3. STAKEHOLDERS & THE STRATEGIC
The Strategic Management Process
Organizational and Environmental Analysis
Strategy Implementation and Control
4. Concept and Definition
A company’s strategy consists of the competitive
moves and business approaches devised by
management to produce successful performance.
Strategy is management’s “game plan” for running
the business, strengthening the company’s
competitive position, satisfying customers, and
achieving performance targets.
5. No well-defined business path to follow
No roadmap to manage by
No cohesive, reasoned action plan to
produce successful performance
Without a strategy, managers have:
6. The Three Big Strategic Questions
1. Where are we now?
This involves thinking about the company’s
external market environment and internal
situation and capabilities
2. Where do we want to go?
This involves thinking about what top
management wants the company to be like
in 5 to 10 years
3. How will we get there?
This involves thinking about what
STRATEGY the company should
pursue to perform successfully and get
from where it is to where it wants to go.
This third step is where companies often:
9. THE FIVE TASKS OF STRATEGIC
1. Defining the business, stating a mission, and
forming a strategic vision
2. Setting measurable objectives and performance
3. Crafting a strategy to achieve the objectives
4. Implementing and executing the strategy
5. Evaluating performance, reviewing new
developments, and initiating corrective adjustments
in long-term direction, objectives, strategy, or
10. Definition of Strategic Management
STRATEGIC MANAGEMENT is the process through
Analyze and learn from the stakeholders inside and
outside the organization,
Establish strategic direction,
Create strategies that are intended to help achieve
All in an effort to satisfy KEY STAKEHOLDERS.
11. Stakeholder Approach
are groups or individuals who can
significantly affect or are significantly affected
by an organization’s activities such as
customers, employees, stockholders,
communities, suppliers, etc.
have, or believe they have, a legitimate claim
on some aspects of the organization or its
12. THE ORGANIZATION AND
Organizational Environment –
Groups, individuals, and forces outside of the
traditional boundaries of the organization that
are significantly influenced by or have a major
impact on the organization.
This includes both the operating and broad
OPERATING ENVIRONMENT – employees,
competitors, customers, suppliers, lenders,
unions, gov’t agencies, local communities,
BROAD ENVIRONMENT – global economic
forces, sociocultural forces, technological
change, and global political and legal forces.
ADAPTATION – The process of responding
to the environment.
ENACTMENT – The process of influencing
the environment to make it less hostile and
more conducive to organizational success.
16. Strategic Direction
Statement describing the organization’s
overall purpose, broad goals, and the scope
of it’s operations.
Statement expressing management’s view of
what the organization can or should become
in the future
17. Strategy Formulation
1. Corporate-Level Strategy
Concerned with the selection of business areas in
which the organization will compete
Referred to as domain definition
2. Business-Level Strategy
Concerned with how businesses compete in the
areas they have selected
Referred to as domain direction and navigation
3. Functional-Level Strategy
Provides details of how functional areas work
together to achieve business-level strategy
18. Strategic Implementation and
Strategy Implementation –
Creating the functional strategies, systems,
structures, and processes needed by the
organization to achieve strategic ends
Strategic Control –
The processes that lead to adjustments in
strategic direction, strategies, or the
implementation plan, when necessary
19. Strategic Restructuring
Involves renewed emphasis on the things an
organization does well, combined with a variety of
tactics to revitalize the organization and strengthen its
*****None of the tasks of strategic management are a
one-time only exercise. Times change. Conditions
change. Events unfold. Better ways to do things
become evident. Things happen that require new
initiatives and actions. New leadership emerges
20. Alternative Perspectives on Strategy
The environment is the primary determinant of
strategy. The most successful organization
will be the one that best ADAPTS to existing
21. STRATEGIC CHOICE –
Organizations do not have to submit to forces
in the environment, they can create their
environments through relationships with
stakeholders and other activities.
22. STAKEHOLDER VIEW –
Compromise between determinism and choice.
Through stakeholder analysis and management
processes, organizations can better understand and
influence their environments.
23. DELIBERATE VS EMERGENT
Deliberate Strategy – an intended strategic
course planned and pursued by managers.
Emergent Strategy – an unplanned strategy
that emerges from a stream of managerial
**** In reality, both processes must be present
for an organization to truly excel.
24. RESOURCE-BASED VIEW OF THE
An organization is a bundle of financial, human,
physical, and organizational resources. Resources
that create value for customers but are difficult for
competitors to imitate provide the basis for a
sustainable competitive advantage.
What are these resources?
25. STAKEHOLDER ANALYSIS AND
STAKEHOLDER ANALYSIS –
Involves identifying and prioritizing key stakeholders,
assessing their needs, collecting ideas from them, and
integrating this knowledge into strategic management
STAKEHOLDER MANAGEMENT –
Includes communicating, negotiating, contracting,
and managing relationships with stakeholders and
motivating them to behave in ways that are
beneficial to the organization and its other
27. Fig. 3-1: The External Environment
Remote Environment (Global and Domestic)
Industry Environment (Global and Domestic)
Operating Environment (Global and Domestic)
• Entry barriers
• Supplier power
• Buyer power
• Substitute availability
• Competitive rivalry
28. The Broad Environment
Global economic forces
Global political forces
29. Socio-cultural Trends
Analysis of societal trends is important from at
least four perspectives:
1. The values and beliefs of key stakeholders
are derived from broader societal influences,
which can create opportunities and threats
for the firm.
30. Major Sociocultural Issues in the U.S.
Role of government (health & child care)
Legality of abortion
Increase in environmentalism
Migration to the Sunbelt
Aids and other health concerns
Graying of America
Levels of foreign investment
Role of the military
Social costs of restructuring
In addition, company strategy must be adapted to each geographic region, not just
31. Socio-cultural Trends
2. Awareness of and compliance with the attitudes of
society can help an organization avoid problems
associated with being a “bad corporate citizen.”
Reputation is important as it can’t be imitated! Therefore,
corporate image can become a competitive advantage.
40. Technological Forces
Technology – refers to human knowledge
about products and services and the way
they are made and delivered.
Invention – a new idea or technology proven
to work in the laboratory.
Innovation – An invention that can be
replicated reliably on a meaningful scale.
56. Fig. 3-4: Forces Driving Industry
Threat of new
Threat of substitute
products or services
57. Customers are a force when …
There are a small number of them
They make high volume purchases
The purchases they make represent a large
percentage of their total costs
The sellers’ products are plentiful and/or
They earn low profits
58. Customers are a force when …
They can easily integrate backward and
become their own suppliers
Sellers’ products don’t have much influence
on the quality of their customer’s products
Information on sellers’ costs and demand is
readily available to buyers
59. In combination, these forces determine the
bargaining power of customers
Obviously, the greater their power,
the higher the priority customers
should be given in the strategic
60. Suppliers are a force when …
There are only a few suppliers
There are few or no substitutes
Suppliers do not sell a large percentage of
their products to the buying industry
The buying industry must have the product
that suppliers provide in order to manufacture
its own product
61. Suppliers are a force when …
Suppliers have differentiated their products or
made it costly to switch suppliers
Suppliers can easily integrate forward and
compete directly with former buyers
62. In combination, these forces determine the
bargaining power of suppliers
Obviously, the greater their power,
the higher the priority suppliers
should be given in the strategic
Rivalry among existing competitors WILL incite
retaliation or counter moves. These moves
typically include things like:
Sales force and/or capacity expansions
New product introductions
Long-term contracts with customers
64. Major Forces That Lead To High
Levels Of Competition
Slow industry growth
High fixed costs
Lack of product differentiation
A large number of competitors
High exit barriers
66. Firms often keep track of the activities and
capabilities of their competitors through …
Competitive benchmarking – a tool in which
management uses the best practices of
competitors in setting objectives to
encourage improvement in performance.
What is the fallacy of benchmarking and how
could it actually harm your strategy?
67. Potential Competitors
Entry barriers prevent firms from freely moving into an
industry. They include:
Economies of scale
Access to distribution channels
Other cost advantages such as proprietary
68. Indirect Competitors
If organizations provide goods that are readily
substitutable for the goods provided by an
industry, these organizations become indirect
competitors. This leads to …
A ceiling on the price for the good
Can create new expectations
69. What do we do with this model?
Use it to understand how the firm should
position itself relative to these forces
Use it to influence the forces by actions such
as erecting high entry barriers through
economies of scale or differentiation
Use it to decide whether or not to enter or
leave a particular industry
70. Basic Postures
Firms use two primary postures when dealing with
Buffering – techniques designed to stabilize and
predict environmental influences (PR, market
research, lobbying, etc.)
Bridging (also referred to as boundary spanning) –
techniques that build on interdependencies (joint
ventures, strategic alliances, partnering, industry
level lobbying, extranets, etc.)
72. From a resource-based perspective -
Strengths – are firm resources and capabilities
that can lead to a competitive advantage.
Weaknesses – are resources and capabilities
that the firm does not possess but that are
necessary, resulting in a competitive
73. From a resource-based perspective -
Opportunities – are conditions in the broad and
operating environments that allow a firm to take
advantage of organizational strengths, overcome
organizational weaknesses, and/or neutralize
74. From a resource-based perspective -
Threats – are conditions in the broad and operating
environments that may stand in the way of
organizational competitiveness or the achievement of
77. Value can be created -
In any primary or support activity
In the way they are combined
In the way internal activities are linked to the
78. Value Chain Analysis
Value chain analysis may be combined with stakeholder
analysis to identify strengths and weaknesses and to
uncover opportunities for savings or ways to add
value for customers.
79. Plus …
The combination of stakeholder analysis with value
chain analysis holds great potential for developing
strategies that are both efficient and effective.
88. Business Definition
What is our business? …
Should be addressed from four perspectives:
1. Who is being satisfied?
2. What is being satisfied?
3. How are customer needs satisfied?
4. What are our products and/or services?
92. An organization’s mission …
Reflects management’s vision of what the
organization seeks to do and to become
Provides a clear view of what the
organization is trying to accomplish
Indicates an intent to stake out a particular
93. Specific questions that help form
strategic vision -
What business are we in now?
What business do we want to be in?
What will our customers want in the future?
What are the expectations of our
94. Questions, con’t.
Who will be our future competitors?
What should our competitive scope be?
How will technology impact our industry?
What environmental scenarios are possible?
Our business is renting cars. Our mission is
total customer satisfaction.
To be the world’s best in chemicals and
To market vehicles developed and
manufactured in the United States that are
world leaders in quality, cost, and customer
satisfaction through the integration of people,
technology, and business systems and to
transfer knowledge, technology, and
experience throughout General Motors.
Key Market: To offer the fast food
Contribution: food prepared in the same
high-quality manner world-wide, tasty and
Distinction: delivered in a consistent, low-
key décor and friendly atmosphere.
98. Goals in most companies …
Maximize long-term shareholder wealth
Optimize employee potential
102. Concentration Positives
Allows the firm to master the business
Better positioned to develop sustainable
Places organizational resources under less
Clear strategic direction
Easier for external stakeholders to
understand the firm’s mission
103. Concentration Negatives
Is risky when environments are unstable
Makes the firm vulnerable to product
obsolescence and industry maturity
Can lead to cash problems, both negative
May not provide stimulation for management
105. Market Failure
– occurs when transaction costs are high
enough to encourage an organization to
produce a good or service in-house instead of
buying from the open market.
106. Taper Integration
- Occurs when an organization produces part of its
requirements in-house and buys the rest of what it
needs on the open market.
Related Diversification – firm’s involvement in
other businesses related to its core business.
Unrelated Diversification – firm’s involvement
in businesses not related to its core business.
113. Best Cost Strategy
*** The essence of a best cost
strategy is to find a level of
differentiation that will bring a
premium price while doing so at
a reasonable cost.
114. Focus Strategies
*** The key to a focus strategy is catering
to a particular segment in the market.
115. The Issue of Tradeoffs
A sustainable strategic position requires tradeoffs. If a
company moves upscale, it repositions itself away
from its current customer base.
116. Tradeoffs arise for three reasons …
Inconsistency of image or reputation - a firm can’t
go in different directions without confusing the
Need for different types of resources - different
positions require different equipment, employee
behaviors, skills, product configurations, and
Overall costs - internal coordination and control can
be very expensive.
117. Five Fatal Strategy Flaws
Misreading Industry Attractiveness
Possessing No True Competitive
Pursuing A Competitive Advantage That Is
Compromising A Strategy In Order To Grow
Not Making Your Strategy Explicit And Not
Communicating It To Your Employees
118. Growth Strategies
Joint ventures/strategic alliances
122. Functional Strategies
Collective patterns of decisions made and actions
taken by employees that implement the growth and
competitive strategies of the organization.
Do you see any potential conflict in this statement?
123. Marketing Strategy
– a plan to promote, price, and distribute the products
and services of an organization, as well as how to
identify and service customer groups.
124. Operations Strategy
- a plan to design and manage the processes needed to
create the products and services of the organization.
125. Research and Development Strategy
– a plan that guides basic research of the organization
as well as its development of more effective and
efficient applications, products, and processes.
126. Information Systems Strategy
– a plan to provide the organization with the information
technology necessary for the operation, planning,
and control of business activities.
127. Human Resources Strategy
– a plan that guides the recruiting, hiring, training, and
compensating of employees as well as organizational
128. Financial Strategy
– a plan to provide the organization with the capital
structure and funds appropriate for implementing
growth and competitive strategies.
129. Functional Strategies MUST …
be consistent in three important areas:
1. Within function
2. Between function
3. With the generic-level strategy
131. Example, con’t.
Increase employee morale through continuous
training and increased incentive opportunities.
Implement a quarterly pay-for-performance plan for
every position in the organization.
Implement training and educational development
standards and opportunities for every position in the
134. STRATEGIC CONTROL
Strategic Control System – organizational
system by which top management can
evaluate the progress of the organization in
accomplishing its goals, as well as point out
areas in need of attention.
141. CRITICAL RESULT AREAS
Organizational areas that are key to ensuring
that the organization accomplishes its goals
and its vision.
Improvement in worker skill levels
Creation of new process controls
143. GOAL SETTING
Bottom-Up Approach – goal setting
begins in functional areas, which
translates into business-level goals of
the various divisions that are combined
to form the corporate-level goals.
145. FEEDBACK CONTROL
Budgets – feedback controls that provide
revenue and expense targets.
Financial Ratios – feedback controls used to
control organizational processes and
behavior (Current ratio, quick ratio, etc.).
Audits – a type of feedback control system
used to provide information to support
financial, customer, or internal perspectives.
Firm conduct and outcomes are measured
against established guidelines.
147. FEEDBACK CONTROL
Concurrent Controls – very similar to
feedback controls, except that the time
horizon is shortened to “real time.”
Process Control – controls associated with
production and service processes and with
quality standards (i.e., making sure things
148. ORGANIZATIONAL CRISES
A better definition:
When the feces hits the fast-moving, rotary
bladed instrument. In other words, when the
@$%&*# hits the fan!
If they prepare at all, they prepare for too few
contingencies. Further, preparation is
They focus on only one aspect of a crisis, and
only after it has occurred.
They only consider technical factors in the
cause or prevention of crises.
They don’t explicitly consider the
ramifications to key stakeholders.