Unit 4 Strategic Management Process: Achieving & Sustaining Competitive Advantage

Overview

Welcome to Unit 4.

Two key words in this unit are achieving and sustaining. In our lives, we put in hard work and achieve some milestone(s). Be it in our grades in education, financial management, physical fitness, sports performance, etc. Achievement calls for effort and sacrifices to be made, as well as prices to be paid. We feel good and experience a sense of satisfaction when we achieve these milestones. But now comes the rigorous part of sustaining our achievements. For instance, once sports teams achieve success, there is pressure on the team to sustain that achievement. Otherwise, all the hard work will be considered a “flash in the pan”, a “chance occurrence” or a “passing” achievement.

In like fashion, once an organization achieves an advantageous position through the implementation of strategies, they must strive to sustain and build on this advantage. In the last three units, we have discussed: (1) the role of the manager, (2) the organization and its environment, (3) the formulation of strategies to optimize resources, (4) the need to constantly reinvent to stay ahead of the competition. In all this, strategy was a key term in our discussions. Now in unit 4, we look at achieving and sustaining that competitive advantage as an organization.

Topics

This unit is divided into the following topics:

1. Strategic Management
   
2. Firm Vision and Mission
   
3. The Role of Strategic Analysis in Formulating a Strategy
   
4. Strategic Objective and Levels of Strategy
   
5. Planning Firm Actions to Implement Strategies
   
6. Measuring and Evaluating Strategic Performance

Learning Outcomes

When you have completed this unit, you should be able to:

• Describe the difference between a firm’s vision and mission
  
• Articulate a clear vision and mission for your organization
  
• Explain how strategy analysis, strategy formulation and implementation are connected
  
• List and analyze the types of strategies at a firm’s disposal
  
• Analyze the elements of a strategic plan

Activity Checklist

Here is a checklist of learning activities you will benefit from in completing this unit. You may find it useful for planning your work. Expected time commitment: 2 hours

Learning Activities

• Read section 9.1 in your text and answer the questions provided.
  
• Read the article on mission and vision statements, read section 9.2 of your text, and outline the similarities and differences between mission and vision statements.
  
• Read section 9.3 in your management textbook and review following frames and tools from Unit 3: SWOT (b) PESTEL (c) Porters Five Forces (d) Value Chain (e) VRIO.
  
• Read section 9.4 of your textbook, reflect on Table 9.1 and create a similar table for an organization. Apply the BCG matrix (Exhibit 9.7) to an organization.
  
• Use the SMART framework to compare the outcomes of goals.
  
• Read the last section of Chapter 9 in your text and analyze the Interface Inc case study.
  
• Analyze the mission & vision statements of 5 organizations.
  

Assessment

• Unit 5 Team Memo (Please confirm assignment instructions in Moodle)

Resources

• Bright, D. S. & Cortes, A. H. (2019). Principles of Management.
• Other online resources will be provided in the unit.

4.1 Strategic Management

Our first topic in Unit 4 is strategic management. Simply put, strategic management is the utilization of a firm’s resources to reach its goals and objectives. Some of you might ask how strategic management differs from management and the answer is that while both are important, management is about how the organization is operating in the “here and now”, whereas strategic management focuses on the future. Strategic management is about creating paths for future success; it’s about finding new ways to be competitive in the future. Another way to distinguish between management and strategic management is to see management as the “what” the organization does now and strategic management as the “how” for the future.

Strategic management is a process, and it calls for commitment to stay the course to reach organizational goals, but also agility to make course corrections as needed on the way to reach these goals. The process of strategic management is not limited to businesses. - Non-profits, universities etc., use the strategic management process with great success to reach their goals.

As discussed in other units, the culture of the organization and structure of the organization are important factors that affect the successful implementation of any strategic management process. For instance, if an organization has a culture where only the top management makes the decisions and pass it down to the organization, there will be no “buy in” with the rest of the organization to embrace any new initiative. Or, if an organization has a very rigid and hierarchical organizational structure, any new strategic management initiative will be met with resistance and will fail.

Therefore, as a manager, understanding the strategic management process is critical for success.

For starters, lets look at the Strategy Cycle (diagram below). A strategy cycle spells out the steps in the strategic management process. Different texts have varying steps in the strategy cycle; ranging from 5 to 12 in some cases. We will be looking at a strategic cycle that contains six steps and, in this unit, we will discuss each step in detail. The course text in section 9.1, provides a clear picture the strategy cycle. Exhibit 9.3 below (from section 9.1 of text) highlights the 6 steps of the strategic management process that we will look at. While the term strategy cycle implies that each step leads to the next (and this is correct), bear in mind that in real life, several steps/stages can be in operation simultaneously. Top-level managers are masters at dealing with several steps/stages at the same time. As you read section 9.1, you will discover examples of how several of these components need to be addressed at the same time and how they all feed into the cycle. We begin our journey around the Strategy cycle at Vision and Mission (topic 2).

Figure 4.1. The Strategy Cycle (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)

Activity: Read and Reflect

Read section 9.1 in your text and answer the following questions:

• How has your organization used the strategy cycle?
  
• Do you recall when several steps in the cycle were worked on simultaneously?
  
• How did you feel at this time?

Note that the learning activities in this course are ungraded, unless specified. They are designed to help you succeed in your assessments in this course, so you are strongly encouraged to complete them.

4.2 Firm Vision and Mission

At the core of every organization is its vision and mission statement. The vision statement captures the organizations reason for being. Why does the organization exist? Why was the organization founded? What is the organization trying to accomplish? A vision statement ought to be a simple statement or two that declares clearly why the business or organization exists. The mission statement takes the “why” of the vision statement and explains “how” the vision will be fulfilled. The chart below explains the difference between mission and vision statements.

The vision and mission statements of an organization are foundational, since strategy, budgets, human resource planning and a host of other organizational dynamics will be of little use, if an organization does not have a defined purpose and direction.

	Mission Statement	Vision Statement
About	A Mission statement talks about HOW you will get to where you want to be. Defines the purpose and primary objectives related to your customer needs and team values.	A Vision statement outlines WHERE you want to be. Communicates both the purpose and values of your business.
Answer	It answers the question, “What do we do? What makes us different?”	It answers the question, “Where do we aim to be?”
Time	A mission statement talks about the present leading to its future.	A vision statement talks about your future.
Function	It lists the broad goals for which the organization is formed. Its prime function is internal; to define the key measure or measures of the organization’s success and its prime audience is the leadership, team and stockholders.	It lists where you see yourself some years from now. It inspires you to give your best. It shapes your understanding of why you are working here.
Change	Your mission statement may change, but it should still tie back to your core values, customer needs and vision.	As your organization evolves, you might feel tempted to change your vision. However, mission or vision statements explain your organization’s foundation, so change should be kept to a minimum.
Developing a statement	What do we do today? For whom do we do it? What is the benefit? In other words, Why we do what we do? What, For Whom and Why?	Where do we want to be going forward? When do we want to reach that stage? How do we want to do it?
Features of an effective statement	Purpose and values of the organization: Who are the organization’s primary “clients” (stakeholders)? What are the responsibilities of the organization towards the clients?	Clarity and lack of ambiguity: Describing a bright future (hope); Memorable and engaging expression; realistic aspirations, achievable; alignment with organizational values and culture.

Activity: Comparing Mission and Vision Statements

What does a mission statement of an organization explain that a vision statement does not?

1. First, read the article “Difference Between Vision and Mission Statements” on the ClearVoice website. This article also includes 25 examples of mission and vision statements to help you understand the distinction between mission and vision statements.
   
2. Next, read section 9.2 in your course textbook Principles of Management.
   
3. Then, perform a Google search looking for 5 successful organizations and identify their mission and vision statements. How do they measure up considering our readings on mission and vision and the 25 examples in the article?

4.3 The Role of Strategic Analysis in Formulating a Strategy

Having looked at the first step in the strategy cycle – vision and mission, we now come to the second step which is strategy analysis. In Unit 3, we surveyed tools and frames that help assess and analyze an organization’s internal and external environment. This information is vital to formulating viable strategies, making informed decisions and in the writing of business plans for start ups. Strategic analysis will help raise and answer the following questions in the formulation of strategies:

• “What sort of products and services must we embark upon?”
  
• “Do we have the internal capabilities to initiate and sustain this venture?”
  
• “Do we possess current technologies?
  
• How is our level of staffing? Do they need training and upskilling?
  
• “Who are our competitors and what range of products will they offer?”
  
• “How can we offer something better in terms of quality and price?”

As managers walk their teams through these questions, they will have a better picture on the direction and type of strategies they need to formulate. Is it cost, differentiation or focus strategy? It might be helpful to revisit Unit 3 and review our discussions on the environment of the organization in relation strategy formulation.

Activity: Read and Review

• Read section 9.3 in your course course textbook Principles of Management.
  
• Revisit and review following frames and tools from Unit 3:
  1. SWOT (b) PESTEL (c) Porters Five Forces (d) Value Chain (e) VRIO.
     

4.4 Strategic Objective and Levels of Strategy

In topic 4, we will look at Step 3 (develop objectives) and Step 4 (create and choose strategies) of the strategy cycle. Having understood the place and importance of analysis in strategy formulation, we now take another step in this unit to look at big picture objectives and levels of strategies to reach those objectives. The information gleaned from the analyses will help in establishing realistic objectives and deciding on which level of strategy the organization will pursue. Section 9.4 introduces three levels of strategy and helps us understand the important connection between strategies, objectives and actions.

The first level of strategy is the business-level strategy and has to do with the internal aspects of the organization. This involves evaluating how a business organizes its activities, its internal resources and capabilities, and in keeping with these if they will pursue a cost leadership or differentiation strategy with the products/services on offer.

The second level is the corporate strategy which has to do with the future of the organization. This is at a higher level than the business level strategy and involves decisions on whether the business should expand, shrink or continue at the same level of operation. For instance, are there business units that need to shut down? Are there units that are doing extremely well that need to be supported? Are there new units that ought to open up to increase year-round revenue instead of seasonal revenues?

The BCG Matrix (exhibit 9.7 in your text and reproduced below in activity 4.4) is a helpful tool that gives managers a quick picture on which business units are doing well and which units are not. The BCG matrix plots market share against market growth and has four quadrants: question mark, star, cash cow, dog. For example, business units in the star category are doing well and need investment and support, wheras business units in the dog category need to be shut down.

The third level is the international strategy and is similar to the corporate level strategy except that its focus is on the geographic dimensions of the business. Are there foreign markets the organization can enter and expand? What opportunities are there? And how can the business exploit these opportunities?

Note: Table 9.1, from section 9.4 in your course text provide a very helpful guide as to how strategies, objectives and action steps flow one from the other. Take some time to reflect on the flow and the specific actions that result.

How Grand Strategies Are Translated into Objectives and Actions

	Grand Strategy	Strategic Objective	Potential Action
Business-Level Strategy	Growth	Increase business revenue by 25%	Introduce a new product.
			Expand to a new location.
Corporate-Level Strategy	Growth	Increase corporate revenue by 10%	Acquire a competitor.
			Expand to a new country.
			Develop a business in a new industry.
International Strategy	Growth	Attract 10% overall market share in a new country	Export products to that country.
			Acquire a local company in that country to gain their customers.

Table 9.1 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)

Activity: Read, Reflect and Apply

• Read section 9.4 in your course textbook Principles of Management.
  
• Reflect on Table 9.1 and create a similar table for your organization.
  
• Apply the BCG matrix (Figure 4.2) to your organization or an organization you are very familiar with. Identify what products, services, units fit into the dog, question mark, cash cow and star categories.
  

Figure 4.2 The BCG Matrix (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)

4.5 Planning Firm Actions to Implement Strategies

We now come to step 5 in the strategy cycle, which deals with the implementation of the strategies. Having looked at the flow from strategy, to objectives, to actions, we now build and expand on the types of actions an organization will take in keeping with its objectives. This topic focuses on the what, when, and how of the action steps, the resources required, allocation of staffing, and required technology to carry out these actions and reach goals in a timely manner.

Goals may look great and grandiose on paper. But if the organization is to be successful, goals must be achieved well and on time. A helpful tool to evaluate goals is the SMART framework (Figure 4.3). The SMART framework is not limited to the business world, but can be utilized in any realm of our lives – to complete projects, financial management, study plans, weight management, career planning, anger management, etc.

Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license, Source

Activity: Creating SMART Goals

• Think about (a) a personal goal you achieved (b) a personal goal you did not achieve. Use the SMART framework to compare the outcomes. Going forward, what will you change when establishing goals?

• Each of the following statements is a goal or objective, but it is not expressed very clearly. Rewrite each statement as a SMART goal and be ready to explain what you had to change to make it SMART. (Feel free to substitute these companies for other companies you are familiar with)

  • Amazon wants to improve product delivery times.
    
  • Starbucks baristas should make customized drinks more quickly.
    
  • Sales associates should sell more cars this month.
    
  • McDonald’s needs more customers at dinnertime.
    
  • FedEx wants to compete with UPS.
    
  • Boxed wants to reach more customers.
    
  • Lyft wants to increase revenue.

4.6 Measuring and Evaluating Strategic Performance

Measuring is a key part of our lives. We measure our height and weight, we measure the quantity of ingredients that go into any preparation, we measure performances in sports to track progress. There are many popular quotes on measurement. It has been said that what you cannot measure you cannot manage, what you cannot measure you cannot improve, or, what you cannot observe you cannot measure. From these statements it is clear that measuring is essential to management and progress, and measurements must be observable.

Once the strategy/strategies have been decided upon and implemented, measuring and evaluating how successful the implementation is crucial. Are the results on track? Is performance above or below standards set? Are the outcomes in alignment with the vision and mission of organization? If not, what corrective actions/measures will be taken? All these questions and more need to be dealt with in measuring and evaluating of strategies. This is Step 6 in the strategy cycle.

We must also bear in mind that the right measures be used in evaluating strategies – at macro, mezzo, and micro levels. The little aspects must not be overlooked, or assumed, in the evaluation stage. Read this impactful story to find out how NASA lost a Mars orbiter, because a “little” detail was overlooked and assumed.

• NASA lost to Mars Orbiter

Evaluations and Assessment provide data. It is the role of the managers to understand, sort, arrange and present to all stakeholders what the numbers and data mean and how the data impacts the story of the organization. See picture below.

Figure 4.4 Lego Depiction of Data. Source: Lego Depiction of Data

Activity: Read and Apply

Read the last section of Chapter 9 in your text and consider the following questions:

1. How often should performance evaluations be carried out?
   
2. What are the dangers of evaluating too early and too often?
   
3. What are the dangers of evaluating just towards the end of the initiative?

Read the Interface Inc. story in the Critical Thinking Case (section 9 of course text) and complete the 3 questions at the end. This case will help you understand and tie in vision, mission, strategy formulation and implementation, performance measure, motivation, and change management

1. What reaction do you think employees had when Ray Anderson announced he wanted to change the company’s mission?
   
2. How would you turn the Seven Fronts of Sustainability into SMART goals?
   
3. How is tying rewards to improved sustainability performance a form of strategic control?

Activity: Watch and Apply

Watch the video, What Is Strategy? It’s a Lot Simpler Than You Think, and consider the following questions:

• As you watch Professor Felix Oberholzer-Gee discuss strategy, understand the value stick. How does your organization create value to the clients and customers?
  
• Professor Oberholzer talks about ‘Willingness to Pay(WTP)’ and Willingness to Sell(WTS)’ and the difference between the two being the value to the customer. How does WTP translate to your organization? How does WTS translate to your organization?
  
• What are three specific steps you could take to increase value created to your client/customer?

Activity: Search and Analyze

Select 5 organizations (2 for-profit organizations, 2 non-profit organizations, 1 educational institution).

Do an online search to:

1. Analyze their mission & vision statements
   
2. Discuss how they measure up to our discussions on the importance of vision and mission.
   
3. Discover key observations and references to strategy, formulation, implementation, and evaluation of strategies to reach their goals

Note: If you are in a synchronous cohort (e.g., FAR Centre), you will work on this activity in groups. Your instructor will provide more details on this activity.

Unit 4 Summary

In Unit 4, you have had the opportunity to understand some very steps in the planning process. We started of by looking the importance of vision and mission in an organizations journey. The vision and mission give the organization direction and purpose. We then looked at the need for strategy and walked through analysis - from formulation to implementation. Once implemented, plans need to be evaluated to ensure the organization is on track to meet goals.

Personal Application

Before participating in the assessment for this unit, consider how you might apply what you have learned.

• Assume you are leading/managing a: (a) small division in an organization, (b) small scale start up, or (c) ministry team in church.
• Pick one of these three scenarios and write a 1–2-page memo to your team on the importance of one topic covered during your readings for Unit 4.
• The memo to the team will emphasize the importance of applying this topic/ practice for organizational success and will include specific steps to motivate team members to implement these initiatives.

Please see the Assessments section in Moodle to confirm assignment instructions, including the grading criteria and due dates.

Checking Your Learning

Before you move on to the next unit, you may want to check to make sure that you are able to:

• Describe the difference between a firm’s vision and mission
• Articulate a clear vision and mission for your organization
• Explain how strategy analysis, strategy formulation and implementation are connected
• List and analyze the types of strategies at a firm’s disposal
• Analyze the elements of a strategic plan