Ch01 Strategic Management and Strategic Competitiveness – major concepts
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Chapter 1: Strategic Management and Strategic Competitiveness –
major concepts• strategic competitiveness• sustainable competitive
advantage• above-average returns• “strategic” management• strategic management
process• external strategic fit• internal strategic fit• hypercompetition
• industrial-organizational (I/O) model of above- average returns
• resource-based model of above-average returns
• strategic intent• mission statement• stakeholders• social responsibility• organizational values
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Strategic CompetitivenessStrategic CompetitivenessAchieved when a firm successfully formulates and Achieved when a firm successfully formulates and implements a value-creating strategyimplements a value-creating strategy
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Sustained Competitive AdvantageSustained Competitive AdvantageOccurs when a firm develops a strategy that competitors Occurs when a firm develops a strategy that competitors are not simultaneously implementingare not simultaneously implementingProvides benefits which current and potential competitors Provides benefits which current and potential competitors are unable to duplicateare unable to duplicate
Strategic CompetitivenessStrategic CompetitivenessAchieved when a firm successfully formulates and implements a value-creating strategyAchieved when a firm successfully formulates and implements a value-creating strategy
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Sustained Competitive AdvantageSustained Competitive Advantage
Above-Average ReturnsAbove-Average ReturnsReturns in excess of what an investor expects to earn from Returns in excess of what an investor expects to earn from other investments with similar riskother investments with similar risk
Occurs when a firm develops a strategy that competitors are not simultaneously implementingOccurs when a firm develops a strategy that competitors are not simultaneously implementingProvides benefits which current and potential competitors are unable to duplicateProvides benefits which current and potential competitors are unable to duplicate
Strategic CompetitivenessStrategic CompetitivenessAchieved when a firm successfully formulates and implements a value-creating strategyAchieved when a firm successfully formulates and implements a value-creating strategy
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which are required for firms to achievewhich are required for firms to achieve
Above-Average ReturnsAbove-Average Returns
Strategic CompetitivenessStrategic Competitiveness
Sustained Competitive AdvantageSustained Competitive Advantage
Strategic Management ProcessStrategic Management Process
Involves the full set of:Involves the full set of:
ActionsActionsCommitmentsCommitments DecisionsDecisions
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Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
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Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
Strategy FormulationStrategy Formulation Strategy ImplementationStrategy Implementation
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Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
Strategy FormulationStrategy Formulation
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics
Chapter 6Chapter 6Corporate-LevelCorporate-Level
StrategyStrategy
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 9Chapter 9CooperativeCooperativeStrategiesStrategies
Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring
Strategy ImplementationStrategy Implementation
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Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
Strategy FormulationStrategy Formulation
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics
Chapter 6Chapter 6Corporate-LevelCorporate-Level
StrategyStrategy
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 9Chapter 9CooperativeCooperativeStrategiesStrategies
Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring
Strategy ImplementationStrategy Implementation
Chapter 10Chapter 10CorporateCorporate
GovernanceGovernance
Chapter 11Chapter 11StructureStructure& Control& Control
Chapter 12Chapter 12StrategicStrategic
LeadershipLeadership
Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation
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Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average
ReturnsReturns
Strategy FormulationStrategy Formulation
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics
Chapter 6Chapter 6Corporate-LevelCorporate-Level
StrategyStrategy
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 9Chapter 9CooperativeCooperativeStrategiesStrategies
Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring
Strategy ImplementationStrategy Implementation
Chapter 10Chapter 10CorporateCorporate
GovernanceGovernance
Chapter 11Chapter 11StructureStructure& Control& Control
Chapter 12Chapter 12StrategicStrategic
LeadershipLeadership
Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation
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Chapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcess
Strategic IntentStrategic Intent
Strategic MissionStrategic Mission
StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average
ReturnsReturnsFeedback
Strategy FormulationStrategy Formulation
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics
Chapter 6Chapter 6Corporate-LevelCorporate-Level
StrategyStrategy
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 9Chapter 9CooperativeCooperativeStrategiesStrategies
Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring
Strategy ImplementationStrategy Implementation
Chapter 10Chapter 10CorporateCorporate
GovernanceGovernance
Chapter 11Chapter 11StructureStructure& Control& Control
Chapter 12Chapter 12StrategicStrategic
LeadershipLeadership
Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation
Str
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Str
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Str
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Strategic Management – “shooting at a moving target of co-alignment” (Thompson, 1967)
External Strategic Fit =
Strategy formulation to
-match internal capabilities
with specific attractive
external opportunities;
-create strategies
that effectively adapt to
external (industry and
competitive) trends.
Internal Strategic Fit =
Strategy implementation to
-match the skills and
resources of the firm to
requirements for successful
strategy execution;
-ensure that actions and
resources facilitate strategy
accomplishment.
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Challenge of Strategic ManagementChallenge of Strategic Management
Chapter One: Key ThemesChapter One: Key Themes
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Challenge of Strategic ManagementChallenge of Strategic Management
Changing Competitive LandscapeChanging Competitive Landscape
Chapter One: Key ThemesChapter One: Key Themes
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“Hypercompetition” =fleeting competitive advantage due to
aggressive/relentless challengersGlobalization
• more opportunities• more competitors• greater complexity• “liability of
foreignness”• increasing global
interdependencies
Technology change• perpetual/disruptive
technology change• org’l learning, agility
are critical attributes• tap key information
and org’l intellect• role of org’l culture
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Strategic Intent
• “leveraging the firm’s resources, capabilities, and competencies to accomplish the firm’s goals in a competitive environment” (pg. 21)
• a passion to win that is widely shared by organizational participants
• strong internal drive and commitment to the organization and its goals
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Challenge of Strategic ManagementChallenge of Strategic Management
Changing Competitive LandscapeChanging Competitive Landscape
Two Models of Superior ProfitabilityTwo Models of Superior Profitability
Industrial Organization ModelIndustrial Organization ModelResource-Based ModelResource-Based Model
Chapter One: Key ThemesChapter One: Key Themes
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I/O Model of Superior ReturnsI/O Model of Superior Returns
The Industrial Organization Model suggests that above-average returns for any firm are largely determined by characteristics outside the firm.
The Industrial Organization Model suggests that above-average returns for any firm are largely determined by characteristics outside the firm.
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I/O Model of Superior ReturnsI/O Model of Superior Returns
The Industrial Organization Model suggests that above-average returns for any firm are largely determined by characteristics outside the firm.
The Industrial Organization Model suggests that above-average returns for any firm are largely determined by characteristics outside the firm.
The I/O model largely focuses on industry structure or attractiveness of the external environment rather than internal characteristics of the firm.
The I/O model largely focuses on industry structure or attractiveness of the external environment rather than internal characteristics of the firm.
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Action required:Action required:External EnvironmentExternal Environment
General EnvironmentGeneral Environment
Industry EnvironmentIndustry Environment
Competitive EnvironmentCompetitive Environment
Study the external environment, especially the industry environment.
I/O Model of Superior ReturnsI/O Model of Superior Returns
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External EnvironmentExternal Environment
General EnvironmentGeneral Environment
Industry EnvironmentIndustry Environment
Competitive EnvironmentCompetitive Environment
An Attractive IndustryAn Attractive Industry
An industry whose structural characteristics suggest above-average returns are possible
An industry whose structural characteristics suggest above-average returns are possible
Action required:Action required:Locate an industry with high potential for above-average returns.
I/O Model of Superior ReturnsI/O Model of Superior Returns
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External EnvironmentExternal Environment
General EnvironmentGeneral Environment
Industry EnvironmentIndustry Environment
Competitive EnvironmentCompetitive Environment
Attractive IndustryAttractive Industry
An industry whose structural characteristics suggest above-average returns are possible
An industry whose structural characteristics suggest above-average returns are possible
Action required:Action required:Identify strategy called for by the industry to earn above-average returns.
I/O Model of Superior ReturnsI/O Model of Superior Returns
Selection of a strategy linked with above-average returns in a particular industry
Selection of a strategy linked with above-average returns in a particular industry
StrategyFormulationStrategyFormulation
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External EnvironmentExternal Environment
General EnvironmentGeneral Environment
Industry EnvironmentIndustry Environment
Competitive EnvironmentCompetitive Environment
Attractive IndustryAttractive Industry
An industry whose structural characteristics suggest above-average returns are possible
An industry whose structural characteristics suggest above-average returns are possible
Strategy FormulationStrategy Formulation
Selection of a strategy linked with above-average returns in a particular industry
Selection of a strategy linked with above-average returns in a particular industry
Action required:Action required:Develop or acquire assets and skills needed to implement the strategy.
Assets and SkillsAssets and Skills
Assets and skills required to implement a chosen strategy
Assets and skills required to implement a chosen strategy
I/O Model of Superior ReturnsI/O Model of Superior Returns
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External EnvironmentExternal Environment
General EnvironmentGeneral Environment
Industry EnvironmentIndustry Environment
Competitive EnvironmentCompetitive Environment
Attractive IndustryAttractive Industry
An industry whose structural characteristics suggest above-average returns are possible
An industry whose structural characteristics suggest above-average returns are possible
Strategy FormulationStrategy Formulation
Selection of a strategy linked with above-average returns in a particular industry
Selection of a strategy linked with above-average returns in a particular industry
Assets and SkillsAssets and Skills
Assets and skills required to implement a chosen strategy
Assets and skills required to implement a chosen strategy
Action required:Action required:Use the firm’s strengths (its assets or skills) to implement the strategy.
Strategy ImplementationStrategy Implementation
Selection of strategic actions linked with effective implementation of the chosen strategy
Selection of strategic actions linked with effective implementation of the chosen strategy
I/O Model of Superior ReturnsI/O Model of Superior Returns
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External EnvironmentExternal Environment
General EnvironmentGeneral Environment
Industry EnvironmentIndustry Environment
Competitive EnvironmentCompetitive Environment
Attractive IndustryAttractive Industry
An industry whose structural characteristics suggest above-average returns are possible
An industry whose structural characteristics suggest above-average returns are possible
Strategy FormulationStrategy Formulation
Selection of a strategy linked with above-average returns in a particular industry
Selection of a strategy linked with above-average returns in a particular industry
Assets and SkillsAssets and Skills
Assets and skills required to implement a chosen strategy
Assets and skills required to implement a chosen strategy
Action required:Action required:
Strategy ImplementationStrategy Implementation
Selection of strategic actions linked with effective implementation of the chosen strategy
Selection of strategic actions linked with effective implementation of the chosen strategy
Superior ReturnsSuperior Returns
Earning of above-average returnsEarning of above-average returns
Maintain selected strategy in order to outperform industry rivals.
I/O Model of Superior ReturnsI/O Model of Superior Returns
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The Resource-Based Model suggests that above-average returns for any firm are largely determined by characteristics inside the firm.
The Resource-Based Model suggests that above-average returns for any firm are largely determined by characteristics inside the firm.
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
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The Resource-Based Model suggests that above-average returns for any firm are largely determined by characteristics inside the firm.
The Resource-Based Model suggests that above-average returns for any firm are largely determined by characteristics inside the firm.
The Resource-Based view focuses on developing or obtaining valuable resources and capabilities which are difficult or impossible for rivals to imitate.
The Resource-Based view focuses on developing or obtaining valuable resources and capabilities which are difficult or impossible for rivals to imitate.
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
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ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
Action required:Action required:Identify firm resources. Study strengths and weak- nesses relative to rivals.
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
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ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
Action required:Action required:Determine what firm capabilities allow it to do better than rivals.
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
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ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
Action required:Action required:Determine how firm’s resources and capabilities may create competitive advantage.
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
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ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
An AttractiveIndustryAn AttractiveIndustry
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Action required:Action required:Locate an attractive industry.
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
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ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
An AttractiveIndustryAn AttractiveIndustry
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Action required:Action required:Select strategy that best exploits resources and capabilities relative to opportunities in environs.
Strategy Formulation and Implementation
Strategy Formulation and Implementation
Strategic actions taken to earn above-average returns
Strategic actions taken to earn above-average returns
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
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ResourcesResources
Inputs to a firm’s production process.Inputs to a firm’s production process.
CapabilityCapability
Capacity for an integrated set of resources to integratively perform a task or activity.
Capacity for an integrated set of resources to integratively perform a task or activity.
Competitive AdvantageCompetitive Advantage
Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals
An AttractiveIndustryAn AttractiveIndustry
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities
Action required:Action required:Maintain selected strategy in order to outperform industry rivals.
Strategy Formulation and Implementation
Strategy Formulation and Implementation
Strategic actions taken to earn above-average returns
Strategic actions taken to earn above-average returns
Resource-Based Model of Superior ReturnsResource-Based Model of Superior Returns
Superior ReturnsSuperior Returns
Earning of above-average returnsEarning of above-average returns
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Mission Statements
• typically the starting point for strategic planning
• provide a relatively enduring yet basic description of an organization’s domain
• should clearly include three core elements:1. product2. target market3. differentiating feature
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Rape and Abuse Crisis Center provides crisis intervention, advocacy,
and counseling services – free of charge –
to all persons in the region who have been victims of domestic violence or
sexual assault.
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To create meaningful mission statements . . .
• PRODUCT description should be carefully balanced - not too broad, not too narrow
• TARGET MARKET should be expressed as specifically as possible
• DIFFERENTIATING FEATURE should be meaningful and realistic
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Mission Statements –
So what?
Who cares?
Why bother?
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To be the leader in providing
strategic business management solutions
to the midmarket
through a global network of partners
dedicated to lasting customer relationships
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Mission Statement for NDSU’s College of Business?
Be sure to clearly and appropriately include
1. Product(s)
2. Target market(s)
3. Differentiating feature(s)
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Why is it so difficult to develop a concise, compelling, and
agreed-upon mission statement?
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ELDERHOSTEL’s mission statement
We are the nation’s first and the world’s largest education and travel organization foradults 55 and over, dedicated to providingexceptional learning opportunities atremarkable value.
We value stimulating, expert information;adventure; and the spirit of camaraderie.
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Organizational Values
• values and beliefs that are widely shared and endorsed by org’l participants
• can lead to an ingrained way of thinking and acting within the org’n
• often linked to competitive advantage
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StakeholdersStakeholders Groups who are affected by a firm’s performance and who have claims on
its performance
Groups who are affected by a firm’s performance and who have claims on
its performance
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders
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StakeholdersStakeholders
FirmFirm
Groups who are affected by a firm’s performance and who have claims on
its performance
Groups who are affected by a firm’s performance and who have claims on
its performance
Capital MarketCapital Market
Stock market/InvestorsStock market/Investors
Debt suppliers/BanksDebt suppliers/Banks
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders
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StakeholdersStakeholders
FirmFirm
Groups who are affected by a firm’s performance and who have claims on
its performance
Groups who are affected by a firm’s performance and who have claims on
its performance
Product MarketProduct Market
Capital MarketCapital Market
Stock market/InvestorsStock market/Investors
Debt suppliers/BanksDebt suppliers/Banks
Primary Customers SuppliersPrimary Customers Suppliers
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders
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StakeholdersStakeholders
FirmFirm
Groups who are affected by a firm’s performance and who have claims on
its performance
Groups who are affected by a firm’s performance and who have claims on
its performance
Product MarketProduct MarketOrganizationalOrganizational
Capital MarketCapital Market
Stock market/InvestorsStock market/Investors
Debt suppliers/BanksDebt suppliers/Banks
EmployeesManagersNon-Managers
EmployeesManagersNon-Managers
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders
Primary Customers SuppliersPrimary Customers Suppliers
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Social Responsibility
• Uses a very broad view of stakeholders
• Considers the long-term interests of society in strategic decision-making
• Involves ethical actions (which are often beyond legal requirements)
• Responds to social expectations
• Strives for good corporate citizenship
• Difficult balancing of stakeholder interests
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Social Responsibility
So what?
Who cares?
Why bother?
How to demonstrate?
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