Strategic Management Chapter 1 PDF

STRATEGIC MANAGEMENT - CHAPTER 1 shutdowns of factories slowed production. These problems raise serious questions. Will Elon’s Twitter use...

STRATEGIC MANAGEMENT - CHAPTER 1 shutdowns of factories slowed production. These problems raise serious questions. Will Elon’s Twitter use continue to cause problems? Are the quality problems going STRATEGIC MANAGEMENT- developing and executing plans to achieve the to tank Tesla’s growth? Can Tesla emerge from the COVID-19 shutdown organization’s goal and objective. successfully?  Maximizing the firm’s resources, capabilities to come up, to attain, to achieve, to  The company faces stiff competition from automakers attempting to regain their gain competitive advantage. footholds in a highly aggressive market. Competitors are attempting to compete in  Strategies to achieve or gain competitive advantage. the same areas as Tesla. Porsche’s Taycan, a Tesla competitor, got a huge win with a purchase from Bill Gates. As competitors continue to develop autonomous 1.1 Introduction capabilities and better electric batteries, will Tesla continue to dominate US auto  Successful organizations have found that a strategic management process helps markets? them achieve their goals within a dynamic and competitive environment.  Strategic management is a comprehensive process designed for firms to best use 1.2 What is Strategic Management? their resources and capabilities to provide superior firm performance.  Issues such as those currently faced by Tesla are the focus of strategic  Analysis of the external, competitive, and internal environments help shape the management because they help answer the key question examined by strategic strategies that a firm pursues to be successful. Strategies are broad goals that, as management—”Why do some firms outperform other firms?” accomplished, help the organization move forward toward its vision.  More specifically, strategic management examines how actions and events  Strategy formation goes back to ancient times, particularly used in warfare. involving top executives (such as Elon Musk), firms (Tesla), and industries (the Although not perfect, the strategic management process creates a framework for electric car market) influence a firm’s success or failure. an organization to look outside of itself and set a course for success.  Strategic management involves the utilization or planned allocation of resources to implement major initiatives taken by executives on behalf of stakeholders to Will Tesla Make It? improve performance of firms in an environment. Formal tools exist for  On January 7, 2020, Tesla Inc. became the most valuable US automaker in history. understanding these relationships, and many of these tools are explained and Valued at $81.39 billion, Tesla passed Ford Motor Company as most valuable. applied in this book. But formal tools are not enough; creativity is just as important Approximately two weeks later, Tesla passed Volkswagen to become the second to strategic management. Mastering strategy is therefore part art and part science. most valuable car company worldwide. Still well behind Toyota, which has a $233  Defining strategy is not simple. Strategy is a complex concept that involves many billion market capitalization, Tesla’s growth is unprecedented in the automotive different processes and activities within an organization. It involves goals and industry. Can Tesla become number one worldwide? objectives that an organization needs to achieve to be successful in the  Despite tremendous growth, Tesla has its share of problems as well. Its founder, marketplace. The development of these goals, however, requires a strategic Elon Musk, tweeted that the company’s stock price was too high; sending the stock management process to be done correctly and thoroughly. tumbling, the Model 3 lost Consumer Reports recommendations, and COVID-19  A strategy is typically a higher level, broad goal, without a lot of specifics. It is 1.3 Intended, Emergent, and Realized Strategies long-term in nature. It provides the direction that an organization wants to move toward to be more successful. Intended Strategy Emergent Strategy Realized Strategy  New or revised strategies may be developed as a result of changes in the business The company changed its environment, such as what happened during the COVID-19 pandemic. Firms also David McConnell The perfumes McConnell name to Avon in 1939, and routinely revise or create new strategies, often annually, by assessing and reacting aspired to be a writer. gave out with his books were its direct marketing system to external and competitive forces and to maximize organizational performance. When his books weren’t popular, inspiring the remained popular for  By identifying their resources and capabilities, firms attempt to deploy these selling he decided to foundation of the California decades. Avon is now through strategies that will give them a competitive advantage, so consumers will give out perfume as a Perfume Company. available online and in retail buy their product or service instead of a competitor’s. gimmick. outlets worldwide. When father and son ESPN is now billed as the team Scott and Don As the network became worldwide leader in sports, Rasmussen were fired successful, ESPN has owning several ESPN from the New England branched out beyond the affiliates as well as Whalers, they local softball games and production of ESPN envisioned a cable demolition derbies that were magazine, ESPN radio, and television network that first broadcasted. broadcasting for ABC. focused on sports events in the state of Connecticut. In 1977, a cash-strapped An idea emerged. Soon the The Home Shopping advertiser gave a radio radio station featured a Network evolved into a retail station managed by regular show called “Suncoast powerhouse selling on their Lowell Paxson 112 Bargaineers.” In 1982, Paxson own channel on television. electric can openers to and a partner launched the With the increased popularity pay off an overdue bill. Home Shopping Club on local of online shopping and The can openers were cable television in Florida. competitors like Amazon, offered over the air for their success has faltered. $9.95 and quickly sold out.  technology: facsimile (fax) machines. The firm developed a service called ZapMail that involved documents being sent electronically via fax machines between FedEx offices and then being delivered to customers’ offices. FedEx executives hoped that ZapMail would be a success because it reduced the delivery time of a document from overnight to just a couple of hours. Unfortunately, the ZapMail system had many technical problems that frustrated customers. Even worse, FedEx failed to anticipate that many businesses would simply purchase their own fax machines. ZapMail was shut down, and FedEx lost hundreds of millions of dollars following its failed emergent strategy. In retrospect, FedEx made a costly mistake by venturing outside of the domain that was central to its intended strategy: package delivery (Funding Universe, n.d.). Emergent strategies can also lead to tremendous success. Southern Bloomer Intended Strategy Manufacturing Company was founded to make underwear for use in prisons and mental An intended strategy is the strategy that an organization hopes to execute. Intended hospitals. Many managers of such institutions believe that the underwear made for retail strategies are usually described in detail within an organization’s strategic plan. When a markets by companies such as Calvin Klein and Hanes is simply not suitable for the strategic plan is created for a new venture, it is called a business plan. As an people under their care. Instead, underwear issued to prisoners needs to be sturdy and undergraduate student at Yale in 1965, Frederick Smith had to complete a business plan durable to withstand the rigors of prison activities and laundering. To meet these needs, for a proposed company as a class project. His plan described a delivery system that Southern Bloomers began selling underwear made of heavy cotton fabric. would gain efficiency by routing packages through a central hub and then pass them to their destinations. A few years later, Smith started Federal Express (Funding Universe, An unexpected opportunity led Southern Bloomer to go beyond its intended strategy of n.d.), a company whose strategy closely followed the plan laid out in his class project. serving institutional needs for durable underwear. Just a few years after opening, FedEx has achieved a ranking among the World’s Most Admired Companies according to Southern Bloomer’s performance was excellent. It was servicing the needs of about 125 Fortune magazine. Certainly, Smith’s intended strategy has worked out far better than facilities, but unfortunately, this was creating a vast amount of scrap fabric. An attempt to even he could have dreamed (Donahoe, 2011; Memphis Business Journal, 2011). use the scrap as stuffing for pillows had failed, so the scrap was being sent to landfills. This was not only wasteful but also costly. Emergent Strategy Emergent strategy has also played a role at Federal Express. An emergent strategy is an One day, co-founder Don Sonner visited a gun shop with his son. Sonner had no interest unplanned strategy that arises in response to unexpected opportunities and/or challenges. in guns, but he quickly spotted a potential use for his scrap fabric during this visit. The Sometimes emergent strategies result in disasters. In the mid-1980s, FedEx deviated patches that the gun shop sold to clean the inside of gun barrels were of poor quality. from its intended strategy’s focus on package delivery to capitalize on an emerging According to Sonner, when he “saw one of those flimsy woven patches they sold that unraveled when you touched them, I said, “Man, that’s what I can do” with the scrap fabric.  Most organizations create intended strategies that they hope to follow to be Unlike other gun-cleaning patches, the patches that Southern Bloomer sold did not give successful. Over time, however, changes in an organization’s situation give rise to off threads or lint, two by-products that hurt guns’ accuracy and reliability. The patches new opportunities and challenges. Organizations respond to these changes using quickly became popular with the military, police departments, and individual gun emergent strategies. Realized strategies are a product of both intended and enthusiasts. Before long, Southern Bloomer was selling thousands of pounds of patches realized strategies. per month. A casual trip to a gun store unexpectedly gave rise to a lucrative emergent strategy (Wells, 2002). 1.4 The History of Strategic Management Those who cannot remember the past are condemned to repeat it. Realized Strategy – George Santayana, The Life of Reason A realized strategy is the strategy that an organization actually follows. Realized strategies are a product of a firm’s intended strategy (i.e., what the firm planned to do), Santayana’s quote has strong implications for strategic management. The history of the firm’s deliberate strategy (i.e., the parts of the intended strategy that the firm strategic management can be traced back several thousand years. Great wisdom about continues to pursue over time), and its emergent strategy (i.e., what the firm did in strategy can be acquired by understanding the past, but ignoring the lessons of history reaction to unexpected opportunities and challenges). In the case of FedEx, the intended can lead to costly strategic mistakes that could have been avoided. Certainly, the present strategy devised by its founder many years ago—fast package delivery via a centralized offers very important lessons; businesses can gain knowledge about what strategies do hub—remains a primary driver of the firm’s realized strategy. For Southern Bloomers and do not work by studying the current actions of other businesses. But this section Manufacturing Company, realized strategy has been shaped greatly by both its intended discusses two less obvious sources of wisdom: (1) strategy in ancient times and (2) and emergent strategies, which center on underwear and gun-cleaning patches. military strategy. This section also briefly traces the development of strategic management as a field of study. In other cases, firms’ original intended strategies are long forgotten. An unrealized strategy refers to the abandoned parts of the intended strategy. When aspiring author Strategy in Ancient Times David McConnell was struggling to sell his books, he decided to offer complimentary Perhaps the earliest-known discussion of strategy is offered in the Old Testament of the perfume as a sales gimmick. McConnell’s books never did escape the stench of failure, Bible (Bracker, 1980). Approximately 3,500 years ago, Moses faced quite a challenge but his perfumes soon took on the sweet smell of success. The California Perfume after leading his fellow Hebrews out of enslavement in Egypt. Moses was overwhelmed Company was formed to market the perfumes; this firm evolved into the personal care as the lone strategist at the helm of a nation that may have exceeded one million people. products juggernaut known today as Avon. For McConnell, his dream to be a successful Based on advice from his father-in-law, Moses began delegating authority to other writer was an unrealized strategy, but through Avon, a successful realized strategy was leaders, each of whom oversaw a group of people. This hierarchical delegation of driven almost entirely by opportunistically capitalizing on change through emergent authority created a command structure that freed Moses to concentrate on the biggest strategy. decisions and helped him implement his strategies. Similarly, the demands of strategic management today are simply too much for a chief executive officer (the top leader of a company) to handle alone. Many important tasks are thus entrusted to vice presidents One of Sun Tzu’s ideas that has numerous business applications is that winning a battle and other executives. without fighting is the best way to win. Apple’s behavior in the personal computer business offers a good example of this idea in action. Many computer makers such as In ancient China, strategist and philosopher Sun Tzu offered thoughts on strategy that Toshiba, Acer, and Lenovo compete with one another based primarily on price. This continue to be studied carefully by business and military leaders today. Sun Tzu’s leads to price wars that undermine the computer makers’ profits. In contrast, Apple best-known work is The Art of War. As this title implies, Sun Tzu emphasized the creative prefers to develop unique features for its computers, features that have created a fiercely and deceptive aspects of strategy. loyal set of customers. Apple boldly charges far more for its computers than its rivals charge for theirs. Apple does not even worry much about whether its computers’ software Strategic management borrows many ideas from ancient uses of strategy over time. The is compatible with the software used by most other computers. Rather than fighting a following anecdotes provide a few notable examples of historical actions that remain battle with other firms, Apple wins within the computer business by creating its own relevant for the study of modern strategy. Indeed, the Greek verb strategos means “army unique market and by attracting a set of loyal customers. Sun Tzu would probably admire leader” and the idea of stratego ( from which we get the word strategy) refers to the idea Apple’s approach. of destroying one’s enemies through the effective use of resources. Perhaps the most famous example of strategy in ancient times revolves around the Trojan horse. According to legend, Greek soldiers wanted to find a way to enter the gates of Troy and attack the city from the inside. They devised a ploy that involved creating a giant wooden horse, hiding soldiers inside the horse, and offering the horse to the Trojans as a gift. The Trojans were fooled and brought the horse inside their city. When night arrived, the hidden Greek soldiers opened the gates for their army, leading to a Greek victory. In modern times,the term Trojan horse refers to gestures that appear on the surface to be beneficial to the recipient but that mask a sinister intent. Computer viruses also are sometimes referred to as Trojan horses. A far more noble approach to strategy than the Greeks’ is attributed to King Arthur of Britain. Unlike the hierarchical approach to organizing Moses used, Arthur allegedly considered himself and each of his knights to have an equal say in plotting the group’s strategy. Indeed, the group is thought to have held its meetings at a round table so that no voice, including Arthur’s, would be seen as more important than the others. The choice of furniture in modern executive suites is perhaps revealing. Most feature rectangular meeting tables, perhaps signaling that one person—the chief executive officer—is in Nearly a century later, Americans turned on one another during the Civil War. After four charge. years of hostilities, the Confederate states were forced to surrender. Historians consider the Confederacy to have had better generals, but the Union possessed greater resources, Another implication for strategic management offered by King Arthur and his Knights of such as factories and railroad lines. As many modern companies have discovered, the Round Table involves the concept of mission. Their vigorous search to find the Holy sometimes good strategies simply cannot overcome a stronger adversary. Grail (the legendary cup used by Jesus and his disciples at the Last Supper) serves as an Two wars fought on Russian soil also offer insights. In the 1800s, a powerful French exemplar for the importance of a central mission to guide organizational strategy and invasion force was defeated in part by the brutal nature of Russian winters. In the 1940s, actions. a similar fate befell German forces during World War II. Against the advice of some of his leading generals, Adolf Hitler ordered his army to conquer Russia. Like the French before Lessons Offered by Military Strategy them, the Germans were able to penetrate deep into Russian territory. As George Key military conflicts and events have shaped the understanding of strategic Santayana had warned, however, the forgotten past was about to repeat itself. Horrific management (Table 1.3). Indeed, the word strategy has its roots in warfare. The Greek cold stopped the German advance. Russian forces eventually took control of the combat, verb strategos means “army leader” and the idea of stratego (from which we get the word and Hitler committed suicide as the Russians approached the German capital, Berlin. strategy) refers to defeating an enemy by effectively using resources (Bracker, 1980). Five years earlier, Germany ironically had benefited from an opponent ignoring the A book written nearly five hundred years ago is still regarded by many as an insightful strategic management lessons of the past. In ancient times, the Romans had assumed guide for conquering and ruling territories. Niccolò Machiavelli’s 1532 book The Prince that no army could cross a mountain range known as the Alps. An enemy general named offers clever recipes for success to government leaders. Some of the book’s suggestions Hannibal put his men on elephants, crossed the mountains, and caught Roman forces are quite devious, and the word Machiavellian is used today to refer to acts of deceit and unprepared. French commanders made a similar bad assumption in 1940. When manipulation. Germany invaded Belgium (and then France) in 1940, its strategy caught French forces by surprise. Two wars fought on American soil provide important lessons about strategic management. In the late 1700s, the American Revolution pitted the American colonies The top French commanders assumed that German tanks simply could not make it against mighty Great Britain. The Americans relied on nontraditional tactics, such as through a thickly wooded region known as the Ardennes Forest. As a result, French guerilla warfare and the strategic targeting of British officers. Although these tactics were forces did not bother preparing a strong defense in that area. Most of the French army considered by Great Britain to be barbaric, they later became widely used approaches to and their British allies instead protected against a small, diversionary force that the warfare. The Americans owed their success in part to help from the French navy, Germans had sent as a deception to the north of the forest. German forces made it illustrating the potential value of strategic alliances. through the forest, encircled the allied forces, and started driving them toward the ocean. Many thousands of French and British soldiers were killed or captured. In retrospect, the French generals had ignored an important lesson of history: do not make assumptions about what your adversary can and cannot do. Executives who make similar assumptions The ancient Chinese strategist Sun Tzu made it clear that strategic management is about their competitors put their organizations’ performance in jeopardy. partially art. But it is also part science. Major steps toward developing the scientific aspect of strategic management were taken in the early twentieth century by Frederick W. Taylor. Strategic management often borrows lessons as well as metaphors from classic military In 1911, Taylor published The Principles of Scientific Management. The book was a strategy. For example, major business decisions are often categorized as “strategic” response to Taylor’s observation that most tasks within organizations were organized while more minor decisions (such as small changes in price or the opening of a new haphazardly. Taylor believed that businesses would be much more efficient if location) are referred to as “tactical” decisions. Here are a few select examples of classic management principles were derived through scientific investigation. In The Principles of military strategies that hold insights for strategic decisions today. Scientific Management, Taylor stressed how organizations could become more efficient through identifying the “one best way” of performing important tasks. Implementing Taylor’s principles was thought to have saved railroad companies hundreds of millions of dollars. Although many later works disputed the merits of trying to find the “one best way,” Taylor’s emphasis on maximizing organizational performance became the core concern of strategic management as the field developed. Also in the early twentieth century, automobile maker Henry Ford emerged as one of the pioneers of strategic management among industrial leaders. At the time, cars seemed to be a luxury item for wealthy people. Ford adopted a unique strategic perspective, however, and boldly offered the vision that he would make cars the average family could afford. Building on ideas about efficiency from Taylor and others, Ford organized assembly lines for creating automobiles that lowered costs dramatically. Despite his wisdom, Ford also made mistakes. Regarding his company’s flagship product, the Model T, Ford famously stated, “Any customer can have a car painted any color that he wants Strategic Management as a Field of Study so long as it is black.” When rival automakers provided customers with a variety of color Universities contain many different fields of study, including physics, literature, chemistry, choices, Ford had no choice but to do the same. computer science, and engineering. Some fields of study date back many centuries (e.g., literature), while others (such as computer science) have emerged only in recent years. The acceptance of strategic management as a necessary element of business school Strategic management has been important throughout history, but the evolution of programs took a major step forward in 1959. A widely circulated report created by the strategic management into a field of study has mostly taken place over the past century. Ford Foundation recommended that all business schools offer a capstone course. The A few of the key business and academic events that have helped the field develop are goal of this course would be to integrate knowledge across different business fields such discussed next. as marketing, finance, and accounting to help students devise better ideas for addressing complex business problems. Rather than seeking a “one best way” solution, as as a franchisee, Sam Walton opened the first Walmart in Rogers, Arkansas. Relying on a advocated by Taylor and Harvard’s business policy course, this capstone course would strategy that emphasized low prices and high levels of customer service, Walmart grew to emphasize students’ critical thinking skills in general and the notion that multiple ways of 882 stores with a combined $8.4 billion dollars in annual sales by 1985. A decade later, addressing a problem could be equally successful in particular. The Ford Foundation sales reached $93.6 billion across nearly 3,000 stores. In 2010, Walmart was the largest report was a key motivator that led US universities to create strategic management company in the world. In recent years, Walmart has arguably downplayed customer courses in their undergraduate and master of business administration programs. service in favor of cutting costs. Time will tell whether deviating from Sam Walton’s original strategic positioning will hurt the company. Although strategy has been important throughout history, strategic management as a field of study has largely developed over the past century. Below are a few key business Two pivotal events that firmly established strategic management as a field of study took and academic events that have helped the field evolve. place in 1980. One was the creation of the Strategic Management Journal. The introduction of the journal offered a forum for researchers interested in building knowledge about strategic management. Much like important new medical findings that appear in the Journal of the American Medical Association and The New England Journal of Medicine, the Strategic Management Journal publishes path breaking insights about strategic management. The second pivotal event in 1980 was the publication of Competitive Strategy: Techniques for Analyzing Industries and Competitors by Harvard professor Michael Porter. This book offers concepts such as five forces analysis and generic strategies that continue to strongly influence how executives choose strategies more than thirty years after the book’s publication. Given the importance of these concepts, both five forces analysis and generic strategies are discussed in detail in Chapter 3 “Evaluating the External Environment” and Chapter 6 “Selecting Business-Level Strategies”, respectively. Many consumers today take web-based shopping for granted, but this channel for commerce was created recently. The 1995 launch of Amazon by founder Jeff Bezos was perhaps the pivotal event in creating internet- based commerce. In pursuit of its vision “to be earth’s most customer-centric company,” Amazon has diversified far beyond its In 1962, business and academic events occurred that seemed minor at the time but that original focus on selling books and has evolved into a dominant retailer. Powerful giants would later give rise to huge changes. Building on the business savvy that he had gained have stumbled badly in Amazon’s wake. Sears had sold great varieties of goods (even including entire houses) through catalogs for many decades, as had JCPenney. Neither This book focuses attention on the widely accepted approaches that frame the firm created a strong online sales presence to keep pace with Amazon, and both contemporary practice and understanding of strategic management. The field of strategic eventually dropped their catalog businesses. As often happens with old and large firms, management has always had its critics, and, as with any academic discipline, this Sears and JCPenney were outmaneuvered by a creative and versatile upstart. criticism has challenged the field to adapt and improve over time. Over time, both practitioners and scholars have voiced concerns about various areas of the strategic Ethics have long been an important issue within the strategic management field. Attention management process, and this section summarizes the general critiques to deepen your to the need for executives to act ethically when creating strategies increased dramatically own ability to critically consider the processes of strategic management in your own in the early 2000s when a series of companies such as Enron Corporation, WorldCom, organizations and career. Tyco, Qwest, and Global Crossing were found to have grossly exaggerated the strength of their performance. After a series of revelations about fraud and corruption, investors in The kinds of concerns about strategic management differ depending upon who is voicing these firms and others lost billions of dollars, tens of thousands of jobs were lost, and them. From the perspective of firm managers or executives, commonly expressed some executives were sent to prison. concerns target the high levels of investment required in order to get more benefit than cost from an effective strategic management process. For strategic management to be Like ethics, the implications of international competition are of central interest to strategic done well, it is typically a complex process that is high in cost, time, and difficulty management. Provocative new thoughts on the nature of the international arena were (Cameron, 2019; Katsanos, 2019). Further, some decision makers are skeptical of the offered in 2005 by Thomas L. Friedman. In his book The World Is Flat: A Brief History of ability of strategic management to achieve its goal: to accurately anticipate an unknown the Twenty-First Century, Friedman argues that many of the advantages that firms in future (Cameron, 2019; Llopis, 2019). Some critics go so far as to suggest that developed countries such as the United States, Japan, and Great Britain take for granted committing to a strategy may limit a firm’s ability to respond to a changing environment are disappearing. One implication is that these firms will need to improve their strategies when companies “make future decisions on obsolete data” (Cameron, 2019). In the if they are to remain successful. opening paragraph of Michael Raynor’s bestselling book The Strategy Paradox, he says Looking to the future, it appears likely that strategic management will prove to be more “Most strategies are built on specific beliefs about the future. Unfortunately, the future is important than ever. In response, researchers who are interested in strategic deeply unpredictable. Worse, the requirements of breakthrough success demand management will work to build additional knowledge about how organizations can implementing strategy in ways that make it impossible to adapt should the future not turn maximize their performance. Executives will need to keep track of the latest scientific out as expected. The result is the Strategy Paradox: strategies with the greatest findings. Meanwhile, they also must leverage the insights that history offers on how to be possibility of success also have the greatest possibility of failure” (2007, p. 1). successful while trying to avoid past mistakes. In his book, Mr. Raynor goes on to discuss that survivorship bias is an issue because the 1.5 Contemporary Critique of Strategic Management strategies of firms that survive are evaluated more than those that fail. The issue of survivorship bias also is a research area within the field of strategic management. Additionally, other strategy scholars raise concerns about how the dominant approaches The strategic management process begins with an understanding of strategy and to strategic management reinforce existing assumptions about power and inequalities performance. As we have noted in this introductory chapter, strategic management is within organizations (e.g., affecting gender, race, etc.) and in the global market (i.e., both an art and a science, and it involves multiple conceptualizations of the notion of reproducing the same “winners” and “losers”) (Knights & Morgan, 1991; Levy et al., 2011; strategy drawn from recent and ancient history. In Chapter 2 “Assessing Organizational Montgomery et al., 1989). Performance”, we focus on how the organization’s mission and vision shape the development of the firm’s strategy. Consequently, how managers understand and Some critiques focus on the inadequacies of specific strategic tools or theories. For interpret the performance of their firms is often central to understanding strategy. example, some scholars challenge existing firm-level, resource-based approaches for its inability to adequately assess and capture changing contexts and capabilities Environmental and internal scanning is the next stage in the process. Managers must (resource-based approaches are introduced in Chapter 5) (Bromiley & Fleming, 2002; constantly scan the external environment for trends and events that affect the overall Teece, 2019). Finally, the field of strategic management has been critiqued for being too economy, and they must monitor changes in the particular industry in which the firm concerned with achieving immediate, business “results” (Montgomery et al., 1989), and at operates. For example, Apple’s decision to create the iPhone demonstrates its ability to other times, for not being attuned enough to the real-time, practical needs of business interpret that traditional industry boundaries that distinguished the cellular phone industry (Pricop, 2012). and the computer industry were beginning to blur. At the same time, firms must evaluate their own resources to understand how they might react to changes in the environment. It is evident that there are plenty of reasons to think critically about how a firm’s decision For example, intellectual property is a vital resource for Apple. Between 2008 and 2010, makers choose to engage in their strategic management processes. Ultimately, Apple filed more than 350 cases with the US Patent and Trademark Office to protect its responsibility for determining a firm’s strategic approach is left to the discretion of the use of such terms as apple, pod, and safari (Apple Inc.). firm’s executive team. While the theories, tools, and resources introduced throughout this text are well-researched, time-tested, and best practices in the field of strategic A classic management tool that incorporates the idea of scanning elements both external management, no approach is perfect, nor is it intended to be. and internal to the firm is SWOT (strengths, weaknesses, opportunities, and threats) analysis. Strengths and weaknesses are assessed by examining the firm’s internal 1.6 Understanding the Strategic Management Process resources, while opportunities and threats refer to external events and trends. The value Strategic management is a process that involves building a careful understanding of how of SWOT analysis parallels ideas from classic military strategists such as Sun Tzu, who the world is changing, as well as a knowledge of how those changes might affect a noted the value of knowing yourself as well as your opponent. Chapter 3 “Evaluating the particular firm. CEOs, such as late Apple founder Steve Jobs, must be able to carefully External Environment” examines the topic of evaluating the external environment in detail, manage the possible actions that their firms might take to deal with changes that occur in and Chapter 4 “Evaluating the Internal Environment” presents concepts and tools for their environment. We present a model of the strategic management process in Figure managing firm resources. Synthesizing the information gained in the external and internal 1.7, “Overall Model of the Strategic Management Process”. This model also guides our analysis into a SWOT framework is addressed in Chapter 5. The SWOT is then used to presentation of the chapters contained in this book. formulate the strategic issue(s) that the firm must deal with as it formulates strategies.  This chapter provides an overview of strategic management and strategy. Ideas about Strategy formulation is the next step in the strategic management process. This involves strategy span many centuries, and modern understanding of strategy borrows from developing specific strategies and actions. Certainly, part of Apple’s success is due to the ancient strategies as well as classic military strategies. You should now understand that unique products it offers the market, as well as how these products complement one there are numerous ways to conceptualize the idea of strategy, and that effective another. A customer can buy an iPod that plays music from iTunes—all of which can be strategic management is needed to ensure the long-term success of firms. The study of stored in Apple’s Mac computer (Inside CRM Editors, n.d.). In Chapter 6 “Selecting strategic management provides tools to effectively manage organizations, but it also Business-Level Strategies”, we discuss how selecting business-level strategies helps to involves the art of knowing how and when to apply creative thinking. Knowledge of both provide firms with a recipe that can be followed that will increase the likelihood that their the art and the science of strategic management is needed to help guide organizations as strategies will be successful. In Chapter 7, “Innovation Strategies”, we present insights on their strategies emerge and evolve over time. Such tools will also help you effectively the role innovation plays in strategy development and implementation. Chapter 8 chart a course for your career as well as to understand the effective strategic management of the organizations for which you will work. Figure 1.8: The importance of knowing yourself and your opponent is applicable to the knowledge of strategic management for business, military strategy, and classic strategy games such as chess. “Selecting Corporate-Level Strategies” focuses on selecting corporate-level strategies, and Chapter 9 “Competing in International Markets” presents possibilities for firms competing in international markets. Strategy implementation is the final stage of the process. One important element of strategy implementation entails crafting an effective organizational structure and corporate culture. For example, part of Apple’s success is due to its consistent focus on innovation and creativity that Steve Jobs described as similar to that of a start- up. Chapter 10 “Executing Strategy through Organizational Design” offers ideas on how to manage these elements of implementation. The final chapter explores how to lead an ethical organization through corporate governance, social responsibility, and sustainability. 1.7 Conclusion