AISE Ch01 strategic management mba

8/19/2019 AISE Ch01 strategic management mba

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© 2007 Thomson/South-Western.© 2007 Thomson/South-Western.

All rights reserved.All rights reserved.

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



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



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@



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



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.



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



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



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.



FIGUREFIGURE 1.2 1.2

The I* Mode' o+ The I* Mode' o+

,o%e!,%erage,o%e!,%erage

Ret#rnsRet#rns



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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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


%ttracti"e Indutr!%ttracti"e Indutr!


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).). ,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



Strateg! &ormulationStrateg! &ormulation


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.. !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




%et and S'ill%et and S'ill


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. *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





Strateg! ImplementationStrateg! Implementation


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Ind#stria' *rgani-ation (I*) Mode'Ind#stria' *rgani-ation (I*) Mode'





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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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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).). !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


#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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.. o"ate an attra"tive industry.o"ate an attra"tive industry.

(eource(eource




,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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.. 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





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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(eource(eource





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


#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)


Product Mar'etProduct Mar'et

Sta'eholderSta'eholder

Prod#ct Mar1etProd#ct Mar1et


< "#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)


Product Mar'etProduct Mar'et

Sta'eholderSta'eholder

+rgani,ational+rgani,ational

Sta'eholderSta'eholder*rgani-ationa'*rgani-ationa'



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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.

Documents

AISE Ch01 strategic management mba