Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
CHAPTER 7
Strategy and Strategic Management
Insights and hard work deliver results
Chapter 7 Overview
Each Chapter contains several inset features designed to assist the student reader in applying
the concepts to relevant examples. Management Live illustrates how experiences and
activities relate to work performance. Choices provides students with an opportunity to
evaluate various sides of an issue in order to make an informed decision. Hot Topic explores
samples of debated topics in business and strategy. Facts to Consider introduces research or
trends that may be used for class discussion in the classroom or online for distance learning.
Insight profiles the importance of critical thinking. Quick Case presents a business related
scenario for class analysis and discussion.
Chapter seven provides a definition of strategy and a review of strategic management and
insights. The chapter explores various levels of strategies, including those for growth, in use
at most organizations. Considerable attention is then devoted to both corporate-level and
business-level strategy formulation. Divestiture and restructuring strategies, used primarily
when an organization runs into difficulties, are reviewed. A brief discussion of firms
pursuing global strategies, cooperative and partnership strategies, and e-business strategies
follows.
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
Chapter 7 Takeaway Questions
• Takeaway 7.1 Identify the types of strategies used by organizations
• Takeaway 7.2 Understand how managers formulate and implement strategies
Chapter 7 Lecture Outline:
• Takeaway 7.1 What Types of Strategies Are Used By Organizations?
o Strategy is a comprehensive plan for achieving competitive advantage
o Organizations use corporate, business, and functional strategies
• Takeaway 7.2 How Do Managers Formulate and Implement Strategies?
o The strategic management process formulates and implements strategies
o SWOT analysis identifies strengths, weaknesses, opportunities, and threats
Chapter 7 Supporting Materials
Figures
• Figure 7.1: What Are the Steps in the Strategic Management Process?
• Figure 7.2: What Does SWOT Analysis Try to Discover?
• Figure 7.3: What Is Porter’s Five Forces Model of Industry Attractiveness?
• Figure 7.4: What are Strategic Options in Porter’s Competitive Strategies Model?
• Figure 7.5: Why is the BCG Matrix Useful in Strategic Planning?
What’s inside?
• Management Live: Diversity in leadership linked to financial performance
• Hot Topic: Can the sharing economy create good jobs?
Applications
• TestPrep 7 Multiple-Choice Questions
• Skill Building Portfolio
o Self-Assessment 7: Facts and Inferences
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
Chapter Outline:
Takeaway 7.1: What Types of Strategies Are Used by Organizations?
• Strategy is a comprehensive plan for achieving competitive advantage
✓ A strategy is a comprehensive action plan that identifies long-term direction for
an organization and guides resource utilization to accomplish its goals
✓ “Best guess” about what to do to be successful in the face of rivalry and changing
conditions
• Organizations use corporate, business and functional strategies
✓ Corporate strategy provides direction and guides resource allocation for the
organization as a whole
• Growth strategies focus on expansion
✓ Growth strategies are those designed to increase the size of current operations
➢ Concentration strategies focus on an existing business area
➢ Diversification strategies focus on entering new business areas
• Restructuring and divestiture strategies focus on consolidation
✓ A retrenchment strategy seeks to correct weaknesses by making radical changes
to current ways of operating
➢ Liquidation – when a business closes and sells is assets to pay creditors
✓ A restructuring strategy seeks to correct weaknesses by reducing the scale or
• Global strategies focus on international business initiatives
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
✓ Globalization strategy adopts standardized products and advertising for
worldwide use
• Cooperation Strategies focus on alliances and partnerships
✓ Strategic alliances – two or more organizations create a partnership to pursue an
area of mutual interest or strengthen competitive advantage.
➢ Airlines often create strategic alliances with foreign airlines to facilitate
easier foreign travel ticketing for travelers and create a competitive
✓ Coopetition – competitors share information or technology with the intent of
creating a larger market for both
• E-business strategies focus on using the internet to gain competitive advantage
✓ B2C – business to customers; uses the Web and apps to link businesses directly
with customers
➢ B2B – business to business; link businesses with members of their supply chains
➢ C2B – customers to business; uses Web and apps to link customers with
businesses
Table 7.1 summarizes the types of web-based business models
✓ Advertising model
✓ Brokerage model
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
7.1 Questions for discussion with Suggested Answers
1) With things changing so fast today, is it really possible for a business to achieve
“sustainable” competitive advantage?
2) Why is growth such a popular business strategy?
3) Is it good news or bad news for investors when a business announces that it is
restructuring?
7.1 Career Situation: What Would You Do?
A neighborhood business association has this set of members: coffee shop, bookstore,
drugstore, dress shop, hardware store, and bicycle shop. The owners of these businesses are
interested in how they might “cooperate” for better success. As a business consultant to the
association, what would you propose as possible strategic alliances that would join sets of
these businesses together for mutual gain?
Takeaway 7.2 How Do Managers Formulate and Implement Strategies?
• The strategic management process formulates and implements strategies
✓ Strategic management is the process of formulating and implementing strategies
to accomplish long-term goals and sustain competitive advantage
• See Figure 7.1 for a description of the steps in the management process
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
✓ Review current situation
✓ Analyze organization and external environment
• SWOT analysis identifies strengths, weaknesses, opportunities, and threats
✓ SWOT analysis is a tool used in strategic planning to determine the current status
of the organization
✓ See Figure 7.2 for a depiction of SWOT analysis
➢ Internal Assessment of the Organization includes its strengths and
weaknesses
➢ External assessment of the organization includes its opportunities and
threats
✓ Core competency is a special strength that gives and organization a competitive
advantage
DISCUSSION TOPIC
To prompt a lively discussion, engage the students in a SWOT analysis of your college or
university. They will typically have a lot of opinions ⎯ some quite insightful ⎯ about the
strengths and weakness of the institution. They are likely to be less well informed about the
• Tips to Remember : Key Operating Objectives of Organizations
✓ Profits
✓ Cost efficiency
✓ Market share
✓ Product quality
• Porter’s five forces model analyzes industry attractiveness
✓ Figure 7.3 illustrates the five forces model which include competitors, new
entrants, suppliers, customers and substitutes
➢ Bargaining power of suppliers
➢ Bargaining power of customers
✓ Unattractive industry – intense rivalry, easy entry, substitute products, powerful
suppliers and customers
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
• Porter’s competitive strategies model identifies business or product strategies
✓ A differentiation strategy seeks competitive advantage through uniqueness
✓ A cost leadership strategy seeks competitive advantage through operating with
lower costs than competitors
✓ What is the market scope – broad or narrow?
✓ What is the expected source of competitive advantage – lower price or product
uniqueness?
✓ The four combinations of answers result in:
DISCUSSION TOPIC
If you used the Discussion Topic regarding a SWOT analysis of your college or university,
you can continue with that scenario in this Discussion Topic. Have the students discuss which
of Porter’s generic strategies that your college or university uses. Make sure that the students
fully explain their reasoning.
• Portfolio planning examines strategies across multiple businesses or products
✓ Useful for companies that operates a variety of businesses
✓ BCG matrix analysis is a planning tool for such companies
✓ See Figure 7.5 for a depiction of the BCG matrix approach
• Strategic leadership ensures strategy implementation and control
✓ Requires good organization structures and cultures, and the right staffing
✓ Strategic leadership – the capability to inspire people to successfully implement
organizational strategies
✓ A strategic leader has to:
➢ Be a guardian of trade-offs
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
✓ Strategic control – responsibility of top managers to keep in touch with strategy,
how well it is being implemented and if it needs to be changed to be more
effective in accomplishing the mission
DISCUSSION TOPIC
7.2 Questions for discussion with Suggested Answers
1) Can an organization have a good strategy but a poor sense of mission?
2) Would a monopoly receive a perfect score for industry attractiveness in Porter’s five
forces model?
3) Does the BCG Matrix oversimplify a complex strategic management problem?
7.2 Career Situation: What Would You Do?
For some years now, you’ve owned a small specialty bookshop in a college town. You sell
some textbooks but mainly cater to a broader customer base. Your store always stocks the
latest fiction, nonfiction, and children’s books. Recent numbers show a steep decline in sales,
including of books that would normally be considered best sellers. You suspect this is
because of the growing popularity of e-books and e-readers such as the Amazon Kindle and
Barnes & Noble Nook. Some of your friends say it’s time to close up because your market is
dying. Is it hopeless, or is there a business strategy that might yet save the store?
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
Teaching Notes
In this section, ideas, exercises, and assignments are provided to assist you in integrating the
concepts in Exploring Management for your students, especially the special features of the
text.
Management Live: Diversity in Leadership Linked to Financial
Performance
If the diversity advantage is real, why aren’t more U.S. companies making it part of their
performance strategies? If the diversity advantage applies in large organizations, will it hold
true for smaller ones? How your teams – work and personal, are you getting the most out of
the diversity advantage?
Choices: Double Irish with a Dutch sandwich
No, it’s not a drink and a sandwich we’re talking about. It’s a global business strategy used to
re-duce corporate income taxes paid in the United States. Ireland offers a 12.5% corporate tax
Global business is a complicated world, and tax laws vary widely from one country to the
next. International business executives have to be sophisticated and informed when it comes
to managing financial transactions across borders. Are you among those who applaud
executives who find and exe-cute international tax avoidance strategies? Or would you like to
put a stop to them? Why?
Ethics Check: Life and Death at an Outsourcing Factory
The sight of netting outside the dormitories of Foxconn factories is sobering when you learn
that it was installed to prevent suicides of workers who lose hope and jump off the dormitory
roof. What responsibility do employers have to make sure workers not only have safe
working conditions, but work that has meaning with a sense of accomplishment and hope of a
better future? What responsibility do U.S companies such as Apple, Dell and HP have to
make sure Foxconn remedies conditions that lead workers to suicide? How about us as
consumers? Do we have a responsibility? Would you alter your consumption habits?
Student answers will vary. This can be used as a good class discussion issue.
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
Facts to Consider:
Disposable Workers Are Becoming Indispensible to Business Profits
Northwestern University economist, Robert Gordon, proclaims that we are now in the era of
disposable workers. Businesses seem enamored with the idea of hiring less full-timers and
Hot Topic: Can the Sharing Economy Create Good Jobs?
Sharing economy offers boundless opportunities for Web and app-driven business
innovation. A PricewaterhouseCoopers survey found 7% of U.S. workers already active on
shared economy platforms, and the number is growing rapidly. They range from those
supplementing full-time jobs with extra income, to those who can’t find traditional full-time
employment, to those wanting to work but needing flexibility in schedules. Clients seem
delighted for the most part. But, is this sharing economy good for workers? While the income
HOW ABOUT IT?
The sharing economy is here, but what are its implications for large and small employers, for
career seekers, and for society at large? Is this a hot spot for innovation and eventual job
creation, or is another sign that income inequalities are here to stay? How can the sharing
economy be turned into a real strategic opportunity that benefits employers and workers
alike? What are the career strategy implications of all this for you?
Insight: Get and Stay Ahead with Critical Thinking
Managers face significant challenges as they try to move their organizations forward in the
world’s increasingly complex and ever-changing environments. When the environment is
complicated and uncertain, critical thinking skills are especially important. They help us to
gather, organize, analyze, and interpret information to make good decisions in situations that
range from difficult to totally perplexing.
Schermerhorn & Bachrach Exploring Management 6th edition Instructor’s Manual
Quick Case: Kick Starting a Friend’s Business Idea
This case asks students to act as a person with money and a nice stock portfolio who is often
a target for handouts and loans. A friend is looking for advice and financing for a small shop
called The Design Place where customers can go to choose fabrics, and then use a workspace
to design their own fashions.
Skill Building Portfolio
Terms to Define:
B2B business strategy
B2C business strategy
Core competencies
Corporate strategy
Cost leadership strategy
Crowdsourcing
Differentiation strategy
Diversification
Divestiture
Downsizing
Mission
Operating objectives
P2P business strategy
Restructuring
Retrenchment strategy
Strategy implementation
Sustainable competitive advantage
SWOT analysis
Transnational strategy
Vertical integration