Podcast
Questions and Answers
What does the rational approach to strategic management primarily focus on?
What does the rational approach to strategic management primarily focus on?
Which approach to strategic management focuses on the actual formulation of strategies in practice?
Which approach to strategic management focuses on the actual formulation of strategies in practice?
What distinguishes the holistic approach to strategic management from the other approaches?
What distinguishes the holistic approach to strategic management from the other approaches?
According to the description of the rational approach, what do managers assume about their capabilities?
According to the description of the rational approach, what do managers assume about their capabilities?
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What does the organisational approach propose regarding strategic decision-making processes?
What does the organisational approach propose regarding strategic decision-making processes?
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In the context of strategic management, what is a primary concern of the holistic approach?
In the context of strategic management, what is a primary concern of the holistic approach?
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Which aspect of global competition is highlighted as a key issue for strategic management?
Which aspect of global competition is highlighted as a key issue for strategic management?
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What assumption is made in the rational approach regarding the strategies formulated by managers?
What assumption is made in the rational approach regarding the strategies formulated by managers?
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What is emphasized by the initial strategy of a business like GLOVO?
What is emphasized by the initial strategy of a business like GLOVO?
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Which type of objectives is a company likely to overlook when first entering a market?
Which type of objectives is a company likely to overlook when first entering a market?
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Which is a common issue related to the management of strategic objectives?
Which is a common issue related to the management of strategic objectives?
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What is a characteristic of open-ended objectives?
What is a characteristic of open-ended objectives?
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Which category of objectives includes achieving annual growths?
Which category of objectives includes achieving annual growths?
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What is a potential downside of focusing too heavily on short-term results?
What is a potential downside of focusing too heavily on short-term results?
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Which type of objectives might lead to creative and energized efforts even if they seem impossible?
Which type of objectives might lead to creative and energized efforts even if they seem impossible?
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Which level of strategic objectives focuses on integrating efforts across the entire company?
Which level of strategic objectives focuses on integrating efforts across the entire company?
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What is required for value creation for the shareholder to occur?
What is required for value creation for the shareholder to occur?
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Which of the following is not a criterion shareholders may use to estimate the return on their investment?
Which of the following is not a criterion shareholders may use to estimate the return on their investment?
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What is a significant challenge resulting from the separation of ownership and management in firms?
What is a significant challenge resulting from the separation of ownership and management in firms?
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Which group of stakeholders is noted for having considerable decision-making power within the firm?
Which group of stakeholders is noted for having considerable decision-making power within the firm?
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Why is maximizing shareholder wealth subject to limitations?
Why is maximizing shareholder wealth subject to limitations?
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How has the role of the classical entrepreneur in firms changed over time?
How has the role of the classical entrepreneur in firms changed over time?
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What potential conflict arises due to the interests of managers and shareholders?
What potential conflict arises due to the interests of managers and shareholders?
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What aspect of the relationship between shareholders and stakeholders is emphasized?
What aspect of the relationship between shareholders and stakeholders is emphasized?
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What is a key aspect of the economic-functional area for firms?
What is a key aspect of the economic-functional area for firms?
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In the context of social responsibility, what does the quality of life era emphasize?
In the context of social responsibility, what does the quality of life era emphasize?
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Which of the following best describes the social action/investment area of a firm?
Which of the following best describes the social action/investment area of a firm?
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Which factor is primarily concerned with the laws and regulations influencing businesses?
Which factor is primarily concerned with the laws and regulations influencing businesses?
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What defines crucial stakeholders in a firm?
What defines crucial stakeholders in a firm?
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Which stakeholder group requires significant management attention due to their two characteristics?
Which stakeholder group requires significant management attention due to their two characteristics?
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Why might companies choose to engage in social responsibility in a market economy?
Why might companies choose to engage in social responsibility in a market economy?
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Which aspect of the economic-functional area contributes to the wealth generation in society?
Which aspect of the economic-functional area contributes to the wealth generation in society?
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According to agency theory, what is a potential conflict between top managers and shareholders?
According to agency theory, what is a potential conflict between top managers and shareholders?
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What is a consequence of failing to balance the objectives of relevant stakeholders?
What is a consequence of failing to balance the objectives of relevant stakeholders?
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What is a potential outcome if a firm fails to maintain proper relations with its stakeholders?
What is a potential outcome if a firm fails to maintain proper relations with its stakeholders?
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Which of the following is NOT a consideration of the economic-functional area of a firm?
Which of the following is NOT a consideration of the economic-functional area of a firm?
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What does the presence of no stakeholders indicate about their characteristics?
What does the presence of no stakeholders indicate about their characteristics?
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How does market competition influence stakeholder power?
How does market competition influence stakeholder power?
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Which motive could drive top managers away from maximizing shareholder value?
Which motive could drive top managers away from maximizing shareholder value?
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What is a necessary attribute for stakeholders to influence a firm's objectives effectively?
What is a necessary attribute for stakeholders to influence a firm's objectives effectively?
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What is the primary purpose of defining the scope of the firm?
What is the primary purpose of defining the scope of the firm?
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Why might a specific mission be beneficial for an organization?
Why might a specific mission be beneficial for an organization?
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What challenge is likely faced by diversified firms when identifying their mission?
What challenge is likely faced by diversified firms when identifying their mission?
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What is implied about the nature of a firm’s mission when it is not explicitly written down?
What is implied about the nature of a firm’s mission when it is not explicitly written down?
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How does the definition of the core capabilities impact a firm's competitive advantage?
How does the definition of the core capabilities impact a firm's competitive advantage?
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What might be a consequence of having a general mission for a firm?
What might be a consequence of having a general mission for a firm?
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What role do values and beliefs play in defining a firm’s mission?
What role do values and beliefs play in defining a firm’s mission?
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What does a major gap between a firm's future aims and its present reality indicate?
What does a major gap between a firm's future aims and its present reality indicate?
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Study Notes
Strategic Management
- Firms must align their strategies with the environment
- Managers need strategies that adapt to unstable environments
- Strategic decisions have evolved alongside management systems
Key Concepts
- Strategy Andrews (1965): a pattern of major objectives, purposes, or goals, along with essential policies and plans to achieve them. It defines the company's business and aspirations.
- Strategy Chandler (1962): selection of long-term goals and programs for achieving them. Actions, plans, and approaches for goal attainment. Linking a firm to its environment, including the need to establish competitive advantages. The notion of change is inherent to strategy.
- Strategy Porter (1980): the selection of long-term goals and programs for reaching them; the choice of actions, planes, programs or approaches; the relationship of a firm to its environment to achieve advantage and improve performance, and the processes through which strategic decisions are made to attain those goals.
- Dynamics Ronda and Guerras (2012): the relations between the firm and its environment, where actions are taken to achieve goals or improve performance through resource use.
- Environment influences a firm by setting the context for its decisions. A firm is part of its competitors' environment, shaping and adapting that environment in its favor
- Stakeholders: individuals, groups, or organizations impacted by a firm's actions
- Opportunities external factors that favor a firm's success
- Threats obstacles that hinder a firm's success
- Strategies high-level plan for achieving objectives
- Competitive advantage a firm having superior attributes, making it better than competitors in the marketplace.
- Profitability and how it's measured
- Rational approach → prescriptive, based on economic logic.
- Organizational approach → descriptive.
- Good strategies → are internally consistent and fit the context
- Poor strategies → may lead to failure, or liquidation
Phases of Strategic Management
- Strategic analysis → research into a firm and its environment, involving internal and external analyses to inform strategy.
- Strategic formulation → defining objectives and a blueprint to achieve them. Integration of insights across different areas, and crafting strategies.
- Strategic implementation → putting plans into action with thorough assessment for improvement.
Other Major Concepts
- Resources and capabilities → assets used to gain market advantage; and capabilities representing a firm's collective competencies.
- Strengths → activities a firm can do well
- Weaknesses → activities a firm struggles with
- Competitive advantage → distinguishing characteristics that rivals can´t immediately copy, and allow superior performance
- Strategic fit → alignment of strategy with firm's resources, capabilities, and environment
- Organizational fit → alignment between strategy and organizational culture, structure, and people,
Levels of Strategy
- Corporate strategy → long-term objectives, types of activities to be performed, and markets.
- Competitive strategy → segments in the market, services provided, and competitive advantage.
- Functional strategies → focus on how each organizational part contributes to achieving corporate objectives.
Strategic Management as a Field
- Academic discipline emerged in the 1960s
- Chandler (1962) first academic research into business strategy
- Andrews (1965) developed a definition of strategy
- Ansoff (1965) categorized corporate growth strategies
Approaches to Strategic Management
- Rational approach: assumes rational decision-making.
- Organizational approach: emphasizes the organizational context, including social aspects, ethical and political environment factors.
Toward a Holistic View
- A holistic approach combines the rational and organizational factors for a more complete picture of reality.
- Emphasizing the intertwining relationship between strategies that are intended and those developed through experience, and the economic and more organizational aspects of the firm's management.
- Emergent strategies arise from experience and in response to situations in which a structured approach is not useful
The Firm's Future Direction and Value
- Vision → long-term, overall goal
- Mission → the role the firm will play in the future
- Strategic objectives → specific, measurable short-term goals
- Values → fundamental beliefs and principles guiding operations
Strategic Objectives
- Explicit objectives: measurable, attainable outcomes desired.
- Level of ambition: ambitious objectives give more drive and effort
- Scope of objectives: appropriate scope is needed for effectiveness.
Measuring Firm Performance
- Accounting Profit: difference between revenues and expenses.
- Economic profit: considers the cost of capital investment
- EVA (Economic Value Added): Difference between EBIAT and the cost of capital invested.
- ROA (Return on Assets)/ROE (Return on Equity): indicators of performance in relation to profit margins and total assets
Competitive Strategies
- Cost leadership → aim to be the lowest cost provider in the market to gain a larger market share.
- Differentiation → offering unique products or services to stand out from competitors and command a higher price
- Focused cost leadership → concentrating on a specific part of the market to gain a cost advantage.
- Focused differentiation → providing unique products or services for a specific market segment to be priced higher.
- The strategy clock, a more extensive version of Porter's competitive strategies.
Internal Analysis
- Resources → tangible and intangible assets
- Capabilities → skills and competencies
- SWOT analysis → summarizes a firm's strengths and weaknesses, external opportunities, and threats
Strategic Analysis: identifying the competitive environment
- Industry → firms that produce close substitutes
- Competition → companies that compete for the same customer groups
- Competitive landscape → involves a dynamic interaction of the forces of supply, demand, technological advancements, and environmental conditions.
Defining The Scope of the Firm
- Scope → range of products and markets a firm serves. A firm's identity and personality.
- Functional area → aspects related to the firm's operations (economic, quality of life, or social).
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Description
Test your knowledge on the various approaches to strategic management, including rational, holistic, and organisational perspectives. This quiz will challenge your understanding of strategic formulation and decision-making processes. Explore key concepts and assumptions that underpin effective strategic management.
