What are the foundations of strategic competitiveness?

1
What are the foundations of strategic
competitiveness?

• Basic concepts of strategy
• Competitive advantage operating with an
  attribute or set of attributes that allows an
  organization to outperform its rivals.
• Sustainable competitive advantage one that is
  difficult for competitors to imitate.

2
What are the foundations of strategic
competitiveness?

• Basic concepts of strategy (cont.)
• Strategy a comprehensive action plan that
  identifies long-term direction for an
  organization and guides resource utilization to
  accomplish organizational goals with sustainable
  competitive advantage.
• Strategic intent focusing all organizational
  energies on a unifying and compelling goal.

3
What are the foundations of strategic
competitiveness?

• Basic concepts of strategy (cont.)
• Strategic management the process of formulating
  and implementing strategies to accomplish
  long-term goals and sustain competitive advantage.

4
What are the foundations of strategic
competitiveness?

• Goal of strategic management is to create
  above-average returns for investors.
• Returns exceeding those for alternative
  opportunities at equivalent risk.
• Earning above-average returns depends in part on
  the organizations competitive environment.

5
What are the foundations of strategic
competitiveness?

• Environments and competitive advantage
• Monopoly.
• Only one player and no competition.
• Creates absolute competitive advantage.
• Oligopoly.
• Few players not directly competing against each
  other.
• Long-term competitive advantage in defined market
  segment.
• Hypercompetition.
• Several players directly competing against each
  other.
• Any competitive advantage is only temporary.

6
What is the strategic management process?

• Strategy formulation
• The process of creating strategy.
• Involves assessing existing strategies,
  organization, and environment to develop new
  strategies and strategic plans capable of
  delivering future competitive advantage.

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Figure 9.1 Strategy formulation and
implementation in the strategic management
process.
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What is the strategic management process?

• Strategic question for strategy formulation
• What is our business mission?
• Who are our customers?
• What do our customers consider value?
• What have been our results?
• What is our plan?

9
What is the strategic management process?

• Strategy implementation
• The process of allocating resources and putting
  strategies into action.
• All organizational and management systems must be
  mobilized to support and reinforce the
  accomplishment of strategies.

10
What is the strategic management process?

• Essential tasks for strategy implementation
• Identify organizational mission and objectives.
• Assess current performance vis-à-vis mission and
  objectives.
• Create strategic plans to accomplish purpose and
  objectives.
• Implement the strategic plans
• Evaluate results change strategic plans and/or
  implementation processes as necessary.

11
What is the strategic management process?

• Analysis of mission
• The reason for an organizations existence.
• Good mission statements identify
• Customers
• Products and/or services
• Location
• Underlying philosophy
• An important test of the mission is how well it
  serves the organizations stakeholders.

12
What is the strategic management process?

• Analysis of mission
• What kind of difference do we want to make in the
  world?
• What do we want to be known for?
• Starbuckss mission is to be the premier
  purveyor of the finest coffee in the world while
  maintaining our uncompromising principles as we
  grow.

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Figure 9.2 How external stakeholders can be
valued as strategic constituencies of
organizations.
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What is the strategic management process?

• Analysis of values
• Values are broad beliefs about what is or is not
  appropriate.
• Strong core values for an organization helps
  build institutional identity, gives character to
  an organization, and it backs up the mission
  statement.
• Organizational culture reflects the dominant
  value system of the organization as a whole.

15
What is the strategic management process?

• Organizational culture ?
• Shapes the values of managers and other
  organization members.
• Points people in common directions.
• Helps build institutional identity.
• Gives character to the organization in the eyes
  of employees and external stakeholders.
• Backs up the mission statement.
• Guides the behavior of organizational members in
  meaningful and consistent ways.

16
What is the strategic management process?

• Analysis of objectives
• Objectives are specific results that
  organizations try to accomplish (like their
  goals)
• Whereas a mission statement sets forth an
  official purpose for the organization
• And the core values describe the appropriate
  standards of behavior for a companys
  accomplishments.

17
What is the strategic management process?

• Analysis of objectives
• Typical operating objectives according to Peter
  Drucker
• Profitability (make money)
• Market share (increase customers)
• Human talent (top talent)
• Financial health (positive cash flow)
• Cost efficiency (low cost)
• Product quality (high quality)
• Innovation (leading edge)
• Social responsibility (positive contribution to
  society)

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SWOT ANALYSIS

• A SWOT analysis is performed in order to
  determine the strengths, weaknesses,
  opportunities and threats of an organization
• A major goal of a SWOT analysis is to find out
  what a companys core competency is.
• A core competency is a special strength that
  gives an organization a competitive advantage.

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Figure 9.3 SWOT analysis of strengths,
weaknesses, opportunities,and threats.
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SWAT ANALYSIS

• Note that the strengths and weaknesses stem from
  internal sources (within the company) whereas the
  opportunities and threats stem from external or
  environmental factors.
• External factors include technology, government,
  social structures, population demographics,
  competitors, and customers. Opportunities
  usually exist as new markets, strong economy or
  weakness in competitors

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SWOT ANALYSIS

• What are our Opportunities?
• Possible new markets?
• Strong economy?
• Weak market rivals?
• Emerging technologies?
• Growth of existing market?

• What are our Threats?
• New competitors?
• Shortage of resources?
• Changing market tastes?
• New regulations?
• Substitute products?

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Figure 9.4 Porters model of five strategic
forces affecting industry competition.
Source Developed from Michael E. Porter,
Competitive Strategy (New York Free Press, 1980).
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How are strategies formulated?

• Porters generic strategies model
• Michael Porter developed a five force model for
  industry analysis to help answer the question Is
  this an attractive industry for us to compete in?
  and How can we best compete for customers in
  this industry?

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Porters Generic Strategies

• According to Porter, business-level strategic
  decisions are driven by two basic factors
• 1) Market scope How broad or how narrow is the
  target market (niche market?)
• 2) Competitive advantage How will you compete
  by lower price or by product uniqueness?

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Figure 9.6 Porters generic strategies framework
soft-drink industry examples.
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Porters Generic Strategies

• Porters generic strategies for gaining
  competitive advantage
• Differentiation strategy
• Cost leadership strategy
• Focused differentiation strategy
• Focused cost leadership strategy

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Porters Generic Strategies

• Differentiation where the organizations
  resources and attention are directed toward
  making its products appear different from those
  of the competition (example, Coke, Pepsi,
  Starbucks)
• Organizations pursuing differentiation strategy
  seek competitive advantage by making their
  products clearly different from their
  competitors. The objective is to attract
  customers who become loyal. This strategy
  requires organization strength in marketing and
  creativity. Its success depends on continuing
  customer perceptions of product quality and
  uniqueness (i.e. Polo, Ralph Lauren)

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Porters Generic Strategies

• Cost Leadership Where the organizations
  resources an attention are directed toward
  minimizing costs to operate more efficiently than
  the competition (example, Presidents Choice
  Cola, No Frills)
• Organizations pursuing a cost leadership strategy
  try to have lower costs than their competitors
  and therefore achieve higher profits. The
  objective is to continually improve efficiency
  with tight cost controls. (Walmart)

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Porters Generic Strategies

• Focused Differentiation where the organization
  concentrates on one special market segment and
  tries to offer customers in that segment a unique
  product (AW Root Beer, Canada Dry). The
  objective is to serve the customers needs better
  than anyone else.

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Porters Generic Strategies

• Focused cost leadership Where the organization
  concentrates on one special market segment and
  tries in that segment to be the provider with the
  lowest costs (ex. Red Cherry Pop). Another
  example is West Jet. They are a successful low
  cost airline. They took out business class and
  food services to keep costs low and they fly into
  smaller airports. This no-frills approach, has
  helped West Jet to become Canadas second largest
  airline.

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Corporate Governance

• Corporate governance
• System of control and performance monitoring of
  top management.
• Done by boards of directors and other major
  stakeholder representatives.
• The BOD and the shareholders ensure that an
  organization operates in the best interests of
  its owners.
• Increasing emphasis on corporate governance in
  contemporary businesses.