Competitiveness and Globalization Chapter 1 Strategic
Management
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Module 1 In this module, you will develop definitions for
strategy, strategic competitiveness, competitive advantage, and
above average returns an appreciation for the importance of
strategy an ability to recognize strategy an awareness of the
strategic intent of familiar firms appreciate the importance of
strategy to the success of the firm recognize a strategy
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Understanding Strategy Define Strategy
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Understanding Strategy From the Greek word strategia meaning
generalship Merriam-Webster The science and art of employing the
political, economic, psychological, and military forces of a nation
or group of nations to afford the maximum support to adopted
policies in peace or war. Terms used in regard to strategy
Objectives; Mission; Strengths; Weaknesses Military strategy
assumes conflict
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Sun Tsu (544 496 BC) Link between military & strategy The
Art of War So it is said that if you know your enemies and know
yourself, you will not be imperiled in a hundred battles; if you do
not know your enemies but do know yourself, you will win one and
lose one; if you do not know your enemies nor yourself, you will be
imperiled in every single battle.
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Business Strategy If military strategy assumes conflict, what
does business strategy assume?
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Business Strategy If military strategy assumes conflict, what
does business strategy assume? Competition Winning Market Dominance
Number 1 Define business strategy
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Strategy Defined Glueck (1980) defined strategy as: a unified,
comprehensive, and integrated plan designed to ensure that the
basic objectives of the enterprise are achieved. Quinn (1980)
defined strategy as: the pattern or plan that integrates an
organization's major goals, policies, and action sequences into a
cohesive whole. Barney (1997) defined strategy as: a pattern of
resource allocation that enables firms to maintain or improve their
performance.
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Strategy Defined What do these definitions have in common?
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Dr. Henry Mintzberg McGill University Leading world authority
on strategy Framework for understanding strategy What is the
framework?
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Dr. Henry Mintzberg (1987) strategy is a plan, that is, a
consciously intended course of action strategy is a ploy, that is,
a specific maneuver intended to outwit an opponent or competitor
strategy is a pattern, that is, a consistent set of behaviours
strategy is a position, that is, the mediating force between the
internal and external environment strategy is a perspective, that
is, an ingrained way of perceiving the world
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Apply the framework Applying Mintzberg's strategy framework to
Starbucks: Plan: open 1800 new stores in 2006 Pattern:
predominantly company operated stores Position: high-traffic,
high-visibility locations around the world (37 countries)
Perspective: commitment to coffee producers and the environment
Ploy: third meeting place between home and work
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Goal of strategy is to Create a sustainable competitive
advantage that leads to above average returns Sustainable
competitive advantage means: satisfying your customers in ways that
cannot be readily duplicated by your competitors How does RIM
satisfy its customers in ways that cannot be readily duplicated by
competitors?
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Above average returns means: Outperforming your competitors by
generating returns that exceed the returns that investors expect to
earn from other investments with similar levels of risk. When
interest rates are high, why is it more difficult to persuade
investors to invest in the stock market than when interest rates
are low?
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Above average returns Is it reasonable to assume that a company
can generate above average returns in the long run? Can a thriving
business sustain the intensity to deliver like this? Shareholder is
king Why did Eaton's fail as a business? What important change in
retailing did the Company miss?
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Strategy Important? Is strategy important? What does strategy
do for a firm?
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Strategy Important? What does strategy do for a firm? Strategy
sets the direction for the firm. Strategy focuses the effort's of
employees and promotes coordination. Strategy defines the
organization and provides a convenient way to explain what the firm
does. Strategy provides consistency and reduces ambiguity.
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Disadvantages? Is it always a good thing?
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Disadvantages? Locked in Example of BCG we decided this would
be our strategy when we started25 years ago (Unable to move forward
because the company is tied to the past) Strategy must be flexible
Strategy thats like a Jelly-fish is undefined and too flimsy
Strategy thats like a brick wall is too structured and not movable
without breaking down the organizational structure Ideal strategy
is more like a Backbone flexible yet entirely stable and can
support the organizational framework
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Hambrick and Frederickson (2005) In spite of 30 years of "hard
thinking about strategy" little is known about what actually
constitutes a strategy. Their framework is: Arenas (where to
operate) Vehicles (how to get there) Differentiators (about
winning) Staging Activities (speed and sequence) Economic Logic
(anticipated returns)
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Red Bull Apply the Hambrick & Frederickson (2005) model to
Red Bull Arenas (where does Red Bull operate? Where did they start?
Where do they operate now?) Vehicles (how did they get there?)
Differentiators (What is it about Red Bull that helps them win in
their market? What sets them apart?) Staging Activities (Speed and
sequence of how they rolled out their product in the marketplace.)
Economic Logic (What are their past returns and future anticipated
returns?)
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Red Bull Arena Europe 1987 Vehicle licensed a local firm (TC
Pharmaceuticals) to produce the product Differentiators Red Bull
gives you wings Staging Activities Austria, Germany, rolled out
across Europe, into North America, South America, and Australia
Asia is next Economic Logic 1 yr sales growth of 22% (2003 to
2004)
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What is NOT strategy Michael Porter on Strategy
http://www.youtube.com/watch?v=ibrxIP0H84M
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What is NOT strategy Productivity or quality improvements to a
business Cost reductions within the business The introduction of
new technology E-commerce sales Supply Chain Management These are
tactics, the ways you implement a strategy, but they are not
strategy in themselves.
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Porter (1996) Article entitled, What is Strategy Differentiates
between operational effectiveness and strategy Firms thrive when
they have something that sets them apart A difference they can
preserve Take a look at one of those firms
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Ikea Inexpensive, contemporary furniture that is sold worldwide
Organic expansion (wholly owned stores) Reliable quality, low
price, positive shopping experience One store in each targeted
country followed by additional stores at a later date Economies of
scale and efficiencies from replication
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What is their competitive advantage?
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Whats luck got to do with it? How much does luck have to do
with strategy? Why is strategy often described as being an art and
a science?
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Gildan Activewear and FOTL Issues: growth and market share
quality control and manufacturing knock-off brand strategy How did
Gildan get into the market? What role did Gildan play in the fate
of Fruit of the Loom? What happened to FOTL?
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Vision & Mission Define Vision & Mission What do they
have to do with Strategy? What role does a corporate vision play in
a companys success? What role does a corporate mission play in a
companys success
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Stakeholders Who are a firms stakeholders? What roles do
stakeholders play?
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Stakeholders Stakeholders are those who can affect, and are
affected by, a firms strategic outcomes. How are stakeholders
impacted by a firm earning below average returns?
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Strategic Leaders Do you have to be a CEO to have the role of
strategic leader? What work does a strategic leader engage in?
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Community & Ethics Ethics & Leadership What is the
measurement of worthwhile leadership? Ethics & financial
returns (in the wake of Enron) Corporate Social Responsibility
& Strategy Heather Reisman Corporate social responsibility
comes from her personal dedication to solving environmental and
social issues Chapters has changed the industry: First major book
retailer to announce they would not sell books without a certain
percentage of recycled paper used in manufacturing Entire industry
had to restructure to accommodate her demand
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Self-Study Review Questions 1. Why is it so difficult to define
strategy? 2. Is strategy all about winning? 3. Is Sun Tzus The Art
of War still relevant? 4. Could a firm survive without a strategy?
5. Why is it not enough to simply obtain a competitive advantage?
6. If benchmarking is unlikely to provide a sustainable competitive
advantage why do firms continue to do it? 7. How much does luck
have to do with strategy? 8. Does every firm need a business
strategy?