PRELIMS
Strategic management
What is Strategic Management?
Strategic Management is a set of managerial decision and
action that determines the long-run performance of a
corporation. It includes environmental scanning ( both
external and Internal), strategy formulation (strategic or
long range planning), Strategy implementation, and
evaluation and control. The study of strategic
management therefore emphasizes the monitoring and
evaluation of external opportunities and threats in lights of
a corporation’s strengths and weaknesses.
How to achieve Strategic competitiveness?
Strategic competitiveness is achieved when a firm
successfully formulates and implements a value creating
strategy.
What is strategy?
A strategy is an integrated and coordinated set of
commitments and actions designed to exploit core
competencies and gain a competitive advantage.
When choosing a strategy, firm makes choices among
compete ting alternatives as the pathway for deciding how
they will pursue strategic competitiveness. In this sense,
the chosen strategy indicates what the firm will do as well
as the firm will not do
What is competitive advantage?
A firm has competitive advantage when it 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.
What is Above-average returns?
Above-average returns are returns in excess of what an
investor expects to earn from other investments
with similar amount of risk.
What is Risk?
Risk is an investors uncertainty about the economic gains
or losses that will result from a particular investment.
- The most successful companies learn how to effectively
manage risk.
- Effectively managing risk reduces investors uncertainty
about the result of their investment.
- Returns are often measure in terms of accounting
figures, such as returns on asset, returns of equity, or
return on sales.
What is an Average return?
Average return equal to those an investor expect to earn
form other investment with similar amount of risk.
Strategic Management Process
Strategic Management Process is the full set of
commitments, decisions and actions required for a firm to
achieve Strategic Competitiveness and earn above
average-returns.
Three Stages of Strategic Management Process
- Analysis
- The external environment
- The internal organization
Strategy
- Strategy Formulation
- Business level strategy
- Competitive Rivalry and Competitive Dynamics
- Corporate level strategy
- Merger and acquisition strategies
- International Strategy
- Corporate Strategy
Strategy Implementation
- Corporate governance
- Organizational Structure and Controls
- Strategic Leadership
- Strategic Entrepreneurship
Performance
- Competitive Advantages
- Above-average returns
The process involves analysis, strategy and
performance.
The first step is the process to analyze its external
environment and Internal environment to determine
its resources, capabilities and core-competencies -on
which the strategy likely to be used.
With the information gained from external and Internal
analysis, the firm develop its vision and mission
and formulate one or more strategies.
To implement its strategies, the firm takes actions to
enact each strategy with intent of achieving strategic
competitiveness and above average returns.
Effective strategic actions that take place in the context of
carefully integrated strategy formulation and
implementation efforts result in positive performance.
This dynamic strategic management process must be
maintained as ever-changing markets and competitive
structures are coordinated with firms continuously
evolving strategic inputs.
Next we will examine two models that firms use to gather
the information and knowledge required to choose and
then effectively implement their strategies. The insights
gained from these models also serve as the foundation for
forming firms vision and mission.
The first model (industrial organization) I/O suggest that
external environment is the primary determinants of a
firms strategic actions. According to this model, identifying
and then operating effectively in an attractive industry or
segment of an industry are the key to competitive
success.
The second model (resourced based) suggest that a firms
unique resources and capabilities are the critical link to
strategic competitiveness. Thus the first model is
concerned primarily with the firms external environment,
while the second model is concerned primarily with the
firms internal organization.
The I/O Model of Above-average Returns
1. Study the external environment especially the
industry environment
The external environment
- The General environment
- The industry environment
- The competitive environment
2. Locate industry with high potential for above
average returns
An attractive Industry
- An industry whose structural characteristics
suggest Above-average returns
3. Identify the strategy called by the attractive
industry to earn above-average returns
Strategy formulation
- Selection of a strategy linked with above
average returns in particular industry
4. Develop or acquire assets and skills needed to
implement strategy
 Asset and Skills
- Assets and skulls required to implement a
chosen strategy
5. Use firms’ strengths to implement strategy
Strategy Implementation
- Selection of strategic actions linked with
effective implementation of a chosen strategy
Superior Returns
- Earning of Above-average returns
Typically, the model suggest that firms can earn above
average returns by producing either standardized
goods or services at cost below those of competitors or by
producing differentiated goods or services for
which customers are willing to pay a price premium.
Resource-based Model of Above Average-Returns
The resource-based model of above average returns
assumes that each organization is a collection of unique
resources and capabilities. The uniqueness of its resources
and capabilities is the basis of affirms
strategy and its ability to earn above average returns.
What is Resources?
Resources are inputs into a firm’s production process,
such as capital equipment, the skill of individual
employees, patents, finances, and talented managers.
Individual alone may not yield a competitive advantage.
In fact, resources have a greater likelihood of being a
source of competitive advantage when they formed into
capability.
What is capability?
Capability is the set of resources to perform a task or an
activity in an integrative manner.
What is core competencies?
Core competencies are capabilities tat serve as a source of
competitive advantage for a firm over time.
The resource-based model of Above average
returns
1. Identify the firms’ resources. Study its
strengths and weaknesses compared with those
of competitors.
Resources-Inputs into a firm’s production process
2. Determine the firms’ capabilities. What do the
capabilities allow the firm to do better than its
competitors.
Capability-Capacity of an integrated set of
resources to interactively perform a task or
activity
3. Determine the potential of the firms’ resources
and capabilities in terms of a competitive
advantage.
Competitive advantage- ability of a firm to
outperform its rivals
4. Locate an attractive industry
An attractive industry- an industry with
opportunities that can be exploited by the firms
resources
and capabilities
5. Select a strategy that best allows the firms to
utilize its resources and capabilities relative to
opportunities in external environment
Strategy- Formulation and Implementation- Strategic
actions taken to earn above average returns
Superior returns- Earning above-average returns
Vision and Mission
After studying the internal and external environment of
the organization, the firm has the information it
needs to form its mission and vision. Stakeholders learn a
great deal about the firm studying its mission
and vision. Indeed, a key purpose of a vision and mission
statements is to inform stakeholders of what the firm is,
what it seeks to accomplish, and who it seeks to serve.
What is a vision?
A vision is a picture of what the firm wants to be and, in
broad terms, what it wants to ultimately achieve.
Vision statements articulates the ideal description of an
organization and gives shape to its intended future. In
other words, a vision statement points the firm in the
direction pf where it would like to be in
years to come.
It is also important to recognize that vision statements
reflect firm’s values and aspirations and are intended to
capture the hearth and mind of each employee and,
hopefully many of its stakeholders. A firm’s vision tends to
be enduring while its mission can change with new
environmental conditions. A vision statement tends to be
relatively short and concise, making it easier to
remember.
What is a mission?
A mission specifies the business in which the firms intend
to compete and the customers it intend to serve.
The firm’s mission is more concrete than its vision.
However, similar to the vision, a mission should establish
a firm’s individuality and should be inspiring and relevant
to all stakeholders. Together the mission and vision
provide the foundation that firm needs to choose and
implement one or more strategies.
What is stakeholder?
Stakeholder are individuals, groups, and organizations
that can affect the firm’s vision and mission, are
affected by the strategic outcomes achieved, and have
enforceable claims on the firm’s performance.
People who are affected by a firm’s performance and who
have claims on its performance.
Classification of stakeholders
1. Capital Market Stakeholders
- Shareholder
- Major Suppliers of Capital (e.g. banks)
2. Product Market stakeholders
- Primary customer
- Suppliers
- Host communities
- Unions
3. Organizational Stakeholders
- Employees
- Managers
What are strategic leaders?
Strategic leaders are people located in different areas and
levels of the firm using strategic management
process to select strategic actions that help the firm
achieve its vision and mission.
What is organizational culture?
Refers to the complex set of ideologies, symbols, and core
values that are shared throughout the firm and that
influence how the firm conducts business.

MIDTERMS
It specifies actions a firms takes to gain a competitive advantage
by selecting and managing a group of different business
competing in different product markets.
CORPORATE LEVEL STRATEGIES
If a company or firm uses either a single or a dominant business
corporate-level diversification strategy, the firm is pursuing?
LOW LEVEL OF DIVERSIFICATION
Which of the following is not a value creating diversification?
TAX LAW
This refers to the cost savings a firm creates by successfully
sharing resources, capabilities or transferring one or more
corporate level core competencies that were developed in one of
its businesses to another of its businesses.
ECONOMIES OF SCOPE
These are complex sets of resources and capabilities that link
different businesses, primarily through managerial and
technological knowledge, experience, and expertise.
CORPORATE LEVEL CORE COMPETENCIES
This exist when a firm is able to sell its products above the
existing competitive level or to reduce the cost of its primary and
support activities below the competitive level, or both.
MARKET POWER
It exists when two or more diversified firms simultaneously
compete in the same product areas or geographical markets.
MULTIPOINT COMPETITION
It exists when a company produces its own inputs or its own
source of output distribution
VERTICAL INTEGRATION
This refers to cost savings realized through improved allocations
of financial resources bed fo investments inside or outside the
firm.
FINANCIAL ECONOMIES
It exists when the value created by business units working
together exceeds the value that those same units create working
independently
COMPETITION
It refers to a return equal to those an investor expect to earn
form other investment with similar amount of risk
AVERAGE RETURNS
It is a full set of commitments, decisions and actions required for
a firm to achieve Strategic Competitiveness and earn above
average-returns
STRATEGIC MANAGEMENT
Which of the following is odd man out?
CORPORATE GOVERNANCE
It includes the institutions and activities involved in creating new
knowledge and translating that knowledge into new outputs,
products, processes and materials
TECHNOLOGICAL SEGMENT
Which of the following is odd man out?
THREAT OF NEW ENTRANTS
It is a set of data and information the firms gathers to better
understand and anticipate competitors objectives, strategies,
assumptions and capabilities.
COMPETITOR INTELLIGENCE
These refers to assets that can be observed and quantified.
TANGIBLE RESOURCES
This markets in which the firms competitive advantages are
partially shielded from imitation and imitation is moderately
costly.
FAST CYCLE NARKET
Which of the following is odd man out?
TECHNOLOGICAL RESOURCES
This allows the firms to exploit opportunities or neutralize threats
in its external environment.
VALUABLE RESOURCES
It is an integrated and coordinated set of commitments and
actions the firms uses to gain a competitive advantage by
exploiting core competencies in specific product market
BUSINESS LEVEL STRATEGIES
When selecting a business-level strategy the firm determines
WHO WILL BE SERVED WHAT NEEDS THOSE TARGET
COSTUMERS HAVE HOW THOSE NEEDS BE SATISFIED
This dimension of the relationship is concerned with the firm's
access and connection to customers
REACH
This dimension of relationship is concerned with the depth and
detail of the two-wayy flow of information between the firm and
the customer
RICHNESS
The dimension of relationship is concerned with facilitating
useful interactions with customers
AFFILIATION
This is a process used to cluster people with similar needs into
individual and identifiable group?
MARKET SEGMENTATION
Which of the following is odd man out? (END USE, PRODUCTS,
GEOGRAPHIC)
DEMOGRAPHIC SEGMENT
After the firm decides who it will serve, what should be the next
step?
FIRM MUST IDENTIFY THE TARGETTED COSTUMER
GROUPS NEEDS THAT ITS GOODS OR SERVICES CAN
SATISFIES
It is an integrated set of actions taken to produce goods or
services with features that are acceptable to customer at the
lowest cost relative to that of competitors.
COST ELADERSHIP STRATEGY
It is an integrated set of actions taken to produce goods or
services that customer perceived as being different in ways that
are important to them.
DIFFERENTIATION STRATEGY
It is an integrated set of actions taken to produce goods or
services that serve the needs of a particular competitive
segment.
FOCUS STRATEGY
It involves engaging in primary value chain activities and support
functions that allow this simultaneously pursue low cost and
differentiation.
INTEGRATED COST LEADERSHIP/ DIFFERENTIATION
STRATEGY
Which of the following does not belong to the group?
END USE SEGMENT
It is achieved when a company 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 A Above
average returns
COMPETITIVE ADVANTAGE
This refers to returns in excess of what an investor expects to
earn from other investments with similar amount of risk.
ABOVE AVERAGE RETURNS

These are people located in different areas and levels of the firm
using strategic management process to select strategic actions
that help the firm achieve its vision and mission,
STRATEGIC LEADERS
This refers to the primary customers, suppliers and host
community.
PRODUCT MARKET STAKE HOLDERS
It is the area in which organizations and interest groups compete
for attention, resources and a voice in overseeing the body of
laws, and regulations guiding interactions among nations as well
as between firms and various local governmental agencies.
LEGAL SEGMENT
One reason these threats pose such threat is that they bring
additional production capacity. Use the demand for a good
service is increasing additional capacity hold consumers costs
down, resulting in less revenue and lower returns for competing
firms.
THREATS OF NEW ENTRANTS
This denotes the extent to which a firm revenue or profits are
derived from particular market
COMPLEXITY
and understand the competitive rivalry present in the markets in
which they compete.
COMPETITOR RIVALRY
is a strategic or tactical action the firm takes to build or defend
its competitive advantages or improve its market position
COMPETITIVE ACTION
It is 3 market-based moves at evolves a significant commitment
of organizational re difficult to implement and reverse.
STRATEGIC ACTION
It is a market-based move that is taken to fine tune a strategy, it
involves fewer resources relatively easy to implement and
reverse.
TACTICAL ACTION
In addition to market commonality, resource similarity, and the
drivers of Awareness, motivation, and ability, other factors affect
the likelihood a competitor attack its competitors. This refers to?
LIKELIHOOD OF ATTACK
It is a firm that takes an initial competitive action in order to
build or defend its competitive advan or to improve its market
position.
FIRST MOVER

These are the firms operating in the same market, offering It is firm that responds to a competitive action a significant
similar products and targeting similar amount of time after the first movers action and the second
customers. movers response.
MARKET DEPENDENCE LATE MOVER

is the ongoing set of competitive actions and competitive This competitive speed of market in which the firms capabilities
responses that occur among firms as they maneuver for an that contribute to advantages aren't shielded from imitation and
advantageous market position. where imitation is often rapid and inexpensive.
COMPETITION RIVALRY FAST CYCLE MARKET

It's a set of competitive actions and responses affirms takes to
build or defend its competitive advantage and to impose its
market position
COMPETITIVE BEHAVIOR
Refer to all competitive behaviors that is, the total set of actions
and responses taken by all firms competing within a market.
COMPETITIVE DYNAMIC
It's the first step the firm takes to be able to predict the extent
and nature of its rivalry with each competitor.
COMPETITOR ANALYSIS
Concerns the ongoing actions and response between the firms
and its direct competition for an advantageous market position,
also concerns the ongoing actions and responses among all firms
competing within a market for advantageous positions.
COMPETITIVE RIVALRY
The success of firms competitive action is affected by the
likelihood that a competitor will respond to as well as by the
type, the effectiveness of that response. In general a firm is
likely to respond to a competitor's action when?
ALL OF THE ABOVE

It is concerned with the number of market with which the firm

and a competitor are jointly involved and the degree of
importance of each individual markets to each
MARKET COMMONALITY

It is the extent to which the firm's tangible and intangible

resources are comparable to the competitors in terms of both
type and amount. umm A. Market commonality
DIFFERENTIATION STRATEGY

It is a prerequisite to any competitive actions or response taken

by a firm, refers to the extent to which competitors recognize
the degree of their mutual interdependence that results from
market commonality and resource similarity
AWARENESS

Concerns the firms incentive to take action or to respond to a

competitor's attack relates to perceived gains and losses.
MOTIVATION

This relates to each firms resources and flexibility they provide

without available resources the firm is not able to attack the
competitor or respond to its action.
ABILITY

The ongoing competitive action/response sequence between a

firm and a competitor affects he performance of both firms.
Because of this, it is important for companies to carefully analyze