Strategic Management Concepts and Cases

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Strategic Management Concepts and Cases
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About the Authors
Michael A. Hitt is a Distinguished Professor and
holds the Joseph Foster Chair in
BusinessLeadership and the C. W. and Dorothy Conn
Chair in New Ventures at TexasAM University. He
received his Ph.D. from the University of
Colorado. He has coauthored or coedited 25 books
and 130 journal articles. Some of his books are
Downscoping How to Tame the Diversified
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R. Duane Ireland holds the Foreman R. and Ruby S.
Bennett Chair in Business in the Mays Business
School, Texas AM University. He also serves as
the head of the management department in the Mays
School. He teaches strategic management courses
at all levels (undergraduate, masters, doctoral,
and executive). His research, which focuses
ondiversification, innovation, corporate
entrepreneurship, and strategic
entrepreneurship,has been published in a number
of journals, including Academy of Management
Journal, Academy of Management Review, Academy of
Management Executive, Administrative Science
Quarterly, Strategic Management Journal, Journal
of Management, Human Relations, and Journal of
Management Studies, among others.
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Robert E. Hoskisson holds the W. P. Carey Chair
in the Department of Management at the W. P.
Carey School of Business at Arizona State
University. He received his Ph.D. from the
University of CaliforniaIrvine. His research
topics focus on international diversification,
privatization and cooperative strategy, product
diversification, corporate governance, and
acquisitions and divestitures. He teaches courses
in corporate and international strategic
management, cooperative strategy, and strategy
consulting, among others.
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• What is strategic management?

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Studying this chapter should provide you with the
strategic management knowledge needed to

• 1. Define strategic competitiveness, strategy,
  competitive advantage, above-average returns, and
  the strategic management process.
• 2. Describe the 21st-century competitive
  landscape and explain how globalization and
  technological changes shape it.
• 3. Use the industrial organization (I/O) model to
  explain how firms can earn above-average returns.
• 4. Use the resource-based model to explain how
  firms can earn above-average returns.
• 5. Describe vision and mission and discuss their
  value.
• 6. Define stakeholders and describe their ability
  to influence organizations.
• 7. Describe the work of strategic leaders.
• 8. Explain the strategic management process.

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Strategic Competitiveness
Achieved when a firm successfully formulates and
implements a value-creating strategy
Sustained Competitive Advantage
Occurs when a firm develops a strategy that
competitors are not simultaneously implementing
Above-Average Returns
Returns in excess of what an investor expects to
earn from other investments with similar risk
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The Strategic Management Process
Involves the full set of
which are required for firms to achieve
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
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Figure1.1 The Strategic Management Process
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• The strategic management process (see Figure 1.1)
  is the full set of commitments,
• decisions, and actions required for a firm to
  achieve strategic competitiveness and earn
  above-average returns.

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Challenge of Strategic Management
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21st Century Competitive Landscape

• Fundamental nature of competition is changing
• Rapid technological changes
• Rapid technology diffusions
• Dramatic changes in information and communication
  technologies
• Increasing importance of knowledge

• The pace of change is relentless.... and
  increasing
• Traditional industry boundaries are blurring,
  such as...
• Computers
• Telecommunications

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21st Century Competitive Landscape

• The global economy is changing
• People, goods, services and ideas move freely
  across geographic boundaries
• New opportunities emerge in multiple global
  markets
• Markets and industries become more
  internationalized

• Traditional sources of competitive advantage no
  longer guarantee success
• New keys to success include
• Flexibility
• Innovation
• Speed
• Integration

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21st Century Competitive Landscape
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The Global Economy

• A global economy is one in which goods, services,
  people, skills, and ideas move freely across
  geographic borders.

GE is moving boldly into China and other emerging
markets.
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The March of Globalization

• Globalization is the increasing economic
  interdependence among countries and their
  organizations as reflected in the flow of goods
  and services, financial capital, and knowledge
  across country borders. Globalization is a
  product of a larger number of firms competing
  against one another in an increasing number of
  global economies.

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Technology and Technological Changes

• There are three categories of trends and
  conditionstechnology diffusion and disruptive
• technologies, the information age, and
  increasing knowledge intensitythrough which
  technology is significantly altering the nature
  of competition and contributing to unstable
  competitive environments as a result of doing so.

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• Strategic flexibility is a set of capabilities
  used to respond to various demands and
  opportunities existing in a dynamic and uncertain
  competitive environment.

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Alternative Models of Superior Returns
Industrial Organization Model
Resource-BasedModel
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• The industrial organization (I/O) model of
  above-average returns explains the external
  environments dominant influence on a firms
  strategic actions. The model specifies that the
  industry in which a company chooses to compete
  has a stronger influence on performance than do
  the choices managers make inside their
  organizations.

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The I/O Model of Above-average Returns

• The first model (industrial organization or I/O)
  suggests that the external environment is the
  primary determinant of a firms strategic
  actions.
• The second model (resource based) suggests that a
  firms unique resources and capabilities are the
  critical link to strategic competitiveness.

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The Resource-Based Model of Above-Average Returns

• Resources are inputs into a firms production
  process, such as capital equipment, the skills of
  individual employees, patents, finances, and
  talented managers.

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• A capability is the capacity for a set of
  resources to perform a task or an activity in an
  integrative manner.
• Core competencies are capabilities that serve as
  a source of competitive advantage for a firm over
  its rivals.

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Groups who are affected by a firms performance
and who have claims on its wealth
Stakeholders
The firm must maintain performance at an adequate
level in order to maintain the participation of
key stakeholders
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Strategic Leaders

• Strategic leaders are people located in different
  parts of the firm using the strategic management
  process to help the
• firm reach its vision and mission.

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Southwest Airlines has built a unique corporate
culture.
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Stakeholder Involvement
Each of the key stakeholders wants a piece of the
same pie
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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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REVIEW QUESTIONS

• 1. What are strategic competitiveness, strategy,
  competitive advantage,above-average returns, and
  the strategic management process?
• 2. What are the characteristics of the
  21st-century landscape? What two factors are the
  primary drivers of this landscape?
• 3. According to the I/O model, what should a firm
  do to earn above-average returns?
• 4. What does the resource-based model suggest a
  firm should do to earn above-average returns?
• 5. What are vision and mission? What is their
  value for the strategic management process?
• 6. What are stakeholders? How do the three
  primary stakeholder groups influence
  organizations?
• 7. How would you describe the work of strategic
  leaders?
• 8. What are the elements of the strategic
  management process? How are they interrelated?