Theory of Strategic Management
LEADERSHIP, STRATEGY, AND COMPETITIVE ADVANTAGE
Why do some organizations succeed while others fail?
Strategy- a set of related actions managers take to increase company’s performance.
Strategic Leadership- Effectively managing a company’s strategy-making process Strategy Formulation- Determining & selecting strategies Strategy Implementation- Putting strategies into action to improve company’s efficiency & effectiveness
Determinants of Shareholder Value
To increase shareholder value, managers must pursue strategies that increase the profitability of the company and grow the profits.
“Maximizing shareholder value is the ultimate goal of profit making companies…”
“…results when a company’s strategies lead to superior performance compared to competitors
Sustained Competitive Advantage
“A company’s… strategies enable it to maintain above average profitability for a number of years.”
Company’s Business Model
“…a conception of how a set of strategies…mesh… (to) allow… company to gain competitive advantage and achieve superior profitability… Encompasses how the company will:
• • • • • • Select customers Define/differentiate product offerings Create value for customers Acquire/keep customers Produce goods/services Lower costs • Deliver goods/services to market Organize activities within company Configure its resources Achieve/sustain a high profitability Grow business over time
• • •
Differences in Industry Performance Profitability/Profit Growth: Overall performance
of industry relative to other industries
success in industry compared to competitors
ROI in Selected Industries (2004–2008)
Performance in Nonprofit Enterprises
Nonprofit entities= government agencies, universities, charities:
◦ Not in business to make a...