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The Management of Strategy: Concepts and Cases 9e

Part I: Strategic Management Inputs Chapter 1: Strategic Management and Strategic Competitiveness

Chapter 1: Strategic Management and Strategic Competitiveness

Overview: Eight content areas
Nature of Competition The Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process

What is Strategy?

Strategy is the great work of the organization. In situations of life or death, it is the Tao of survival or extinction. Sun Tzu, The Art of War

Working Definition of Strategy (1970s)

The determination of the long-run goals & objectives of an enterprise, & the adoption of courses of action & the allocation of resources necessary for carrying out these goals. Alfred Chandler, Strategy and Structure

What is strategy? (1980s)

Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.
That what the rivals CANT do!

Michael Porter, Harvard Business Review

What is strategy? (current)

Strategy is an integrated and coordinated set of commitment and actions designed to

exploit core competencies and gain a sustainable competitive advantage.

Nature of Competition: Basic concepts

Strategic Competitiveness
Achieved when a firm formulate & implements a valuecreating strategy

Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage

Competitive Advantage (CA)

Implemented strategy that competitors are unable to duplicate or find too costly to imitate

Above Average Returns

Returns in excess of what investor expects in comparison to other investments with similar risk

The Strategic Management Process

The Competitive Landscape

Introduction: The Competitive Landscape (CL)
Pace of change is rapid Industry boundaries are blurring Financial capital is more scarce and markets are increasingly volatile Other CL characteristics: Economies of scale, change in managerial mind-set from traditional to more flexible and innovative

The Competitive Landscape (Contd)

Introduction: The Competitive Landscape (CL)
Hypercompetition extremely intense rivalry among competing firms, 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

The Competitive Landscape (Contd)

The Global Economy
Goods, services, people, skills and ideas move freely across geographic borders Europe, through the European Union (EU) is the worlds largest single market Emerging major competitive forces: China & India In summary: globalization increased economic interdependence among countries as reflected in the flow of goods and services, financial capital, and knowledge across country borders


The Competitive Landscape (Contd)

Technology and Technological Changes
3 categories:
1. Technology diffusion & disruptive technologies 2. The information age 3. Increasing knowledge intensity


The Competitive Landscape (Contd)

Technology and Technology Changes (Contd)
Technology diffusion
Perpetual innovation: describes how new information-intensive technologies are replacing older forms Speed to market may be primary competitive advantage 12 18 month timeframe to gather info re: competitor R&D

Disruptive technologies Technologies that

Destroy value of existing technology Create new markets


The Competitive Landscape (Contd)

Technology and Technology Changes (Contd)
The information age
Dramatic changes over last several years Major technological developments affect how information is used and disseminated Internet provides infrastructure for information anytime, anywhere

Increasing knowledge intensity

Defined as information, intelligence & expertise Strategic Flexibility set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment


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


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, as shown by their profit-maximizing behaviors


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

Five-Forces Model (Michael Porter)
The 5 Forces includes
Suppliers, buyers, competitive rivalry, product substitutes and potential entrants

Determines the nature/level of competition and profit potential in an industry


The Resource-Based Model of AAR


The Resource-Based Model of AAR (Contd)

Basic Premise - a firm's unique [internal] resources & capabilities, in combination, are the basis for firm strategy and AAR
Each firms performance difference across time emerges (vs industrys structural characteristics) Combined uniqueness should define the firms strategic actions Resources are tangible and intangible


Vision and Mission

Picture of what the firm wants to be and, in broad terms, what it 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

Specifics business(es) in which firm intends to compete and customers it intends to serve More concrete than the vision


Strategic Vision and Mission of CUHK

Our Vision To be acknowledged locally, nationally and internationally as a firstclass comprehensive research university whose bilingual and multicultural dimensions of student education, scholarly output and contribution to the community consistently meet standards of excellence. Our Mission To assist in the preservation, creation, application and dissemination of knowledge by teaching, research and public service in a comprehensive range of disciplines, thereby serving the needs and enhancing the wellbeing of the citizens of Hong Kong, China as a whole, and the wider world community.

To Combine Tradition with Modernity, To Bring Together China and the West.


Stakeholders are both individuals and groups
They can affect, and are affected by, the strategic outcomes/performance a firm achieves

Firms are not equally dependent on all stakeholders


The Three Stakeholder Groups


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 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


Strategic Management Process

Rational approach used by firms to achieve strategic competitiveness and earn above-average returns (AAR) Figure 1.1 (Diagram of chapter relationships)
Part 1: Strategic Mgmt Inputs Part 2: Strategic Actions: Strategy Formulation Part 3: Strategic Actions: Strategy Implementation