You are on page 1of 33

Strategic Management: Concepts and Cases

Part I: Strategic Management Inputs Chapter 1: Strategic Management and Strategic Competitiveness
1

Chapter 1: Strategic Management and Strategic Competitiveness


Overview: Eight content areas

Nature of Competition The 21st Century Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Strategic Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process
2

Nature of Competition: Boeing vs. Airbus


Boeing Historically a global leader in airplane manufacturing Revenue from commercial aircraft division & govt contracts Regained supremacy in 2006: more 787 super jumbo orders vs. Airbuss more efficient A-380 Changed strategy and design

Different production process Smaller plane (787 Dreamliner)

Airbus EU Government owned and subsidized Won competitor battle with Boeing between 2001 & 2005 Responded to customer demands with more efficient A-380 aircraft
3

Nature of Competition: Basic concepts

Strategic Competitiveness

Achieved when a firm formulate & implements a value-creating strategy


Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage Implemented strategy that competitors are unable to duplicate or find too costly to imitate Returns in excess of what investor expects in comparison to other investments with similar risk
4

Strategy

Competitive Advantage (CA)

Above Average Returns

Nature of Competition: Basic concepts


Risk Investors uncertainty about economic gains/losses resulting from a particular investment

(Contd)

Average Returns Returns equal to what investor expects in comparison to other investments with similar risk Strategic Management Process (SMP) Full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns
5

The Strategic Management Process

Chapter 1: Strategic Management and Strategic Competitiveness


Overview: Eight content areas

Nature of Competition The 21st Century Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Strategic Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process
7

st 21

Century Competitive Landscape

Introduction: The Competitive Landscape (CL) Pace of change is rapid Partnerships created by mergers & acquisitions (M&As) Other CL characteristics: Economies of scale, advertising budgets not as effective as before, change in managerial mind-set from traditional to more flexible and innovative

st 21

Century Competitive Landscape

(Contd)

Introduction: The Competitive Landscape (CL) Hypercompetition extremely intense rivalry among competing firms, characterized by Escalating & increasingly aggressive competitive moves Assumptions of market stability replaced with notion of INstability and change Two primary drivers of the competitive landscape: The global economy Technology

21st Century Competitive Landscape

(Contd)

The Global Economy Goods, services, people, skills and ideas move freely across geographic borders Europe, through the European Union (EU) is the worlds largest single market EU vs U.S. GDP: 35% higher Emerging major competitive forces: China & India In summary: globalization increased economic interdependence among countries as reflected in the flow of goods and services, financial capital, and knowledge across country borders
10

21st Century Competitive Landscape


Technology and Technological Changes

(Contd)

3 categories:

1. Technology diffusion & disruptive technologies 2. The information age 3. Increasing knowledge intensity

11

21st Century Competitive Landscape


Technology and Technology Changes

(Contd)

(Contd)

Technology diffusion

Perpetual innovation: describes how new informationintensive technologies are replacing older forms Speed to market may be primary competitive advantage 12 18 month timeframe to gather info re: competitor R&D Technologies that
Destroy value of existing technology Create new markets
12

Disruptive technologies

21st Century Competitive Landscape


Technology and Technology Changes


(Contd)

(Contd)

1. Technology diffusion & disruptive technologies 2. The information age 3. Increasing knowledge intensity

13

21st Century Competitive Landscape


Technology and Technology Changes

(Contd)

(Contd)

The information age Dramatic changes over last several years Major technological developments: computers, phones, artificial intelligence, virtual reality Internet provides infrastructure for information anytime, anywhere Increasing knowledge intensity Defined as information, intelligence & expertise and is the basis of technology and its application Gained through experience, observations and inferences Strategic Flexibility set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment
14

Chapter 1: Strategic Management and Strategic Competitiveness


Overview: Eight content areas

Nature of Competition The 21st C Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Strategic Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process
15

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)

16

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)


Basic Premise to explain the dominant

influence of the external environment on a firm's strategic actions and performance

17

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)


Underlying Assumptions External environment imposes pressures and constraints that determine the strategies resulting in AAR Most firms compete within a particular industry/segment
Control similar strategically relevant resources Pursue similar strategies in light of those resources Resources for implementing strategies are highly mobile across firms Therefore any resource differences between firms will be short-lived

Organizational decision makers are rational and committed to acting in the firm's best interests, as shown by their profit-maximizing behaviors
18

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)


Five-Forces Model (Michael Porter) The 5 Forces includes

Suppliers, buyers, competitive rivalry, product substitutes and potential entrants

Reinforces the importance of economic theory Analytical tool previously lacking in the field of strategy Determines the nature/level of competition and profit potential in an industry

Suggests an industrys profitability is an interaction between these 5 forces

19

Industrial Organizational (I/O) Model of Above-Average Returns (AAR) (Contd)


Limitations Only two strategies are suggested:

Cost Leadership
THE low-cost leader Customer willing to pay the premium price for being different

Differentiation

Internal resources & capabilities not considered

20

The ResourceBased Model of AAR

21

The Resource-Based Model of AAR


Basic Premise - a firm's unique [internal]

(Contd)

resources & capabilities, in combination, is the basis for firm strategy and AAR

Each firms performance difference across time emerges (vs industrys structural characteristics) Combined uniqueness should define the firms strategic actions Resources are tangible and intangible

22

The Resource-Based Model of AAR


Resources Inputs into a firm's production process

(Contd)

Includes capital equipment, employee skills, patents, high-quality managers, financial condition, etc.

Basis for competitive advantage: When resources are valuable, rare, costly to imitate and nonsubsitutable Internal/firm-specific resources (N=3)

Physical
Things you can touch/feel = tangible

Human
People / employees

Organizational capital
Relative to the firm itself
23

The Resource-Based Model of AAR

(Contd)

Capability Capacity for a set of resources to perform a task or activity in an integrative manner Core Competency A firms resources and capabilities that serve as sources of competitive advantage over its rival Summary A firm has superior performance because of

Unique resources and capabilities, and the combination makes them different, and better, than their competition driving the competitive advantage
24

Chapter 1: Strategic Management and Strategic Competitiveness


Overview: Eight content areas

Nature of Competition The 21st C Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Strategic Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process
25

Vision and Mission


Vision Picture of what the firm wants to be What the firm ultimately wants to achieve An effective vision statement is the responsibility of the leader who should work with others to form it Foundation for the mission Mission Specifics business(es) in which firm intends to compete and customers it intends to serve More specific than the vision
26

Stakeholders
Basic Premise a firm can effectively manage

stakeholder relationships to create a competitive advantage and outperform its competitors Stakeholders are individuals and groups

They can affect, and are affected by, the strategic outcomes/performance a firm achieves Three (3) classifications

27

The Three Stakeholder Groups

28

Stakeholders

(Contd)

Classifications of Stakeholders Capital Market

Expect returns commiserate with risk accepted by investments Higher the dependency relationship, the more direct and significant firms response The 4 groups benefit due to competitive battles The employees
29

Product Market

Organizational

Chapter 1: Strategic Management and Strategic Competitiveness


Overview: Eight content areas

Nature of Competition The 21st C Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Strategic Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process
30

Strategic Leaders
People located in different parts of the firm using

the strategic management process to help the firm reach its vision and mission

Decisive and committed to nurturing those around them Create and sustain organizational culture Organizational culture emerges from & sustained by leaders

Complex set of ideologies, symbols and core values shared throughout the firm Affects leaders/their work which in-turn shapes culture Influences how the firm conducts business
31

Strategic Leaders

(Contd)

The Work of Effective Strategic Leaders Work long hours Must be able to think seriously and deeplyabout the purposes of the organizations they head or functions they perform, about strategies, tactics,..and peopleand about the important questions they need to ask. Predicting Outcomes: Profit Pools (PP) Anticipates their decisions relative to the PP Entails the total profits earned in an industry at all points along the value chain
32

Strategic Management Process


Rational approach used by firms to achieve

strategic competitiveness and earn above average returns (AAR) Figure 1.1 (Diagram of chapter relationships)

Part 1: Strategic Mgmt Inputs Part 2: Strategic Actions: Strategy Formulation Part 3: Strategic Actions: Strategy Implementation Part 4: Cases

33

You might also like