STRATEGIC MANAGEMENT

Tutorial 1 – The Strategic Management Process

Starbucks is a New Economy Multinational

Starbucks is not an ordinary purveyor of a cup of coffee. It is a large innovative multinational

firm that engages in major strategic actions to enter new international and product markets
(e.g. acquisition). It is a multi-billion-dollar company with many stores operating in multiple
countries. As of June 2015, Starbucks has 22,519 stores worldwide. Starbucks has become a
major player in the Asian market, which is interesting because it took on a largely tea-
drinking culture. They also have 3,251 stores in China and has adapted to local market tastes
by developing larger stores, where for example, the Chinese can lounge and meet with
friends. It has also introduced flavours that specifically for the Chinese market, such as red-
bean Frappuccino’s.
It also has products that cater to tea drinkers as well. Starbucks’ success in China is reflected
by the fact that China is and was projected to be the second largest market for Starbucks.

Starbucks also entered Vietnam and India with high expectations in 2013. Interestingly,
Vietnam is the second largest producer of coffee beans in the world behind Brazil. Starbucks
hopes to work with Vietnamese farmers to grow a high-quality Arabica coffee bean.
Although Starbucks has experienced significant success in Asia, its experience in Europe has
been mixed. It has had some success but also encountered a different coffee culture. At first it
tried to have Europeans adapt to the Starbucks approach but because of the importance
Starbucks places on its future in Europe, the company is adapting to the European café
culture. This means that Starbucks is building larger stores with additional seating to allow
people to meet and spend time in stores, as they have done in Asia. It has implemented other
practices and products that adapt even more to local (country) cultures and tastes (e.g. France
and England).

In addition to Starbucks’ international thrust, it also engages in significant innovation

strategic actions to add to its product line. In recent years, it has introduced Via, an instant
coffee, and a single-cup coffee maker (named Verisomo) that allows customers to make their
own latte at home. Another attempt to add to it product line is evidenced by its acquisition of
the tea chain, Teavana. In fact, it paid $620 million to acquire the Atlanta-based company. It
also acquired a juice-maker, evolution Fresh, and Bay Bread, the operators of La Boulange
bakeries.

Starbucks’ strategic actions have enjoyed much success. In 2000, it had 3,501 and stores; in
2010 it had 16,858 stores and in 2019 it had approximately 30,000 stores worldwide. “We’re
not just passionate purveyors of coffee, but everything else that goes with a full and
rewarding coffeehouse experience. We also offer a selection of premium teas, fine pastries
and other delectable treats to please the taste buds. And the music you hear in store is chosen
for its artistry and appeal.” (www.starbucks.com)

Mission Statement - “to inspire and nurture the human spirit – one person, one cup and one
neighbourhood at a time.”

Vision Statement - “to establish Starbucks as the premier purveyor of the finest coffee in the
world while maintaining our uncompromising principles while we grow.”

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 Discussion Questions

1. Define the following terms: Group 1

a) Strategic competitiveness - This is when a firm successfully formulates and
implements a value-creating strategy. Value Creation is the process of turning labor
and resources into something that meets the needs of others. That includes, for
example, farmers growing crops.
b) Strategy- A strategy is an integrated and coordinated set of commitments and actions
designed to exploit core competencies and gain competitive advantage.
In other words – all the things the firm does to ensure its success in the market.
c) Competitive advantage - is when a firm implements such a strategy and other
companies are unable to duplicate it or find it too costly to imitate. Example KFC
d) Above-average returns - are returns in excess of what an investor expects
to earn from other investments with similar amount of risks.

2. What are the characteristics of the current competitive landscape? What two factors
are the primary drivers of this landscape? Group 2
Answer
The competitive landscape refers to the list of options a customer could choose rather than
your product.

 Relying on data to make business decisions and to have a competitive advantage.

 Ability to adapt to latest technologies in the market and improve the customer
experience.
 Creating a customer-centric business plan to meet the customer demands in the
market.
 Becoming flexible in our approach to doing business.
 Going digital and creating a transparent business process.

 Making business decisions

and gaining a competitive
advantage by relying on
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 data.
 • The ability to adapt to the
latest market innovations
and improve the consumer
 experience.
 • Developing a customer-
centric company plan to
fulfill market client wants
 • Becoming more adaptable
in our business practices.
 • Creating a transparent
company process by going
digital
 Making business decisions
and gaining a competitive
advantage by relying on
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 data.
 • The ability to adapt to the
latest market innovations
and improve the consumer
 experience.
 • Developing a customer-
centric company plan to
fulfill market client wants
 • Becoming more adaptable
in our business practices.
 • Creating a transparent
company process by going
digital
 Making business decisions
and gaining a competitive
advantage by relying on
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  data.
 • The ability to adapt to the
latest market innovations
and improve the consumer
 experience.
 • Developing a customer-
centric company plan to
fulfill market client wants
 • Becoming more adaptable
in our business practices.
 • Creating a transparent
company process by going
digital
What two factors are the primary drivers of this landscape are :

 Technology: The world is changing and the companies are developing new
technologies to help companies improve their business performance. Making use of
these technologies will help the company grow faster and also have a competitive
advantage in the market.

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  Flexibility: A company cannot rely on just one business strategy to succeed and
instead they need to think of being flexible in their approach. Meeting the market
demands is the desired end result and being flexible to important for that.

 Globalization is the increased economic interdependence among countries

as reflected in the flow of goods and services, financial capital, and
knowledge across borders.

3. According to the I/O model, what should a firm do to earn above-average returns? Group
3

The I/O Model, often known

as the Industrial Organization
Model, is a model that
describes how businesses
are organized. This model
explains that you must
consider the external
environment before
developing a strategy.
According to the
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industrial organization
model or I/O model, firms
must (1) study the
external
environment, particularly the
industry environment, (2)
locate an industry with a high
potential for above-average
returns, (3) identify the
strategy required by the
attractive industry to earn
above-average returns, (4)
develop or acquire assets and
skills needed to implement the
strategy, and (5) utilize the
strategy
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The I/O Model, often known
as the Industrial Organization
Model, is a model that
describes how businesses
are organized. This model
explains that you must
consider the external
environment before
developing a strategy.
According to the
industrial organization
model or I/O model, firms
must (1) study the
external

8
environment, particularly the
industry environment, (2)
locate an industry with a high
potential for above-average
returns, (3) identify the
strategy required by the
attractive industry to earn
above-average returns, (4)
develop or acquire assets and
skills needed to implement the
strategy, and (5) utilize the
strategy
The I/O Model, often known
as the Industrial Organization
Model, is a model that

9
describes how businesses
are organized. This model
explains that you must
consider the external
environment before
developing a strategy.
According to the
industrial organization
model or I/O model, firms
must (1) study the
external
environment, particularly the
industry environment, (2)
locate an industry with a high

10
potential for above-average
returns, (3) identify the
strategy required by the
attractive industry to earn
above-average returns, (4)
develop or acquire assets and
skills needed to implement the
strategy, and (5) utilize the
strategy
The I/O Model, often known as the Industrial Organization Model, is a model that
describes how businesses are organized. This model explains that you must
consider the external environment before developing a strategy. According to the
industrial organization model or I/O model, firms must (1) study the external
environment, particularly the industry environment, (2) locate an industry with a high
potential for above-average returns, (3) identify the strategy required by the
attractive industry to earn above-average returns, (4) develop or acquire assets and
skills needed to implement the strategy, and (5) utilize the strategy

4.What does the resource-based model suggest a firm should do to earn above-average
returns? Group 4

First, differences in firms’ performances across time are due primarily to their unique
resources and capabilities rather than the industry’s structural characteristics.
Second, firms acquire different resources and develop unique capabilities based on how they
combine and use the resources.
Third, that resources and capabilities are NOT highly mobile across firms.

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Fourth, that the differences in resources and capabilities are the basis of competitive
advantages.
Or

To earn above-average returns inside his or her organization, the Resource Based
model advises the following: It's worth noting at least five steps. First, identify the
firm's resources; second, determine the firm's capabilities; third, determine the
potential of the firm's resources and capabilities in terms of a competitive advantage;
fourth, identify an attractive industry; and finally, develop and implement a strategy
that allows the firm to best utilize its resources and capabilities in relation to external
opportunities

5. What are vision and mission? What is their value for the strategic management process?
Group 5

Vision is a picture of what the firm wants to be and, in broad terms, what it wants to

ultimately achieve. The vision is the foundation for the firm’s mission while the firm’s

mission is more concrete than its vision. A mission specifies the business or businesses in

which the firm intends to compete and the customers it intends to serve

6. What are stakeholders? How do the three primary stakeholder groups influence
organizations? Group 1

Stakeholders are the individuals and groups who can affect and be affected by the strategic
outcomes achieved and who have enforceable claims on the firm’s performance.

The capital market, which includes shareholders and borrowers, the product market, which
includes customers and suppliers, and the organizational stakeholders, which include
employees, are the three key stakeholders. Stakeholders can influence an organization in a
variety of ways: having interested investors and creditors allows the organization to fund
project proposals that will generate profits and help the company grow; second,
establishing a business requires loyal customers and a good relationship with a
supplier. Suppliers provide the raw ingredients needed to create a final product that meets the
needs of the client

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The capital market, which
includes shareholders and
borrowers, the product market,
which includes customers and
suppliers, and the
organizational stakeholders,
which
include employees, are the
three key stakeholders.
Stakeholders can influence an
organization in a variety of
ways: having interested
investors and creditors allows
the
organization to fund
project proposals that will
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generate profits and help
the
company grow; second,
establishing a business
requires loyal customers
and a
good relationship with a
supplier. Suppliers provide the
raw ingredients needed to
create a final product that
meets the needs of the client
7. How would you describe the work of strategic leaders? Group 2

Strategic leaders lay the groundwork for an organization's structure, distribute resources, and
communicate their strategic vision. Strategic leaders work in an uncertain environment on
exceedingly complicated themes that are influenced and influenced by events and
organizations outside their control. Strategic leaders can conceive, express, and passionately
hold a vision while persistently pursuing it to completion.

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Strategic leaders create the
conditions for an
organization's structure,
distribute
resources, and communicate
their strategic vision.
Strategic leaders labor in
a
ambiguous environment on
extremely complex topics
that are influenced and
influenced by events and
organizations outside of their
control. Strategic leaders can

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establish, express, and
passionately possess a vision,
as well as relentlessly pursue
it to completion.
8. What are the elements of the strategic management process? How are they interrelated?
Group 3

Strategic management refers to how an organization's leaders establish and implement goals.
Strategic management considers how resources such as money, people, and time affect the
environment in which the firm operates.The four key components of the strategic
management process are environmental scanning, strategy design, strategy implementation,
and strategy evaluation. Strategic management may make or break a firm. Many firms fail
because they lack a good plan. Leaders that have a clear vision and grasp of what a company
demands will always have an advantage over competitors. Setting corporate goals and
connecting them to the company's vision is critical when developing a growth strategy. As a
company grows and changes, a strategic plan can act as a benchmark for success.

Multiple Choice Questions

1. A firm's ________ is defined as its theory about how to gain competitive advantages.
a) objective
b) mission
c) vision
d) strategy

2. A sequential set of analyses and choices that can increase the likelihood that a firm will
choose a strategy that generates competitive advantages is the
a) organizational change process.
b) strategic management process.
c) mission statement process.
d) goal setting process.

3. A firm's ________ is its long-term purpose that defines both what it aspires to be in the
long run and what it wants to avoid in the meantime.
a) mission
b) strategy
c) objective

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 d) goal

4. Actions firms take to gain competitive advantages in a single market or industry are
known as
a) business level strategies.
b) corporate level strategies.
c) diversification strategies.
d) strategy implementation.

5. Actions firms take to gain competitive advantages by operating in multiple markets or

industries simultaneously are known as
a) corporate level strategies.
b) diversification strategies.
c) business level strategies.
d) strategic alliance strategies.

6. ________ occurs when a firm adopts organizational policies and practices that are
consistent with its strategy.
a) strategy formulation
b) strategic choice
c) strategy implementation
d) strategic control

7. When a firm is able to create more economic value than rival firms it is said to have a(n)
a) comparative advantage.
b) competitive advantage.
c) residual advantage.
d) economic advantage.

8. The economic interdependence among countries as reflected in the flow of goods,

services, financial capital and knowledge across country borders is defined as
a) hypercompetition.
b) boundaryless retailing.
c) strategic intensity.
d) globalization.

9. The industrial organization (I/O) model argues that

a) the key factor in success is choosing the correct industry in which to compete.
b) the firm’s internal resources and capabilities represent the foundation for development
of a value creating strategy.
c) the key to earning above-average returns is strategic flexibility.
d) the internal structure of the organization must match the industry in which it competes
in order to earn above-average returns on investment.

10. The resource-based model of the firm argues that

a) all resources have the potential to be the basis of sustainable competitive advantage.
b) resources alone can be a source of sustainable competitive advantage.
c) the key to competitive success is the structure of the industry in which the firm
competes.

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 d) resources that are valuable, rare, costly to imitate, and non-substitutable form the
basis of a firm’s core competencies.

Unit 1 – Crossword Puzzle

ACROSS

4 - Specifies the business in which the firm intends to compete and the customers it intends to
serve. Mission
7 - Being competitive by implementing a strategy that creates superior value gives the firm
a(n) ________________ Strategic

8 - An integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage strategy
11 - Core ___________ area capabilities that serves as a source of competitive advantage for a firm
over its rivals. competencies
12 - Inputs into the firm’s production resources

DOWN

1 - The returns that are expected to be earned from other investments with a similar
amount of risks. Average
2 - A picture of what the firm wants to be Vision

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3 - The capacity for a set of resources to perform a task or an activity in ana integrative manner.
Capabilities
5 - The ____________ organizational model states that the firm’s performance is determined
primarily by a range of industry properties including economies of scale. Industrial
6 - Individuals, groups, and organizations that can affect the firm’s mission and vision.
Stakeholders
9 - An economy in which goods, services, people, skills, and ideas move freely across
geographical borders. global
10 - The strategic management ____________ is the full set of commitment, decisions, and actions
required for a firm to achieve strategic competitiveness and earn above-average returns.
Process
12 - An investor’s uncertainty about economic gains or losses. Risk

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