competition and Military conflict The objective of war is usually to defeat the enemy The objective of war is usually to defeat the enemy The purpose of business rivalry is seldom so aggressive: most business enterprises limit their competitive ambitions, seeking coexistence rather than the destruction of competitors. The purpose of business rivalry is seldom so aggressive: most business enterprises limit their competitive ambitions, seeking coexistence rather than the destruction of competitors.

The Distinction Between Corporate and Business Strategy Corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes. Corporate strategy decisions include investment in diversification, vertical integration, acquisitions, and new ventures; the allocation of resources between the different businesses of the firm Corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes. Corporate strategy decisions include investment in diversification, vertical integration, acquisitions, and new ventures; the allocation of resources between the different businesses of the firm

The Distinction Between Corporate and Business Strategy Business strategy is concerned with how the firm competes within a particular industry or market Business strategy is concerned with how the firm competes within a particular industry or market If the firm is to prosper within an industry, it must establish a competitive advantage over its rivals If the firm is to prosper within an industry, it must establish a competitive advantage over its rivals

Basic questions of strategies Firms strategy :How can the firm make money? Firms strategy :How can the firm make money? Corporate strategy :What business or businesses should we be in? Corporate strategy :What business or businesses should we be in? Business strategy :How should we compete ? Business strategy :How should we compete ?

Levels of strategy and organizational structure Corporate strategy is the responsibility of the top management team, supported by corporate strategy staff Corporate strategy is the responsibility of the top management team, supported by corporate strategy staff Business strategy is formulated and implemented primarily by the individual businesses, typically organized as divisions or business units Business strategy is formulated and implemented primarily by the individual businesses, typically organized as divisions or business units Functional strategies are the elaboration and implementation of business strategies through individual functions / production, R&D, marketing, human resources, finance/ Functional strategies are the elaboration and implementation of business strategies through individual functions / production, R&D, marketing, human resources, finance/

The different roles of Strategy within the firm Strategy as Decision Support : strategy is a pattern or theme that gives coherence to the decisions Strategy as Decision Support : strategy is a pattern or theme that gives coherence to the decisions Strategy as a Process for Coordinating and Communicating: strategy helps achieve consistency in decisions Strategy as a Process for Coordinating and Communicating: strategy helps achieve consistency in decisions Strategy as Target: strategy is forward looking. A fundamental concern is what the firm wants to be n the future Strategy as Target: strategy is forward looking. A fundamental concern is what the firm wants to be n the future

The purpose of strategy is not to provide answers but to help us understand the issues!

Chapter 2. Values, Mission, and Vision There is more to business than making money! There is more to business than making money! Profits are to business as breathing is to life. Breathing is essential to life, but it is not the purpose for living Profits are to business as breathing is to life. Breathing is essential to life, but it is not the purpose for living

Values, Mission, and Vision Profit maximization provides the foundation for strategy analysis, yet it is not the goal that inspired Henry Ford to build a business that profoundly changed twentieth-century lifestyles; nor is it the one that causes Bill Gates to continue working at Microsoft rather than retiring to enjoy his billions of dollars of personal wealth Profit maximization provides the foundation for strategy analysis, yet it is not the goal that inspired Henry Ford to build a business that profoundly changed twentieth-century lifestyles; nor is it the one that causes Bill Gates to continue working at Microsoft rather than retiring to enjoy his billions of dollars of personal wealth

Values Values All companies possess broader organizational values that are integral to their sense of All companies possess broader organizational values that are integral to their sense of who they are, what they represent, what they want to achieve, and how they intend to achieve it. who they are, what they represent, what they want to achieve, and how they intend to achieve it.

Values Values The Royal Dutch/Shell Group has long been committed to a set of business principles based on core values of honesty, integrity, and respect for people, and the promotion of trust, openness, teamwork, professionalism, and pride. The Royal Dutch/Shell Group has long been committed to a set of business principles based on core values of honesty, integrity, and respect for people, and the promotion of trust, openness, teamwork, professionalism, and pride.

Mission and Vision Mission and Vision A Mission statement is a statement of a companys purpose. It typically comprises a statement of what the company is trying to achieve and very often defines, in broad terms, the business that it is in. A Mission statement is a statement of a companys purpose. It typically comprises a statement of what the company is trying to achieve and very often defines, in broad terms, the business that it is in. If MISSION outlines what the company is attempting to achieve at the present time, its VISION offers a view of what the enterprise might become. If MISSION outlines what the company is attempting to achieve at the present time, its VISION offers a view of what the enterprise might become.

Statements of Mission and Vision America Online, Inc America Online, Inc Mission Statement: To build a global medium as central to peoples lives as the telephone or television… and even more valuable Mission Statement: To build a global medium as central to peoples lives as the telephone or television… and even more valuable Vision Statement: To build an interactive medium that improves the lives of people and benefits society as no other medium before it Vision Statement: To build an interactive medium that improves the lives of people and benefits society as no other medium before it

Statements of Mission and Vision Chevron: Chevron: Mission: We are an international company providing energy and chemical products vital to the growth of the worlds economies.Our mission is to create superior value for our stockholders, customers and employees Mission: We are an international company providing energy and chemical products vital to the growth of the worlds economies.Our mission is to create superior value for our stockholders, customers and employees Vision: Our vision is to be Better than the Best, which means: employees are proud of their success as a team; customers, suppliers, and government prefer us; competitors respect us; communities welcome us; investors are eager to invest in us. Vision: Our vision is to be Better than the Best, which means: employees are proud of their success as a team; customers, suppliers, and government prefer us; competitors respect us; communities welcome us; investors are eager to invest in us.