Ch. 8

Strategic
Management
Copyright
Copyright © 2014 Pearson©Education,
2012 Pearson Education,
Inc. publishing as Prentice Hall 9-1
Inc. Publishing as Prentice Hall
Define strategic management and explain why it’s
important.
Explain what managers do during the six steps of
the strategic management process.
Describe the three types of corporate strategies.
Describe competitive advantage and the
competitive strategies organizations use to get
it.
Discuss current strategic management issues.
Copyright
Copyright © 2014 © Education,
Pearson 2012 PearsonInc.Education,
publishingInc.
as Prentice Hall 9-2
Publishing as Prentice Hall
What Is Strategic Management?
• Strategic management - what managers do to

develop the organization’s strategies. It’s an
important task involving all the basic management
functions—planning, organizing, leading, and
controlling.
• Strategies - the plans for how the organization

will do what it’s in business to do, how it will
compete successfully, and how it will attract and
satisfy its customers in order to achieve its goals.
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What Is Strategic Management?
• Business model - how a company is going to

make money.
• It focuses on two things: (1) whether customers

will value what the company is providing and (2)
whether the company can make any money doing
that.
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Why Is Strategic Management
Important?
1. It results in higher organizational

performance.
2. It requires that managers examine and
adapt to business environment changes.
3. It coordinates diverse organizational units,
helping them focus on organizational
goals.
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The Strategic Management Process
• Strategic management process - a six-

step process that encompasses strategic
planning, implementation, and evaluation.
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Exhibit 9-1
Strategic Management Process
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(cont.)
• Step 1: Identifying the organization’s
current mission, goals, and strategies
– Mission: a statement of the purpose of an
organization. The mission statement
addresses the question: What is the
organization’s reason for being in business?
• The scope of its products and services
– Goals: the foundation for further planning

• Measurable performance targets
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Exhibit 9-2
Components of a Mission Statement
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(cont.)
• Step 2: Doing an external analysis

– The environmental scanning of specific and
general environments
• Focuses on identifying opportunities and threats
• Managers in every organization need to conduct

an external analysis. Influential factors such as
competition, pending legislation, and labor supply
are included in the external environment.
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(cont.)
• Step 2: Doing an external analysis
After analyzing the external environment, managers

must assess what they have learned in terms of
opportunities and threats. Opportunities are
positive trends in external environmental factors;
threats are negative trends in environmental factors.
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(cont.)
• Step 3: Doing an internal analysis

– The internal analysis provides important information
about an organization’s specific resources and
capabilities:
• Any activities the organization does well or any
unique resources that it has are called strengths.
• Strengths create value for the customer and

strengthen the competitive position of the firm.
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(cont.)
• Step 3: Doing an internal analysis
• Weaknesses are activities the organization does
not do well or resources it needs but does not
possess.
• Weaknesses can place the firm at a competitive
disadvantage.
• Organizational culture is important in internal
analysis; the company’s culture can promote or
hinder its strategic actions.
– Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)
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SWOT Analysis
• SWOT analysis - an analysis of the

organization’s strengths, weaknesses,
opportunities, and threats.
• Resources - an organization’s assets that

are used to develop, manufacture, and
deliver a product to its customers.
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Strengths and Weaknesses
• Capabilities - an organization’s skills and

abilities in doing the work activities needed
in its business.
• Core competencies - the organization’s

major value-creating capabilities that
determine its competitive weapons.
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(cont.)
• Step 4: Formulating strategies

– Develop and evaluate strategic alternatives.
– Select appropriate strategies for all levels in the
organization that provide relative advantage
over competitors.
– Match organizational strengths to
environmental opportunities.
– Correct weaknesses and guard against threats.
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(cont.)
• Step 5: Implementing strategies
– Implementation - effectively fitting organizational
structure and activities to the environment.
– The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its requirements.
• Step 6: Evaluating results
– How effective have strategies been?
– What adjustments, if any, are necessary?
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What Is Corporate Strategy?
• Corporate strategy - an organizational

strategy that determines what businesses
a company is in or wants to be in, and
what it wants to do with those businesses.
• Strategic Business Unit (SBU) - the
single independent businesses of an
organization that formulate their own
competitive strategies.
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Types of Corporate Strategies
• Growth - expansion into new products

and markets.
• Stability - maintenance of the status quo.
• Renewal - examination of organizational
weaknesses that are leading to
performance declines.
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Exhibit 9-3
Types of Organizational Strategies
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Growth Strategies
• Growth strategy - a corporate strategy

that’s used when an organization wants to
expand the number of markets served or
products offered, through either its current
business(es) or new business(es).
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Types of Growth Strategies
• Concentration - focuses on its primary line

of business and increases the number of
products offered or markets served in this
primary business
• Vertical integration
– Backward vertical integration - the
organization becomes its own supplier
– Forward vertical integration - the organization
becomes its own distributor
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Types of Growth Strategies (cont.)
• Horizontal integration - a company grows

by combining with competitors.
• Diversification
– Related diversification - when a company
combines with other companies in
different, but related, industries
– Unrelated diversification - when a company
combines with firms in different and unrelated
industries
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Corporate Strategies (cont.)
• Stability strategy - a
corporate strategy in
which an organization
continues to do what it is
currently doing. E.g.:
continuing to serve the
same clients by offering
the same product or
service, maintaining
market share.
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Corporate Strategies (cont.)
• Renewal strategy - a corporate strategy

designed to address declining
performance.
– Retrenchment strategy - a short-run renewal
strategy used for minor performance
problems.
– Turnaround strategy - when an organization’s
problems are more serious, more drastic
action is needed.
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Current Strategic Management Issues
(cont.)
• Strategic flexibility - the ability to
recognize major external changes, to
quickly commit resources, and to
recognize when a strategic decision was a
mistake.
• Given the highly uncertain environment

that managers face today, strategic
flexibility seems absolutely necessary!
Copyright
Copyright
Copyright © 2014 © Education,
Pearson 2012 PearsonInc.Education,
publishingInc.
as Prentice Hall 9-27
Publishing as Prentice Hall

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Strategic

• Strategic management - what managers do to

• Strategies - the plans for how the organization

• Business model - how a company is going to

• It focuses on two things: (1) whether customers

1. It results in higher organizational

• Strategic management process - a six-

– Goals: the foundation for further planning

• Step 2: Doing an external analysis

• Managers in every organization need to conduct

• Step 2: Doing an external analysis

After analyzing the external environment, managers

• Step 3: Doing an internal analysis

• Strengths create value for the customer and

• SWOT analysis - an analysis of the

• Resources - an organization’s assets that

• Capabilities - an organization’s skills and

• Core competencies - the organization’s

• Step 4: Formulating strategies

• Corporate strategy - an organizational

• Growth - expansion into new products

• Growth strategy - a corporate strategy

• Concentration - focuses on its primary line

• Horizontal integration - a company grows

• Renewal strategy - a corporate strategy

• Given the highly uncertain environment

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