Chapter 1 – Creating Competitive Advantages
What is Strategic Management?
Given the many challenges and opportunities in the global marketplace, today’s managers must do more
than set long-term strategies and hope for the best. They must go beyond what some have called
incremental management, whereby they view their job as making a series of minor changes to improve the
efficiency of their firm’s operations. Rather than view their role as mere custodian of the status quo, today’s
leaders must be proactive, anticipate change, continually refine and, when necessary, make significant
changes to their strategies.
Defining Strategic Management
Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to
create and sustain competitive advantages. Competitive advantage is what makes a company’s offerings
superior to those of its competitors.
The above definitions of strategic management and competitive advantage capture two main elements that
go to the heart of the field of strategic management.
First, the strategic management of an organization entails three ongoing processes;
of strategic goals (vision, mission, and strategic objectives) along with the
analysis of the internal and external environment of the organization.
address two basic questions; What industries should we compete in? How
should we compete in those industries?
must be taken. Firms must take the necessary actions to implement their
strategies. This requires leaders to allocate the necessary resources and to design the
organization to bring the intended strategies to reality.
Second, the essence of strategic management is the study of why some firms outperform
others. Thus, managers need to determine how a firm is to compete so that it can obtain
advantages that are sustainable over a period of time.
The Four Key Attributes of Strategic Management
Four attributes distinguish strategic management form the other functions such as accounting, marketing, or
operations, which are performed inside an organization.
1. Directs the organization toward overall goals and objectives
2. Includes multiple stakeholders in decision making
3. Incorporates short-term and long-term perspectives
4. Recognizes trade-offs between efficiency and effectiveness
The Strategic Management Process
We have identified 3 ongoing processes (analysis, decisions, and actions) that are central to strategic
management. In practice, these 3 processes often referred to as strategy analysis, strategy formulation, and
strategy implementation are highly interdependent. Moreover, these 3 processes do not take place one after
the other in a sequential fashion.