Competitive Strategy: Lecture 1: Strategic Management Process

HI6006
Competitive Strategy
Lecture 1: Strategic Management Process

An Overview
Terminology
• Strategic competitiveness is achieved when a

firm successfully formulates and implements a
value-creating strategy.
• Strategy is an integrated and coordinated set of
commitments and actions designed to exploit core
competencies and gain a competitive advantage.
• Competitive advantage occurs when a firm
implements a strategy that creates superior value
for customers, which competitors are unable to
duplicate it or find too costly to imitate it.
Strategy Development and Implementation Process
Analyse the • Goal: To

External determine
Resources,
Environment and Capabilities and
the Internal Core
Organization Competencies
Formulate Vision
and Mission and
Develop the
Company
Strategy
• Goal: Achieving
Proceed with Strategic
Strategy Competitiveness
Implementation and Above
Average returns
Vison, Values, Mission, Strategy
Vision – a clear picture of what the company is

striving to become
Values – principles and beliefs that are to be

upheld and not violated in this firm
Mission – a specific statement describing where

and how the firm intends to compete
Strategy – a set of plans to accomplish the above

Stakeholders
Activity
Consider the Vision of McDonalds:

‘To be the world’s leading quick-service restaurant’
Consider McDonald’s core values ?
What is McDonald’s mission?
What Stakeholder groups can we identify?

Conflicting Priorities
 Different stakeholder groups have different goals
 Managing stakeholder conflict is part of strategy
Activity: consider the stakeholders of McDonalds

and any conflicts that could occur
A Changing Landscape
• Fundamental Changes Occuring:

• Globalisation
• Technology
• Industry boundaries blurring
• E.g.: Entertainment Industry
• Traditional sources of competitive advantage
• New managerial mindset needed
Hyper-Competitive Business Environment
Market
Instability
New Hyper-
Industries competitive Escalating
based on
Business Competition
technology
advances Environment
Strategic
Maneuvering
Dynamic, Rational, Two-Stage Process
• Dynamic Process
• Ever-changing markets and competition need to
be coordinated with a firm’s evolving inputs
• Rational Approach
• Used to achieve strategic competitiveness and
earn above-average returns.
• Formulation and implementation
• Must be simultaneously integrated to
successfully employ the strategic management
process.
Risks and Returns
• Risk refers to an investor’s uncertainty about the

economic gains or losses that will result from a
particular investment.
• Average returns are returns equal to what
investors can expect to earn from other
investments with a similar amount of risk.
• Above-average returns are returns greater than
those investors can expect to earn from other
investments with a similar amount of risk.
The Increasing Role of Technology
Technology Trends
Technology Diffusion and
Disruptive Technologies
The Information Age
Increasing Knowledge
Intensity
Some Strategy Formulation Tools
External Environment Analysis (PESTEL)
Input-Output Model
Five Forces Model
Generic Strategies
Resource-Based View
External Environment
PESTEL
Political aspects
Economic considerations
Social dynamics
Technology advances
Environmental concerns
Legal and ethical matters
Input-Output Model (I/O)
 Grounded in economics, the I/O model has four

underlying assumptions:
1. The external environment is assumed to impose
pressures and constraints that determine
strategies that will result in above-average returns.
2. Most firms competing within an industry or a
segment of that industry are assumed to possess
similar resources and pursue similar strategies.
Input-Output Model (I/O)
3. Resources are highly mobile (similar) across

firms, so any resource differences that might develop between
firms will be short lived.
4. Organisational decision makers are assumed to be

rational and committed to acting in the firm’s best
interests, i.e. will use
‘profit-maximising behaviour’.
The Five Forces Model
 The Five Forces Model (Porter)

• An analytical tool used to help firms understand the
attractiveness of an industry as measured by its
profitability potential
 Assumes that an industry’s profitability is a

function of interactions among the five forces
• Suppliers, buyers, rivalry, product substitutes and potential
new entrants to the industry.
Two Generic Strategies
1. Cost leadership strategy - produce

standardised goods and services at costs below
those of competitors
2. Differentiation strategy - produce

differentiated goods or services for which
customers are willing to pay a price premium
Resource-Based View
An organisation has its resources and capabilities
When combined these represent a unique set of

‘core competencies’
Those ‘core competencies’ allow a firm to compete

and develop ‘sustainable competitive advantage’
[more detail in week 3]

Introduction to Case Analysis
 Read the Case – looking to identify (highlight)

key strategic issues
 Decide which Strategy Model or theoretical
concepts are relevant to this case
 Use the model as your ‘template’ to summarise
the key issues identified in the case
 Form a picture of how this company (case)
applies the strategy model or theoretical
concepts
 Evaluate how well the company (case) has
applied Strategy Theory
Tutorial Activities in small groups
1. Examine the Zara mini-case (p73) and comment on

Zara’s vision, values, mission, and strategies
2. Examine the Welspun mini-case (p80) and comment on

the firm’s resources and capabilities
3. Examine the Proctor and Gamble case (p85) and

comment on the core competencies and how they are
used to create customer value

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What are the main components of the strategic management process?

What are the main components of the strategic management process?

What are Porter's five forces model?

What are Porter's five forces model?

HI6006

Lecture 1: Strategic Management Process

• Strategic competitiveness is achieved when a

Analyse the • Goal: To

Vision – a clear picture of what the company is

Values – principles and beliefs that are to be

Mission – a specific statement describing where

Strategy – a set of plans to accomplish the above

Consider the Vision of McDonalds:

Consider McDonald’s core values ?

What is McDonald’s mission?

What Stakeholder groups can we identify?

 Different stakeholder groups have different goals

 Managing stakeholder conflict is part of strategy

Activity: consider the stakeholders of McDonalds

• Fundamental Changes Occuring:

• Risk refers to an investor’s uncertainty about the

The Information Age

External Environment Analysis (PESTEL)

Five Forces Model

 Grounded in economics, the I/O model has four

3. Resources are highly mobile (similar) across

4. Organisational decision makers are assumed to be

 The Five Forces Model (Porter)

 Assumes that an industry’s profitability is a

1. Cost leadership strategy - produce

2. Differentiation strategy - produce

An organisation has its resources and capabilities

When combined these represent a unique set of

Those ‘core competencies’ allow a firm to compete

[more detail in week 3]

 Read the Case – looking to identify (highlight)

1. Examine the Zara mini-case (p73) and comment on

2. Examine the Welspun mini-case (p80) and comment on

3. Examine the Proctor and Gamble case (p85) and

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