Strategic Management Ch01

© 2006 by Nelson, a division of Thomson Canada Limited. 1-1

Strategic Management & Strategic Competitiveness

Chapter One

© 2006 by Nelson, a division of Thomson Canada Limited.

“Canada is rather cool”**The Economist 2003

Canada is home not only to world-class commercial competitors but to dominant

companies in their industries



Strategic Management & Competitiveness

Knowledge Objectives1. Define strategic competitiveness, competitive advantage

and above average returns.2. Describe the 21st century competitive landscape & ex-

plain how globalization & technological changes shape it.3. Use the industrial organization (I/O) model to explain how

firms can earn above average returns.4. Use the resource-based model to explain how firms can

earn above-average returns.5. Describe strategic intent and strategic mission and

discuss their value.6. Describe stakeholders & their ability to influence firms.7. Describe strategists’ work & the strategic mgmt. process.


Desired Strategic Outcomes

Strategic CompetitivenessAchieved when a firm successfully formulates and implements a value-creating strategy.

Occurs when a firm develops a strategy that competitors are not simultaneously implementing.

Sustained Competitive Advantage

Above-Average ReturnsReturns in excess of what an investor expects to earn from other investments with similar risk.

Provides benefits which current and potential competitors are unable to duplicate.


Important Definitions

RiskAn investor’s uncertainty about the economic gains or losses resulting from a particular investment.

Returns equal to what an investor expects from other investments with similar amount of risk.

Average returns

Strategic management processThe full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns.


The Strategic Management

Process

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions

Ch. 1: Strat. Mgmt. & Com-petitiveness

Ch. 2: Strat. Mgmt . &

Performance

Chapter 3:The External Environment

Chapter 4:The Internal Environment

Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 1: Strategic

ManagementStrategic

Competitiveness


ManagementStrategic

CompetitivenessStrategic Mission & Strategic Intent


What is Strategy?

• An integrated and coordinated set of commitments & actions designed to exploit core competencies and gain a

competitive advantage.


What is Strategy?“A unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.” (Glueck, 1980:9)

“The pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.” (Quinn, 1980)

“A good strategy… neutralizes threats and exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses.” (Barney, 1997:17)

“A pattern of resource allocation that enables firms to maintain or improve their performance.


Intended, Emergent & Realized Strategies

IntendedStrategies

RealizedStrategiesDeliberate

Strategies

EmergentStrategies

UnrealizedStrategies

Thus, strategy can emerge from“a Pattern in the stream of decisions or actions”


Alternative Models of Superior ReturnsIndustrial Organization Model

The External Environment

An Attractive Industry


Assets and Skills


Superior Returns

Resource-BasedModel

Resources

Capabilities

Competitive Advantage

An Attractive Industry


Superior Returns

OIOI


Four Attributes of Resources and Capabilities (Competitive Advantage)

Rare possessed by few, if any, current and potential competitors

Costly to when other firms either can’t obtain them Imitate or must obtain at a much higher cost

Organized supported by the appropriate structure, to be controls, and rewards Exploited

* an *

Res

ourc

es a

nd C

apab

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ies

Res

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es a

nd C

apab

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Valuable allow firm to neutralize threats or exploit opportunities in its external environment


Resources and capabilities that meet these four criteria become a source of:

Rare

Costly to Imitate

Organized to be

Exploited

Valuable

* an *

Core CompetenciesCore CompetenciesCore Core CompetenciesCompetencies

Res

ourc

es a

nd C

apab

ilit

ies

Res

ourc

es a

nd C

apab

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* an *

Core CompetenciesCore CompetenciesCore Core CompetenciesCompetencies

Core Competencies are the basis for a firm’s:

Competitive Competitive advantageadvantage

Strategic Strategic competitivenesscompetitiveness

Ability to earn Ability to earn above-average above-average

returnsreturns


CEO’s ranking of business importance

1. A strong & well thought out strategy

2. Maximizing customer satisfaction & loyalty

3. Business leadership, quality products & services

4. Concern for consistent profits

5. Strong & consistent profits


21st Century Values

• Flexibility

• Speed to market

• Innovation

• Integration

• Handling challenges from constantly changing conditions

• Hypercompetition


The Global Economy

One in which goods, services, people, skills, and ideas move freely across geographic

borders


World competitiveness ratingsPopulation > 20 million (Ranks) Population < 20 million (Ranks)

Country 2003 2002 2001 2000 Country 2003

2002 2001 2000

USA 1 1 1 1 Finland 1 2 4 3

Australia 2 3 3 3 Singapore 2 6 3 2

Canada 3 2 2 2 Denmark 3 4 10 10

Malaysia 4 6 10 9 Hong Kong 4 10 2 8

Germany 5 4 4 4 Switzerland 5 3 6 4

Taiwan 6 7 5 8 Luxembourg 6 5 5 6

U.K. 7 5 6 5 Sweden 7 7 7 7

France 8 9 8 7 Netherlands 8 1 1 1

Spain 9 8 7 8 Iceland 9 11 11 11

Thailand 10 13 14 13 Austria 10 8 9 12

Japan 11 11 9 10 Ireland 11 9 8 5

China 12 12 12 11 Norway 12 12 14 9


Technology and Technological Change

• Increasing rate of tech. change and diffusionPerpetual innovation

• The information agePersonal computers, cellular phones, artificial

intelligence, virtual reality, massive databases, electronic networks, e-business

• Increasing knowledge intensityInformation, intelligence, expertise, strategic

flexibility.


Internally focused, it is the leveraging of a firms resources, capabilities, and

core competencies to establish the firms goals in the competitive

environment.

Strategic Intent

Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies. Externally focused, it is a statement of a

firms unique purpose and the scope of it’s operations in product and market

terms.

Strategic Mission


StakeholdersGroups who are affected by firm’s performance & who

have claims on its performance

The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders

Firm

Capital Market

Stock market/Investors

Debt suppliers/Banks

Product Market

Primary Customers Host CommunitiesUnionsSuppliers

Organizational

EmployeesManagersNonmanagers


Organizational strategists

Top level managers, executives, top management team, or general managers

Organizational culture

A complex set of ideologies, symbols and core values that influence how the firm conducts it’s business.


Predicting Outcomes of Strategic Decisions

1. Define the profit pool’s boundaries.2. Estimate the pool’s overall size.3. Estimate the size of the value chain.4. Reconcile the calculations.

The strategic management process calls for disciplined approaches to the development of competitive advantage.


The Strategic Management Process

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy


Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation


StrategicActions

Ch. 1: Strat. Mgmt. & Com-petitiveness

Ch. 2: Strat. Mgmt . &

Performance

Chapter 3:The External Environment

Chapter 4:The Internal Environment

Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs


ManagementStrategic

Competitiveness


ManagementStrategic



ManagementStrategic


Strategic Management Ch01

Education

Transcript of Strategic Management Ch01