Lecture 1

>>Strategic competitiveness is achieved when a firm successfully formulates and

implements a value-creating strategy

>>A firm has a competitive advantage when it implements a strategy competitors

are unable to duplicate or find too costly to try to imitate.

>>Above-average returns are returns in excess of what an investor expects to earn

from other investments with a similar amount of risk.

>>Risk is an investor’s uncertainty about the economic gains or losses that will result
from a particular investment.

>>The 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.

The competitive Landscape --- competition changes:

>>the pace of this change is relentless and is increasing.

>>determining the boundaries of an industry has become challenging.

>>Hypercompetition - assumptions of [market stability] are replaced by notion of

[inherent instability and change]. ---In a hypercompetitive market, firms often
aggressively challenge their competitors in the hopes of improving their competitive
position and ultimately their performance (the amount and speed of growth). ---The
two primary drivers are the emergence of a global economy and technology, specially
rapid technological change.

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 has led to higher levels of
performance standards in many competitive dimensions, including those of quality,
cost, productivity, product introduction time, and operational efficiency.

Technology Diffusion and Disruptive Technologies:

>>Technology diffusion is the rate at which new technologies become available and
are used.
>>Perpetual innovation describe how rapidly and consistently new information-
intensive technologies replace older ones. --- The short product life cycles resulting
from these rapid diffusion of new technologies.

>>Disruptive innovation can destroy the value of existing technology and create new
markets. (radical or breakthrough innovation)

Ex:

Apple shows a strong competency in studying information about its customers as well
as potential consumers of the new product. These efforts result in opportunities to
understand individual customers’ needs and then target goods and services to satisfy
those needs.

Increasing knowledge intensity:

>>Knowledge (information, intelligence, and expertise) is the basis of technology and

its application. --- Knowledge is gained through experience, observation, and
inference and is an intangible resource.

>>strategic flexibility is a set of capabilities used to respond ot various demands and

opportunities existing in a dynamic and uncertain competitive environment. --- Thus,
strategic flexibility involves coping with uncertainty and its accompanying risks.

The I/O Model of Above-Average Returns

>>The industry organization (I/O) model explains the environment’s dominant

influence of firms strategic actions.

>>The I/O model has four underlying assumptions:

1. the external environment is assumed to impose pressures and constraints that

determine the strategies that would result in above-average returns.

2. most firms competing within an industry or within a certain segment of that

industry 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 assumed to be highly mobile across

firms, so any resource differences that might develop between firms will be short-
lived.
4. organizational decision makers are assumed to be rational and committed to acting
in the firm’s best interests, as known by their profit-maximizing behaviors.

The resource-based model of above-average returns: it assumes that each organization

is a collection of unique resources and capabilities. The uniqueness of its resources
and capabilities is the basis for a firm’s strategy and its ability to earn above-average
returns.

>>Resources are inputs into a firm’s production processes such as capital equipment,
skills of employees, patents and talented managers.

>>Capabilities are capacities for a set of resources to perform a task or an activity in

an integrative manner.

>>Cor competencies are resources and capalibities that serve as a source of

competitive advantage for a firm over its rivals.
Vision and Mission:

>>Vision is a picture of what the firm wants to be, and in broad terms, what it wants
to ultimately achieve.

>>Mission specifies the business in which the firm intends to compete and the
customers it intends to serve. (mission is more concrete than its vision, mission deals
more directly with product markets and customers)

Stakeholders: are the individuals and groups who can affect the vision and mission of
the firm, are affected by the strategic outcomes achieved, and have enforceable claims
on a firm’s performance.

classifications of stakeholders:

>>capital market stakeholders: the shareholders and major suppliers of capital

(lender)
capital market stakeholders expect a firm to preserve and enhance the wealth that they
entrusted to it.

>>product market stakeholders: primary customer, suppliers, host communities,

unions.

Product market stakeholders are satisfied when a firm’s profit margin reflects a
balance between the returns to capital market stakeholders and their share. They have
divergent interests.

>>organizational stakeholders: employees, managers, non-managers

They expect the firm to provide a dynamic, stimulating and rewarding work
environment.

Strategic leaders: CEOs, Top management teams, those closest to the action

>>They are people located in different parts of the firm using the strategic
management process to help the firm reach its vision and mission. They are
committed to helping the firm create value for customers and returns for shareholders
and other stakeholders.

>>Organizational culture also affects the work of strategic leaders. In turn, strategic
leaders’ decisions and actions shape a firm’s culture. 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.

>>Predicting outcomes of strategic decisions: profit pools. [Strategic leaders attempt

to predict the outcome of their decisions before taking efforts to implement them.]

Mapping an industry’s profit pool can help anticipate the possible outcomes of
decisions and focus on growth in profits. [profit pools entail the total profits earned in
an industry at all points along the value chain]

Lecture 2
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