CHAPTER 1
STRATEGIC MANAGEMENT AND
STRATEGIC COMPETITIVENESS
Important Definitions
Strategic Management Process
 The full set of commitments, decisions, and
actions required for a firm to achieve
strategic competitiveness and earn above-
average returns
Strategy
 is an integrated and coordinated set of
commitments and actions designed to
exploit core competencies and gain a
competitive advantage
Competitive Advantage
 Achieved when a firm implements a strategy
that creates superior value for customers
and that competitors are unable to duplicate
or find it too costly to try to imitate
Strategic Competitiveness
 Achieved when a firm successfully
formulates and implements a value-creating
strategy
Above-Average Returns
 Occurs when a firm develops a strategy that
competitors are not simultaneously
implementing Provides benefits which
current and potential competitors are unable
to duplicate
Risk
 An investor’s uncertainty about the
economic gains or losses that will result
from a particular investment
Average Returns
 Returns that are equal to those an investor
expects to earn from other investments with
a similar amount of risk
Competitive Landscape
Fundamental nature of competition is changing
Hypercompetitive environments
 Dynamics of strategic maneuvering among
global and innovative combatants
 Price-quality positioning, new knowhow, first
mover
 Protect or invade established product or
geographic markets
Emergence of global economy
 Goods, services, people, skills, and ideas
move freely across geographic borders.
 Spread of economic innovations around the
world.
 Political and cultural adjustments are
required
Rapid technological change
 Increasing rate of technological change and
diffusion
 The information age
 Increasing knowledge intensity
Important Definitions
Hyper Competition
 describes competition that is excessive
such that it creates inherent instability and
necessitates constant disruptive change for
firms in the competitive landscape
Technology and Technological Changes
 Technology-related trends and conditions
can be placed into three categories:
1. Technology diffusion and disruptive
technologies
2. The information age,
3. Increasing knowledge intensity
Global Economy
 is one in which goods, services, people,
skills, and ideas move freely across
geographic Borders.
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
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
Strategic Flexibility
1. Study the external environment, specially
the industry environment
2. Locate an industry with high potential for
above average returns
3. Identify the Strategy called for by the
attractive Industry to earn above average
returns.
4. Develop or acquire assets and skills needed
to implement the strategy.
5. Use the firm’s strengths, its developed or
acquired assets and skills to implement the
strategy
The External Environment
The General Environment
The industry Environment
The Competitor Environment
An Attractive Industry
An Industry whose structural characteristics
suggest above average returns.
Strategy Formulation
Selection of a strategy linked with above-
average returns in a particular industry

 A set of capabilities used to respond to Assets and Skills

various demands and opportunities existing
in a dynamic and uncertain competitive
environment It involves coping with
uncertainty and the accompanying risks
Organizational
slack
Assets and skill required to implement a
chosen strategy
Strategy Implementation
Selection of Strategic Actions linked
with effective implementation of the
chosen strategy

Strategic Strategic Superior Returns

reorientation Flexibility Earning of above-average returns

Capacity to learn
I/O Model of Above-Average Returns

Alternative Models of Superior Returns

Industrial Organization Resource-Based Model
Model
The External Resources
Environment Capability
An Attractive Industry Competitive Advantage
Strategy Formulation An Attractive Industry
Assets and Skills Strategy Implementation
Strategy Implementation Superior Returns
Superior Returns

The I/O Model above-Average Returns


1. Strategy dictated by the external environments of
the firm (what opportunities exist in these
environments?)
2. Firm develops internal skills required by external
environment (what can the firm do about the
opportunities?)
Four Assumptions of the I/O Model
1. The external environment is assumed to
possess pressures and constraints that
determine the strategies that would result in
above-average returns
2. Most firms competing within a particular or
within a certain segment of it are assumed
to control similar strategically relevant
resources and to pursue similar strategies in
light of those resources
3. Resources used to implement strategies are
highly mobile across firms
4. Organizational decision makers are
assumed to be rational and committed to
acting in the firm’s best interests, as shown
by their profit-maximizing behaviors
The Resource-Based Model of
aboveAverage Returns
1. Identify the firm’s resources. Study its
strengths and weaknesses compared
with those of competitors.
2. Determines the firm’s capabilities. What
do the capabilities allow the firm to do
better that its competitors?
3. Determine the potential of the firm’s
resources and capabilities in terms of a
competitive advantage.
4. Locate an attractive industry.
5. Select a strategy that best allows the
firm to utilize its resources and
capabilities relative to opportunities in
the external environment.
Resources
Inputs into a firm’s production process
Capability
Capacity of an integrated set of resources to
integratively perform a task or activity
Competitive Advantage
Ability of a firm to outperform its rivals
An Attractive Industry
An industry with opportunities that can be
exploited by the firm’s resources and
capabilities
Strategy Formulation and Implementation
Strategic actions taken to earn above average
return
Superior Returns
Earning of above-average returns
I/O Model of Above-Average Returns
Industrial Organization Model
The External Environment
1. Study the external environment, especially the
industry environment
 economies of scale
 barriers to market entry
 diversification
 product differentiation
 degree of concentration of firms in the
industry
An Attractive Industry
2. Locate an attractive industry with a high potential
for above-average returns
 Attractive industry: one whose structural
characteristics suggest above-average
returns
Strategy Formulation
 Identify the strategy called for by the
attractive industry to earn above-average
returns
 Strategy formulation: selection of a strategy
linked with above-average returns in a
particular industry
Assets and Skills
4. Develop or acquire assets and skills needed to
implement the strategy.
 Assets and skills: those assets and skills
required to implement a chosen strategy
Strategy Implementation
5 .Use the firm’s strengths (its developed or  possessed by few, if any, current and
acquired assets and skills) to implement the potential competitors
strategy
Costly to imitate
 Strategy implementation: select strategic
actions linked with effective implementation  when other firms cannot obtain them or
of the chosen strategy must obtain them at a much higher cost
Non-substitutable

 the firm is organized appropriately to obtain

the full benefits of the resources in order to
realize a competitive advantage

Resource-based Model of Above Average Resources and capabilities that meet these four
Returns criteria become a source of:
1. Firm’s Resources
Strategy dictated by unique resources and
capabilities of the firm (what can the firm do best?)
Find an environment in which to exploit these
assets (where are the best opportunities?)

 Resource-based Model
Resources
1. Identify the firm’s resources-- strengths and Core Competencies are the basis for a firm’s
weaknesses compared with competitors
Resources: inputs into a firm’s production
process
Capability
2. Determine the firm’s capabilities--what it can
do better than its competitors
Capability: capacity of an integrated set of
resources to integratively perform a task or
activity
Competitive Advantage
3. Determine the potential of the firm’s resources
Four Attributes of Resources and Capabilities
and capabilities in terms of a competitive
(Competitive Advantage)
advantage
Valuable
Competitive advantage: ability of a firm to
 allow the firm to exploit opportunities or outperform its rivals
neutralize threats in its external environment
An Attractive Industry
Rare
4. Locate an attractive industry
An attractive industry: an industry with opportunities
that can be exploited by the firm’s resources and
capabilities
Strategy Form/Impl
5. Select a strategy that best allows the firm to
utilize its resources and capabilities relative to
opportunities in the external environment
Strategy formulation and implementation: strategic
actions taken to earn above average returns
Vision & Mission
The key purpose of vision and mission statements
is to inform stakeholders of what the firm is, what it
seeks to accomplish, and who its seeks to serve
Vision
 is a picture of what the firm wants to be and,
in broad terms, what it wants to ultimately
achieve.
 a vision statement points the firm in the
direction of where it would like to be in the
years to come
Vision Statement
 It is also important to recognize that vision
statements reflect a firm’s values and
aspirations and are intended to capture the
heart and mind of each employee and,
hopefully, many of its other stakeholders.
 EXAMPLE:
Facebook Vision Statement: People use
Facebook to stay connected with friends
and family, to discover what’s going on in
the world, and to share and express what
matters to them.
 McDonald’s Vision Statement: Our vision is
to be the world’s best quick service
restaurant.
Mission
 A mission specifies the businesses in which
the firm intends to compete and the
customers it intends to serve.
 A firm’s mission is more concrete than its
vision
Together, the vision and mission provide the
foundation that
 the firm needs to choose and implement
one or more strategies.
Business ethics are a vital part of the firm’s
discussions to decide what it wants to become (its
vision) as well as who it intends to serve and how it
desires to serve those individuals and groups (its
mission).
Mission Statement
 EXAMPLE:
Facebook Mission Statement: "Facebook's
mission is to give people the power to share
and make the world more open and
connected. People use Facebook to stay
connected with friends and family, to
discover what's going on in the world, and to
share and express what matters to them"
 McDonald’s Mission Statement:
 " Be the best employer for our people in
each community around the world and
deliver operational excellence to our
customers in each of our restaurants.
The Firm and Its Stakeholders
Stakeholders
The firm must maintain performance at an
adequate level in order to retain the participation of
key stakeholders
 Capital Market Stakeholders
Shareholders
Major suppliers of capital
- Banks
- Private lenders
- Venture capitalists
 Product Market Stakeholders
- Primary customers
- Suppliers
- Host communities
- Unions
 Organizational Stakeholders
- Employees
 - Managers
- Nonmanagers
Stakeholder Involvement
Two issues affect the extent of stakeholder
involvement in the firm
1. How do you divide the returns to keep
stakeholders involved?
2. How do you increase the returns so
everyone has more to share?
Chapter 2
The Business Vision & Mission
Strategic Management: Concepts & Cases 11th Edition Fred David
VISION & MISSION
A business is not defined by its name, statutes, or
articles of incorporation. It is defined by the business
mission. Only a clear definition of the mission and
purpose of the organization makes possible clear and
realistic business objectives." —Peter Drucker
even excite a business into superior performance. The
job of a strategist is to identify and project a clear
vision." —John Keane
"Where there is no vision, the people perish." —
Proverbs 29:18
The last thing IBM needs right now is a vision. (July
1993) What IBM needs most right now is a vision.
(March 1996)" —Louis V. Gerstner Jr., CEO, IBM
Corporation
"The best laid schemes of mice and men often go
awry." —Robert Burns (paraphrased)
"A strategist’s job is to see the company not as it
is . . .but as it can become." —John W. Teets, Chairman
of Greyhound, Inc.
"That business mission is so rarely given adequate
thought is perhaps the most important single cause of
business frustration." —Peter Drucker.
"The very essence of leadership is that you have to have
vision. You can’t blow an uncertain trumpet." Theodore
Hesburgh
VISION
● Vision Statement should answer the question:
What do we want to become?
● A clear vision provides the foundation for
developing a comprehensive mission statement
● Vision statement must be formulated first and
foremost
Consideration in creating a Vision Statement:
● It should be short
● Preferably one sentence
● It’s a must that as many managers as possible
should have an input in developing the
statement.
MISSION
● Mission should answer the question: What is
our business
● It is an enduring statement of purpose that
distinguishes one organization from other
similar enterprises.
MISSION STATEMENT
● Is a declaration of an organization’s “reason of
being”
● A clear mission statement is essential for
effectively establishing objectives and
formulating strategies.
● Sometimes called CREED STATEMENT, a
statement of purpose, a stamen of philosophy,
a statement of beliefs, a statement of business
principles, or a statement of “defining our
business.
● It reveals what an organization wants to be and
whom it wants to serve.
● It reveals what an organization wants to be and
whom it wants to serve.
● A business mission is the foundation for
priorities, strategies, plans and work
assignment.
● It is the starting point for the design of
managerial jobs and, above all for the design of
managerial structures.
 ● Establishing objectives and implementing
strategies should not be rush. Vision and
statement should be established first.
SOMETHING TO THINK ABOUT
● Profit alone is not enough to motivate people.
● As many managers as possible should be involve
in developing vision and mission statement
Process of Developing Vision and Mission Statement
Approach A.
1. Select several articles about these statements and ask
all managers to read these as background information
● Video tape
1. Define and compare vision and mission
2. Explain the detailed process of vision and
mission development.
3. Write the BulSu mission, assess and comment
on it based on the components. identified by
Fred David
Shared Vision –
• Creates commonality of interests
• Reduce daily monotony

2. Ask them to prepare a vision and mission statement • Provides opportunity & challenge
for the organization

3. Facilitator or committee of top managers shall merge

these statements in a single document and distribute
the draft statement to all managers
4. Request for modification, additions, and deletion is
needed
5. Conduct Meeting to revise the document
Vision Statement Examples
To be the first choice in the printed communications
business. The first choice is the best choice, and being
the best is what Atlanta Web pledges to work hard at
being—every day! Vision Statement Examples -- Atlanta
Web Printers, Inc

6. Produce the final document and make sure all

managers input and support the final document
Mission Statements
Approach B.
•Enduring statement of purpose
1. Discussion Groups of managers to develop and
•Distinguishes one firm from another
modify existing statement.
•Declares the firm’s reason for being
Approach C.

1. Hiring outside consultant or facilitator to manage the

process and draft the language Vision & Mission
Approach D. Profit & vision are necessary to effectively motivate a
workforce
1. Hiring Outside person with expertise in developing
such statement. Mission Statements Examples
Campbell and Yeung The Bellevue Hospital, with respect, compassion,
integrity, and courage, honors the individuality and
● Vision” a possible and desirable future state of
confidentiality of our patients, employees, and
an organization
community, and is progressive in anticipating and
● Mission- more associated with behavior and the
providing future health care services. -- The Bellevue
present.
Hospital
Benefits of Vision and Mission

● Divergent Views
Importance of Mission
Communicating Vision and Mission
Benefits from a strong mission
 ● Unanimity of Purpose structure of society by initiating innovative ways to
● Resource Allocation improve the quality of life of a broad community—local,
● Organizational Climate national and international.
● Focal point for work structure

Mission & Customer Orientation – Vern McGinnis

● Define what the organization is

● Define what it aspires to be
● Limited to exclude some ventures
● Broad enough to allow for growth
● Distinguishes firm from all others
● Stated clearly – understood by all

Social Policy & Mission

● Social policy should be integrated in all

strategic-management activities
● Mission should convey the social responsibility
of the firm

Research results are mixed, however, firms with formal

mission statements –

● 2x average return on shareholder’s equity

● Positive relationship to company performance
● 30% higher return on certain financial measures

Mission Elements

● Customers
● Markets
● Employees
● Public Image
● Self-concept
● Philosophy
● Survival Growth Profit
● Products Services
● Technology

Ben & Jerry’s Mission

Ben & Jerry’s mission is to make, distribute and sell the

finest quality all-natural ice cream and related products
in a wide variety of innovative flavors made from
Vermont dairy products. To operate the Company on a
sound financial basis of profitable growth, increasing
value for our shareholders, and creating career
opportunities and financial rewards for our employees.
To operate the Company in a way that actively
recognizes the central role that business plays in the
Objectives
 For example, the same neighborhood group
might have an objective of increasing the
percentage of people living in the community
o What are Objectives? with adequate housing as a community-level
o Why should you create objectives? outcome objective
o When should you create objectives? Objectives should be S.M.A.R.T. + C.:
o How do you create objectives?
1. Specific
2. Measurable
3. Achievable
Objectives 4. Relevant/Realistic
 Objectives are the specific measurable results of 5. Timed
6. Challenging
the initiative.
 Objectives specify how much of what will be
accomplished by when.
 For example, one of several objectives for a 1. Specific ∙
community initiative to promote care and caring  That is, they tell how much (e.g., 10%) of what
for older adults might be: "By 2024 (by when), is to be achieved (e.g., what behavior of whom
to increase by 20% (how much) those elders or what outcome) by when (e.g., by 2025)?
reporting that they are in daily contact with
someone who cares about them (of what)." 2. Measurable

There are three basic types of objectives
1. Process objectives
2. Behavioral objectives.
3. Community-level outcome objectives.
1. Process objectives
 These are the objectives that provide the
groundwork or implementation necessary to
achieve your other objectives.
 For example, the group might adopt a
comprehensive plan for improving
neighborhood housing. In this case, adoption of
the plan itself is the objective.
2. Behavioral objectives.
 These objectives look at changing the behaviors
of people (what they are doing and saying) and
the products (or results) of their behaviors.
 For example, a neighborhood improvement
group might develop an objective for having an
increased amount of home repair taking place
(the behavior) and fewer houses with broken or
boarded-up windows (the result).
3. Community-level outcome objectives.
 Information concerning the objective can be
collected, detected, or obtained.
3. Achievable
 It is feasible to pull them off
4. Relevant/Realistic
 Relevant to the mission. Your organization has a
clear understanding of how these objectives fit
in with the overall vision and mission of the
group
5. Timed
 Your organization has developed a timeline (a
portion of which is made clear in the objectives)
by which they will be achieved.
6. Challenging
 They stretch the group to set its aims on
significant improvements that are important to
members of the community

Example: ∙ "By 2025, rates of teen pregnancy among 12-
17 year old girls will decrease by 30%."

 These are often the product or result of behavior

change in many people. They are focused on
change at the community level instead of an
individual level.
Why Should You Create Objectives? ∙
1. Having benchmarks to show progress.
2. Completed objectives can serve as a marker to
show members of your organization, funders,
and the greater community what your initiative
has accomplished.
3. Creating objectives helps your organization keep
focused on initiatives most likely to have an
impact
4. Keeping members of the organization working
toward the same long-term goals
When Should You Create Objectives? ∙
1. Your organization has developed (or revamped)
its vision and mission statements, and is ready to
take the next step in the planning process.
2. Your organization's focus has changed or
expanded.
3. The organization wants to address a community
issue or problem, create a service, or make a
community change that requires:
a) Several years to complete.
b) A change in behavior of large numbers of
people. ∙
c) A multi-faceted approach.
How Do You Create Objectives?
1. Define Or Reaffirm Your Vision and Mission
Statements
2. Determine The Changes to Be Made
3. Collect Baseline Data on The Issues to Be
Addressed
4. Decide What Is Realistic for Your Organization
to Accomplish
5. Set The Objectives for Your Organization or
Initiative
6. Review The Objectives Your Organization Has
Created
7. Use Your Objectives to Define Your
Organization's Strategies

Strategy Formulation
Strategic Management:
 the process of determining an organization’s
basic mission and long-term objectives, then
implementing a plan of action for pursuing the
mission and attaining objectives
 Growing need for strategic management related
to increasingly diversified operations in
continuously changing international
environment
Benefits of strategic management
• Sets long-term direction for the total enterprise
Business Strategy
• Identifies how a strategic business unit or
division will compete in its product or service
domain
Functional Strategy
• Guides activities within one specific area of
operations

 Establish the mission

 Formulate philosophy
 Establish policies
 Setting objectives
 Developing strategy
 Plan the organizational
 structure
 Provide personnel
 Establish procedures
 Provide facilities
 Provide capital
 Set standards
 Establish programs and
 plans Growth And Diversification Strategies
 Control information Growth Strategy
 Activate people
• Expansion through current operations
Concentration
Types Of Strategies
• Expansion within an existing business area
Strategy
Diversification
• a comprehensive plan guiding resource
allocation to achieve long-term organization • Expansion occurs by entering new business
goals. areas

Strategic Intent Vertical Integration

• focuses organizational energies on achieving a • Expansion by acquiring existing suppliers or

compelling goal. distributors

Competitive Advantage
• operating in successful ways that are difficult to
duplicate

Corporate Strategies
Corporate Strategy Restructuring and Retrenchment Strategies
Retrenchment
• Changes operations to correct weaknesses
• Liquidation-
- An extreme form of retrenchment wherein
the business closes and sells off its assets
Restructuring
• Reduces the scale or mix of operations
Downsizing
• Decreases the size of operations
Divestiture
• Sells off part of the organization to focus on core
businesses
Steps to strategic management
• Environmental analysis
• Establish organizational direction
• Strategy formulation
• Strategy implementation
• Strategic control
Strategy formulation
• What is the purpose(s) and objective(s) of the
organization?
• Where is the organization presently going?
• What critical environmental factors does the
organization currently face?
• What can be done to achieve organizational
objectives more effectively in the future?
Formulating business strategies
• Structural analysis of competitive forces
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of substitute products
- Rivalry among existing competitors
- Strategic alternatives
• Commander approach
• Organizational change approach
• Collaborative approach
• Cultural approach
Commander approach
• Manager determines “best” strategy
• Manager uses power to see strategy
implemented
• Three conditions must be met
– Manager must have power
– Accurate and timely information is
available
– No personal biases should be present
• Limitations
– Can reduce employee motivation and
innovation
• Advantages
– Managers focus on strategy formulation
– Works well for younger managers
– Focuses on objective rather than
subjective
Organizational change approach
• Focuses on the organization
• Behavioral tools are used
• Includes focusing on the organization’s staffing
and structure
• Often more effective than Commander
• Used to implement difficult strategies
• Limitations
– Managers don’t stay informed of
changes occuring within the
environment
– Doesn’t take politics and personal
agendas into account
– Imposes strategies in a “top-down”
format
– Can backfire in rapidly changing
industries
Collaborative approach

Formulating functional strategies • Enlarges the Organizational Change Approach

• Manager is a coordinator
• Operations strategy
• Management team members provide input
• Financial strategy
• Group wisdom is the goal
• Marketing strategy
• Advantages
• Human resource strategy
– Increased quality and timeliness of
Strategy implementation information
 – Improved chances of effective B2C Business Strategies
implementation
• use IT and Web portals to vertically link
• Limitations
organizations with members of their customers.
– Contributing managers have different
points of view and goals
– Management retains control over the Strategic Management
process
• Strategy formulation begins with the
organization’s mission and objectives.
• SWOT analysis identifies strengths, weaknesses,
Cultural approach
opportunities, and threats.
• Includes lower levels of the company • Porter’s five forces model examines industry
• Breaks down barriers between management and attractiveness.
workers • Porter’s competitive strategies model examines
• Everyone has input into the formulation and business or product strategies.
implementation of strategies • Portfolio planning examines strategies across
• Works best in high resource firms multiple businesses or products.
• Advantage • Strategic leadership activates organizations for
– More enthusiastic implementation strategy implementation.
• Limitations
– Workers should be informed, intelligent
– Consumes large amounts of time Strategic management
– Strong company identity becomes • the process of formulating and implementing
handicap strategies.
– Can discourage change and innovation
Strategy Formulation
• the process of creating strategies
Global Strategies
Strategy Implementation
Globalization Strategy
• the process of putting strategies into action.
• Adopts standardized products and advertising
•
for use worldwide
Poster’s Five Forces
Multidomestic Strategy
• Customizes advertising and products to best fit
local needs
Transnational Strategy
• Seeks efficiencies of global operations with
attention to local markets
E-Business Strategies
E-Business Strategies
• Focus on Using the Internet for Business
Transactions
B2B Business Strategies
• use IT and Web portals to vertically link Porter’s Competitive Strategies
organizations with members of their supply
chains. • Differentiation Strategy
 Offers products and services that are uniquely
different from the competition
• Focused Differentiation Strategy
offers a unique product to a special market
segment.
• Cost Leadership Strategy
Seeks to operate at lower costs than competitors
• Focused Cost Leadership Strategy
uses cost leadership and target needs of a special
market.
Strategy Implementation
Strategic Leadership
• the capability to inspire people to successfully
engage in a process of continuous change,
performance enhancement, and implementation
of organizational strategies
 Performing External Audit

CHAPTER 3 I/O

THE EXTERNAL ASSESSMENT

Strategic Management: Concept & Cases 11th
Edition Fred David

External Strategic Management Audit

Identify & Evaluate factors beyond the control of a
single firm
 Increased foreign competition
 Population shifts
 Information technology
Key External Forces & the Organization
Perspective Firm Performance
Social, Cultural, Demographic & Environmental
Forces
U.S. Facts
 Aging population
 Less Caucasian
 Widening gap between rich & poor
 2025 = 18.5% population >65 years
 2075 = no ethnic or racial majority

Key Social, Cultural, Demographic &

Environmental Variables
 Childbearing rates
 Number of special interest groups
 Number of marriages & divorces
 Number of births & deaths
 Immigration & emigration rates

Political, Government & Legal Forces

Globalization of Industry
 Worldwide trend toward similar
consumption patterns
 Global buyers and sellers
 E-commerce
 Technology for instant currency transfers
 3. Broke or not, fix it
Competitive Forces 4. Innovate or evaporate
Identifying Rival Firms 5. Acquisition is essential to growth
 Strengths 6. People make a difference
 Weaknesses 7. No substitute for quality
 The Five-Forces Model of Competition

The Global Challenge

 Faced by U.S. Firms --

  Gain & maintain exports to other nations
  Defend domestic markets against imported
 goods

C
apabilities Industry Analysis: The External Factor
Evaluation (EFE) Matrix
 Opportunities
Summarize & Evaluate
 Threats
 Objectives
 Strategies
7 Characteristics of most Competitive U.S. Firms:
1. Market share matters

Industry Analysis EFE

  Organization response is outstanding to Internal resources are more important than
threats and weaknesses external factors.
Total weighted score of 1.0  Three all Encompassing Categories
1. Physical Resources
 Firm’s strategies not capitalizing on
2. Human Resources
opportunities or avoiding threats
3. Organizational Resources

 Empirical Indicators
Industry Analysis: Competitive Profile Matrix
 Rare
(CPM)
 Hard to Imitate
Identifies firm’s major competitors and their  Not easily substitutable
strengths & weaknesses in relation to a sample
firm’s strategic positions

Integrating Strategy & Culture

 Organizational Culture
Pattern of behavior developed by an
organization as it learns to cope with its
problem of external adaptation and internal
CHAPTER 4 integration…is considered valid and taught
to new members
THE INTERNAL ASSESSMENT

Management
Nature of an Internal Audit
 Internal strengths/weaknesses
 External opportunities/threats
 Clear statement of mission

Internal Audit
 Parallels process of External Audit

 Information from:
 Management
 Marketing
 Finance/Accounting
 Production/operations
 Research & Development Marketing
 Management Information Systems
 Customer Needs/Wants for
Products/Services
1. Defining
Resource Based View (RBV)
2. Anticipating
 Approach to Competitive Advantage 3. Creating
4. Fulfilling
 Marketing Functions
1. Customer Analysis
2. Selling Products/Services
3. Product & Service planning
4. Pricing
5. Distribution
6. Marketing Research
7. Opportunity Analysis

 Finance/Accounting
1. Investment decision (Capital
Budgeting)
2. Financing Decicion
3. Dividend Dicision
4. Financial Analysis – Key financial
ratios

 Production/Operations Functions
 Process
 Capacity
 Inventory
 Workforce
 Quality

 Research and Development Functions

 Development of new products before
competitors
 Improving product quality
 Improving manufacturing
processesto reduce costs

 Management Information Systems

 Information System
 CIO/CTO
 Security
 User-friendly
 E-commerce