Ch01 Strategic Mgmt & Strategic Competitiveness.-1

8/3/2019 Ch01 Strategic Mgmt & Strategic Competitiveness.-1

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Ch1-1Dr. Virendra Swarup Institute of Computer Studies, Kanpur

Chapter 1

Strategic Management and

Strategic Competitiveness

Mr. Anuj Srivastava

M.Com, MBAAsstt. Professor


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Ch1-2

Sustained Competitive Advantage

Above-Average Returns

Returns in excess of what an investor expects to

earn from other investments with similar risk

Occurs when a firm develops a strategy thatcompetitors are not simultaneously implementing

Provides benefits which current and potentialcompetitors are unable to duplicate


Achieved when a firm successfully formulates

and implements a value-creating strategy


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Ch1-3

which are required for firms to achieve:

Above-Average Returns


Sustained Competitive Advantage

The Strategic Management Process

Involves the full set of:

ActionsCommitments Decisions


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Ch1-4

Chapter One: Key Themes

Industrial Organization Model

Resource-Based Model

Challenge of Strategic Management

Changing Competitive Landscape

Two Models of Superior Profitability

Key Stakeholder Groups


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Ch1-5

Competitive success is transient...unless care is

taken to preserve competitive position

Only 16 of the 100 largest U.S. companies atthe start of the 20th century are still

identifiable today!

In a recent year, 44,367 businesses filed for

bankruptcy and many more U.S. businesses failed

Challenge of Strategic Management


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Ch1-6

Rapid technological changes

Rapid technology diffusions

Dramatic changes in

information and

communication technologies

Increasing importance of

knowledge

Fundamental nature of

competition is changingThe pace of change

is relentless....

and increasing

Traditional industry

boundaries are

blurring, such as... Computers

Telecommunications

21st Century Competitive Landscape


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The global economy is

changing

People, goods, services andideas move freely across

geographic boundaries

New opportunities emerge

in multiple global markets

Markets and industries

become more

internationalized

Traditional sources of

competitive advantage

no longer guarantee

success

New keys to success

include:

Flexibility

Innovation

Speed

Integration

21st Century Competitive Landscape


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Alternative Models of Superior Returns

Resource-Based

Model

Industrial Organization

Model

The External Environment

An Attractive Industry

Strategy Formulation

Assets and Skills

Strategy Implementation

Superior Returns

Resources

Capability

Competitive Advantage

An Attractive Industry


Superior Returns


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I/O Model of Superior Returns

The Industrial Organization modelsuggests that above-average returns

for any firm are largely determined

by characteristics outside the firm.

This model largely focuses on industry

structure or attractiveness of the

external environment rather than

internal characteristics of the firm.


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Action required:External

Environment

General Environment

Industry Environment

Competitive

Environment

Study the externalenvironment, especially

the industry environment.



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External

Environment

General Environment


Competitive

Environment

An Attractive

Industry

An industry whose

structural characteristics

suggest above-average

returns are possible

Action required:

Locate an industry withhigh potential for above-

average returns.



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External

Environment

General Environment


Competitive

Environment

Attractive

Industry

An industry whose




Action required:

Identify strategy called forby the industry to earn

above-average returns.

Selection of a strategy

linked with above-

average returns in a

particular industry

Strategy

Formulation



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External

Environment

General Environment


Competitive

Environment

Attractive

Industry

An industry whose




Strategy

Formulation


linked with above-


particular industry

Action required:

Develop or acquire assetsand skills needed to

implement the strategy.

Assets and Skills

Assets and skills

required to implement

a chosen strategy



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External

Environment

General Environment


Competitive

Environment

Attractive

Industry

An industry whose




Strategy

Formulation


linked with above-


particular industry

Assets and Skills

Assets and skills


a chosen strategy

Action required:

Use the firms strengths(its assets or skills) to

implement the strategy.

Strategy

Implementation

Selection of strategic

actions linked with

effective implementation

of the chosen strategy



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External

Environment

General Environment


Competitive

Environment

Attractive

Industry

An industry whose




Strategy

Formulation


linked with above-


particular industry

Assets and Skills

Assets and skills


a chosen strategy

Action required:

Strategy

Implementation

Selection of strategic

actions linked with

effective implementation

of the chosen strategy

Superior Returns

Earning of above-

average returns

Maintain selected strategyin order to outperform

industry rivals.



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The Resource-Based model suggeststhat above-average returns for any

firm are largely determined by

characteristics inside the firm.

This model focuses on developing or

obtaining valuable resources and

capabilities which are difficult or

impossible for rivals to imitate.

Resource-Based Model of Superior Returns


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Resources

Inputs to a firms

production process.

Action required:

Identify firm resources.Study strengths and weak-

nesses relative to rivals.



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Resources

Inputs to a firms

production process.

Action required:

Determine what firmcapabilities allow it to dobetter than rivals.

Capability

Capacity for an integrated

set of resources to perform

a task or activity.



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Resources

Inputs to a firms

production process.

Capability


set of resources to

integratively perform atask or activity.

Competitive

Advantage

Ability of a firm to

outperform its rivals

Action required:

Determine how firmsresources and capabilities

may create competitive

advantage.



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Resources

Inputs to a firms

production process.

Capability


set of resources to


Competitive

Advantage



An AttractiveIndustry

Location of an industry

with opportunities that

can be exploited by the

firms resources andcapabilities

Action required:

Locate an attractiveindustry.



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Resources

Inputs to a firms

production process.

Capability


set of resources to


Competitive

Advantage








Action required:

Select strategy that bestexploits resources and

capabilities relative to

opportunities in environs.

Strategy

Formulation and

Implementation

Strategic actions taken to

earn above-average

returns



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Ch1-22

Resources

Inputs to a firms

production process.

Capability


set of resources to


Competitive

Advantage








Action required:

Maintain selected strategyin order to outperform

industry rivals.

Strategy

Formulation and

Implementation

Strategic actions taken to

earn above-average

returns

Superior Returns

Earning of above-

average returns



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Ch1-23

Nonsubstitutable the firm must be organized appropriately toobtain the full benefits of the resources inorder to realize a competitive advantage

Valuable allow the firm to exploit opportunities orneutralize threats in its externalenvironment

Rare possessed by few, if any, current andpotential competitors

Costly to Imitate when other firms either cannot obtain themor must obtain them at a much higher cost

Resources and capabilities lead to

Competitive Advantagewhen they are:


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Ch1-24

Core Competencies

When these four

criteria are met,

Resources andCapabilities

become:

Core Competencies are resources and capabilitiesthat can serve as a source ofCompetitive Advantage.

The Resource-Based model argues that CoreCompetencies are the basis for a firms Competitive

Advantage, Strategic Competitiveness and Ability to

Earn Above-average Returns.


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Ch1-25

Winning competitive battles through deciding

how to leverage internal resources, capabilities,

and core competencies.

Strategic Intent

An application of strategic intent in terms of

products to be offered and markets to be served.

Strategic Mission


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Ch1-26

BUSINESS WEEKSS 10 Top Managers of the Year, 1999Name Company Strategic Accomplishment

Minoru Arakawa Nintendo America Scored huge hit by bringing Pok mon to U.S.

over objections of co-workers and negativemarket research

Bernard Arnault LVMH From just 23 in Oct. 98, LVMHs U.S. shareshave vaulted 280%, to about 87

Arthur Blank Home Depot Profits should jump 46%, to $2.3 billion forfiscal year 1999. Sales are expected to grow25%, to $38 billion

Peter Bijur Texaco After his company was labeled racist, attracted

minorities to key jobs, including treasurer IraHall, a former IBM executive

Gordon Binder Amgen Boosted stock price by around 100% last year, toabout $54

Steve Case America Online Deals to broaden AOLs availability and serviceswill help boost income 102% this fiscal year, to$800 million

John Chambers Cisco Systems Broadened Cisco into strategic businesses such

as software, consulting, and fiber-opticcommunications

Jim Curvey Fidelity Investments Reduced internal conflicts and spurred growththrough management changes

Thierry Desmarest Totalfina Acquired rival French oil company ELFAquitaine for $44 billion. Shares up about 35%in 99, as profits expected to grow 20%, to $3.1billion

Bernie Ebbers MCI Worldcom Turned toward more profitable data, Internet,and international operations

The most

effectivestrategists provide

a vision (strategic

intent) to

effectively elicitthe help of others

in creating a

firm's competitive

advantage.

Strategic Intent


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Ch1-27

Stakeholders: Groups who are affected by a firmsperformance and who have claims on itswealth

The firm must maintainperformance at an adequate level inorder to maintain the participationof key stakeholders

Organizational

EmployeesManagers

Non-Managers

Firm

Capital Market

Stock market/Investors

Debt suppliers/Banks

Product Market

Primary CustomersSuppliers


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Ch1-28

Stakeholder InvolvementEach of the key stakeholderswants a piece of the same pie

1 How do you divide the piein order to keep all of the

stakeholders involved?

2

How do you increase thesize of the pie so that thereis more to go around?

Chapter 2


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Chapter 3

InternalEnvironment

Chapter 2

External

EnvironmentThe Strategic

Management

Process

Strategic Intent

Strategic Mission

Strategic

Competitiveness

Above Average

ReturnsFeedback

Strategy Formulation

Chapter 4Business-LevelStrategy

Chapter 5CompetitiveDynamics

Chapter 6Corporate-LevelStrategy

Chapter 8

International

Strategy

Chapter 9

CooperativeStrategies

Chapter 7

Acquisitions &

Restructuring


Chapter 10CorporateGovernance

Chapter 11Structure

& Control

Chapter 12

Strategic

Leadership

Chapter 13Entrepreneurship

& Innovation

Strategic

Inputs

Strategic

Actions

Strategic

Outcomes

Documents

Ch01 Strategic Mgmt & Strategic Competitiveness.-1