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Introduction to Strategic Management - Coggle Diagram
Introduction to Strategic Management
Defining strategy
Key Questions
How should Google deal with a changing competitive landscape?
Are new AI technologies threatening its search business?
What is the business logic behind this deal? (Market share, synergies, cost savings)
Is lowering prices a proactive strategy or a defensive reaction against Lidl?
Does it make the company more competitive?
Has Apple become too dependent on China? Will investing in India solve Apple’s problems?
What is Strategy? (Some Definitions)
The long-term direction of an organization.
A pattern in a stream of decisions.
Competitive strategy is about being different, choosing unique activities for value.
Determination of long-run goals, objectives, and resource allocation.
Focus of Strategic Management
Strategic management takes a holistic perspective on a company or business.
Concerned with its overall health and performance.
Addresses critical issues and their resolution for future competitiveness.
Mapping the Field of Strategic Management
Strategy "Content"
Corporate strategy: Which businesses to be in?
Competitive strategy: How to win in a business?
Functional strategy: Support from specific functions.
Strategy "Process"
Where do strategies come from and how are they implemented?
Strategic decisions: How are they made?
Strategic processes: What happens, who participates?
Strategic organization: How are strategies implemented?
Strategy and success
How to be Successful
Analyzing commonalities in successful companies.
Key principles: "Stay close to the customer," "Stick to what you are best at," "Think big, aim high."
Problem:
Beware of success bias.
Sources of Competitive Success
In strategy, success is relative: competitive advantage.
Ancient Greek sources of advantage: Bie (physical strength) and Metis (strategic insight).
Strength alone doesn't guarantee victory (e.g., Finland vs. USSR in the Winter War).
Strategic insights reveal hidden advantage sources.
Market Share: A Source of Advantage?
Exploration of market share and profitability correlation.
Causality can vary:
Higher market share leads to scale advantages.
Unprofitable companies exit, leaving profitable ones with more share.
Unique strategic capabilities lead to better products, more customers, and higher margins.
Implications for strategy depend on the correct causality understanding.
Strategy and direction
What do we actually mean by success?
Ways to think about "performance"
Economic/financial goals:
Financial market: Shareholder value (TRS – total shareholder return).
Accounting: Profits/profitability (return on sales, return on assets).
Product market: Revenues, revenue growth, market share.
Broader performance goals:
Effectiveness: Meeting set criteria (e.g., operational efficiency, CO2 emissions reduction).
Balanced scorecard: Comprehensive indicators (financial, customer, internal, innovation/learning).
Triple bottom line: Economic + social + environmental performance (CSR, sustainability).
Strategy and Goals
Strategy implies actions for reaching goals.
Performance shortfalls may signal the need for a new strategy.
Goals provide direction for strategy implementation.
Where do goals come from?
Set by managers, founders, and owners.
Reflect personal values of these individuals.
Pressures from investors for financial and other goals.
Ethical and social responsibility considerations.
Corporate Social Responsibility: Shareholder vs. Stakeholder Approach
Shareholder approach prioritizes firm owners.
Stakeholder approach recognizes potential trade-offs.
Pursuing stakeholder goals doesn't necessarily decrease profits or shareholder value.
Using Performance Measures
Measure and use performance goals as targets.
Gap analysis: Compare actual vs. target performance.
Trends: Compare performance over time.
Benchmarking: Compare performance with competitors.
Goals and Different Time Horizons
Businesses with different time horizons require different goals.
Organizational purpose and strategy statements (Mission, Vision, Values, Objectives/Goals) clarify direction.
Be cautious of empty, fancy-sounding words; substance behind the words is crucial.