Copyright © 2005 John Wiley & Sons, Inc. All rights
reserved. Reproduction or translation of this work
beyond that permitted in Section 117 of the 1976 United
States Copyright Act without the express written
permission of the copyright owner is
unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley
& Sons, Inc. The purchaser may make back-up copies
for his/her own use only and not for distribution or
resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of
these programs or from the use of the information
contained herein.
Definition of Strategic Management
• Strategic management is a process through
which:
› Organizations analyze and learn from their internal and
external environments,
› Establish strategic direction,
› Create strategies that are intended to move the
organization in that direction, and
› Implement those strategies
• All in an effort to satisfy key stakeholders
Three Perspectives on Strategic
Management
• Traditional Perspective
› Origin
¤ Economics, other business disciplines, and
consulting firms
› View of Firm
¤ An economic entity
› Approach to Strategy Formulation
¤ Situation analysis of internal and external
environments leading to formulation of mission and
strategies
› Source of Competitive Advantage
¤ Best adapting the organization to its environment by
taking advantage of strengths and opportunities and
overcoming weaknesses and threats
Traditional Strategic Management
Process
Situation Analysis
(external environment)
Strategic
Direction
(mission
& goals)
Strategy Formulation
(take advantage of
strengths/overcome
weaknesses & threats)
Strategy Implementation
(development &
execution of
implementation plans)
Strategy Fundamentals
• Traditional View
› Environmental
determinism (the best
strategy is determined by
the environment)
› Firms should adapt to the
environment
› Strategy is deliberate
(intended)
• Contemporary View
› Enactment (firms can
influence their
environments)
› A firm should pursue
actions to make the
environment more
hospitable
› Strategy emerges from a
stream of decisions as
firms learn
Three Perspectives on Strategic
Management
• Resource-based View
› Origin
¤ Economics, distinctive competencies and general
management capability
› View of Firm
¤ A collection of resources, skills and abilities
› Approach to Strategy Formulation
¤ Analysis of organizational resources, skills and
abilities. Acquisition of superior resources, skills
and abilities
› Source of Competitive Advantage
¤ Possession of resources skills and abilities that are
valuable, rare and difficult to imitate by competitors
The Organization as a Bundle of
Resources
General Organizational
Resources
•Firm Reputation
•Brand Names and Patents
•Contracts
•Stakeholder Relationships
Financial Resources
•Internal and External
Sources of Financing
•Financial Strength
Organizational
Knowledge
and Learning
Human Resources
•Skills, Background and
Training of Managers and
Employees
•Organization Structure
Physical Resources
•Plants and Equipment
•Organizational Locations
•Access to Raw Materials
Three Perspectives on Strategic
Management
• Stakeholder View
› Origin
¤ Business ethics and social responsibility
› View of Firm
¤ A network of relationships among the firm and its
stakeholders
› Approach to Strategy Formulation
¤ Analysis of the economic power, political influence,
rights and demands of various stakeholders
› Source of Competitive Advantage
¤ Superior linkages with stakeholders leading to trust,
goodwill, reduced uncertainty, improved business
dealings and ultimately higher firm performance
A Typical Stakeholder Map
Activist
Groups
Competitors
Local
Communities
The Organization
Suppliers
Owners/Board of Directors
Managers
Employees
Customers
The Media
Unions
Financial
Intermediaries
Government Agencies
and Administrators
Can External Stakeholders Be
Managed?
• Internal Stakeholder
Management
› Nature of Relationship
¤ Contractual
› Physical Location
¤ Predominantly inside
organization
structure, sometimes
geographically
diverse
› Motivation to Perform
¤ Regular payments,
retention, bonuses,
common purpose,
persuasion
› Direct Control
¤ Schedules, plans,
sometimes direct
supervision
• External Stakeholder
Management
› Nature of Relationship
¤ Contractual, legal or
informal
› Physical Location
¤ Predominantly
outside organizational
structure; sometimes
included
› Motivation to Perform
¤ Regular payments,
retention, incentives,
bonuses, common
purpose, persuasion
› Direct Control
¤ Schedules, plans, less
often direct
supervision
The Strategic Management Process
Analyze the Environment,
Stakeholders and
Organizational Resources
(Chs. 2 & 3)
Establish
Strategic
Direction
(Ch. 4)
Formulate Strategies
Business-Unit (Ch. 5)
Corporate-Level (Ch. 6)
Entrepreneurship (Ch. 9)
Implement Strategies
& Establish Controls
(Chs. 7 & 8)
Strategy Formulation in a
Multibusiness Organization
Entire Corporation
(Corporate Level:
Domain Definition)
Business 1
Business 2
(Business Level:
Domain Direction/Navigation)
(Business Level:
Domain Direction/Navigation)
Marketing
Finance
Operations
Research
(Functional Level: Implementation and Execution)
Human Resources
Why Go Global
• More favorable climate for foreign business
›
›
›
›
›
›
›
•
•
•
•
•
Trade barriers falling
Newly industrializing countries
Worldwide shift towards market economies
Easier to exchange capital in foreign markets
Communication systems are worldwide
English universally spoken
Technical standards universal
Domestic markets saturated
Sometimes foreign markets more profitable
Acquire state-of-the-art resources
Lower cost for goods and services
Acquire technical knowledge
Strategic Planning Process vs.
Strategic Thinking
• The strategic planning process is often rigid
and unimaginative, with detailed instructions
pertaining to every aspect of the process
• Strategic thinking leads to creative solutions
and new ideas
• The best firms use both!
Elements of Strategic Thinking
• Intent Focused
› Strategic intent--a managerial vision of where the firm is going
• Comprehensive
› A “systems” perspective. Envisions the firm as a part of a larger
system of value creation.
• Opportunistic
› Seizes unanticipated opportunities
• Long-term Oriented
› Looks several years into the future at what the firm will become
• Built on Past and Present
› learns from the past and builds on a foundation of the realities of
the present
• Hypothesis Driven
› Creative ideas are then critically evaluated. Takes risks
The Hospitality Industry –
Foodservice Players
Consists of institutional providers, food
contractors, and restaurants
• The US restaurant industry has 870,000
restaurants and sales of $426 billion
• The restaurant industry can be divided into
two main segments, quick-service and fullservice
The Hospitality Industry – Lodging
Players
The US lodging industry has over 42,000 hotels, 4.4
million guestrooms, and sales of about $103 billion
• Is composed of five segments:
• Luxury (upper upscale)
• Upscale
• Midscale with food and beverage
• Midscale without food and beverage
• Economy
• Hotels can be owned, franchised and operated by a
variety of different players in business relationships
Major Concepts in Chapter 1
• The strategic management process involves
analysis of the environment and organization,
creation of strategic direction, strategy
formulation, strategy implementation and
strategic control
• Strategic thinking is a creative process that
should be encouraged
• The strategic management model used in this
book is built on three perspectives:
traditional, resource-based and stakeholder.
These perspectives complement each other.
Major Concepts in Chapter 1
• Organizations should learn from and adapt to
aspects of their environment that would be
difficult or too expensive to change, but can
influence (enact) other aspects of their
environments
• Strategy is part deliberate and part emergent
• Superior organizational resources lead to
superior organizational performance
• Organizations sit at the center of a network of
stakeholders. Effective stakeholder
management can lead to acquisition of
superior resources and other positive
outcomes
Major Concepts in Chapter 1
• Globalization continues to increase as foreign
environments become more hospitable to
investment and organizations search for
world-class opportunities and resources
• Strategic thinking involves intuition and
creativity. It is intent focused,
comprehensive, opportunistic, long-term
oriented, built on past and present, and
hypothesis driven. Organizations should
encourage this kind of thinking.