Chapter 6
Strategic
Management
PowerPoint slides by
R. Dennis Middlemist
Colorado State University
Learning Objectives
After studying this chapter, you should be
able to:
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Define strategy
Explain the role of environmental analysis in
strategy formulation
Explain the strategic planning process
Utilize strategic planning tools, such as the
product life cycle model, portfolio matrix, and
SWOT analysis.
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Learning Objectives
After studying this chapter, you should be
able to:

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3
Describe strategy implementation tools such
as the Seven S Model.
Describe the differences between intended
and emergent strategies.
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Competitive Advantage
 Competitive advantage
 The ability of a firm to win consistently over
the long term in a competitive situation.
 Competitive advantage is created through
the achievement of five qualities
 Superiority
 Non-substitutability
 Inimitability
 Appropriability
 Durability
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Five Qualities that Lead to
Competitive Advantage
Superiority
Superiority
 Are you significantly better
than your competitors?
 At what things are you
better?
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Five Qualities that Lead to
Competitive Advantage
Superiority
Inimitability
 Managers must create
Inimitability
barriers that make it hard
for others to copy their
superiority advantages
 Culture
 Product
design
 Marketing strategy
 And others
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Five Qualities that Lead to
Competitive Advantage
Superiority
Inimitability
Durability
Durability (long lasting)
 Legally protected
 Patents
 Copyrights
 Brand names
 Well-established
 Brand image
 Reputation for quality
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Five Qualities that Lead to
Competitive Advantage
Superiority
Non-substitutability
 Can the customer’s need
Inimitability
Durability
Non-substitutability
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that you fulfill can be met
by alternative means?
 Encyclopedias
vs.
information availability on
the Internet
 Movie theater entertainment
vs. concert band
entertainment
Five Qualities that Lead to
Competitive Advantage
Superiority
Appropriability
 Can you actually capture
Inimitability
Durability
the profits that can be
made in the business?
 Supernormal returns
 Profits
Non-substitutability
Appropriability
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that are above the
average for a comparable
set of firms
 Primarily a function of
greater-than-average
cost-price margins
Strategic Management Process:
Setting Direction
Strategic management process is a
planning process in which managers
1. Set the organization's general direction and
objectives
2. Formulate a specific strategy
3. Plan and carry out the strategy’s
implementation
4. Monitor results and make necessary
adjustments
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Strategic
Management
Process
Determine
strategic intent
Define
organizational mission
Analyze environment
Set objectives
Determine
requirements
Assess
resources
Develop action plans
Implement plans
Strategic
Planning
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Monitor outcomes
Feedback
Adapted from Exhibit 6.1: Strategic Management Process
Strategic Management Process:
Setting Direction
Strategic Intent
Strategic intent: what the organization
ultimately wants to be and do
 General identity, direction, and level of
aspirations of the organization
 A key objective is to inspire
 Should paint a general picture of aspiration
and engender a strong emotional response in
just a few words
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Strategic Management Process:
Setting Direction
Mission
Mission statement articulates the fundamental
purpose of the organization
 Company philosophy
 Company identity, or self-concept
 Principal products or services
 Customers and markets
 Geographic focus
 Obligations to shareholders
 Commitment to employees
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Mission Statement for the
Internal Revenue Service
The IRS mission is to “provide America’s taxpayers
top quality service by helping them
understand and meet their tax responsibilities
and by applying the tax law with
integrity and fairness to all.”
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Adapted from Exhibit 6.2 Mission Statement for the Internal Revenue Service
Strategic Management Process:
Setting Direction
Strategic Objectives
Strategic objectives translate the
strategic intent and mission of the firm into
concrete and measurable goals
 Facilitates a firm's ability to
 Allocate resources appropriately
 Reach a shared understanding of priorities
 Delegate responsibilities
 Hold people accountable for results
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Strategic Management Process:
Setting Direction
Strategic Objectives
 Strategic objectives address many issues,
such as
 Revenue growth
 Technological
 Profitability
leadership
 Cash flow
 Operating efficiency
(e.g., costs per unit,
expense per
employee)
 Customer satisfaction
 Market share
 Financial returns (e.g.,
return on equity, return
on assets)
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Strategic Management Process:
Formulating a Strategy
 Competitive strategy: determining how
the company is going to compete and
achieve its strategic objectives, mission,
and ultimate strategic intent
 Generic strategies
 Techniques and tools
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Strategic Management Process:
Formulating a Strategy
 Generic strategies
 Cost leadership
 Differentiation
 Scope
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Cost Leadership
General player whose product or
service features command industry
average prices but whose costs are
significantly below the industry
average.
Niche player with average prices
and below-average costs that
focuses on a segment of
customers or a specific
geography.
Example: Wal-mart
Example: Columbia Sports
Differentiation
Strategy
Generic Strategies and Scope
General player whose product or
service features command
premium prices and whose costs
are at the industry average.
Niche player with average costs
but commanding premium prices
that focuses on the high end and
customers in a general or specific
geography.
Example: Sony
Example: Morgan Motors
General
Focused
Scope
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Adapted from Exhibit 6.3: Generic Strategies and Scope
Strategic Management Process:
Formulating a Strategy
 Internal and external analysis
 Tools and concepts
 Environmental analysis

Value proposition
 Organizational analysis
 Value chain
 Five primary activities
 Four support activities
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Value Proposition for Three
Car Companies
High
Company C
Equal
value line
Company B
Reliability
Company A
Best Value
Low
Low
High
Price
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Adapted from Exhibit 6.4: Value Proposition for Three Companies
Support Activities
The Value Chain
Firm infrastructure (e.g., Finance, Planning)
Human resource management
Technology development
Procurement
Inbound
logistics
Operations Outbound
logistics
Marketing
and sales
After-sale
service
Primary Activities
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Adapted from Exhibit 6.5: The Value Chain
Strategic Management Process:
Formulating a Strategy
 Leveraging the value chain
 Determine where in your value chain you
have the potential to add the greatest value
 Segment business activities, see the
important linkages and make adjustments
 Resource-based approach
 Recognize and exploit internal strengths of
the company
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Strategic Management Process:
Formulating a Strategy
 Core competencies
 Are interrelated sets of activities that deliver
competitive advantages in the short-term and longterm
 Provide access to a wide variety of markets
 Significantly contribute to perceived customer
benefits of the end products or services
 Are difficult for competitors to imitate
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Integrating Internal and
External Analyses
Product Life Cycle
Birth
Growth
Maturity
Decline
High
Low
Time
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Adapted from Exhibit 6.6: Product Life Cycle
Integrating Internal and
External Analyses
Product Life Cycle
Sales
High
Low
Time
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Adapted from Exhibit 6.7: International Product Life Cycles
Integrating Internal and
External Analyses
Portfolio Analysis
Market Attractiveness
High
BCG
Matrix
Low
High
Relative Market Share
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Adapted from Exhibit 6.8: BCG Matrix
Integrating Internal and
External Analyses
Portfolio Analysis
Market Attractiveness
High
BCG
Matrix
Low
High
Our
Relative
Ability
Market
To Compete
Share
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Adapted from Exhibit 6.9: International Matrix
Integrating Internal and
External Analyses
SWOT Analysis
 Internal environment
 Strengths
 Weaknesses
 Tools
 Core
competencies
framework
 Resource analysis
framework
 Value chain framework
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Internal Environment
SW
Integrating Internal and
External Analyses
SWOT Analysis
 External environment
 Opportunities
 Threats
 Tools
 Product life cycle analysis
 Portfolio analysis
 Five forces framework
SWOT
External Environment
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Strategic Management Process:
Strategy Implementation
Strategy
Seven S’s
Structure
1. Strategy
 Plan or course of action
 Allocation of firm’s resources to
reach goals
2. Structure
 Basic grouping of reporting relationships and
activities
 Linking of separate organizational entities
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Adapted from Exhibit 6.10: Seven S Model
Strategic Management Process:
Strategy Implementation
Strategy
Seven S’s
3. Shared Values
 Significant meanings or guiding
concepts
Structure
Shared
values
Systems
4. Systems
 Formal processes and procedures
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Management control systems
Performance measurement and reward systems
Planning and budgeting systems
The ways people relate to them
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Adapted from Exhibit 6.10: Seven S Model
Strategic Management Process:
Strategy Implementation
Strategy
Seven S’s
Skills
Structure
Shared
values
5. Skills
 Organizational competencies
 Other capabilities residing in the
organization
Systems
Style
6. Style
 Leadership style of management
 Operating style of the organization
 Reflection of the norms people act upon
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Adapted from Exhibit 6.10: Seven S Model
Strategic Management Process:
Strategy Implementation
Strategy
Seven S’s
7. Staff
 Recruitment
 Selection
 Development
 Socialization
 Advancement of people in the
organization
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Skills
Structure
Shared
values
Systems
Staff
Style
Adapted from Exhibit 6.10: Seven S Model