Ch1 Strategic Management
Ch1 Strategic Management
Ch1 Strategic Management
World
Chapter 1
Strategic Management and Strategic Competitiveness o Rapid changes in industry boundaries and markets
o Conventional sources of competitive advantage losing
effectiveness
Strategic Competitiveness
o Enormous investments required to compete globally
o Severe consequences for failure
- When a firm successfully formulates and implements a value-
creating strategy.
- An integrated and coordinated set of commitments and actions o Allows for planned actions rather than reactions
designed to exploit core competencies and gain a competitive o Helps coordinate business unit strategies
advantage.
Competitive Advantage
The Competitive Landscape
- When a firm implements a strategy that creates superior value for
customers and that its competitors are unable to duplicate or find Hyper-competition
too costly to try to imitate.
- describes competition that is excessive such that it creates inherent
Risk instability and necessitates constant disruptive change for firms in
the competitive landscape.
- An investor’s uncertainty about the economic gains or losses that
will result from a particular investment. - A condition of rapidly escalating competition based on:
Average Returns Price-quality positioning
- Returns equal to those an investor expects to earn from other Competition to create new know-how and establish first-
investments with a similar amount of risk. mover advantage
Above-average Returns
Competition to protect or invade established product or
geographic markets
- Returns in excess of what an investor expects to earn from other
investments with a similar amount of risk.
The Strategic Management Process - Expansion into global arena complicates a firm’s competitive
environment.
Analysis
Short-term: Where is the fastest growth likely to occur?
External environment and internal organization
Strategy Globalization
o Economies of scale
The amount of time required for firms to learn how to
o Barriers to market entry
compete in markets that are new to them.
o Diversification
o Product differentiation
o Degree of concentration of firms in the industry
Technology and Technological Changes
Technology Diffusion
Five Forces Model of Competition Industry Profitability
- The speed at which new technologies become available
- The industry’s rate of return on invested capital relative to its cost
Disruptive Technologies of capital
- Technologies that destroy the value of existing technology and
create new markets
An industry’s profitability results from interaction among:
- disruptive or radical technology can create what is essentially a new
o Suppliers
industry or can harm industry incumbents
o Buyers
o Competitive rivalry among firms currently in the
industry
Perpetual Innovation o Product substitutes
o Potential entrants to the industry
- The rapidity and consistency with which new, information-
intensive technologies replace older ones
explains the external environment’s dominant influence on a firm’s - Firms acquire different resources and develop unique capabilities.
strategic actions
is the capacity for a set of resources to perform a task or an activity in Above-average returns are the fruits of the firm’s efforts to
an integrative manner. achieve its vision and mission.
Core competencies
When the four key criteria of resources and capabilities are met, they
- Individuals and groups who can affect, and are affected by, the
strategic outcomes achieved and who have enforceable claims on a
become core competencies.
firm’s performance.
Managerial competencies are especially important. Core
competencies serve as a source of competitive advantage, create Claims on the firm’s performance are enforced by the
value, and provide the opportunity for above-average returns. stakeholder’s ability to withhold participation essential to
the firm’s survival.
- Possessed by few, if any, current and potential competitors - Two issues affect the extent of stakeholder involvement in the firm:
- When other firms cannot obtain them or must obtain them at a How to increase returns so everyone has more to share?
much higher cost
Non substitutable
Classifications of Stakeholders
- The firm is organized appropriately to obtain the full benefits of the
1. Capital Market Stakeholders
resources in order to realize a competitive advantage
Vision and Mission Vision - Shareholders and lenders expect the firm to preserve and enhance
the wealth they have entrusted to it.
- A enduring picture of what the firm wants to be and, in broad terms,
what it wants to ultimately achieve. Want the return on their investment (and, hence, their
wealth) to be maximized.
Stretches and challenges people and evokes emotions and
dreams. Expect returns to be commensurate with the degree of
risk to the shareholder.
Vision
- Management must balance the interests of shareholders and lenders
is a picture of what the firm wants to be and, in broad terms, what it with its concerns for the firm’s future competitive ability.
wants to ultimately achieve
- Want companies willing to be long-term employers and providers of Strategic Management Process
tax revenues while minimizing demands on public support services
o Study the external and internal environments.
Union officials o Identify marketplace opportunities and threats.
o Determine how to use core competencies.
- Want secure jobs and desirable working conditions o Use strategic intent to leverage resources,
capabilities and core competencies and win
competitive battles.
o Integrate formulation and implementation of
3. Organizational Stakeholders
strategies.
Employees o Seek feedback to improve strategies.
Strategic Leaders
- People located in different parts of the firm who are using the
strategic management process to help the firm reach its vision and
mission.
o Hard work
o Thorough analyses
o Honesty
o Desire for accomplishment
o Common sense
Organizational Culture
- The complex set of ideologies, symbols, and core values that are
shared throughout the firm and that influence how the firm conducts
business.
- The total profits earned in an industry at all points along the value
chain