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PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook
The University of West AlabamaThe University of West Alabama
StrategicStrategic
ManagementManagementCompetitiveness and Globalization:Competitiveness and Globalization:
Concepts and CasesConcepts and Cases Michael A. HittMichael A. Hitt •• R. Dane !relan"R. Dane !relan" •• Robert #. HoskissonRobert #. Hoskisson
$eventh e"ition$eventh e"ition
STRATEGIC
MANAGEMENT
INPUTS
CHAPT#R %CHAPT#R %
Strategic Management Strategic Management
Management of StrategyManagement of Strategy
Concepts and CasesConcepts and Cases
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&&'(W)#D*#'(W)#D*# ((+,#CT!-#$+,#CT!-#$
1. !efine strategi" "om#etitiveness$ strategy$ "om#etitive
advantage$ a%ove-average returns$ and the strategi"
management #ro"ess.
2. !es"ri%e the 21st-"entury "om#etitive lands"a#e andelain ho' glo%ali(ation and te"hnologi"al "hanges
sha#e it.
). *se the industrial organi(ation +,/ model to elain
ho' firms "an earn a%ove-average returns.
. *se the resour"e-%ased model to elain ho' firms
"an earn a%ove-average returns.
Studying this chapter should provide you with the strategic
management knowledge needed to:
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&&'(W)#D*#'(W)#D*# ((+,#CT!-#$+,#CT!-#$ (cont’d)(cont’d)
. !es"ri%e vision and mission and dis"uss their value.
. !efine staeholders and des"ri%e their a%ility to
influen"e organi(ations.
7. !es"ri%e the 'or of strategi" leaders.
3. 4lain the strategi" management #ro"ess.
Studying this chapter should provide you with the strategic
management knowledge needed to:
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Important DefnitionsI
mportant Defnitions
5Strategi" 6om#etitivenessStrategi" 6om#etitiveness When a firm su""essfully formulates and im#lementsWhen a firm su""essfully formulates and im#lements
a value-"reating strategy.a value-"reating strategy.
5 StrategyStrategy
An integrated and "oordinated set of "ommitments An integrated and "oordinated set of "ommitmentsand a"tions designed to eloit "ore "om#eten"iesand a"tions designed to eloit "ore "om#eten"ies
and gain a "om#etitive advantage.and gain a "om#etitive advantage.
5 6om#etitive Advantage6om#etitive Advantage
When a firm im#lements a strategy that itsWhen a firm im#lements a strategy that its
"om#etitors are una%le to du#li"ate or find too "ostly"om#etitors are una%le to du#li"ate or find too "ostly
to try to imitate.to try to imitate.
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Important Defnitions (cont’d)I
mportant Defnitions (cont’d)
5isis An investor8s un"ertainty a%out the e"onomi" gains An investor8s un"ertainty a%out the e"onomi" gains
or losses that 'ill result from a #arti"ularor losses that 'ill result from a #arti"ular
investment.investment.
5 Average eturns Average eturns eturns e9ual to those an investor ee"ts to earneturns e9ual to those an investor ee"ts to earn
from other investments 'ith a similar amount of ris.from other investments 'ith a similar amount of ris.
5 A%ove-average eturns A%ove-average eturns
eturns in e&"ess of 'hat an investor ee"ts toeturns in e&"ess of 'hat an investor ee"ts toearn from other investments 'ith a similar amountearn from other investments 'ith a similar amount
of ris.of ris.
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Important Defnitions (cont’d)I
mportant Defnitions (cont’d)
5Strategi" Management :ro"essStrategi" Management :ro"ess The full set of "ommitments$ de"isions$ and a"tionsThe full set of "ommitments$ de"isions$ and a"tions
re9uired for a firm to a"hieve strategi"re9uired for a firm to a"hieve strategi"
"om#etitiveness and earn a%ove-average returns."om#etitiveness and earn a%ove-average returns.
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FIGUREFIGURE 1.11.1
The Strategic The Strategic
ManagementManagement
ProcessProcess
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The 2st!"ent#r$ "ompetiti%e The 2st!"ent#r$ "ompetiti%e
&andscape&andscape
5 A :erilous ;usiness World A :erilous ;usiness World a#id "hanges in industry %oundaries and maretsa#id "hanges in industry %oundaries and marets
6onventional sour"es of "om#etitive advantage losing6onventional sour"es of "om#etitive advantage losing
effe"tivenesseffe"tiveness
4normous investments re9uired to "om#ete glo%ally4normous investments re9uired to "om#ete glo%ally
Severe "onse9uen"es for failureSevere "onse9uen"es for failure
5 !evelo#ing!evelo#ing and ,and ,m#lementingm#lementing StrategyStrategy
Allo's for #lanned a"tions rather than rea"tions Allo's for #lanned a"tions rather than rea"tions
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!ynami"!ynami">lo%al 4"onomy>lo%al 4"onomya#id te"hnologi"ala#id te"hnologi"al
"hange"hange
Strategi" maneuveringStrategi" maneuvering
among glo%al and innovativeamong glo%al and innovative"om%atants"om%atants
The "ompetiti%e &andscape The "ompetiti%e &andscape
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G'oa' Econom$G'oa' Econom$
5The >lo%al 4"onomyThe >lo%al 4"onomy
>oods$ #eo#le$ sills$ and ideas move freely a"ross>oods$ #eo#le$ sills$ and ideas move freely a"ross
geogra#hi" %orders.geogra#hi" %orders.
Movement is relatively unfettered %y artifi"ialMovement is relatively unfettered %y artifi"ial
"onstraints."onstraints. 4ansion into glo%al arena "om#li"ates a firm8s4ansion into glo%al arena "om#li"ates a firm8s
"om#etitive environment."om#etitive environment.
5 Short-term? Where is the fastest gro'th liely to o""ur@Short-term? Where is the fastest gro'th liely to o""ur@
5 ong-term? Where 'ill sustaina%le gro'th o""ur@ong-term? Where 'ill sustaina%le gro'th o""ur@
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G'oa' Econom$ (cont’d)G'oa' Econom$ (cont’d)
5The Mar"h of >lo%ali(ationThe Mar"h of >lo%ali(ation
,n"reased e"onomi" interde#enden"e among,n"reased e"onomi" interde#enden"e among
"ountries"ountriesBBthe flo' of goods and servi"es$ finan"ialthe flo' of goods and servi"es$ finan"ial
"a#ital$ and no'ledge a"ross "ountry %orders"a#ital$ and no'ledge a"ross "ountry %orders
5
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Techno'og$ and Techno'ogica' "hanges Techno'og$ and Techno'ogica' "hanges
5Te"hnology !iffusionTe"hnology !iffusion
The s#eed at 'hi"h ne' te"hnologies %e"omeThe s#eed at 'hi"h ne' te"hnologies %e"ome
availa%leavaila%le
5 !isru#tive Te"hnologies!isru#tive Te"hnologies
Te"hnologies that destroy the value of e&istingTe"hnologies that destroy the value of e&istingte"hnology and "reate ne' maretste"hnology and "reate ne' marets
5 :er#etual ,nnovation:er#etual ,nnovation
The ra#idity and "onsisten"y 'ith 'hi"h ne'$The ra#idity and "onsisten"y 'ith 'hi"h ne'$
information-intensive te"hnologies re#la"e older onesinformation-intensive te"hnologies re#la"e older ones
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Techno'ogica' "hanges Techno'ogica' "hanges
5The ,nformation AgeThe ,nformation Age
The a%ility to effe"tively and effi"iently a""ess and useThe a%ility to effe"tively and effi"iently a""ess and use
information has %e"ome an im#ortant sour"e ofinformation has %e"ome an im#ortant sour"e of
"om#etitive advantage."om#etitive advantage.
Te"hnology in"ludes #ersonal "om#uters$ "ellularTe"hnology in"ludes #ersonal "om#uters$ "ellular#hones$ artifi"ial intelligen"e$ virtual reality$ massive#hones$ artifi"ial intelligen"e$ virtual reality$ massive
data%ases$ ele"troni" net'ors$ internet trade.data%ases$ ele"troni" net'ors$ internet trade.
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Techno'ogica' "hanges (cont’d) Techno'ogica' "hanges (cont’d)
5,n"reasing Cno'ledge ,ntensity,n"reasing Cno'ledge ,ntensity
Cno'ledge as a "riti"al organi(ational resour"e forCno'ledge as a "riti"al organi(ational resour"e for
"reating an intangi%le "om#etitive advantage"reating an intangi%le "om#etitive advantage
$trateic fle/ibility0$trateic fle/ibility0 the set of "a#a%ilities used tothe set of "a#a%ilities used to
res#ond to various demands and o##ortunities inres#ond to various demands and o##ortunities indynami" and un"ertain "om#etitive environmentsdynami" and un"ertain "om#etitive environments
(rani1ational slack0(rani1ational slack0 sla" resour"es that allo' thesla" resour"es that allo' the
firm fle&i%ility to res#ond to environmental "hangesfirm fle&i%ility to res#ond to environmental "hanges
rgani(ational "a#a"ity to learnrgani(ational "a#a"ity to learn
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I* Mode' o+ ,o%e!,%erage Ret#rnsI* Mode' o+ ,o%e!,%erage Ret#rns
5!ominan"e of the 4&ternal 4nvironment!ominan"e of the 4&ternal 4nvironment
The industry in 'hi"h a firm "om#etes has a strongerThe industry in 'hi"h a firm "om#etes has a stronger
influen"e on the firm8s #erforman"e than do theinfluen"e on the firm8s #erforman"e than do the
"hoi"es managers mae inside their organi(ations."hoi"es managers mae inside their organi(ations.
5 ,ndustry :ro#erties !etermining :erforman"e,ndustry :ro#erties !etermining :erforman"e 4"onomies of s"ale4"onomies of s"ale
;arriers to maret entry;arriers to maret entry
!iversifi"ation!iversifi"ation
:rodu"t differentiation:rodu"t differentiation
!egree of "on"entration of firms in the industry!egree of "on"entration of firms in the industry
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Fo#r ,ss#mptions o+ the I* Mode'Fo#r ,ss#mptions o+ the I* Mode'
4&ternal environment im#oses #ressures and "onstraints4&ternal environment im#oses #ressures and "onstraintsthat determine strategies leading to a%ove-average returns.that determine strategies leading to a%ove-average returns.
11
22
Most firms "om#eting in an industry "ontrol similar strategi"allyMost firms "om#eting in an industry "ontrol similar strategi"ally
relevant resour"es and #ursue similar strategies.relevant resour"es and #ursue similar strategies.
esour"es used to im#lement strategies are highlyesour"es used to im#lement strategies are highly
mo%ile a"ross firms.mo%ile a"ross firms.33
44rgani(ational de"ision maers are assumed to %e rationalrgani(ational de"ision maers are assumed to %e rational
and "ommitted to a"ting in the firm8s %est interests +#rofit-and "ommitted to a"ting in the firm8s %est interests +#rofit-
ma&imi(ing.ma&imi(ing.
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FIGUREFIGURE 1.2 1.2
The I* Mode' o+ The I* Mode' o+
,o%e!,%erage,o%e!,%erage
Ret#rnsRet#rns
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GlobalGlobal
TechnologicalTechnological E c o
n o
m i c
E c o
n o m i c
D e m
o g r a p h i c
D e m
o g r a p h i c S
o c i o
c u l t u
r a l
S o c i o
c u l t u
r a l
P o l i t i
c a l / L e g a l
P o l i t i
c a l / L e g a l
Indutr!Indutr!En"ironmentEn"ironment
#ompetitor#ompetitor
En"ironmentEn"ironment
GeneralGeneral
En"ironmentEn"ironment
I* Mode' o+ ,o%e!,%erage Ret#rnsI* Mode' o+ ,o%e!,%erage Ret#rns
1.1. Strategy is di"tated %yStrategy is di"tated %ythe e&ternal environmentthe e&ternal environment
of the firmof the firmBBwhatwhat
opportunities exist inopportunities exist in
these environments?these environments?
2.2. Dirm develo#s internalDirm develo#s internal
sills re9uired %ysills re9uired %y
e&ternal environmente&ternal environmentBB
what can the firm dowhat can the firm do
about the opportunities?about the opportunities?
E$ternal En"ironment
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Ind#stria' *rgani-ation Mode'Ind#stria' *rgani-ation Mode'
1.1. Study the e&ternalStudy the e&ternalenvironment$ es#e"ially theenvironment$ es#e"ially the
industry environment?industry environment?
5 4"onomies of s"ale4"onomies of s"ale
5 ;arriers to maret entry;arriers to maret entry
5 !iversifi"ation!iversifi"ation
5 :rodu"t differentiation:rodu"t differentiation
5 !egree of "on"entration of!egree of "on"entration of
firms in the industryfirms in the industry
The E$ternal En"ironmentThe E$ternal En"ironment
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Ind#stria' *rgani-ation Mode'Ind#stria' *rgani-ation Mode'
2.2. o"ate an attra"tiveo"ate an attra"tive
industry 'ith a highindustry 'ith a high
#otential for a%ove-#otential for a%ove-
average returns.average returns.
,ttracti%e ind#str$.,ttracti%e ind#str$.
*ne /hose str#ct#ra'*ne /hose str#ct#ra'
characteristics s#ggestcharacteristics s#ggest
ao%e!a%erage ret#rns0ao%e!a%erage ret#rns0
The E$ternal En"ironmentThe E$ternal En"ironment
%ttracti"e Indutr!%ttracti"e Indutr!
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Ind#stria' *rgani-ation Mode'Ind#stria' *rgani-ation Mode'
).). ,dentify the strategy "alled for,dentify the strategy "alled for
%y the attra"tive industry to%y the attra"tive industry toearn a%ove-average returns.earn a%ove-average returns.
Strateg$ +orm#'ation.Strateg$ +orm#'ation.
Se'ection o+ a strateg$Se'ection o+ a strateg$
'in1ed /ith ao%e!a%erage'in1ed /ith ao%e!a%erage
ret#rns in a partic#'arret#rns in a partic#'arind#str$0ind#str$0
The E$ternal En"ironmentThe E$ternal En"ironment
%ttracti"e Indutr!%ttracti"e Indutr!
Strateg! &ormulationStrateg! &ormulation
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Ind#stria' *rgani-ation Mode'Ind#stria' *rgani-ation Mode'
.. !evelo# or a"9uire!evelo# or a"9uire assets andassets and
sillssills needed to im#lement aneeded to im#lement a
"hosen strategy."hosen strategy.
,ssets and s1i''s. those,ssets and s1i''s. those
assets and s1i''s re#iredassets and s1i''s re#iredto imp'ement a chosento imp'ement a chosen
strateg$0strateg$0
The E$ternal En"ironmentThe E$ternal En"ironment
%ttracti"e Indutr!%ttracti"e Indutr!
Strateg! &ormulationStrateg! &ormulation
%et and S'ill%et and S'ill
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Ind#stria' *rgani-ation Mode'Ind#stria' *rgani-ation Mode'
. *se the firm8s strengths +its. *se the firm8s strengths +its
develo#ed or a"9uired assetsdevelo#ed or a"9uired assets
and sills to im#lement theand sills to im#lement the
strategy.strategy.
Strateg$ imp'ementation.Strateg$ imp'ementation.
se'ect strategic actionsse'ect strategic actions
'in1ed /ith e3ecti%e'in1ed /ith e3ecti%e
imp'ementation o+ theimp'ementation o+ the
chosen strateg$0chosen strateg$0
The E$ternal En"ironmentThe E$ternal En"ironment
%ttracti"e Indutr!%ttracti"e Indutr!
Strateg! &ormulationStrateg! &ormulation
%et and S'ill%et and S'ill
Strateg! ImplementationStrateg! Implementation
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Ind#stria' *rgani-ation (I*) Mode'Ind#stria' *rgani-ation (I*) Mode'
The E$ternal En"ironmentThe E$ternal En"ironment
%ttracti"e Indutr!%ttracti"e Indutr!
Strateg! &ormulationStrateg! &ormulation
%et and S'ill%et and S'ill
Strateg! ImplementationStrateg! Implementation
S#perior ret#rns. earningS#perior ret#rns. earning
ao%e!a%erage ret#rnsao%e!a%erage ret#rns
Superior (eturnSuperior (eturn
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Fi%e Forces Mode' o+ "ompetitionFi%e Forces Mode' o+ "ompetition
5 ,ndustry :rofita%ility,ndustry :rofita%ility
The industry8s rate of return on invested "a#italThe industry8s rate of return on invested "a#ital
relative to its "ost of "a#italrelative to its "ost of "a#ital
5 An industry8s #rofita%ility results from intera"tion An industry8s #rofita%ility results from intera"tion
among?among? Su##liersSu##liers
;uyers;uyers
6om#etitive rivalry among firms "urrently in the6om#etitive rivalry among firms "urrently in the
industryindustry :rodu"t su%stitutes:rodu"t su%stitutes
:otential entrants to the industry:otential entrants to the industry
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Fi%e Forces Mode' o+ "ompetitionFi%e Forces Mode' o+ "ompetition
(cont’d)(cont’d)5 Dirms earn a%ove-average returns %y?Dirms earn a%ove-average returns %y?
6ost leadershi#6ost leadershi#
5 :rodu"ing standardi(ed #rodu"ts or servi"es:rodu"ing standardi(ed #rodu"ts or servi"es
!ifferentiation!ifferentiation
5 Manufa"turing differentiated #rodu"ts for 'hi"hManufa"turing differentiated #rodu"ts for 'hi"h
"ustomers are 'illing to #ay a #ri"e #remium"ustomers are 'illing to #ay a #ri"e #remium
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The Reso#rce!4ased Mode' o+ ,o%e! The Reso#rce!4ased Mode' o+ ,o%e!
,%erage Ret#rns,%erage Ret#rns
5 Model Assum#tionsModel Assum#tions
4a"h organi(ation is a "olle"tion of uni9ue resour"es4a"h organi(ation is a "olle"tion of uni9ue resour"es
and "a#a%ilities that #rovides the %asis for its strategyand "a#a%ilities that #rovides the %asis for its strategy
and that is the #rimary sour"e of its returns.and that is the #rimary sour"e of its returns. 6a#a%ilities evolve and must %e managed6a#a%ilities evolve and must %e managed
dynami"ally.dynami"ally.
!ifferen"es in firms8 #erforman"es are due #rimarily!ifferen"es in firms8 #erforman"es are due #rimarily
to their uni9ue resour"es and "a#a%ilities rather thanto their uni9ue resour"es and "a#a%ilities rather thanstru"tural "hara"teristi"s of the industry.stru"tural "hara"teristi"s of the industry.
Dirms a"9uire different resour"es and develo# uni9ueDirms a"9uire different resour"es and develo# uni9ue
"a#a%ilities."a#a%ilities.
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FIGUREFIGURE 1.31.3
The Reso#rce! The Reso#rce!
4ased Mode' o+4ased Mode' o+
,o%e!,%erage,o%e!,%erage
Ret#rnsRet#rns
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#nvironment#nvironment
Reso#rce!4ased Mode' o+ ,o%e!Reso#rce!4ased Mode' o+ ,o%e!
,%erage Ret#rns (cont’d),%erage Ret#rns (cont’d)
1.1. Strategy is di"tated %y theStrategy is di"tated %y the
firm8s uni9ue resour"esfirm8s uni9ue resour"es
and "a#a%ilities.and "a#a%ilities.
2.2. Dind an environment inDind an environment in
'hi"h to eloit these'hi"h to eloit these
assets +'here are the %estassets +'here are the %est
o##ortunities@o##ortunities@
$tratey0$tratey0Com2etitive A"vantaeCom2etitive A"vantae
6ore 6om#eten"ies6ore 6om#eten"ies
6a#a%ilities6a#a%ilities
esour"esesour"es
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Reso#rces and "apai'itiesReso#rces and "apai'ities
5 esour"esesour"es
,n#uts into a firm8s,n#uts into a firm8s
#rodu"tion #ro"ess?#rodu"tion #ro"ess?
5 Ca2ital e3i2mentCa2ital e3i2ment
5$kills of in"ivi"al$kills of in"ivi"alem2loyeesem2loyees
5 PatentsPatents
5 4inances4inances
5 Talente" manaersTalente" manaers
5 6a#a%ilities6a#a%ilities
6a#a"ity of a set of6a#a"ity of a set of
resour"es to #erformresour"es to #erform
in an integrativein an integrative
manner manner
A "a#a%ility should A "a#a%ility should not not
%e?%e?
5 $o sim2le that it is$o sim2le that it is
hihly imitable.hihly imitable.
5 $o com2le/ that it$o com2le/ that it
"efies internal"efies internal
steerin an" control.steerin an" control.
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Reso#rce!4ased Mode' (cont’d)Reso#rce!4ased Mode' (cont’d)
1.1. ,dentify the firm8s resour"es,dentify the firm8s resour"esBB
strengths and 'eanessesstrengths and 'eanesses"om#ared 'ith "om#etitors"om#ared 'ith "om#etitors
(eource(eource
Reso#rces. inp#ts into aReso#rces. inp#ts into a
frm’s prod#ction processfrm’s prod#ction process
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Reso#rce!4ased Mode' (cont’d)Reso#rce!4ased Mode' (cont’d)
2.2. !etermine the firm8s!etermine the firm8s
"a#a%ilities"a#a%ilitiesBB'hat it "an do'hat it "an do
%etter than its "om#etitors.%etter than its "om#etitors.
(eource(eource
#apabilit!#apabilit!
"apai'it$. capacit$ o+ an"apai'it$. capacit$ o+ an
integrated set o+ reso#rcesintegrated set o+ reso#rcesto integrati%e'$ per+orm ato integrati%e'$ per+orm a
tas1 or acti%it$0tas1 or acti%it$0
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Reso#rce!4ased Mode' (cont’d)Reso#rce!4ased Mode' (cont’d)
).). !etermine the #otential of!etermine the #otential of
the firm8s resour"es andthe firm8s resour"es and
"a#a%ilities in terms of a"a#a%ilities in terms of a"om#etitive advantage."om#etitive advantage.
(eource(eource
#apabilit!#apabilit!
#ompetiti"e %d"antage#ompetiti"e %d"antage
"ompetiti%e ad%antage."ompetiti%e ad%antage.
ai'it$ o+ a frm toai'it$ o+ a frm to
o#tper+orm its ri%a's0o#tper+orm its ri%a's0
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Reso#rce!4ased Mode' (cont’d)Reso#rce!4ased Mode' (cont’d)
.. o"ate an attra"tive industry.o"ate an attra"tive industry.
(eource(eource
#apabilit!#apabilit!
#ompetiti"e %d"antage#ompetiti"e %d"antage
%ttracti"e Indutr!%ttracti"e Indutr!
,ttracti%e ind#str$. an,ttracti%e ind#str$. an
ind#str$ /ith opport#nitiesind#str$ /ith opport#nities
that can e e5p'oited $ thethat can e e5p'oited $ the
frm’s reso#rces andfrm’s reso#rces andcapai'ities0capai'ities0
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Reso#rce!4ased Mode' (cont’d)Reso#rce!4ased Mode' (cont’d)
.. Sele"t a strategy that %estSele"t a strategy that %est
allo's the firm to utili(e itsallo's the firm to utili(e its
resour"es and "a#a%ilitiesresour"es and "a#a%ilities
relative to o##ortunities inrelative to o##ortunities in
the e&ternal environment.the e&ternal environment.
(eource(eource
#apabilit!#apabilit!
#ompetiti"e %d"antage#ompetiti"e %d"antage
%ttracti"e Indutr!%ttracti"e Indutr!
Strateg! &ormulationStrateg! &ormulation
and Implementationand Implementation
Strateg$ +orm#'ationStrateg$ +orm#'ation
and imp'ementation.and imp'ementation.
strategic actions ta1enstrategic actions ta1en
to earn ao%e a%erageto earn ao%e a%erage
ret#rns0ret#rns0
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Reso#rce!4ased Mode' (cont’d)Reso#rce!4ased Mode' (cont’d)
(eource(eource
#apabilit!#apabilit!
#ompetiti"e %d"antage#ompetiti"e %d"antage
%ttracti"e Indutr!%ttracti"e Indutr!
Strateg! &ormulationStrateg! &ormulation
and Implementationand Implementation
Superior (eturnSuperior (eturn
S#perior ret#rns. earningS#perior ret#rns. earning
ao%e!a%erage ret#rnsao%e!a%erage ret#rns
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"riteria +or Reso#rces and "apai'ities That"riteria +or Reso#rces and "apai'ities That
4ecome "ore "ompetencies4ecome "ore "ompetencies
CoreCore
Com2etenciesCom2etencies
-alable-alable RareRare
Costly to !mitateCostly to !mitate'onsbstittable'onsbstittable
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6o/ Reso#rces and "apai'ities6o/ Reso#rces and "apai'ities
Pro%ide "ompetiti%e ,d%antagePro%ide "ompetiti%e ,d%antage
The frm is organi-ed appropriate'$ to The frm is organi-ed appropriate'$ to
otain the +#'' enefts o+ the reso#rcesotain the +#'' enefts o+ the reso#rces
in order to rea'i-e a competiti%ein order to rea'i-e a competiti%e
ad%antagead%antage
)aluable)aluable ,''o/ the frm to e5p'oit opport#nities,''o/ the frm to e5p'oit opport#nitiesor ne#tra'i-e threats in its e5terna'or ne#tra'i-e threats in its e5terna'
en%ironmenten%ironment
(are(are Possessed $ +e/7 i+ an$7 c#rrent andPossessed $ +e/7 i+ an$7 c#rrent andpotentia' competitorspotentia' competitors
#otl! to#otl! to
imitateimitate
8hen other frms cannot otain them8hen other frms cannot otain them
or m#st otain them at a m#ch higheror m#st otain them at a m#ch higher
costcost
*onubtituta*onubtituta
bleble
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"ore "ompetencies"ore "ompetencies
5 When the four ey "riteria of resour"es andWhen the four ey "riteria of resour"es and
"a#a%ilities are met$ they %e"ome "ore"a#a%ilities are met$ they %e"ome "ore
"om#eten"ies."om#eten"ies.
5 Managerial "om#eten"ies are es#e"iallyManagerial "om#eten"ies are es#e"ially
im#ortant.im#ortant.
5 6ore "om#eten"ies serve as a sour"e of6ore "om#eten"ies serve as a sour"e of
"om#etitive advantage$ "reate value$ and"om#etitive advantage$ "reate value$ and
#rovide the o##ortunity for a%ove-average#rovide the o##ortunity for a%ove-averagereturns.returns.
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8h$ T/o Mode's98h$ T/o Mode's9
5 ,ndustrial rgani(ation,ndustrial rgani(ation
+,/ Model+,/ Model
Do"uses on theDo"uses on the
environment outside theenvironment outside the
firm.firm.
5 esour"e-;asedesour"e-;ased
ModelModel
Do"uses on the insideDo"uses on the inside
of the firmof the firm
Successful strategy formulation and implementationSuccessful strategy formulation and implementation
actions result only when the firm properly uses bothactions result only when the firm properly uses both
models.models.
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:ision and Mission:ision and Mission
5 EisionEision
A enduring #i"ture of 'hat the firm 'ants to %e and$ in A enduring #i"ture of 'hat the firm 'ants to %e and$ in
%road terms$ 'hat it 'ants to ultimately a"hieve.%road terms$ 'hat it 'ants to ultimately a"hieve.
5 Stret"hes and "hallenges #eo#le and evoesStret"hes and "hallenges #eo#le and evoes
emotions and dreams.emotions and dreams.
5 4ffe"tive vision statements are?4ffe"tive vision statements are?
!evelo#ed %y a host of #eo#le from a"ross the!evelo#ed %y a host of #eo#le from a"ross the
organi(ation.organi(ation.
6learly tied to e&ternal and internal environmental6learly tied to e&ternal and internal environmental"onditions."onditions.
6onsistent 'ith strategi" leaders8 de"isions and6onsistent 'ith strategi" leaders8 de"isions and
a"tions.a"tions.
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:ision and Mission (cont’d):ision and Mission (cont’d)
5 MissionMission
S#e"ifies the %usiness or %usinesses in 'hi"h the firmS#e"ifies the %usiness or %usinesses in 'hi"h the firm
intends to "om#ete and the "ustomers it intends tointends to "om#ete and the "ustomers it intends to
serve.serve.
,s more "on"rete than the firm8s vision.,s more "on"rete than the firm8s vision.
,s more effe"tive 'hen it fosters strong ethi"al,s more effe"tive 'hen it fosters strong ethi"al
standards.standards.
5 A%ove-average returns are the fruits of the firm8s A%ove-average returns are the fruits of the firm8s
efforts to a"hieve its vision and mission.efforts to a"hieve its vision and mission.
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Sta1eho'dersSta1eho'ders
5 ,ndividuals and grou#s 'ho "an affe"t$ and are,ndividuals and grou#s 'ho "an affe"t$ and are
affe"ted %y$ the strategi" out"omes a"hieved andaffe"ted %y$ the strategi" out"omes a"hieved and
'ho have enfor"ea%le "laims on a firm8s'ho have enfor"ea%le "laims on a firm8s
#erforman"e.#erforman"e.
6laims on the firm8s #erforman"e are enfor"ed %y the6laims on the firm8s #erforman"e are enfor"ed %y thestaeholder8s a%ility to 'ithhold #arti"i#ation essentialstaeholder8s a%ility to 'ithhold #arti"i#ation essential
to the firm8s survival.to the firm8s survival.
The more "riti"al and valued a staeholder8sThe more "riti"al and valued a staeholder8s
#arti"i#ation$ the greater a firm8s de#enden"y on it.#arti"i#ation$ the greater a firm8s de#enden"y on it. Managers must find 'ays to either a""ommodate orManagers must find 'ays to either a""ommodate or
insulate the organi(ation from the demands ofinsulate the organi(ation from the demands of
staeholders "ontrolling "riti"al resour"es.staeholders "ontrolling "riti"al resour"es.
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Sta1eho'der In%o'%ementSta1eho'der In%o'%ement
5 T'o issues affe"t the e&tent of staeholderT'o issues affe"t the e&tent of staeholder
involvement in the firm?involvement in the firm?
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FIGUREFIGURE 1.41.4 The Three Sta1eho'der Gro#ps The Three Sta1eho'der Gro#ps
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"apita' Mar1et"apita' Mar1etSta1eho'dersSta1eho'ders
Shareho'dersShareho'ders
Ma;or s#pp'iers o+Ma;or s#pp'iers o+
capita'capita'
< 4an1s4an1s
< Pri%ate 'endersPri%ate 'enders
< :ent#re capita'ists:ent#re capita'ists
Sta1eho'dersSta1eho'ders
#apital Mar'et#apital Mar'etSta'eholderSta'eholder
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"apita' Mar1et Sta1eho'ders"apita' Mar1et Sta1eho'ders
5 Shareholders and lenders ee"t the firm toShareholders and lenders ee"t the firm to
#reserve and enhan"e the 'ealth they have#reserve and enhan"e the 'ealth they have
entrusted to it.entrusted to it.
Want the return on their investment +and$ hen"e$ theirWant the return on their investment +and$ hen"e$ their
'ealth to %e ma&imi(ed.'ealth to %e ma&imi(ed.
4e"t returns to %e "ommensurate 'ith the degree4e"t returns to %e "ommensurate 'ith the degree
of ris to the shareholder.of ris to the shareholder.
5 Management must %alan"e the interests ofManagement must %alan"e the interests of
shareholders and lenders 'ith its "on"erns forshareholders and lenders 'ith its "on"erns forthe firm8s future "om#etitive a%ility.the firm8s future "om#etitive a%ility.
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Sta1eho'ders (cont’d)Sta1eho'ders (cont’d)
#apital Mar'et#apital Mar'etSta'eholderSta'eholder
Product Mar'etProduct Mar'et
Sta'eholderSta'eholder
Prod#ct Mar1etProd#ct Mar1et
Sta1eho'dersSta1eho'ders
< "#stomers"#stomers
< S#pp'iersS#pp'iers
< 6ost comm#nities6ost comm#nities
< UnionsUnions
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Prod#ct Mar1et Sta1eho'dersProd#ct Mar1et Sta1eho'ders
5 6ustomers6ustomers
!emand relia%le #rodu"ts at lo' #ri"es!emand relia%le #rodu"ts at lo' #ri"es
5 Su##liersSu##liers
See loyal "ustomers 'illing to #ay highestSee loyal "ustomers 'illing to #ay highest
sustaina%le #ri"es for goods and servi"essustaina%le #ri"es for goods and servi"es5
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Sta1eho'ders (cont’d)Sta1eho'ders (cont’d)
#apital Mar'et#apital Mar'etSta'eholderSta'eholder
Product Mar'etProduct Mar'et
Sta'eholderSta'eholder
+rgani,ational+rgani,ational
Sta'eholderSta'eholder*rgani-ationa'*rgani-ationa'
Sta1eho'dersSta1eho'ders
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*rgani-ationa' Sta1eho'ders*rgani-ationa' Sta1eho'ders
5 4m#loyees4m#loyees
4e"t a dynami"$ stimulating and re'arding 'or4e"t a dynami"$ stimulating and re'arding 'or
environment.environment.
Are satisfied %y a "om#any that is gro'ing and Are satisfied %y a "om#any that is gro'ing and
a"tively develo#ing their sills.a"tively develo#ing their sills.
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Strategic &eadersStrategic &eaders
5 Strategi" eadersStrategi" eaders
:eo#le lo"ated in different #arts of the firm 'ho are:eo#le lo"ated in different #arts of the firm 'ho are
using the strategi" management #ro"ess to hel# theusing the strategi" management #ro"ess to hel# the
firm rea"h its vision and mission.firm rea"h its vision and mission.
5:rere9uisites for 4ffe"tive Strategi" eadershi#:rere9uisites for 4ffe"tive Strategi" eadershi#
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Strategic &eaders (cont’d)Strategic &eaders (cont’d)
5 rgani(ational 6ulturergani(ational 6ulture
The "om#le& set of ideologies$ sym%ols$ and "oreThe "om#le& set of ideologies$ sym%ols$ and "ore
values that are shared throughout the firm and thatvalues that are shared throughout the firm and that
influen"e ho' the firm "ondu"ts %usiness.influen"e ho' the firm "ondu"ts %usiness.
5 The Ealue of a Dun"tional rgani(ational 6ultureThe Ealue of a Dun"tional rgani(ational 6ulture
Su##orts effe"tive delegation of strategi"Su##orts effe"tive delegation of strategi"
res#onsi%ilitiesres#onsi%ilities
:rovides su##ort for strategi" leaders:rovides su##ort for strategi" leaders
4n"ourages so"ial energy4n"ourages so"ial energy
Dosters of res#e"t for othersDosters of res#e"t for others
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Predicting *#tcomes o+ StrategicPredicting *#tcomes o+ Strategic
Decisions. Proft Poo'sDecisions. Proft Poo's
5 :rofit :ool:rofit :ool
The total #rofits earned in an industry at all #ointsThe total #rofits earned in an industry at all #oints
along the value "hainalong the value "hain
5 ,dentifying the "om#onents of a #rofit #ool?,dentifying the "om#onents of a #rofit #ool?
!efine the #ool8s %oundaries.!efine the #ool8s %oundaries.
4stimate the #ool8s overall si(e.4stimate the #ool8s overall si(e.
4stimate si(e of ea"h value-"hain a"tivity in the #ool.4stimate si(e of ea"h value-"hain a"tivity in the #ool.
e"on"ile the "al"ulationse"on"ile the "al"ulationsB'hi"h a"tivity #rovidesB'hi"h a"tivity #rovides
the most #rofit #otential@the most #rofit #otential@
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Strategic Management ProcessStrategic Management Process
5 Study the e&ternal and internal environments.Study the e&ternal and internal environments.
5 ,dentify maret#la"e o##ortunities and threats.,dentify maret#la"e o##ortunities and threats.
5 !etermine ho' to use "ore "om#eten"ies.!etermine ho' to use "ore "om#eten"ies.
5*se strategi" intent to leverage resour"es$*se strategi" intent to leverage resour"es$
"a#a%ilities and "ore "om#eten"ies and 'in"a#a%ilities and "ore "om#eten"ies and 'in
"om#etitive %attles."om#etitive %attles.
5 ,ntegrate formulation and im#lementation of,ntegrate formulation and im#lementation of
strategies.strategies.
5 See feed%a" to im#rove strategies.See feed%a" to im#rove strategies.