Strategic Management In Action

Fifth Edition
Mary Coulter
 Chapter 2
The Context of Managing Strategically

Group 4
Rachel Rose
Yao Hai
Ryan Martin
Matt Porter
 Section 2.1
• Learning Outcomes
– Understanding Competitive Advantage
– Understanding the Three Perspectives
• The I/O View
• Resource-Based View
• Guerrilla View
– Know What Makes a Resource Unique
 Competitive Advantage
– Competitive Advantage: Something unique or
special that a firm does or possesses that provides
an advantage over its competitors.
• For Example:
– Coca Cola’s Brand Recognition and Trade Secret
– Apple iphone Research and Development
– Wal-Mart Cost Control
– All competitive advantages are hard to imitate,
duplicate, or substitute
 The I/O (Industrial Organization) View

• Focus: Structural forces within an industry and

the competitive environment of firms.
• Key Points:
– Obtaining and maintaining competitive advantage
comes directly from analyzing external forces
– How the firm stacks up against its competitors
– Firms positioning and industry characteristics
determine potential profitability
 The Resource-Based View
• Resources: all of the financial, physical, human, intangible, and
structural/cultural assets used by and organization to develop,
produce, and deliver products or services to its consumers.
• Focus: a firms resources are most important in getting
and keeping a competitive advantage.
• Key Points:
– Organizations are different collections of assets and
capabilities
– The key assets are what give a firm competitive advantage
– The best and most appropriate resources will succeed
 The Guerrilla View
• Focus: competitive advantage is temporary
• Why? The environment is continuously
changing.
• Key Points:
– Successful organizations must rapidly and
repeatedly disrupt the current situation and
surprise competitors to keep them on them off
balance
– Constantly create new competitive advantages
 Table 2.1 Comparing the Views of Competitive Advantage
I/O View Resource –Based View Guerrilla View
Competitive Positioning a firm Possession of unique Everything is temporary
Advantage assets or capabilities
Determinants of Characteristics of the Type, amount, and Ability to change and
Profitability industry and where nature of a firms surprise competitors
the firm is positioned resources
Major Concern Competition Resources or capabilities Continual chaotic
conditions
Focus of Analysis External Internal Both
Strategic Choices Choosing an Developing unique Disrupting the current
attractive industry resources situation to boost
and positioning company
appropriately
Why Organizational Resources are Unique?

Does it add value? Is it hard to duplicate

and substitute?

ORGANIZATIONAL RESOURCES AS
COMPETITIVE ADVANTAGE

Can the firm exploit it? Is it rare?

 Section 2.2
-The New Business Environment
-Drivers of the New Business Environment
-Information Revolution
-Technology
-Globalization

-Implications -Critical Success Factors

-Continual Change -Ability to embrace change
-Reduced need for physical assets -Creativity and innovation capabilities
-Vanishing distance and compressed time -Being a world-class organization
-Vulnerability
 -The Information Revolution
The amount of information being created,
captured, and replicated in a digital format is
growing at a rate of 57% a year.

This Information is Available to

- Anyone
- Anywhere
- Anytime

This Instant availability of

information has radically changed
the nature of the business
environment.
-Information (Knowledge) has always
been used to produce goods and
services. It has helped organizations
to be more efficient and effective.

-However, there has been a shift in the

way we look at information now.

-It is the essential resource of

production, not simply as a
means to an end.
-To have a competitive advantage,
organizations must not reply on
traditional factors of production.

-It must now look at how

information and knowledge
can be exploited.
 Technology
-What is technology?

-It is using equipment, materials,

knowledge, and experience to
perform tasks.

-Technology significantly
changes the nature of
competition and affects how
organizations do their work
in three areas.

-Innovation
-Bottom-Up Capability
-Organizational Performance
-Innovation
-Turning a creative product
or process that can be used
or sold.
-More than just creativity alone:
-Developing
-Making
-Marketing something that can
generate a revenue.

-Bottom-Up or “Mass Collaboration -Organizational Performance

Capability” -Understanding that technology is

-Shifting power from institutions to only a tool, not a replacement

individuals. for understanding the economics
Ex. of business.
-American Idol -This allows organizations to be
-eBay the best at what they do.
Ex.
-Wal-Mart, McDonald’s, Starbucks.
 Globalization
-The days of consuming only
domestic products are gone.

-More than ever, organizations must

strategically manage global issues.

-The products we consume now are

provided by a foreign company or

by a domestic company that does
business globally.

-Globalization influences strategic

management in two ways:

-Global Marketplace
-Global competitors
-Global Marketplace -Global competitors

-The whole world is a -Looking for a sustainable

potential marketplace. advantage.

-Potential marketplace range -Have their own unique set of

from small villages in China and experiences and resources.
India to urban areas like
Moscow or Mexico City -Making it much more difficult to
understand their strategic approach.
-This global marketplace
provides significant -However, by partnering together with
opportunities for organizations competitors, you can avoid the treat,
to market their goods and and still be able to achieve the
services. intended competitive advantage in
the global market.
-As global markets open up:
 Implications of These Driving Forces

• There are four major implications of these

driving forces:
1. Continual Change
2. Reduced Need for Physical Assets
3. Vanishing Distance and Compressed Time
4. Vulnerability
 Implications of These Driving Forces

• Continual Change
– External and internal changing conditions
stimulate the need for organizational change
– Ex. Greeting Card Companies
 Implications of These Driving Forces

• Reduced Need for Physical Assets

– Business economic power was once measured by
the amount of physical assets a company
possessed, but this has changed recently to
intangible assets
– A sustainable competitive advantage can be
achieved with nonphysical assets
– Ex. Companies such as Google, Amazon.com,
American Express, and Toyota
 Implications of These Driving Forces
• Vanishing Distance and Compressed Time
– Physical distance and time constraints on an
organization’s strategic decisions have all but
disappeared
– Organization’s potential markets and competitors
can be found anywhere
– Reasons for this change
• Email
• Text Messaging
• Interactive Web Sites
 Implications of These Driving Forces

• Vulnerability
– Organizations face increased vulnerability from
interconnectedness and openness
– Threats from computer viruses, terrorist attacks,
and biological attacks should all be considered
when making strategic decisions
– Ex. Computer Viruses (SoBig, The Love Bug,
BugBear)
 Critical Success Factors
• There are three factors critical to success in
this new business environment:
1. Ability to embrace change
2. Creativity and innovation capabilities
3. Being a world-class organization
 Critical Success Factors
• Ability to Embrace Change
– Change occurs from:
• technological advances,
• from resource,
• or from information availability

Change Agents – oversee and initiate change efforts

Ex. Big change in information transfer with Twitter

 Critical Success Factors
• Creativity and Innovation Capabilities
– “Create and innovate or fail!”

Creativity – ability to combine ideas in a unique way or to

make unusual associations between ideas

– Innovation is another important capability; organization

must be able to channel creativity into useful outcomes

Ex. Apple
 Critical Success Factors
• Being a World-Class Organization
– Strategic decision makers meet the challenge of
ensuring long-run survival and success with world-
class organization
• Significant Technological Support
• Strong Customer Focus
• Continual Learning and Improvement
• Egalitarian Climate
• Creative Human Resource Management
• Flexible Organization Structure
 Section 2.3
• Managing Strategically
– Formulating and implementing strategies that allow organization to develop
and maintain a competitive advantage.
• Competitive Advantage
– What sets an organization apart or what is its competitive edge.

• Strategic Management in Action

 Situation Analysis
 Strategy Formulation
 Strategy Implementation
 Strategy Evaluation

• Fast Fashion
 Vision Statement
• A vision statement is written to establish what
the organization stands for, what it believes in
and why it exists.
• It is a vision that looks beyond what the
organization is now to what it could be
• There are 4 specific parts to make a good
vision statement.
 4 parts to a vision statement
• 1. The vision is to be build on a foundation of
the organizations core values and beliefs
2. Elaborate on the purpose of the company
3.Includes a brief summary of what the
company does
4. Specify Broad goals
Example: Gillette vission statement
• (2,4)The Gillette Company’s Vision is to build Total Brand Value by
innovating to deliver consumer value and customer leadership faster,
better and more completely than our competition (. This Vision is
supported by two fundamental principles that provide the foundation
for all of our activities: (1)Organizational Excellence and Core Values.
Attaining our Vision requires superior and continually improving
performance in every area and at every level of the organization. Our
performance will be guided by a clear and concise strategic statement
for each business unit and by an ongoing Quest for Excellence within
all operational and staff functions.(3) This Quest for Excellence
requires hiring, developing and retaining a diverse workforce of the
highest caliber. To support this Quest, each function employs metrics
to define, and implements processes to achieve, world-class status.
 Why have a vision statement?
• Vision statements are important because they
are written so everyone in the company can
have behavioral expectations.
• Also vision statements can motivate members
of an organization and have increased levels of
effort.
 Mission Statement
• A mission statement is a statement given by each
of the segments of an organization (ex: divisional,
departmental) that elaborates on that segments
purpose, what it does, and its own goals.
• Mission statements help employees stay focused
when making strategic decisions
• Each mission statement must align and go along
with what the companies vision statement is,
that is why there is better focus.
 Corporate Social Responsibility
• CSR is the obligation of organizational decision
makers to make decisions and act in ways that
recognize the interrelatedness of business and
society.
• Businesses need to recognize that ethical
decisions are also strategic decisions.
• Who are the stakeholders in an organization?
 General Mills
• Believe that socially responsible relationships
can make them more competitive.
• General Mills ships three semitrailer trucks full
of cereal and other packaged goods to food
banks every day.
• Good corporate citizenship “doesn’t end with
the bottom line.”
 Traditional View
• Milton Friedman: Corporate social programs
must be paid for. Costs will be passed on to
the end consumer or absorbed by the
organization.
• Profitability suffers, then shareholders suffer.

• Stakeholders=Shareholders?
 Reconciling the Two Views
• CSR programs are expensive and must be paid
for, but these costs can add value.
• Investors look for socially responsible
corporations to invest in. Increasing CRS
actions leads to an increase in demand for
shares of the company's equity. Higher
demand raises the price of stock.
• Other ways to use CSR? (Toms Shoes brand)
 Comparing I/O, Resource Based, and
Guerrilla View
I/O View RBV Guerrilla View
Competitive Positioning in Possessing unique Temporary
Advantage Industry organizational
assets or
capabilities
Determinants of Characteristics of Type, amount and Ability to change
Profitability industry, firm’s nature of firm’s and radically
position within resources surprise
industry competitors with
strategic actions
Focus of Analysis External Internal External and
Internal
Major Concern Competition Resources- Continual, radical,
capabilities and chaotic
conditions
Strategic Choices Choosing attractive Developing unique Rapidly and
repeatedly
 Drivers of the New Business
Environment
• Information revolution
– “… information is now the essential resource of production, not simply
the means to an end.”
• Technology
– Technology: “Its using equipment, materials, knowledge, and
experience to perform tasks.”
– Innovation, Bottom up, and Organizational performance
• Globalization
– Global Markets
– Global Competition
 Implications of Drivers
• Continual Change
• Reduced need for physical assets
• Vanishing distance and compressed time
• Vulnerability

• Toys “R” Us Case Study

 Critical Success Factors
• Ability to embrace change
– Encourage employees to take responsibility for problems and
solutions
• Creativity and innovation capabilities
– Creativity: The ability to combine ideas in a unique way or make
unusual associations between ideas.

• Being a world-class organization

– World-Class Organization: Strategic decision makers take actions
to help it be the best in the world at what it does.
• EA Case Study
 Guiding Strategic Decisions
• Corporate Responsibilities and Ethics:
– CSR: The obligation of organziatonal decision makers to make
decisions and act in ways that recognize the interrelatedness of
business and society.
– Stakeholders

– Timberland Case Study

• Organizational Vision and Mission:
– Organizational Vision: A broad comprehensive picture of what a
leader wants an organization to become.
– Mission Statement: Statement of what specific organizational
units do and what they hope to accomplish.
Mission
To refresh the world...
To inspire moments of optimism and happiness…
To create value and make a difference.

Vision
•People: Be a great place to work where people are inspired to be the best they can be.
•Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and
satisfy people’s desires and needs.
•Partners: Nurture a winning network of customers and suppliers, together we create
mutual, enduring value.
•Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
•Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
•Productivity: Be a highly effective, lean and fast-moving organization.