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Strategic Management
, Sixth Edition
Charles W. L. Hill, University of Washington
Gareth R. Jones, Texas A&M University
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Chapter Summaries
Chapter 1: The Strategic Management Process
- A strategy is an action that a company takes to attain one or more of its goals.
- The profitability of a company can be measured by the return that it makes on the capital invested in the enterprise. Profitability is determined by
the strategies the company adopts.
- A company has a competitive advantage over its rivals when it is more profitable
than the average for all firms in its industry. It has a sustained competitive advantage when it is able
to maintain an above-average profitability over a number of years.
- General managers are responsible for the overall performance of the organization
or for one of its major self-contained divisions. Their overriding strategic
concern is for the health of the total organization under their direction.
- Functional managers are responsible for a particular business function or operation. Although they lack general management responsibilities, they
play a very important strategic role.
- Formal strategic planning models stress that an organization's strategy is the outcome of a rational planning process.
- The major components of the strategic management process are defining the
mission and major goals of the organization; analyzing the external and internal
environments of the organization; choosing a business model and strategies that align or fit an organization's strengths and weaknesses with external environmental opportunities and
threats; and adopting organizational structures and control systems to implement
the organization's chosen strategy.
- A revision of the concept suggests that strategy can emerge from deep within
an organization in the absence of formal plans as lower-level managers respond
to unpredicted situations.
- Strategic planning often fails because executives do not plan for uncertainty and because
ivory tower planners lose touch with operating realities.
- The fit approach to strategic planning has been criticized for focusing too
much on the degree of fit between existing resources and current opportunities,
and not enough on building new resources and capabilities to create and exploit
future opportunities.
- Strategic intent refers to an obsession with achieving an objective that stretches the company and requires it to build
new resources and capabilities.
- Good leaders of the strategy-making process have a number of key attributes:
vision, eloquence, and consistency; commitment; being well informed; a willingness to delegate and empower; political
astuteness; and emotional intelligence.
- In spite of systematic planning, companies may adopt poor strategies if their
decision-making processes are vulnerable to groupthink and if individual cognitive biases are
allowed to intrude into the decision-making process.
- Devil's advocacy and dialectic inquiry are techniques for enhancing the effectiveness
of strategic decision making.
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