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Fundamentals of Strategic Management

Profile image of Luis Angel Guerras-MartinLuis Angel Guerras-Martin
https://doi.org/10.13140/2.1.2703.7440
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Abstract
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The paper presents an in-depth exploration of strategic management fundamentals, focusing on strategic analysis, formulation, and implementation. It emphasizes the significance of corporate objectives, values, and governance within the context of stakeholder relationships, delving into specific methodologies like SWOT analysis and competitive advantages. Moreover, it discusses the strategic management process, highlighting its phases while addressing both internal and external analytical frameworks necessary for effective strategic decision-making.

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Following this introduction, the text addresses Strategic Analysis, with the first part (Chapter 2) considering the matter of identifying a firm’s objectives. The first issue raised focuses on who establishes these objectives, as regards the existence of other stakeholders, especially managers, as opposed to shareholders, and the ability the latter have to control them. This is an area referred to as corporate governance. The section places particular importance on the concepts of mission, vision and strategic objectives for the identification of general guidelines for a firm’s operations. The chapter concludes by considering the corporate values expressed by the assumption of principles of corporate social responsibility and ethical conduct.
Following this introduction, the text addresses Strategic Analysis, with the first part (Chapter 2) considering the matter of identifying a firm’s objectives. The first issue raised focuses on who establishes these objectives, as regards the existence of other stakeholders, especially managers, as opposed to shareholders, and the ability the latter have to control them. This is an area referred to as corporate governance. The section places particular importance on the concepts of mission, vision and strategic objectives for the identification of general guidelines for a firm’s operations. The chapter concludes by considering the corporate values expressed by the assumption of principles of corporate social responsibility and ethical conduct.

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References (78)

  1. 2. VALuE CREATION AND STAkEhOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  2. Value creation as a main firm's objective . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  3. Corporate stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  4. CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1. Internal mechanisms of management control . . . . . . . . . . . . . . . . . . . . . . . .
  5. 3.2. External mechanisms of management control. . . . . . . . . . . . . . . . . . . . . . . .
  6. CORPORATE VALuES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4.1. Corporate social responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  7. 4.2. Business ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  8. SuMMARY BOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QuESTIONS ON ThE ChAPTER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fuRThER READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 3.-Environmental analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LEARNING GOALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  9. 1. ThE BuSINESS ENVIRONMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  10. 2. ANALYSIS Of ThE GENERAL ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  11. 2.1. The environment's strategic profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  12. 2.2. Industrial districts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  13. ANALYSIS Of ThE COMPETITIVE ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  14. 3.1. Defining the competitive environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  15. 3.2. Analysis of the industry's structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  16. 3.3. Industry segmentation: strategic groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  17. 3.4. Competitor analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  18. IMPORTANCE Of ENVIRONMENT ANALYSIS fOR fIRM COMPETITIVENESS . . . . . . . . . . . . . . . .
  19. SuMMARY BOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QuESTIONS ON ThE ChAPTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fuRThER READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 4.-Internal analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LEARNING GOALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  20. 1. A fIRM'S INTERNAL DIAGNOSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  21. 1.1. A firm's identity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  22. 1.2. A firm's strategic profile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  23. 2. ThE VALuE ChAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  24. 2.1. Value chain activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  25. 2.2. Value chain interrelations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  26. 3. ANALYSIS Of RESOuRCES AND CAPABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  27. 3.1. Identifying resources and capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  28. 3.2. Strategically evaluating resources and capabilities . . . . . . . . . . . . . . . . . . . .
  29. 3.3. Managing resources and capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  30. SWOT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  31. SuMMARY BOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  32. QuESTIONS ON ThE ChAPTER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  33. ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fuRThER READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  34. 1.1. Defining the scope of the firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  35. 1.2. Firm growth and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  36. 1.3. Directions for development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  37. 2. ExPANSION STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  38. 2.1. Market penetration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  39. 2.2. Product development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  40. 2.3. Market development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  41. 3. fIRM DIVERSIfICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.1. Related diversification strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  42. 3.2. Unrelated diversification strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  43. VERTICAL INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  44. 5. RESTRuCTuRING ThE BuSINESS PORTfOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  45. 5.1. Business restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  46. 5.2. Portfolio restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  47. SuMMARY BOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QuESTIONS ON ThE ChAPTER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fuRThER READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 8.-Internationalisation strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LEARNING GOALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  48. 1. ThE MuLTINATIONAL fIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  49. 1.1. Concept of multinational firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  50. 1.2. Reasons for internationalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  51. GLOBAL COMPETITION: DETERMINANT fACTORS AND STRATEGIES . . . . . . . . . . . . . . . . . . .
  52. 2.1. Concept of global and multi-domestic industries. . . . . . . . . . . . . . . . . . . . . .
  53. 2.2. Determinant factors for globalisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  54. 2.3. Alternative strategies for international competition . . . . . . . . . . . . . . . . . . . .
  55. ENTRY STRATEGIES fOR INTERNATIONAL MARkETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  56. 3.1. Selecting the target country. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  57. 3.2. Entry mode strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  58. MANAGING A MuLTINATIONAL fIRM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  59. 4.1. Locating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  60. 4.2. Marketing of products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  61. 4.3. Human resources policy: the management of expatriates . . . . . . . . . . . . . . .
  62. 4.4. Managing the cultural gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  63. 4.5. Structural models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  64. SuMMARY BOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QuESTIONS ON ThE ChAPTER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fuRThER READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III STRATEGIC IMPLEMENTATION Chapter 9.-Evaluation and implementation of strategies . . . . . . . . . . . . . . . . . . . . . . . LEARNING GOALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  65. 1. ThE PROCESS Of EVALuATING AND SELECTING STRATEGIES . . . . . . . . . . . . . . . . . . . . . . .
  66. 1.1. Suitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  67. 1.2. Feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  68. 1.3. Acceptability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  69. 2. STRATEGY IMPLEMENTATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  70. 3. DEfINING ThE ORGANISATIONAL MEDIuM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  71. 3.1. The design of organisational structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  72. 3.2. Management and leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  73. 3.3. Organisational culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  74. ADMINISTRATIVE SuPPORT SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  75. 4.1. Strategic planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  76. 4.2. Strategic control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  77. SuMMARY BOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . QuESTIONS ON ThE ChAPTER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . fuRThER READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  78. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Wiley Encyclopedia of Management: Strategic Management Volume 12
Tanya Sammut-Bonnici

Wiley Encyclopedia of Management, 2015

As editors of the Wiley Encyclopedia of Management 3e, Vol. 12 Strategic Management, we aim to provide business practitioners, academics, and students of the field with a comprehensive reference relating to strategy concepts, methods, and techniques to reflect the dynamism of industry practice and academic knowledge. The juxtaposition of concepts, methods and techniques reflects the need for clarity in strategic thought as well as practicality in strategy implementation. As an encyclopedia, this volume provides a broad coverage of the field and an accessible framework for investigating its subject matter. The Strategic Management volume has been compiled through a collaborative network of over 50 professors and industry leaders from universities, business schools, and business organizations from all parts of the globe. The result is a contemporary, dynamic, and global view of strategy, which represents cutting edge thinking in the world of corporate and societal management. The text is designed to be accessible to readers from different backgrounds who contribute to the design, implementation, and use of strategy at various levels in their organizations. The ease of access to the wealth of information embodied in the encyclopedia is made possible through the modular nature of the publication whereby each strategy concept can be searched online and retrieved separately. We developed a comprehensive list of contemporary strategy topics for the third edition by looking at research published over the past decade in top academic journals, reputable industry publications, and the dominant logic of the frameworks of strategy in academic textbooks.We then organized these topics into distinct strategy themes to enable individual topics to be related to broader streams of strategic thought. The result was a significantly updated list of topics from previous editions, made up of 210 topics, 36 of which are new additions with most of the remainder being heavily revised. The new entries come mainly from the rapidly evolving nature of strategy as reflected in the content of popular textbooks on strategy and new approaches to strategic leadership advocated in business schools. There are three distinct fields that are attracting more attention in the field of strategy, which may not constitute a new core but will certainly enrich the way we think about strategy. The new themes revolve around three areas: complex behavior in organizations and industries, the psychological foundations of strategy, and strategic innovation as an area that focuses on the renewal of managerial cognition and on the responses of organizations and industries to contentious and difficult environments. Another area that has gained more citations and more interest from academics and executives in the past few years is cooperation and collaboration, which is being linked to our understanding of complex adaptive behavior. The evolution of the key terms and concepts in the encyclopedia reflects a move toward organizational strategies and resource-based views that have emerged in response to competition, regulation, social trends, and technological innovation. Our approach to building this compendium of strategic management is both conceptual and practical. Strategic management is a performance-driven discipline, with an ingrained competitive stance, that sets out to condition long-term futures. With this mindset in place, one of the major shifts in strategic thinking has been to recognize the centrality of resources and capabilities as the foundation of long-term superior results and the need to create and execute strategic plans that utilize these resources. Therefore, the resource-based view has a much more significant influence in the field of strategy. The practicalities of how the resource-based view can be captured into workable core competences and later on into dynamic capabilities that outpace the competition, will be on center stage in the foreseeable future. The nature of dynamic capabilities links back to complex adaptive behavior, a field that is yet to evolve into a robust practical toolbox for strategic decision makers. The third edition is being published in the aftermath of the 2008 financial crisis, a crisis that has shattered many comfortable illusions about the stability of the global economy and the health and resilience of many important parts of it. The year 2014 also marks a point at which the long period of globalization and intensive technological change can be observed in new structures and strategies around the world, both political and corporate. Thus the context of the field of strategy has changed immensely and we ought to ask if it has changed the nature of strategic thinking itself. The most obvious observation to make is that the nature and importance of competition has been clearly intensified. Falling real incomes have created more demand for low price offerings and differentiated offerings have to show their value proposition more clearly. Everything we know about competition is in many senses reinforced with an override that observes that time horizons have become more compressed, strategies need to pay off earlier, and value propositions will have to be readjusted more frequently. This raises a more complex point. The tension between short-term and long-term thinking has been greatly exacerbated. The 2008 crisis pointed toward rapid financial readjustments, the primacy of cost-driven survival strategies and simultaneously the need for longer term repositioning so as to be able to create the resources and flexibility for strategies to be more reactive, more adaptive and yet more durable. Are we to see more trade-offs toward the short term or do we take from 2008 that more importance should be given to long-term durability? Part of the long-term thinking of corporations is investment and technological change. The invasion of consumer buying habits by innovations such as social networks is provoking fundamental changes in retailing and in consumer goods marketing with consequent implications for investment back down the supply chain. The pace of technical change and consumer buying habits shows no sign of diminishing. As further fuel to these changes, the significance of emerging markets has been very evident in the aftermath of 2008 with considerable visibility of China’s development into a world economic superpower (or is it going to run into bottleneck constraints and revert to more normal growth). Alongside this strand of thinking is a rethinking of globalization as a strategy. The emphasis is now on regional power coupled with increasing free trade. This is a more intricate paradigm than global standardization requiring correspondingly more complex patterns of internationalization. So change is even more positively on the agenda and the capacity to interpret and respond to contextual shifts and rapidly evolving new competitors will become a requisite core competence. Fundamentally, strategic advantage in any and all contexts is driven and fueled by the resources and capabilities of firms. The resource-based view is gaining more attention and will gain more traction in reality as firms begin to work out how to define, measure, and create core competences. The resource based view is a theory waiting for major practical advancement. Without core competences, firms are destined to be price competitors or at best rapid imitators. Long-term superior performance will accrue to those who know what are their strategic assets. The principle focus of strategy regarding the creation of wealth will continue to dominate and will remain critical to the competitive survival of firms. However, the definition of wealth in the economic literature is starting to shift toward a more holistic view that integrates financial and societal well being – a reflection probably of broader public opinion. The effect on the field of strategy is an increase in importance of areas such as corporate social responsibility as well as providing ammunition for the need for organizations to take an even longer view in spite of current short-term financial pressures. The implementation of strategy is an area that requires more attention in terms of providing a working framework of how to execute the wide variety of strategic models available in the literature. Implementation remains a minefield of mobilising financial, human, organizational and social capital, in the form of industry networks. Strategic Management Vol. 12 is a rich collection of the latest thinking on strategic management. We are indebted to our colleagues in international business schools and corporations across the globe, who have contributed with their ideas, opinions, best practices, and latest research finding. It has been a privilege to be part of this great network of strategic minds that have created this comprehensive collection of strategic management concepts.

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The concepts, theory and practice of strategic management have become prominent in modern management literature especially in this new millennium for one obvious reason: that is, because of the complex, nebulous and dynamic nature of contemporary corporate governance. This phenomenon has in turn become a matter of concern to academics and professionals alike on the field. Consequently, the main objective of this paper is to present an overview of strategic management with particular emphasis on its concepts, theory as well as its linkage with the resource-based philosophy of the firm's competitive advantage. A review of the relevant literature was conducted and a connection between strategic management theory and competitive advantage from the recourse-based philosophy of the firm was identified. It was found that the resource-based model is one of the main strategic management theories applicable to explain organizational performance, and it is also a part of the larger management theory family which has evolved to suit the managerial requirements of the modern complex organizations and also the business environments within which the organizations operate. Examining organizational competitive advantage from this school of thought allows the organizations to measure the significance of its internal resources and capabilities in particular towards attaining a competitive advantage, and hence to provide further support and extension to the Philosophical approach.

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Essentials of strategic management
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2003

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