978-1259278211 Chapter 1 Solution Manual Part 3

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Strategic Coherence: What is the mission of your organization? What are the strategic

objectives of the department or unit you are working for? In what ways does your own

Students should understand how their efforts are helping their employers to succeed. One

approach would be to have students list three or four activities they do in their jobs. Then rank

the activities according to the strategic importance to their firm. I would ask students to share

Strategic Coherence: Setting strategic objectives is important in your personal career as

well. Identify and write down three or four important strategic objectives you want to

It may be useful to ask students if they spend any time and energy in activities that do not

contribute to their strategic objectives. Then ask why these activities are not productive. This line

 VIII. Summary

We began this introductory chapter by defining strategic management and articulating

some of its key attributes. Strategic management is defined as “consisting of the analysis,

decisions, and actions an organization undertakes to create and sustain competitive advantages.”

The second section discussed the strategic management process. Here, we paralleled the

above definition of strategic management and focused on three core activities in the strategic

management process—strategy analysis, strategy formulation, and strategy implementation. We

Next, we introduced two important and interrelated concepts—corporate governance and

stakeholder management. Corporate governance consists of three primary elements—

management, boards of directors, shareholders (owners)—which play the key role in determining

a corporation’s strategic direction. Stakeholder management addresses the individuals (and

In the fourth section, we discussed the rate of unpredictable change that managers face

The final section addressed the need for consistency between a firm’s vision, mission,

and strategic objectives. Collectively, they form an organization’s hierarchy of goals. Visions

Chapter 1: Strategic Management: Creating Competitive Advantages

Analyze your university (or college) from the stakeholder concept. Identify the

stakeholders and the nature of their claims on the organization. What are the implications for

administrators?

Teaching suggestions:

You might want to begin by asking the students to identify the difference between shareholders

Discussion should be oriented towards identifying the various stakeholder groups mentioned in

the text, such as:

*Customers: students, alumni, recruiting organizations, organizations using research

*Employees: teaching staff including faculty, research associates, teaching

*Suppliers: funding organizations and donors, stationery and teaching equipment

*Community: taxpayers and the general public who have expectations from the

You might then want to ask whether stakeholder management is zero sum or symbiotic?

(We address this topic and provide a detailed example of Procter & Gamble in Chapter 1).

This would be an interesting issue with which to generate discussion. You can play the role of a

devil’s advocate to enliven the discussion. It can be argued that if faculty and other employees

You might want to then highlight the value of stakeholder symbiosis. Stakeholders are dependent

upon each other for their success and well-being.

1. Top quality research needs excellent financial and support facilities. And administrators

must recognize that in order to ensure the effective functioning of the university, neither

2. Similarly, customers cannot expect to have better quality education unless they are

3. Universities also have the social responsibility of inculcating right attitude, and shaping

You might then want to ask the students to give examples of other social responsibilities of

universities. Some of the social responsibilities that can be discussed, to mention a few, are

Conclusion: The expectations of various stakeholder groups are not constant over time and keep

changing with changes in technology, globalization and other societal changes. An administrator

End-of-Chapter Teaching Notes

Chapter 1: Strategic Management, Creative Competitive Advantages

Summary Review Questions

1. How is “strategic management” defined in the text, and what are its four key attributes?

(pages 9–10)

Response:

Strategic management is the analyses, decisions, and actions an organization undertakes in order

to create and sustain competitive advantages. The four key attributes of strategic management are

that it

Directs the organization toward overall goals and objectives

Includes multiple stakeholders in decision making

2. Briefly discuss the three key activities in the strategic management process. Why is it

important for managers to recognize the interdependent nature of these activities? (pages

12–15)

Response:

The three key attributes in the strategic management process are analyses, decisions, and actions.

Analyses, also called strategy analysis, refer to managers’ development of an understanding of

Decisions, also called strategy formulation, refer to the overall plans that firms develop to

compete and outperform their rivals. These plans exploit the results of analyses, in that firms try

Actions, also called strategy implementation, refer to ensuring that proper strategic controls and

The interdependent nature of these activities stems from various feedback mechanisms that occur

as managers implement their firms’ strategies. Unforeseen environmental developments,

unanticipated resource constraints, and/or changes in managerial preferences will force firms to

3. Explain the concept of “stakeholder management.” Why shouldn’t managers be solely

interested in stockholder management, that is, maximizing the returns for owners of the

firm—its shareholders? (pages 16–18)

Response:

Stakeholder management is where multiple individuals or groups, who have a stake in or can

influence an organization’s performance, are included in the strategic management process. So,

Managers who are interested solely in stockholder management are likely to make decisions that

satisfy short-term profit objectives. These decisions might include downsizing, neglect of asset

4. What is “corporate governance”? What are its three key elements and how can it be

improved? (pages 15–16)

Response:

Corporate governance is defined in the text as the relationship among various participants in

determining the direction and performance of corporations. The primary participants are (1) the

Corporate governance can be improved by including other stakeholder representatives on the

board of directors. These other members would ensure that top management will respond to these

Another way to improve corporate governance is to align managerial incentives with

organizational performance. This alignment is often done through incentive-based pay or

5. How can “symbiosis” (interdependence, mutual benefit) be achieved among a firm’s

stakeholders? (pages 17–18)

Response:

Stakeholder management will, in part, be tricky because of competing interests. For example,

customers may want lower prices while shareholders might want higher prices (which may lead

Inclusion of stakeholders such as the community, government, and environmental groups can

also increase a firm’s reputation. For example, firms that use a triple bottom line and evaluate

6. Why do firms need to have a greater strategic management perspective and

empowerment in the strategic management process throughout the organization? (pages

22–23)

Response:

In today’s complex and dynamic business environment, top managers do not have all the

answers. Rather, top managers will be responsible for communicating their firms’ strategies to

7. What is meant by a “hierarchy of goals”? What are the main components of it, and why

must consistency be achieved among them? (pages 23–24)

Response:

An organization’s hierarchy of goals refers to goals ranging from, at the top, those that are less

specific yet able to evoke powerful and compelling mental images, to, at the bottom, those that

are more specific and measurable. The main components are, at the top, the organizational

There must be consistency among these goals in order to maximize employee motivation and a

sense of equity and fairness when rewards are allocated. Inconsistency among the goals between

Experiential Exercise

Using the Internet or library sources, select four organizations—two in the private sector

and two in the public sector. Find their mission statements. Complete the following exhibit

by identifying the stakeholders that are mentioned. Evaluate the differences between firms

in the private sector and those in the public sector.

Response:

This exercise is intended to highlight the differences between private and public sector

organizations. Students are likely to discover that private sector organizations will focus more on

An interesting extension of this exercise is to reverse it. Offer a couple of other stakeholder

groups, such as the Rainforest Coalition, an organization promoting higher ethical standards for

Application Questions and Exercises

1. Go to the Internet and look up one of these company sites: www.walmart.com,

www.ge.com, or www.ford.com. What are some of the key events that would represent the

“romantic” perspective of leadership? What are some of the key events that depict the

“external control” perspective of leadership?

Response:

For these companies, students may have to look a bit to get to the information on company

leadership. Usually at the bottom of the first page is a link to “about us.” Interestingly, for Ford,

For www.walmart.com, the Wal-Mart story includes information related to the romantic

perspective of leadership, in which the leader determines organizational success. Sam Walton

For http://www.ge.com, the GE website includes information on the romantic perspective of

leadership. There is a link to all the early leaders of GE, back to 1892. No link to Thomas

For www.ford.com, the Ford website includes information on its historical roots, which is linked

to the romantic perspective of leadership. It takes a couple of clicks, but you can get to Henry

Ford’s vision of paying workers $5 a day in 1914. The company still carries the Ford name,

2. Select a company that competes in an industry in which you are interested. What are

some of the recent demands that stakeholders have placed on this company? Can you find

examples of how the company is trying to develop “symbiosis” (interdependence and

mutual benefit) among its stakeholders? (Use the Internet and library resources.)

Response:

This exercise enables students to see how stakeholders other than shareholders are affecting

corporate governance. To extend students’ findings, ask them to look up legislative issues related

3. Provide examples of companies that are actively trying to increase the amount of

empowerment in the strategic management process throughout the organization. Do these

companies seem to be having positive outcomes? Why? Why not?

Response:

Students may come up with numerous examples of empowerment. A Google search of

“employee empowerment” will yield more than 800,000 hits, and lots of good examples. Most of

the information is positive, but for the negative side, check the infamous stories of Nick Leeson,

4. Look up the vision statements and/or mission statements for a few companies. Do you

feel that they are constructive and useful as a means of motivating employees and

providing a strong strategic direction? Why? Why not? (Note: Annual reports, along with

the Internet, may be good sources of information.)

Response:

Students will likely come up with a few examples. An interesting exercise is to first ask students

if they are excited by the statements. If not, then ask how the statements should be changed to

Ethics Questions

1. A company focuses solely on short-term profits to provide the greatest return to the

owners of the business (i.e., the shareholders in a publicly held firm). What ethical issues

could this raise?

Response:

Short-term focus may result in long-term loss. For example, look at Arthur Anderson. That

company is alleged to have increased short-term profits by linking consulting contracts with

2. A firm has spent some time—with input from managers at all levels—in developing a

vision statement and a mission statement. Over time, however, the behavior of some

executives is contrary to these statements. Could this raise some ethical issues?

Response:

From the perspective of lower-level managers, the inconsistency between the mission and vision

statements—and the behavior of the executives—will cause cognitive dissonance. The lower–