Strategic Management and

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Chapter 1

• Strategic Management and
• Strategic Competitiveness

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Strategic Competitiveness
Firm successfully formulates and implements a
value-creating strategy
Sustained Competitive Advantage
Firm develops a strategy that competitors are not
simultaneously implementing
Provides benefits which current and potential
competitors are unable to duplicate
Above-Average Returns
Returns in excess of what an investor expects to
earn from other investments with similar risk
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Strategic Management Process
Involves the full set of
Actions
Commitments
Decisions
required to achieve
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
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Chapter 2
The Strategic Management Process
External
Environment
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Strategy Formulation
Strategy Implementation
Chapter 4
Chapter 5
Chapter 6
Chapter 10
Chapter 11
Business-Level
Competitive
Corporate-Level
Corporate
Structure
Strategy
Dynamics
Strategy
Governance
Control
Actions
Strategic
Chapter 8
Chapter 7
Chapter 9
Chapter 12
Chapter 13
International
Entrepreneurship Innovation
Cooperative
Acquisitions
Strategic
Strategy
Strategies
Restructuring
Leadership
Strategic
Competitiveness
Above Average
Feedback
Returns
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Chapter One Key Themes
Challenge of Strategic Management
Changing Competitive Landscape
Two Models of Superior Profitability
Industrial Organization Model
Resource-Based Model
Key Stakeholder Groups
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Challenge of Strategic Management
Only 2 of the top 25 U.S. corporations in 1900
are still competitive today!
In a recent year, almost 150,000 U.S. businesses
failed or filed for bankruptcy
Competitive success is transient...unless care is
taken to preserve competitive position
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New Competitive Landscape
Fundamental nature of competition is changing
The pace of change is relentless.... and
increasing
Rapid technological changes
Rapid technology diffusions
Traditional industry boundaries are
blurring...such as
Dramatic changes in information and communication
technologies
Computers
Increasing importance of knowledge
Telecommunications
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New Competitive Landscape
The global economy is changing
Traditional sources of competitive advantage no
longer guarantee success
People, goods, services and ideas move freely
across geographic boundaries
New keys to success include
New opportunities emerge in multiple global
markets
Flexibility
Innovation
Markets and industries become more
internationalized
Speed
Integration
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Alternative Model of Superior Returns
Industrial Organization Model
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Resource-Based Model
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I/O Model of Superior Returns
The Industrial Organization Model suggests that
above-average returns for any firm are largely
determined by characteristics outside the firm.
The I/O model largely focuses on industry
structure or attractiveness of the external
environment rather than internal characteristics
of the firm.
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I/O Model of Superior Returns
Action required
External Environment
Study the external environment, especially the
industry environment.
General Environment
Industry Environment
Competitive Environment
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I/O Model of Superior Returns
Action required
Locate an industry with high potential for
above-average returns.
An Attractive Industry
An industry whose structural characteristics
suggest above-average returns are possible
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I/O Model of Superior Returns
Action required
Identify strategy called for by the industry to
earn above-average returns.
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I/O Model of Superior Returns
Action required
Develop or acquire assets and skills needed to
implement the strategy.
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I/O Model of Superior Returns
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I/O Model of Superior Returns
Action required
Maintain selected strategy in order to outperform
industry rivals.
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Resource-Based Model of Superior Returns
The Resource-Based Model suggests that
above-average returns for any firm are largely
determined by characteristics inside the firm.
The Resource-Based view focuses on developing or
obtaining valuable resources and capabilities
which are difficult or impossible for rivals to
imitate.
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Resource-Based Model of Superior Returns
Action required
Identify firm resources. Study strengths and
weak- nesses relative to rivals.
Resources
Inputs to a firms production process.
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Resource-Based Model of Superior Returns
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Resource-Based Model of Superior Returns
Action required
Determine how firms resources and capabilities
may create competitive advantage.
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Resource-Based Model of Superior Returns
Action required
Locate an attractive industry.
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Resource-Based Model of Superior Returns
Action required
Select strategy that best exploits resources and
capabilities relative to opportunities in
environs.
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Resource-Based Model of Superior Returns
Action required
Maintain selected strategy in order to outperform
industry rivals.
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Resources and capabilities lead to Competitive
Advantage when they are
Valuable -
allow the firm to exploit opportunities or
neutralize threats in its external environment
Rare -
possessed by few, if any, current and potential
competitors
Costly to Imitate -
when other firms either cannot obtain them or
must obtain them at a much higher cost
the firm must be organized appropriately to
obtain the full benefits of the resources in
order to realize a competitive advantage
Nonsubstitutable-
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When these four criteria are met, Resources and
Capabilities become
Core Competencies
Core Competencies are Resources and capabilities
that can serve as a source of Competitive
Advantage
The Resource-Based Model argues that Core
Competencies are the basis for a firms
Competitive Advantage, Strategic Competitiveness
and ability to earn above-average returns.
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Strategic Intent
Winning competitive battles through deciding how
to leverage internal resources, capabilities, and
core competencies.
Strategic Mission
An application of strategic intent in terms of
products to be offered and markets to be served.
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Groups who are affected by a firms performance
and who have claims on its performance
Stakeholders
The firm must maintain performance at an adequate
level in order to maintain the participation of
key stakeholders
Capital Market
Firm
Product Market
Organizational
Employees Managers Non-Managers
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Stakeholder Involvement
Each of the key stakeholders involved wants a
piece of the same pie
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How do you divide the pie in order to keep all of
the stakeholders involved?
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How do you increase the size of the pie so that
there is more to go around?