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•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

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What Is Strategic Management?
• Strategies - the actions that and organization
will take in order to
– do its business,
– compete successfully with competitors and
– how it will attract and satisfy its customers to
achieve its goals.

• Strategic management - what managers do to

develop the organization’s strategies.
Copyright © 2012 Pearson Education, Inc.
Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
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 Strategic
Management Process
Strategic management process – Is 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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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
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 Strategic Management Process
• Step 1: Identifying the organization’s current mission,
goals, and strategies
– Mission: a statement that defines the goals
• Step 2: Doing an external analysis
– The environment in which the organization operates
– Look at all the external environmental factors
– Study Trends
– Find positive trends-Opportunities that the company can exploit
– Counter react to negative trends- Threats that the company
needs to fight

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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
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 Strategic Management Process
• Step 3: Doing an internal analysis
– Assessing organizational resources and capabilities.
– Resources are assets (financial, physical, human, intangible) that
is used to develop, manufacture and deliver products to clients.
(What the organization has)
– Analyzing financial and physical assets is fairly easy, but assessing
human (employee skills) and intangible assets isn’t as simple.
– Capabilities are skills and abilities that the organization has to
utilize its resources.
– We can identify Strengths-an activity the organization does well.
– We can find Weaknesses- an activity the organization does not
do well.
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SWOT
Steps 2 and 3 combined are called a SWOT
analysis. (Strengths, Weaknesses,
Opportunities, and Threats)

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 Strategic Management Process
• Step 4: Formulating strategies
– Be realistic
– Match organizational strengths to environmental
opportunities.
– Correct weaknesses and guard against threats.
– Select appropriate strategies for all levels in the
organization
– Develop 3 types of strategies- Corporate, Competitive,
Functional
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Strategic Management Process
• Step 5: Implementing strategies
– Implementation - effectively fitting organizational
structure and activities to the environment.
• Step 6: Evaluating results
– How effective have strategies been?
– What adjustments, if any, are necessary?

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Types of Organizational Strategies

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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
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 Corporate Strategies
Determines what business a company wants to be in and
what to do with those businesses. Top level managers
responsible.
1. 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 businesses or new businesses. (Walmart)
a. Concentration: company focuses on its primary line of
business and increases the number of products offered
or markets served in this primary business. (Kellogs)
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 Corporate Strategies
2. Vertical Integration: either backward, forward, or
both. Becomes its own suppliers (Walmart Dairy),
becomes its own distributor (Apple Retailor).
3. Horizontal integration: a company grows by
combining with competitors. (French cosmetics giant
L’Oreal acquired The Body Shop)
4. Diversification: happens when a company combines
with other companies in different, but related,
industries. (Google acquired Youtube, Doubleclick)
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 Corporate Strategies

2. Stability strategy - a corporate strategy in which an

organization continues to do what it is currently doing.
(Cadbury for a timebeing)
3. Renewal strategy - a corporate strategy designed to
address declining performance.
a. Retrenchment: short-run renewal strategy used for minor
performance problems. (Firing someone, cutting minor costs)
b. Turnaround: When an organization’s problems are more
serious, more drastic action. (Privatization, Longterm Training)

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How Are Corporate Strategies
Managed?
• Corporate strategies are managed via a corporate
portfolio matrix
• These matrix allow managers to understand
priorities and allocated resources
• The first portfolio matrix is the BCG matrix
(developed by the Boston Consulting Group)
• BCG matrix - a strategy tool that guides resource
allocation decisions on the basis of market share
and anticipated growth rate.
Copyright © 2012 Pearson Education, Inc.
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 Exhibit 9-4: BCG Matrix

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 What To Do?
• The dogs should be sold off or liquidated as they have low
market share in markets with low growth potential.
• Managers should “milk” cash cows, limit any new investment
in them.
• Heavy investment in stars will help take advantage of the
market’s growth and help maintain high market share.
• The stars, will eventually develop into cash cows as their
markets mature and sales growth slows.
• The hardest decision for managers relates to the question
marks. After careful analysis, some will be sold off and others
strategically nurtured into stars.
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 The Role of Competitive Advantage
• Competitive strategy - an organizational strategy for how an
organization will compete in its business(es).
• Strategic Business Unit (SBU): When an organization is in
several businesses and those single businesses that have their
own strategies.
• Competitive advantage - what sets an organization apart; its
distinctive edge. How managers can create and sustain
competitive advantage is an important study in strategic
management. Michael Porter came up with the five forces
model, that looks into an industry and help managers choose
their competitive advantage.
Copyright © 2012 Pearson Education, Inc.
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 Porter’s Five Forces Model

•How managers
can create a
sustainable
competitive
advantage.

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 Five Competitive Forces
• Threat of New Entrants
– How likely is it that new competitors will come into the
industry?
– If the market is such that barriers to entry are high and costly
then you can take advantage of this situation
• Threat of Substitutes
– How likely is it that other industries’ products can be substituted
for your industry's products?
– If your client can easily find other products from other industries
that will fulfill the same need then this threat is high and you
can not utilize it to your advantage.

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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
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 Five Competitive Forces
• Bargaining Power of Buyers
– How much bargaining power do buyers have?
– If you have important, powerful buyer, often they have high
bargaining power.
• Bargaining Power of Suppliers
– How much bargaining power do suppliers have?
– The fewer the number of suppliers, the more bargaining power your
supplier has over you
• Current Rivalry
– How intense is the rivalry among current industry competitors?
– Are their many companies in the same industry providing the same
good at competitive prices?
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Choosing Competitive Strategies
Once managers have assessed the five forces
and done a SWOT analysis, they’re ready to
select an appropriate competitive strategy—
that is, one that fits the competitive strengths
(resources and capabilities) of the organization
and the industry it’s in.

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Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
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 Types of Competitive Strategies
• Cost Leadership Strategy
– Seeking to attain the lowest total overall costs (not prices) relative
to other industry competitors
– Overhead is kept at a minimum (Ross, Marshalls, Southwest
Airlines)
• Differentiation Strategy
– Attempting to create a unique and distinctive product or service for
which customers will pay a premium
– Exceptional high quality product, extraordinary service, innovative
design, (Nordstrom for extraordinary service, Apple for product
design)
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 Types of Competitive Strategies
• Focus Strategy
– Using a cost or differentiation advantage to exploit a particular
market segment as opposed to a larger market
– The pervious 2 strategies were aimed at broader market segments
whiles this one caters to a narrower market segment (Avon
cosmetics, Harley Davidson)
• First Mover - An organization that brings a product
innovation to the market or uses new process innovations.
This is not a strategy all companies can adopt. It is unique
and very rare.

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 Functional Strategies
A strategy used by an organization’s various departments in
order to support the overall company strategy. Ex: R&D,
Manufacturing, HR, Finance, Marketing etc. departments
employee their own functional strategies.

Copyright © 2012 Pearson Education, Inc.

Management, Eleventh Edition by Stephen P. Robbins & Mary Coulter
Publishing as Prentice ©2012
Hall Pearson Education, Inc. publishing as Prentice Hall 9-25