MODULE 1

CREATING COMPETITIVE ADVANTAGES Two Fundamental Questions

1. How should we compete in order to create competitive

The Importance of Leadership advantages in the marketplace?

1. Maintaining competitive success or even surviving over 2. How can we create competitive advantages in the

long periods of time is difficult for companies of any size. marketplace that are unique, valuable, and difficult for rivals to

2. So how much credit (or blame) does a leader deserve? copy or substitute?

Two Perspectives of Leadership NOTE: Operational effectiveness is not enough to sustain a

1. Romantic view - leader is the key to determine the competitive advantage.

organization’s success
2. External control perspective - external forces force in the Strategic Management

organization’s success Key Attributes of strategic management:

 Directs the organization toward overall goals and

Leaders can make a difference objectives.

 Must be proactive - anticipate change  Includes multiple stakeholders in decision making.

 Continually refine strategies  Needs to incorporate short-term and long-term

 Be aware of external opportunities and threats perspectives.

 Thoroughly understand their firm’s resources  Recognizes trade-offs between efficiency and

and capabilities effectiveness.

 Make strategic management both a process

and a way of thinking throughout the organization Strategic Management Trade-Offs
- Managers need to be ambidextrous

DEFINING STRATEGIC MANAGEMENT - While also:

 Focusing on short-term efficiency

Strategic Management involves…  Aligning resources to take advantage of existing

product markets

 ANALYSIS  Focusing on long-term effectiveness

 Strategic goals (vision, mission, strategic objectives)  Expanding product-market scope by proactively

 Internal and external environment exploring new opportunities

 DECISIONS - FORMULATION According to Henry Mintzberg, the realized strategies of a firm:

 What industries should we compete in? A. Are a combination of deliberate and emergent

 How should we compete in those industries? strategies.

B. Are a combination of deliberate and differentiation

 ACTIONS - IMPLEMENTATION strategies.

 Allocate necessary resources C. Must be based on a company’s strategic plan. D. must

 Design the organization to bring intended strategies be kept confidential for competitive reasons.

to reality

Intended vs Realized Strategies
 Intended Strategy
- Organizational decisions are determined only by analysis
- Intended strategy rarely survives in its original form
 Realized Strategy
- Decisions determined are by both analysis (deliberate) &
unforeseen environmental developments, unanticipated
resource constraints, and/or changes in managerial
preferences (emergent)
Strategic Management Process
Example: Failure of Intended Strategy
 BORDERS bookstore focused on its intended strategy
– a physical retail presence.
 Sticking to what you know best can be very
dangerous.
 BORDERS found the consumer shift away from brick
& mortar book stores to online book buying and
digital books an overwhelming environmental force
against which they had few defenses.
 Unanticipated developments can often have very
negative consequences for businesses regardless of
how well formulated their strategies are.
STRATEGY ANALYSIS
 Starting point in the strategic management process
 Precedes effective formulation and implementation
of strategies
 Involves careful analysis of the overarching goals of
the organization
 Requires a thorough analysis of the organization’s
external and internal environment
 Analyzing Organizational Goals & Objectives
- Establish a hierarchy of goals
 Vision
 Mission
 Strategic Objectives
 Analyzing the External Environment of the Firm
- Managers must monitor & scan the
environment as well as analyze competitors
 The General Environment
 The Industry Environment
 Assessing the Internal Environment of the Firm
 Analyzing strengths & relationships among
activities that constitute a firm’s value chain
 Can uncover potential sources of competitive
advantage
 Assessing a Firm’s Intellectual Assets
 Knowledge workers & other intellectual assets
drive competitive advantage & wealth creation
 Networks & relationships plus technology
enhances collaboration, accumulates & stores
knowledge
STRATEGY FORMULATION
 Based on strategy analysis
 Developed at several levels
 Involves decisions that can create and sustain
competitive advantage
 Investment decisions
 Commitment of resources
 Operational synergies
 Recognizing viable opportunities
 Formulating Business-Level Strategy
- Successful firms develop bases for sustainable
competitive advantage through
 Cost leadership and/or
  Differentiation, as well as
 Focusing on a narrow or industry
wide market segment
 Formulating Corporate-Level Strategy
- Addresses a firm’s portfolio (or group) of
businesses
 What business(es) should we
compete in?
 How can we manage this portfolio of
businesses to create synergies?
 Formulating International Strategy
 What is the appropriate entry strategy?
 How do we go about attaining competitive
advantage in international markets?

 Entrepreneurial Strategy and Competitive Dynamics

 How do we recognize viable opportunities?
 How do we formulate effective strategies?

STRATEGY IMPLEMENTATION
 Implements the formulated strategy
 Ensures proper strategic control systems
 Establishes an appropriate organizational design
coordinates & integrates activities within the firm
 Coordinates activities with suppliers, customers,
alliance partners
 Leadership ensures organizational commitment to
excellence & ethical behavior
 Promotes learning & continuous improvement
 Acts entrepreneurial in creating new opportunities
 Strategic Control & Corporate Governance
 Information control
 Monitor & scan the environment
 Respond effectively to threats & opportunities
 Behavioral control
 Proper balance of rewards & incentives
 Appropriate cultures & boundaries (or
constraints)
 Effective corporate governance