Description
In this chapter, we look at an important part of the planning that managers do developing organizational strategies. Every organization has strategies for doing what its in business to do. And managers must manage those strategies effectively. Focus on the following learning outcomes as you read and study this chapter.
Copyright © 2014 Pearson Education
1
Chapter 9
Managing Strategy
In this chapter, we look at an important part of the planning that managers do:
developing organizational strategies. Every organization has strategies for doing what
it’s in business to do. And managers must manage those strategies effectively. Focus on
the following learning outcomes as you read and study this chapter.
LEARNING OUTCOMES
9.1 Define strategic management and explain why it’s important.
9.2 Explain what managers do during the six steps of the strategic management
process.
9.3 Describe the three types of corporate strategies.
9.4 Describe competitive advantage and the strategies organizations use to get it.
9.5 Discuss current strategic management issues.
SPOTLIGHT: Manager at Work
Most college students will tell you that their cell phone is something that they can’t do
without. Their choice of cell phone will probably be between a iPhone or Andriod, and
some students may not even have heard of the cell phone manufacturer in this case. At
one time, Nokia was the world’s largest cell phone manufacturer. It still is in some
respects, but its dominance is mainly in European countries. Now Nokia is ready to
break back into the American market. Nokia’s new CEO, Elop, plans to do this by
forming key partnerships, reducing costs, and speeding delivery of products. This
means changing Nokia’s current culture and getting employees to see the need to
change before it’s too late.
Nokia has signed into agreements with Microsoft to produce new phones with the
Windows operating system by year’s end. This is two to three times faster than Nokia’s
current product introductions. As Elop has said, “We are seeing solid progress against
our strategy, and with these planned changes we will emerge as a more dynamic,
nimble and efficient challenger.” Now, it’s do-or-die time for Nokia.
Students should think about how Nokia’s managers can keep employees focused on the
company’s new strategic goals. Change is never easy, and it is especially difficult after
companies have experienced the joys of being the number one in the world. However,
students should see that organizational strategy should constantly evolve and not grow
stagnant. What makes an organization the leader in an industry today will not give rise
to success tomorrow.
In this chapter, we examine the strategic management process as it relates to the
planning function. As you introduce this chapter and share this case, have students
discuss the importance of an organization’s environment to their goals and plans. Also,
what role does national culture play in setting goals and strategy?
Copyright © 2014 Pearson Education
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CHAPTER OUTLINE
INTRODUCTION
Effective managers recognize the role that strategic management plays in their
organization’s performance. Throughout this chapter, students discover that good
strategies can lead to high organizational performance.
9.1 STRATEGIC MANAGEMENT
Managers must carefully consider their organization’s internal and external
environments as they develop strategic plans. They should have a systematic
means of analyzing the environment, assessing their organization’s strengths
and weaknesses, identifying opportunities that would give the organization a
competitive advantage, and incorporating these findings into their planning. The
value of thinking strategically has an important impact on organization
performance.
A. What Is Strategic Management?
1. Strategic management is what managers do to develop the
organization’s strategies.
2. Strategic management involves all four of the basic management
functions—planning, organizing, leading, and controlling.
B. Why Is Strategic Management Important?
1. Strategic management has a significant impact on how well an
organization performs.
2. In today’s business world, organizations of all types and sizes
must manage constantly changing situations.
3. Today’s companies are composed of diverse divisions,
departments, functions, and work activities that must be
coordinated.
4. Strategic management is involved in many of the decisions that
managers make.
9.2 THE STRATEGIC MANAGEMENT PROCESS
The strategic management process is a six-step process that encompasses
strategic planning, implementation, and evaluation. (See Exhibit 9-1)
A. Step 1: Identifying the Organization’s Current Mission, Goals, and
Strategies
1. Every organization needs a mission which is a statement of the
purpose of an organization. The mission statement addresses the
question: What is the organization’s reason for being in business?
2. The organization must also identify its current goals and
strategies.
B. Step 2: Doing an External Analysis
1. 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.
2. After analyzing the external environment, managers must assess
what they have learned in terms of opportunities and threats.
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Opportunities are positive trends in external environmental
factors; threats are negative trends in environmental factors.
3. Because of different resources and capabilities, the same external
environment can present opportunities to one organization and
pose threats to another.
C. Step 3: Doing an Internal Analysis
1. Internal analysis should lead to a clear assessment of the
organization’s resources and capabilities.
2. The organization’s major value-creating skills and capabilities that
determine its competitive weapons are the organization’s core
competencies.
3. Any activities the organization does well or any unique resources
that it has are called strengths.
4. Weaknesses are activities the organization does not do well or
resources it needs but does not possess.
5. Organizational culture is important in internal analysis; the
company’s culture can promote or hinder its strategic actions.
6. SWOT analysis is an analysis of the organization’s strengths,
weaknesses, opportunities, and threats.
D. Step 4: Formulating Strategies
1. After the SWOT, managers develop and evaluate strategic
alternatives and select strategies that are appropriate.
2. Strategies need to be established for corporate, business, and
functional levels.
E. Step 5: Implementing Strategies
1. A strategy is only as good as its implementation.
F. Step 6: Evaluating Results
9.3 CORPORATE STRATEGIES
Strategic planning takes place on three different and distinct levels: corporate,
business, and functional. (See Exhibit 9-3).
A. Corporate Strategy. Corporate strategy is an organizational strategy that
determines what businesses a company is in, should be in, or wants to be
in, and what it wants to do with those businesses.
1. There are three main types of corporate strategies:
a. A growth strategy is a corporate strategy that is used when
an organization wants to grow and does so by expanding the
number of products offered or markets served, either through
its current business(es) or through new business(es).
b. A stability strategy is a corporate strategy characterized by
an absence of significant change in what the organization is
currently doing.
c. A renewal strategy is a corporate strategy designed to
address organizational weaknesses that are leading to
performance declines. Two such strategies are retrenchment
strategy and turnaround strategy.
a. How are corporate strategies managed? Corporate Portfolio
Analysis is used when an organization’s corporate strategy
involves a number of businesses. Managers can manage this
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portfolio of businesses using a corporate portfolio matrix, such
as the BCG matrix. The BCG matrix is a strategy tool that
guides resource allocation decisions on the basis of market
share and growth rate of SBUs. (See Exhibit 9-4)
LEADER WHO MADE A DIFFERENCE
In this section, students are asked what they can learn from Carol Tome, Home Depot’s
Chief Financial Officer. Known as “fix-it-lady,” Ms. Tome, has been instrumental in
recognizing and solving the retailer’s technology problems.
Home Depot is very focused on improving its information technology capabilities. The
goal is not to keep customers waiting. One way the company has done this is by
providing associates with a “first phone” to help check merchandise before it gets to the
register. This technology can also be linked to a customer’s PayPal account. Ask
students if there are other ways that a company like Home Depot can better use
technology. (Stress that any changes need to follow the company’s strategy.)
9.4 COMPETITIVE STRATEGY
A business strategy (also known as a competitive strategy) is strategy focused
on how the organization will compete in each of its businesses.
A. The Role of Competitive Advantage. A competitive advantage is what
sets an organization apart, that is, its distinctive edge. An organization’s
competitive advantage can come from its core competencies.
1. Quality as a Competitive Advantage. If implemented properly,
quality can be one way for an organization to create a sustainable
competitive advantage.
2. Sustaining Competitive Advantage. An organization must be able
to sustain its competitive advantage; it must keep its edge despite
competitors’ action and regardless of evolutionary changes in the
organization’s industry.
3. Michael Porter’s work explains how managers can create and
sustain a competitive advantage that will give a company above-
average profitability. Industry analysis is an important step in
Porter’s framework. He says there are five competitive forces at
work in an industry; together, these five forces determine industry
attractiveness and profitability. (See Exhibit 9-5). Porter
proposes that the following five factors can be used to assess an
industry’s attractiveness:
1) Threat of new entrants. How likely is it that new
competitors will come into the industry?
2) Threat of substitutes. How likely is it that products of other
industries could be substituted for a company’s products?
3) Bargaining power of buyers. How much bargaining power
do buyers (customers) have?
4) Bargaining power of suppliers. How much bargaining
power do a company’s suppliers have?
5) Current rivalry. How intense is the competition among
current industry competitors?
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B. Choosing A Competitive Strategy. According to Porter, managers must
choose a strategy that will give their organization a competitive
advantage. Porter identifies three generic competitive strategies. Which
strategy managers select depends on the organization’s strengths and
core competencies and the particular weaknesses of its competitor(s).
a. A cost leadership strategy is a business or competitive strategy
in which the organization competes on the basis of having the
lowest costs in its industry.
b. A differentiation strategy is a business or competitive strategy in
which a company offers unique products that are widely valued by
customers.
c. A focus strategy is a business or competitive strategy in which a
company pursues a cost or differentiation advantage in a narrow
industry segment.
d. An organization that has been not been able to develop either a
cost or differentiation advantage is said to be “stuck in the
middle.”
e. Subsequent research indicates that it is possible, though very
difficult, for organizations that are stuck in the middle to achieve
high performance.
f. Functional strategy is the strategies used by an organization’s
various functional departments to support the business or
competitive strategy.
9.5 CURRENT STRATEGIC MANAGEMENT ISSUES
A. The Need for Strategic Leadership. Strategic leadership is defined as the
ability to anticipate, envision, maintain flexibility, think strategically, and
work with others in the organization to initiate changes that will create a
viable and valuable future for the organization. Top managers can
provide effective strategic leadership by eight principles including:
determining the organization’s purpose or vision, exploiting and
maintaining the organization’s core competencies, developing the
organization’s human capital, creating and sustaining a strong
organizational culture, creating and maintaining organizational
relationships, reframing prevailing views by asking penetrating questions
and questioning assumptions, emphasizing ethical organizational
decisions and practices, and establishing appropriately balanced
organizational controls. (See Exhibit 9-6.)
B. The Need for Strategic Flexibility. There is guarantee that a well thought
out strategy will lead to positive outcomes. A key element to the
strategic management process is the, the ability to recognize major
external changes, to quickly commit resources, and to recognize when a
strategic decision isn’t working. Exhibit 9–6 provides suggestions for
developing strategic flexibility.
C. Important Organizational Strategies for Today’s Environment
1. E-Business Strategies. Using the Internet, companies have
created knowledge bases that employees can tap into anytime,
anywhere. E-business as a strategy can be used to develop a
sustainable competitive advantage; it can also be used to
establish a basis for differentiation or focus.
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2. Customer Service Strategies. These strategies give customers
what they want, communicate effectively with them, and provide
employees with customer service training.
3. Innovation Strategies. These strategies focus on breakthrough
products and can include the application of existing technology to
new uses. An organization that is first to bring a product
innovation to the market or to use a new process innovation is
called a first mover. Exhibit 9-7 lists the advantages and
disadvantages associated with being a first mover.
Answers to Review and Discussion Questions
1. Describe the six steps in the strategic management process.
The six steps in the strategic management process encompass strategy planning,
implementation, and evaluation. These steps include the following: (1) identify the
current mission, goals, and strategies; (2) do an external analysis; (3) do an internal
analysis (steps 2 and 3 collectively are known as SWOT analysis); (4) formulate
strategies; (5) implement strategies; and (6) evaluate strategies. Strengths are any
activities the organization does well or unique resources that it has. Weaknesses are
activities the organization doesn’t do well or resources it needs but doesn’t have.
Opportunities are positive trends in the external environment. Threats are negative
trends. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
2. How could the Internet be helpful to managers as they follow the steps in the strategic
management process?
The Internet provides voluminous information conveniently and quickly about
competitors, environmental factors, and customers. This information improves the
manager’s ability to make sound strategic management decisions as he or she faces
continuously changing environmental conditions. (LO: 2, Explain what managers do
during the six steps of the strategic management process, AACSB: Use of information
technology)
3. How might the process of strategy formulation, implementation, and evaluation differ
for (a) large businesses, (b) small businesses, (c) not-for-profit organizations, and (d)
global businesses?
All companies, large or small, profit or not-for-profit, domestic or global benefit from the
process of strategy formulation. The major difference that exists between the different
types of companies and the process they go through centers around the development of
their mission and goals. For example, the owners of a small business might not want to
pursue the goal of growth and instead focus on stability. For not-for-profit organizations,
the goal is not about making money for owners or stockholders but about how to find a
way to effectively and efficiently maximize their resources to benefit others. In a global
organization, while the SWOT would be more involved due to the number of potential
elements involved, it remains the same except the goals extend beyond serving one
country or market. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Dynamics of the global economy)
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4. Should ethical considerations be included in analyses of an organization’s internal and
external environments? Why or why not?
Ethical considerations should permeate every activity of an organization. As a firm’s
strategy is the basis for their plans, when ethics are not considered then the organization
is likely to ignore potential ethical problems. (LO: 2, Explain what managers do during
the six steps of the strategic management process, AACSB: Ethical understanding and
reasoning abilities)
5. Describe the three major types of corporate strategies and how the BCG matrix is
used to manage those corporate strategies.
A growth strategy is when an organization expands the number of markets served or
products offered, either through current or new businesses. The types of growth
strategies include concentration, vertical integration (backward and forward), horizontal
integration, and diversification (related and unrelated). A stability strategy is when an
organization makes no significant changes in what it’s doing. Both renewal strategies—
retrenchment and turnaround—address organizational weaknesses that are leading to
performance declines. The BCG matrix is a way to analyze a company’s portfolio of
businesses by looking at a business’s market share and its industry’s anticipated growth
rate. The four categories of the BCG matrix are cash cows, stars, question marks, and
dogs. (LO: 4, Describe competitive advantage and the strategies organizations use to
get it, AACSB: Analytical Skills)
6. Describe the role of competitive advantage and how Porter’s competitive strategies
help an organization develop competitive advantage.
An organization’s competitive advantage is what sets it apart, its distinctive edge. A
company’s competitive advantage becomes the basis for choosing an appropriate
competitive strategy. Porter’s five forces model assesses the five competitive forces that
dictate the rules of competition in an industry: threat of new entrants, threat of
substitutes, bargaining power of buyers, bargaining power of suppliers, and current
rivalry. Porter’s three competitive strategies are as follows: cost leadership (competing
on the basis of having the lowest costs in the industry), differentiation (competing on the
basis of having unique products that are widely valued by customers), and focus
(competing in a narrow segment with either a cost advantage or a differentiation
advantage). (LO: 4, Describe competitive advantage and the strategies organizations
use to get it, AACSB: Analytical Skills)
7. “The concept of competitive advantage is as important for not-for-profit organizations
as it is for profit organizations.” Do you agree or disagree with this statement? Explain,
using examples to make your case.
Not-for-profit and for-profit companies compete for customers. In the case of not-for-
profit companies, those customers are donors and like any market are limited in size. To
be effective non-for-profit companies need something that will attract donors like for-
profit companies attract customers. For example, United Way has an established
network of businesses that regularly donate money as part of their yearly pledge drives.
Another example is Mary Komen’s, known for their work with breast cancer awareness,
that has established a series of runs and walks across the United States and has even
had success in publicizing their cause with the NFL. (LO: 5, Discuss current strategic
management issues, AACSB: Analytical Skills)
8. Describe e-business, customer service, and innovation strategies.
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Using the Internet, companies have created knowledge bases that employees can tap
into anytime, anywhere. E-business as a strategy can be used to develop a sustainable
competitive advantage; it can also be used to establish a basis for differentiation or
focus. Customer service strategies give customers what they want, communicate
effectively with them, and provide employees with customer service training. Innovation
strategies focus on breakthrough products and can include the application of existing
technology to new uses. An organization that is first to bring a product innovation to the
market or to use a new process innovation is called a first mover. (LO: 5, Discuss current
strategic management issues, AACSB: Analytical Skills)
ETHICS DILEMMA
This ethical dilemma brings up the idea that social media companies may not be very
social. If customers try to call companies like LinkedIn, Facebook, or Twitter, they
cannot reach a person on the other end. These companies use their telephone systems
to provide information, not one-on-one support. This is a strategy for these companies;
being internet-based companies they want their customers to use e-mail. Students are
asked about the ethics of this decision? On one side these companies are saving
money, but on the other, they may be denying access to customers (which is ironic
because these companies are all about promoting social interaction). (LO: 4, Describe
competitive advantage and the strategies organizations use to get it, AACSB: Ethical
understanding and reasoning abilities)
SKILLS EXERCISE: DEVELOPING YOUR
BUSINESS PLANNING SKILL
This exercise uses the development of a business plan as a way to introduced students
to skills needed for organizational planning. Students are asked to following nine steps
and put together a business plan for the one of the following ideas:
1. Haircuts at home (you make house calls)
2. Olympic snowboarding computer game
3. Online apartment rental listing
4. Voice-activated house alarm
(LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical
Skills)
WORKING TOGETHER: TEAM EXERCISE
This exercise asks students to work in small groups of three to four to find examples of
company mission statements. Once these mission statements are found, students
should evaluate them on the information presented in Exhibit 9-2 and then come up with
different types of strategies to accomplish those missions. Mission statements can be
found by going to company websites or through other publications (i.e. annual reports).
Finding mission statements for companies is not always easy. Some companies do not
use the words ‘mission statement’ and instead use terms like ‘statement of goals’ or
‘objectives.’ This exercise should be used as an out-of-class assignment.
Copyright © 2014 Pearson Education
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(LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical
Skills)
My Turn to be a Manager
• Do a personal SWOT analysis. Assess your personal strengths and weaknesses
(skills, talents, abilities). What are you good at? What are you not so good at?
What do you enjoy doing? What don’t you enjoy doing? Then, identify career
opportunities and threats by researching job prospects in the industry you’re
interested in. Look at trends and projections. You might want to check out the
information the Bureau of Labor Statistics provides on job prospects. Once you
have all this information, write a specific career action plan. Outline five-year
career goals and what you need to do to achieve those goals. (LO: 2, Explain
what managers do during the six steps of the strategic management process,
AACSB: Reflective thinking skills)
• Using current business periodicals, find two examples of each of the corporate
and competitive strategies. Write a description of what these businesses are
doing and how each represents a particular strategy. (LO: 3, Describe the three
types of corporate strategies, AACSB: Analytical Skills)
• Pick five companies from the latest version of Fortune’s “Most Admired
Companies” list. Research these companies and identify, for each, its (a) mission
statement, (b) strategic goals, and (c) strategies being used. (LO: 2, Explain what
managers do during the six steps of the strategic management process, AACSB:
Analytical Skills)
• Steve’s and Mary’s suggested readings: Adrian Slywotzky and Richard Wise,
How to Grow When Markets Don’t (Warner Business Books, 2003); Jim Collins,
Good to Great: Why Some Companies Make the Leap...and Others Don’t
(Harper Business, 2001); Michael E. Porter, On Competition (Harvard Business
School Press, 1999); James C. Collins and Jerry I. Porras, Built to Last:
Successful Habits of Visionary Companies (Harper Business, 1994); and Gary
Hamel and C. K. Prahalad, Competing for the Future (Harvard Business School
Press, 1994). (LO: 1, Define strategic management and explain why it’s
important, AACSB: Analytical Skills) (LO: 2, Explain what managers do during
the six steps of the strategic management process, AACSB: Analytical Skills)
(LO: 3, Describe the three types of corporate strategies, AACSB: Analytical
Skills) (LO: 4, Describe competitive advantage and the strategies organizations
use to get it, AACSB: Analytical Skills) (LO: 5, Discuss current strategic
management issues, AACSB: Analytical Skills)
• Customer service, e-business, and innovation strategies are particularly
important to managers today. We described in the chapter specific ways that
companies can pursue these strategies. Your task is to pick customer service, e-
business, or innovation and find one example for each of the specific approaches
in that category. For instance, if you choose customer service, find an example of
(a) giving customers what they want, (b) communicating effectively with
customers, and (c) providing employees with customer service training. Write a
Copyright © 2014 Pearson Education
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report describing your examples. (LO: 5, Discuss current strategic management
issues, AACSB: Analytical Skills)
• In your own words, write down three things you learned in this chapter about
being a good manager. (LO: 1, Define strategic management and explain why it’s
important, AACSB: Analytical Skills) (LO: 2, Explain what managers do during
the six steps of the strategic management process, AACSB: Analytical Skills)
(LO: 3, Describe the three types of corporate strategies, AACSB: Analytical
Skills) (LO: 4, Describe competitive advantage and the strategies organizations
use to get it, AACSB: Analytical Skills) (LO: 5, Discuss current strategic
management issues, AACSB: Analytical Skills)
• Self-knowledge can be a powerful learning tool. Go to mymanagementlab and
complete these self-assessment exercises: How Well Do I Handle Ambiguity?
How Creative Am I? How Well Do I Respond to Turbulent Change? Using the
results of your assessments, identify personal strengths and weaknesses. What
will you do to reinforce your strengths and improve your weaknesses? (LO: 1,
Define strategic management and explain why it’s important, AACSB: Analytical
Skills) (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills) (LO: 3, Describe the three types
of corporate strategies, AACSB: Analytical Skills) (LO: 4, Describe competitive
advantage and the strategies organizations use to get it, AACSB: Analytical
Skills) (LO: 5, Discuss current strategic management issues, AACSB: Analytical
Skills)
Answers to Case Application Questions
Fast Fashion
1. How is strategic management illustrated by this case story?
According to the case, Zara’s plan ‘involves a clear and focused understanding of
fashion, technology, and their market, and the ability to adapt quickly to trends.’ Inditex is
practicing strategic management and it is evident starting in:
1) Setting goals – the owner’s goals to produce ‘fast fashion’
2) The formulation of strategy – to use technology to produce designs within two
weeks
3) The implementation of strategy – building the design processes to take
advantage of computer aided technologies
4) The evaluation of results – the constant evaluation of designs to see which are
successful.
(LO: 2, Explain what managers do during the six steps of the strategic management
process, AACSB: Analytical Skills)
2. How might SWOT analysis be helpful to Inditex executives? To Zara store
managers?
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A SWOT is a basic strategic tool that helps decision makers understand the environment
and their own companies abilities. In this case, a SWOT would point out the
opportunities and threats that exist in the garment industry and Inditex’s ability to take
advantage of those opportunities and minimize threats (i.e. from competition). For Zara
store managers a SWOT is not particularly useful unless they are able to contribute to
the firm’s strategy or they have latitude to implement strategic decisions at the store
level. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
3. What competitive advantage do you think Zara is pursuing? How is she exploiting that
competitive advantage?
Zara is implementing a differentiation strategy. By using technology and just-in-time
production, they are seeking to gain a competitive advantage by being faster to market
and more responsive of company needs. The key for Zara is bringing products to market
quickly, so they are not pursuing a low-cost strategy. They are also not pursuing a focus
strategy, in that they are not focusing on only one side of the industry. (LO: 4, Describe
competitive advantage and the strategies organizations use to get it, AACSB: Analytical
Skills)
4. Do you think Zara’s success is due to external or internal factors or both? Explain.
Students should recognize that successful companies are attuned to both internal and
external factors – this is the premise of the Open-System Model. Zara would not be
successful if they did not match their internal strengths to opportunities in the external
environment. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
5. What strategic implications does Zara’s move into online retailing have? (Hint: think in
terms of resources and capabilities.)
Zara’s strength lies in their ability to use technology to monitor changes in sales and
then respond by producing new garments in a quick time frame. This responsiveness to
customer preferences would be a good match to the demands associated with internet
retailing. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
Rewind and Replay. New life in the digital world.
1. Using Porter’s framework, describe Singtel’s competitive strategy. Explain your
choice.
Singtel’s strategy is best described as a focus or segmented strategy. They have
taken a segment of the market, digital streaming on mobile phones, and sought
to become a choice provider. Students may also see Singtel’s strategy as
differentiation. This is a reasonable view, but does not consider that Singtel
currently does not currently compete in the other entertainment markets such as
home computers, cable, or content provision.
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2. What competitive advantage(s) do you think Singtel has? Have its resources,
capabilities, or core competencies contributed to its competitive advantage(s)?
Explain.
Singtel’ competitive advantage is based on several factors: speed, variety, and
technology. All of these factors can be considered part of Singtel’s core
competence of convenience. Students may not recognize that Singtel has
invested hundreds of millions of dollars into technology to stream TV and movies
via phones. This gives the company an advantage over other competitors who
try to enter a market in that to compete would require large amounts of capital to
match Singtel current systems.
3. How will Singtel’s functional strategies have to support its competitive
strategy? Explain.
Functional strategies are the strategies used by an organization’s various
functional departments to support the competitive strategy. This answer lies in
Singtel’s emphasis on creating a personal digital life stream for subscribers.
Students should see that Singtel is pushing development in this area. As stated
by Lew, Singtel does not want to be ‘a pipe’. It has ambitions to go way beyond
being just a telco.
4. What do you think Singtel is going to have to do to maintain its competitive
position, especially as its industry changes?
Students should recognize that Singtel operates in a highly competitive and fast
changing environment. To maintain its competitive advantage, Singtel will have
to stay ahead of trends in the market and new technology. Singtel will have to
gain more control over its content. This may mean entering into new lines of
business, such as laptop style applications. Singtel will also have to be aware of
and take advantage of new technologies, such as internet ready TV’s and even
newer ways of shopping online or watching video that have not yet been
marketed.
ADDITIONAL CHAPTER INFORMATION
The Strategy + Business Web site features valuable sources for strategic management
applications. This Web site is located at [www.strategy-business.com].
doc_755653535.pdf
In this chapter, we look at an important part of the planning that managers do developing organizational strategies. Every organization has strategies for doing what its in business to do. And managers must manage those strategies effectively. Focus on the following learning outcomes as you read and study this chapter.
Copyright © 2014 Pearson Education
1
Chapter 9
Managing Strategy
In this chapter, we look at an important part of the planning that managers do:
developing organizational strategies. Every organization has strategies for doing what
it’s in business to do. And managers must manage those strategies effectively. Focus on
the following learning outcomes as you read and study this chapter.
LEARNING OUTCOMES
9.1 Define strategic management and explain why it’s important.
9.2 Explain what managers do during the six steps of the strategic management
process.
9.3 Describe the three types of corporate strategies.
9.4 Describe competitive advantage and the strategies organizations use to get it.
9.5 Discuss current strategic management issues.
SPOTLIGHT: Manager at Work
Most college students will tell you that their cell phone is something that they can’t do
without. Their choice of cell phone will probably be between a iPhone or Andriod, and
some students may not even have heard of the cell phone manufacturer in this case. At
one time, Nokia was the world’s largest cell phone manufacturer. It still is in some
respects, but its dominance is mainly in European countries. Now Nokia is ready to
break back into the American market. Nokia’s new CEO, Elop, plans to do this by
forming key partnerships, reducing costs, and speeding delivery of products. This
means changing Nokia’s current culture and getting employees to see the need to
change before it’s too late.
Nokia has signed into agreements with Microsoft to produce new phones with the
Windows operating system by year’s end. This is two to three times faster than Nokia’s
current product introductions. As Elop has said, “We are seeing solid progress against
our strategy, and with these planned changes we will emerge as a more dynamic,
nimble and efficient challenger.” Now, it’s do-or-die time for Nokia.
Students should think about how Nokia’s managers can keep employees focused on the
company’s new strategic goals. Change is never easy, and it is especially difficult after
companies have experienced the joys of being the number one in the world. However,
students should see that organizational strategy should constantly evolve and not grow
stagnant. What makes an organization the leader in an industry today will not give rise
to success tomorrow.
In this chapter, we examine the strategic management process as it relates to the
planning function. As you introduce this chapter and share this case, have students
discuss the importance of an organization’s environment to their goals and plans. Also,
what role does national culture play in setting goals and strategy?
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CHAPTER OUTLINE
INTRODUCTION
Effective managers recognize the role that strategic management plays in their
organization’s performance. Throughout this chapter, students discover that good
strategies can lead to high organizational performance.
9.1 STRATEGIC MANAGEMENT
Managers must carefully consider their organization’s internal and external
environments as they develop strategic plans. They should have a systematic
means of analyzing the environment, assessing their organization’s strengths
and weaknesses, identifying opportunities that would give the organization a
competitive advantage, and incorporating these findings into their planning. The
value of thinking strategically has an important impact on organization
performance.
A. What Is Strategic Management?
1. Strategic management is what managers do to develop the
organization’s strategies.
2. Strategic management involves all four of the basic management
functions—planning, organizing, leading, and controlling.
B. Why Is Strategic Management Important?
1. Strategic management has a significant impact on how well an
organization performs.
2. In today’s business world, organizations of all types and sizes
must manage constantly changing situations.
3. Today’s companies are composed of diverse divisions,
departments, functions, and work activities that must be
coordinated.
4. Strategic management is involved in many of the decisions that
managers make.
9.2 THE STRATEGIC MANAGEMENT PROCESS
The strategic management process is a six-step process that encompasses
strategic planning, implementation, and evaluation. (See Exhibit 9-1)
A. Step 1: Identifying the Organization’s Current Mission, Goals, and
Strategies
1. Every organization needs a mission which is a statement of the
purpose of an organization. The mission statement addresses the
question: What is the organization’s reason for being in business?
2. The organization must also identify its current goals and
strategies.
B. Step 2: Doing an External Analysis
1. 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.
2. After analyzing the external environment, managers must assess
what they have learned in terms of opportunities and threats.
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Opportunities are positive trends in external environmental
factors; threats are negative trends in environmental factors.
3. Because of different resources and capabilities, the same external
environment can present opportunities to one organization and
pose threats to another.
C. Step 3: Doing an Internal Analysis
1. Internal analysis should lead to a clear assessment of the
organization’s resources and capabilities.
2. The organization’s major value-creating skills and capabilities that
determine its competitive weapons are the organization’s core
competencies.
3. Any activities the organization does well or any unique resources
that it has are called strengths.
4. Weaknesses are activities the organization does not do well or
resources it needs but does not possess.
5. Organizational culture is important in internal analysis; the
company’s culture can promote or hinder its strategic actions.
6. SWOT analysis is an analysis of the organization’s strengths,
weaknesses, opportunities, and threats.
D. Step 4: Formulating Strategies
1. After the SWOT, managers develop and evaluate strategic
alternatives and select strategies that are appropriate.
2. Strategies need to be established for corporate, business, and
functional levels.
E. Step 5: Implementing Strategies
1. A strategy is only as good as its implementation.
F. Step 6: Evaluating Results
9.3 CORPORATE STRATEGIES
Strategic planning takes place on three different and distinct levels: corporate,
business, and functional. (See Exhibit 9-3).
A. Corporate Strategy. Corporate strategy is an organizational strategy that
determines what businesses a company is in, should be in, or wants to be
in, and what it wants to do with those businesses.
1. There are three main types of corporate strategies:
a. A growth strategy is a corporate strategy that is used when
an organization wants to grow and does so by expanding the
number of products offered or markets served, either through
its current business(es) or through new business(es).
b. A stability strategy is a corporate strategy characterized by
an absence of significant change in what the organization is
currently doing.
c. A renewal strategy is a corporate strategy designed to
address organizational weaknesses that are leading to
performance declines. Two such strategies are retrenchment
strategy and turnaround strategy.
a. How are corporate strategies managed? Corporate Portfolio
Analysis is used when an organization’s corporate strategy
involves a number of businesses. Managers can manage this
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portfolio of businesses using a corporate portfolio matrix, such
as the BCG matrix. The BCG matrix is a strategy tool that
guides resource allocation decisions on the basis of market
share and growth rate of SBUs. (See Exhibit 9-4)
LEADER WHO MADE A DIFFERENCE
In this section, students are asked what they can learn from Carol Tome, Home Depot’s
Chief Financial Officer. Known as “fix-it-lady,” Ms. Tome, has been instrumental in
recognizing and solving the retailer’s technology problems.
Home Depot is very focused on improving its information technology capabilities. The
goal is not to keep customers waiting. One way the company has done this is by
providing associates with a “first phone” to help check merchandise before it gets to the
register. This technology can also be linked to a customer’s PayPal account. Ask
students if there are other ways that a company like Home Depot can better use
technology. (Stress that any changes need to follow the company’s strategy.)
9.4 COMPETITIVE STRATEGY
A business strategy (also known as a competitive strategy) is strategy focused
on how the organization will compete in each of its businesses.
A. The Role of Competitive Advantage. A competitive advantage is what
sets an organization apart, that is, its distinctive edge. An organization’s
competitive advantage can come from its core competencies.
1. Quality as a Competitive Advantage. If implemented properly,
quality can be one way for an organization to create a sustainable
competitive advantage.
2. Sustaining Competitive Advantage. An organization must be able
to sustain its competitive advantage; it must keep its edge despite
competitors’ action and regardless of evolutionary changes in the
organization’s industry.
3. Michael Porter’s work explains how managers can create and
sustain a competitive advantage that will give a company above-
average profitability. Industry analysis is an important step in
Porter’s framework. He says there are five competitive forces at
work in an industry; together, these five forces determine industry
attractiveness and profitability. (See Exhibit 9-5). Porter
proposes that the following five factors can be used to assess an
industry’s attractiveness:
1) Threat of new entrants. How likely is it that new
competitors will come into the industry?
2) Threat of substitutes. How likely is it that products of other
industries could be substituted for a company’s products?
3) Bargaining power of buyers. How much bargaining power
do buyers (customers) have?
4) Bargaining power of suppliers. How much bargaining
power do a company’s suppliers have?
5) Current rivalry. How intense is the competition among
current industry competitors?
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B. Choosing A Competitive Strategy. According to Porter, managers must
choose a strategy that will give their organization a competitive
advantage. Porter identifies three generic competitive strategies. Which
strategy managers select depends on the organization’s strengths and
core competencies and the particular weaknesses of its competitor(s).
a. A cost leadership strategy is a business or competitive strategy
in which the organization competes on the basis of having the
lowest costs in its industry.
b. A differentiation strategy is a business or competitive strategy in
which a company offers unique products that are widely valued by
customers.
c. A focus strategy is a business or competitive strategy in which a
company pursues a cost or differentiation advantage in a narrow
industry segment.
d. An organization that has been not been able to develop either a
cost or differentiation advantage is said to be “stuck in the
middle.”
e. Subsequent research indicates that it is possible, though very
difficult, for organizations that are stuck in the middle to achieve
high performance.
f. Functional strategy is the strategies used by an organization’s
various functional departments to support the business or
competitive strategy.
9.5 CURRENT STRATEGIC MANAGEMENT ISSUES
A. The Need for Strategic Leadership. Strategic leadership is defined as the
ability to anticipate, envision, maintain flexibility, think strategically, and
work with others in the organization to initiate changes that will create a
viable and valuable future for the organization. Top managers can
provide effective strategic leadership by eight principles including:
determining the organization’s purpose or vision, exploiting and
maintaining the organization’s core competencies, developing the
organization’s human capital, creating and sustaining a strong
organizational culture, creating and maintaining organizational
relationships, reframing prevailing views by asking penetrating questions
and questioning assumptions, emphasizing ethical organizational
decisions and practices, and establishing appropriately balanced
organizational controls. (See Exhibit 9-6.)
B. The Need for Strategic Flexibility. There is guarantee that a well thought
out strategy will lead to positive outcomes. A key element to the
strategic management process is the, the ability to recognize major
external changes, to quickly commit resources, and to recognize when a
strategic decision isn’t working. Exhibit 9–6 provides suggestions for
developing strategic flexibility.
C. Important Organizational Strategies for Today’s Environment
1. E-Business Strategies. Using the Internet, companies have
created knowledge bases that employees can tap into anytime,
anywhere. E-business as a strategy can be used to develop a
sustainable competitive advantage; it can also be used to
establish a basis for differentiation or focus.
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2. Customer Service Strategies. These strategies give customers
what they want, communicate effectively with them, and provide
employees with customer service training.
3. Innovation Strategies. These strategies focus on breakthrough
products and can include the application of existing technology to
new uses. An organization that is first to bring a product
innovation to the market or to use a new process innovation is
called a first mover. Exhibit 9-7 lists the advantages and
disadvantages associated with being a first mover.
Answers to Review and Discussion Questions
1. Describe the six steps in the strategic management process.
The six steps in the strategic management process encompass strategy planning,
implementation, and evaluation. These steps include the following: (1) identify the
current mission, goals, and strategies; (2) do an external analysis; (3) do an internal
analysis (steps 2 and 3 collectively are known as SWOT analysis); (4) formulate
strategies; (5) implement strategies; and (6) evaluate strategies. Strengths are any
activities the organization does well or unique resources that it has. Weaknesses are
activities the organization doesn’t do well or resources it needs but doesn’t have.
Opportunities are positive trends in the external environment. Threats are negative
trends. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
2. How could the Internet be helpful to managers as they follow the steps in the strategic
management process?
The Internet provides voluminous information conveniently and quickly about
competitors, environmental factors, and customers. This information improves the
manager’s ability to make sound strategic management decisions as he or she faces
continuously changing environmental conditions. (LO: 2, Explain what managers do
during the six steps of the strategic management process, AACSB: Use of information
technology)
3. How might the process of strategy formulation, implementation, and evaluation differ
for (a) large businesses, (b) small businesses, (c) not-for-profit organizations, and (d)
global businesses?
All companies, large or small, profit or not-for-profit, domestic or global benefit from the
process of strategy formulation. The major difference that exists between the different
types of companies and the process they go through centers around the development of
their mission and goals. For example, the owners of a small business might not want to
pursue the goal of growth and instead focus on stability. For not-for-profit organizations,
the goal is not about making money for owners or stockholders but about how to find a
way to effectively and efficiently maximize their resources to benefit others. In a global
organization, while the SWOT would be more involved due to the number of potential
elements involved, it remains the same except the goals extend beyond serving one
country or market. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Dynamics of the global economy)
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4. Should ethical considerations be included in analyses of an organization’s internal and
external environments? Why or why not?
Ethical considerations should permeate every activity of an organization. As a firm’s
strategy is the basis for their plans, when ethics are not considered then the organization
is likely to ignore potential ethical problems. (LO: 2, Explain what managers do during
the six steps of the strategic management process, AACSB: Ethical understanding and
reasoning abilities)
5. Describe the three major types of corporate strategies and how the BCG matrix is
used to manage those corporate strategies.
A growth strategy is when an organization expands the number of markets served or
products offered, either through current or new businesses. The types of growth
strategies include concentration, vertical integration (backward and forward), horizontal
integration, and diversification (related and unrelated). A stability strategy is when an
organization makes no significant changes in what it’s doing. Both renewal strategies—
retrenchment and turnaround—address organizational weaknesses that are leading to
performance declines. The BCG matrix is a way to analyze a company’s portfolio of
businesses by looking at a business’s market share and its industry’s anticipated growth
rate. The four categories of the BCG matrix are cash cows, stars, question marks, and
dogs. (LO: 4, Describe competitive advantage and the strategies organizations use to
get it, AACSB: Analytical Skills)
6. Describe the role of competitive advantage and how Porter’s competitive strategies
help an organization develop competitive advantage.
An organization’s competitive advantage is what sets it apart, its distinctive edge. A
company’s competitive advantage becomes the basis for choosing an appropriate
competitive strategy. Porter’s five forces model assesses the five competitive forces that
dictate the rules of competition in an industry: threat of new entrants, threat of
substitutes, bargaining power of buyers, bargaining power of suppliers, and current
rivalry. Porter’s three competitive strategies are as follows: cost leadership (competing
on the basis of having the lowest costs in the industry), differentiation (competing on the
basis of having unique products that are widely valued by customers), and focus
(competing in a narrow segment with either a cost advantage or a differentiation
advantage). (LO: 4, Describe competitive advantage and the strategies organizations
use to get it, AACSB: Analytical Skills)
7. “The concept of competitive advantage is as important for not-for-profit organizations
as it is for profit organizations.” Do you agree or disagree with this statement? Explain,
using examples to make your case.
Not-for-profit and for-profit companies compete for customers. In the case of not-for-
profit companies, those customers are donors and like any market are limited in size. To
be effective non-for-profit companies need something that will attract donors like for-
profit companies attract customers. For example, United Way has an established
network of businesses that regularly donate money as part of their yearly pledge drives.
Another example is Mary Komen’s, known for their work with breast cancer awareness,
that has established a series of runs and walks across the United States and has even
had success in publicizing their cause with the NFL. (LO: 5, Discuss current strategic
management issues, AACSB: Analytical Skills)
8. Describe e-business, customer service, and innovation strategies.
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Using the Internet, companies have created knowledge bases that employees can tap
into anytime, anywhere. E-business as a strategy can be used to develop a sustainable
competitive advantage; it can also be used to establish a basis for differentiation or
focus. Customer service strategies give customers what they want, communicate
effectively with them, and provide employees with customer service training. Innovation
strategies focus on breakthrough products and can include the application of existing
technology to new uses. An organization that is first to bring a product innovation to the
market or to use a new process innovation is called a first mover. (LO: 5, Discuss current
strategic management issues, AACSB: Analytical Skills)
ETHICS DILEMMA
This ethical dilemma brings up the idea that social media companies may not be very
social. If customers try to call companies like LinkedIn, Facebook, or Twitter, they
cannot reach a person on the other end. These companies use their telephone systems
to provide information, not one-on-one support. This is a strategy for these companies;
being internet-based companies they want their customers to use e-mail. Students are
asked about the ethics of this decision? On one side these companies are saving
money, but on the other, they may be denying access to customers (which is ironic
because these companies are all about promoting social interaction). (LO: 4, Describe
competitive advantage and the strategies organizations use to get it, AACSB: Ethical
understanding and reasoning abilities)
SKILLS EXERCISE: DEVELOPING YOUR
BUSINESS PLANNING SKILL
This exercise uses the development of a business plan as a way to introduced students
to skills needed for organizational planning. Students are asked to following nine steps
and put together a business plan for the one of the following ideas:
1. Haircuts at home (you make house calls)
2. Olympic snowboarding computer game
3. Online apartment rental listing
4. Voice-activated house alarm
(LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical
Skills)
WORKING TOGETHER: TEAM EXERCISE
This exercise asks students to work in small groups of three to four to find examples of
company mission statements. Once these mission statements are found, students
should evaluate them on the information presented in Exhibit 9-2 and then come up with
different types of strategies to accomplish those missions. Mission statements can be
found by going to company websites or through other publications (i.e. annual reports).
Finding mission statements for companies is not always easy. Some companies do not
use the words ‘mission statement’ and instead use terms like ‘statement of goals’ or
‘objectives.’ This exercise should be used as an out-of-class assignment.
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(LO: 1, Define strategic management and explain why it’s important, AACSB: Analytical
Skills)
My Turn to be a Manager
• Do a personal SWOT analysis. Assess your personal strengths and weaknesses
(skills, talents, abilities). What are you good at? What are you not so good at?
What do you enjoy doing? What don’t you enjoy doing? Then, identify career
opportunities and threats by researching job prospects in the industry you’re
interested in. Look at trends and projections. You might want to check out the
information the Bureau of Labor Statistics provides on job prospects. Once you
have all this information, write a specific career action plan. Outline five-year
career goals and what you need to do to achieve those goals. (LO: 2, Explain
what managers do during the six steps of the strategic management process,
AACSB: Reflective thinking skills)
• Using current business periodicals, find two examples of each of the corporate
and competitive strategies. Write a description of what these businesses are
doing and how each represents a particular strategy. (LO: 3, Describe the three
types of corporate strategies, AACSB: Analytical Skills)
• Pick five companies from the latest version of Fortune’s “Most Admired
Companies” list. Research these companies and identify, for each, its (a) mission
statement, (b) strategic goals, and (c) strategies being used. (LO: 2, Explain what
managers do during the six steps of the strategic management process, AACSB:
Analytical Skills)
• Steve’s and Mary’s suggested readings: Adrian Slywotzky and Richard Wise,
How to Grow When Markets Don’t (Warner Business Books, 2003); Jim Collins,
Good to Great: Why Some Companies Make the Leap...and Others Don’t
(Harper Business, 2001); Michael E. Porter, On Competition (Harvard Business
School Press, 1999); James C. Collins and Jerry I. Porras, Built to Last:
Successful Habits of Visionary Companies (Harper Business, 1994); and Gary
Hamel and C. K. Prahalad, Competing for the Future (Harvard Business School
Press, 1994). (LO: 1, Define strategic management and explain why it’s
important, AACSB: Analytical Skills) (LO: 2, Explain what managers do during
the six steps of the strategic management process, AACSB: Analytical Skills)
(LO: 3, Describe the three types of corporate strategies, AACSB: Analytical
Skills) (LO: 4, Describe competitive advantage and the strategies organizations
use to get it, AACSB: Analytical Skills) (LO: 5, Discuss current strategic
management issues, AACSB: Analytical Skills)
• Customer service, e-business, and innovation strategies are particularly
important to managers today. We described in the chapter specific ways that
companies can pursue these strategies. Your task is to pick customer service, e-
business, or innovation and find one example for each of the specific approaches
in that category. For instance, if you choose customer service, find an example of
(a) giving customers what they want, (b) communicating effectively with
customers, and (c) providing employees with customer service training. Write a
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report describing your examples. (LO: 5, Discuss current strategic management
issues, AACSB: Analytical Skills)
• In your own words, write down three things you learned in this chapter about
being a good manager. (LO: 1, Define strategic management and explain why it’s
important, AACSB: Analytical Skills) (LO: 2, Explain what managers do during
the six steps of the strategic management process, AACSB: Analytical Skills)
(LO: 3, Describe the three types of corporate strategies, AACSB: Analytical
Skills) (LO: 4, Describe competitive advantage and the strategies organizations
use to get it, AACSB: Analytical Skills) (LO: 5, Discuss current strategic
management issues, AACSB: Analytical Skills)
• Self-knowledge can be a powerful learning tool. Go to mymanagementlab and
complete these self-assessment exercises: How Well Do I Handle Ambiguity?
How Creative Am I? How Well Do I Respond to Turbulent Change? Using the
results of your assessments, identify personal strengths and weaknesses. What
will you do to reinforce your strengths and improve your weaknesses? (LO: 1,
Define strategic management and explain why it’s important, AACSB: Analytical
Skills) (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills) (LO: 3, Describe the three types
of corporate strategies, AACSB: Analytical Skills) (LO: 4, Describe competitive
advantage and the strategies organizations use to get it, AACSB: Analytical
Skills) (LO: 5, Discuss current strategic management issues, AACSB: Analytical
Skills)
Answers to Case Application Questions
Fast Fashion
1. How is strategic management illustrated by this case story?
According to the case, Zara’s plan ‘involves a clear and focused understanding of
fashion, technology, and their market, and the ability to adapt quickly to trends.’ Inditex is
practicing strategic management and it is evident starting in:
1) Setting goals – the owner’s goals to produce ‘fast fashion’
2) The formulation of strategy – to use technology to produce designs within two
weeks
3) The implementation of strategy – building the design processes to take
advantage of computer aided technologies
4) The evaluation of results – the constant evaluation of designs to see which are
successful.
(LO: 2, Explain what managers do during the six steps of the strategic management
process, AACSB: Analytical Skills)
2. How might SWOT analysis be helpful to Inditex executives? To Zara store
managers?
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A SWOT is a basic strategic tool that helps decision makers understand the environment
and their own companies abilities. In this case, a SWOT would point out the
opportunities and threats that exist in the garment industry and Inditex’s ability to take
advantage of those opportunities and minimize threats (i.e. from competition). For Zara
store managers a SWOT is not particularly useful unless they are able to contribute to
the firm’s strategy or they have latitude to implement strategic decisions at the store
level. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
3. What competitive advantage do you think Zara is pursuing? How is she exploiting that
competitive advantage?
Zara is implementing a differentiation strategy. By using technology and just-in-time
production, they are seeking to gain a competitive advantage by being faster to market
and more responsive of company needs. The key for Zara is bringing products to market
quickly, so they are not pursuing a low-cost strategy. They are also not pursuing a focus
strategy, in that they are not focusing on only one side of the industry. (LO: 4, Describe
competitive advantage and the strategies organizations use to get it, AACSB: Analytical
Skills)
4. Do you think Zara’s success is due to external or internal factors or both? Explain.
Students should recognize that successful companies are attuned to both internal and
external factors – this is the premise of the Open-System Model. Zara would not be
successful if they did not match their internal strengths to opportunities in the external
environment. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
5. What strategic implications does Zara’s move into online retailing have? (Hint: think in
terms of resources and capabilities.)
Zara’s strength lies in their ability to use technology to monitor changes in sales and
then respond by producing new garments in a quick time frame. This responsiveness to
customer preferences would be a good match to the demands associated with internet
retailing. (LO: 2, Explain what managers do during the six steps of the strategic
management process, AACSB: Analytical Skills)
Rewind and Replay. New life in the digital world.
1. Using Porter’s framework, describe Singtel’s competitive strategy. Explain your
choice.
Singtel’s strategy is best described as a focus or segmented strategy. They have
taken a segment of the market, digital streaming on mobile phones, and sought
to become a choice provider. Students may also see Singtel’s strategy as
differentiation. This is a reasonable view, but does not consider that Singtel
currently does not currently compete in the other entertainment markets such as
home computers, cable, or content provision.
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2. What competitive advantage(s) do you think Singtel has? Have its resources,
capabilities, or core competencies contributed to its competitive advantage(s)?
Explain.
Singtel’ competitive advantage is based on several factors: speed, variety, and
technology. All of these factors can be considered part of Singtel’s core
competence of convenience. Students may not recognize that Singtel has
invested hundreds of millions of dollars into technology to stream TV and movies
via phones. This gives the company an advantage over other competitors who
try to enter a market in that to compete would require large amounts of capital to
match Singtel current systems.
3. How will Singtel’s functional strategies have to support its competitive
strategy? Explain.
Functional strategies are the strategies used by an organization’s various
functional departments to support the competitive strategy. This answer lies in
Singtel’s emphasis on creating a personal digital life stream for subscribers.
Students should see that Singtel is pushing development in this area. As stated
by Lew, Singtel does not want to be ‘a pipe’. It has ambitions to go way beyond
being just a telco.
4. What do you think Singtel is going to have to do to maintain its competitive
position, especially as its industry changes?
Students should recognize that Singtel operates in a highly competitive and fast
changing environment. To maintain its competitive advantage, Singtel will have
to stay ahead of trends in the market and new technology. Singtel will have to
gain more control over its content. This may mean entering into new lines of
business, such as laptop style applications. Singtel will also have to be aware of
and take advantage of new technologies, such as internet ready TV’s and even
newer ways of shopping online or watching video that have not yet been
marketed.
ADDITIONAL CHAPTER INFORMATION
The Strategy + Business Web site features valuable sources for strategic management
applications. This Web site is located at [www.strategy-business.com].
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