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Strategic Management: Concepts and Cases

Chapter 1: Strategic Management and Strategic Competitiveness

What is Strategy?

 Large-scale, future-oriented plan for

interacting with the competitive environment to achieve objectives  Company‟s “game plan”  Framework for managerial decisions


What is Strategic Management? The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company‟s objectives. 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  Investor‟s uncertainty about economic gains/losses resulting from a particular investment (Cont’d)  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 .

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 6 .st 21 Century Competitive Landscape (Cont’d)  Introduction: The Competitive Landscape (CL)  Hypercompetition – extremely intense rivalry among competing firms.

financial capital.21st Century Competitive Landscape (Cont’d)  The Global Economy  Goods. people. skills and ideas move freely across geographic borders  globalization increased economic interdependence among countries as reflected in the flow of goods and services. services. and knowledge across country borders 7 .

21st Century Competitive Landscape  Technology and Technological Changes  (Cont’d) 3 categories: 1. Increasing knowledge intensity  8 . Technology diffusion & disruptive technologies  2. The information age  3.

21st Century Competitive Landscape  Technology and Technology Changes  (Cont‟d) (Cont’d) Technology diffusion   Perpetual innovation: describes how new informationintensive technologies are replacing older forms Speed to market may be primary competitive advantage Technologies that  Destroy value of existing technology  Create new markets  Disruptive technologies  9 .

phones.21st Century Competitive Landscape  Technology and Technology Changes  (Cont‟d) (Cont’d)  The information age  Dramatic changes over last several years  Major technological developments: computers. artificial intelligence. intelligence & expertise and is the basis of technology and its application  Gained through experience. 10 . observations and inferences. anywhere Increasing knowledge intensity  Defined as information. virtual reality  Internet provides infrastructure for information anytime.

Industrial Organizational (I/O) Model of Above-Average Returns (AAR) 11 .

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 12 .

as shown by their profit-maximizing behaviors 13 .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.

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 industry‟s profitability is an interaction between these 5 forces 14 . buyers. competitive rivalry.Industrial Organizational (I/O) Model of Above-Average Returns (AAR)  Five-Forces Model (Michael Porter)  The 5 Forces includes  Suppliers.

Industrial Organizational (I/O) Model of Above-Average Returns (AAR) (Cont’d)  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 15 .

The ResourceBased Model of AAR 16 .

The Resource-Based Model of AAR  Basic Premise . in combination. is the basis for firm strategy and AAR    Each firm‟s performance difference across time emerges (vs industry‟s structural characteristics) Combined uniqueness should define the firms‟ strategic actions Resources are tangible and intangible 17 .a firm's unique [internal] (Cont’d) resources & capabilities.

employee skills. patents.The Resource-Based Model of AAR  Resources  Inputs into a firm's production process  (Cont’d) Includes capital equipment.   Basis for competitive advantage: When resources are valuable. financial condition. high-quality managers. 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 18 . etc.

and the combination makes them different. than their competition – driving the competitive advantage 19 . and better.The Resource-Based Model of AAR (Cont’d)  Capability  Capacity for a set of resources to perform a task or activity in an integrative manner  Core Competency  A firm‟s 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.

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 20 .

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. the strategic outcomes/performance a firm achieves Three (3) classifications 21 . and are affected by.

The Three Stakeholder Groups 22 .

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 23 .

tactics. about strategies.….Strategic Leaders (Cont’d)  The Work of Effective Strategic Leaders  Work long hours  Must be able to “think seriously and deeply…about the purposes of the organizations they head or functions they perform.”  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 24 ..and people…and about the important questions … they need to ask.

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