Fundamentals of Strategic Management

J.E. Navas-López & L.A. Guerras-Martín

3rd edition, 2026

ISBN Pack Dúo (papel+digital): 978-84-1085-805-3; ISBN Digital: 978-84-1085-806-0

The context

Competitiveness, globalisation, competitive advantage, quality improvement, cost reduction, corporate culture... all these and many others are terms that are frequently on the lips of business men and women, managers, politicians, and journalists, for example, when they discuss the modern business world.

Companies today operate in an extremely difficult context, with numerous high-performing competitors, where it no longer suffices to create a company to be successful, and even knowing how to sell is not enough. Competition between firms is becoming more open and tougher. The environment is changing rapidly and becoming ever more turbulent, as shown by the 2008 financial crisis, Brexit, the Covid-19 pandemic, and climate change, among other factors. The trade barriers between countries are disappearing. Today, European integration renders it less and less meaningful to talk about exports to France or imports from Germany.

Against this background, entrepreneurs and senior managers are increasingly required to devote greater effort and analysis to developing and choosing the most appropriate strategy to address environmental challenges and make the business more competitive. It may be said that all companies have, or pursue, a strategy, although in many cases it remains implicit in the management mindset. The effort to analyse, rationalise, and render it explicit plays a key role in improving the company's competitive position and, consequently, its performance. Strategic Management’s core contribution is to provide the logical framework for doing so.

The content
Strategic Management has become the dominant paradigm for interpreting the development of business activity, enabling it to effectively respond to both opportunities and favourable conditions presented by the external environment, as well as to threats and challenges that might emerge. All this without losing sight of the firm's internal resources, capabilities, and strengths, as well as any weaknesses it may still have.

The confluence of these factors yields a point of departure that provides a platform for establishing the various alternatives or courses of action that enable a firm to achieve its established goals. The process culminates in the implementation of these alternatives. This is, in essence, Strategic Management.

In view of this, we shall consider Strategic Management to have three main parts or blocks: Strategic Analysis, Strategic Formulation, and Strategic Implementation. These three parts are used to organise the different blocks of text, as well as the various chapters and content that make up each block, as shown in Figure 0. (see index)

Figure 0: Structure of the book

Chapter 1 is introductory and presents the fundamentals of Strategic Management. It therefore defines the concept of strategy and other related matters, and considers the various levels involved: corporate, competitive and functional. The phases of the process are also analysed using a strictly rational approach to decision-making, and considerations regarding the historical and actual field of Strategic Management are provided.

Following this presentation, the text addresses Strategic Analysis, with the first part (Chapter 2) considering how to identify a firm’s future direction (vision, mission, and strategic goals) and the different ways to measure its performance (through criteria of profitability or value creation). This is followed by an analysis of stakeholders, especially managers, and of shareholders' ability to control them, an area referred to as corporate governance. The chapter concludes by considering the corporate values expressed by the assumption of principles of sustainability, social responsibility and business ethics.

Strategic Analysis comprises two further parts: environmental and internal analysis. Environmental analysis (Chapter 3) examines the factors in the environment that affect a firm’s operations. In turn, regarding this external analysis, a distinction is usually drawn between the general and competitive environments. The former studies the factors that, from a general perspective, influence managers’ behaviour, and techniques such as the environment’s strategic profile and industrial districts will be considered. The latter, the competitive environment, focuses on the type of business the firm pursues and, to that end, uses Porter's Five Forces analysis and industry segmentation analysis.

Internal analysis (Chapter 4) addresses factors specific to the firm and therefore within its decision-making powers. Various analytical tools shed light on the company’s internal situation, including its identity, strategic profile, value chain, and SWOT analysis. Note the importance of analysing resources and capabilities, as a theory explaining why different firms operating in the same industry have different competitive advantages.

As mentioned earlier, the purpose of this first part is to identify the opportunities and threats the environment poses to the firm’s operations, as well as the firm's strengths and weaknesses. The foundations are thus laid for the establishment of different strategies.

This leads into the second part of the book, dealing with Strategic Formulation. This block will study strategies at the corporate and business levels. The main focus at the corporate level is defining the scope of the firm, or the sum of businesses in which it seeks to compete, and the different types of development and growth. At the business level, once the businesses have been defined, the key issue is deciding how to compete more effectively and succeed in each one; in other words, discovering how to gain a competitive advantage.

Strategies at the business level (Chapter 5) study basic competitive strategies and strategies based on the industry’s life cycle. Following an introduction on creating and sustaining a competitive advantage, the chapter delves further into the two classical advantages propounded by Porter: cost leadership and differentiation. The analysis is rounded off with the "strategic clock" model, which expands the original model with new options for competition. A subsequent analysis examines possible strategies for emerging, growing, mature, and declining industries.

Corporate strategies are included in chapters 6 to 8. These cover firm development strategies – expansion, diversification, and restructuring -, the types or methods of development – mergers, acquisitions, and alliances-, and internationalisation strategies.

Development strategies refer to the expediency of continuing to operate with the same products and/or markets or entering and/or leaving new businesses. These strategies are examined in Chapter 6, which analyses the main reasons for choosing one over the other, as well as the different types they may entail: expansion, related diversification, unrelated diversification, vertical integration, and restructuring, both of existing businesses and of the firm’s own business portfolio.

Chapter 7 is devoted to the study of business development methods, distinguishing between internal and external development. The chapter focuses especially on external development, analysing both merger and acquisition processes, and alliances. They all include an investigation into the motives, advantages, drawbacks, types and problems involved in their management.

Finally within this block, Chapter 8 deals with internationalisation strategy, analysing the concept of multinational firm, the reasons for internationalisation, the factors and strategies for global industries, the ways of entering foreign markets, and the specific issues facing a multinational firm, with reference to aspects such as offshoring, commercial and cultural factors, the management of human resources, and structural design.

The third and final part of the book, Strategic Implementation, is contained in Chapter 9. This chapter deals with the process of generating, evaluating and selecting strategies according to the criteria of suitability, feasibility and acceptability. The problem of implementing the strategy is analysed below, where two main aspects stand out: the organisational support for implementation (organisational design, management and leadership systems, strategic management of human resources and corporate culture) and the planning and control systems.

All the chapters contain practical examples of the application of those aspects deemed of greatest interest to real company practices, for which sufficient data have been made available. The overriding aim has been to find applications in well-known Spanish firms, and whenever this has not been possible, in well-known foreign firms operating in Spain. These examples seek to illustrate the theoretical content by revealing, even if only partially, the firms’ true circumstances. The book concludes with a bibliography that includes all the references cited throughout the text, which have provided the general background for the content.