Professional Documents
Culture Documents
STRATEGIC
MANAGEMENT
INPUTS
CHAPTER 1:
STRATEGIC
MANAGEMENT &
STRATEGIC
COMPETITIVENESS
Authored by:
Marta Szabo White. Ph.D
Georgia State University
KNOWLEDGE OBJECTIVES
● Define strategic competitiveness, strategy,
competitive advantage, above-average
returns, and the strategic management
process.
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IMPORTANT DEFINITIONS
• Strategic Competitiveness: achieved when a firm
successfully formulates and implements a value-
creating strategy
• Strategy: an integrated and coordinated set of
commitments and actions designed to exploit core
competencies and gain a competitive advantage.
• Competitive Advantage: is obtained by a firm that
implements a strategy competitors are unable to
duplicate or find too costly to try to imitate
• Above Average Returns : returns in excess of what
an investor expects to earn from other investments with
a similar amount of risk
• Risk: an investor’s uncertainty about the economic
gains or losses that will result from a particular
investment.
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IMPORTANT DEFINITIONS
• Average Returns – are returns equal to
those an investor expects to earn from
other investments with a similar
amount of risk.
• The Strategic Management Process –
is the full set of commitments,
decisions and actions required for a
firm to achieve strategic
competitiveness and earn above
average returns
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OPENING CASE: BORDERS, A FAILURE
EXAMPLE
• Borders, a paperbook giant for 40 years had to close its doors
due to bankruptcy, in September 2011.
• It closed 399 stores and laid off nearly 10,700 workers.
• Earlier on, size was its advantage – it offered tens of
thousands of books in a single store
• It also had a technical advantage of a superior inventory
system that could optimize and even predict, what consumers
would buy across the nation.
• In the mid-1990s Borders lost its competitive edge, investing
heavily in CDs and DVD music sales, just as the industry was
going digital. At that same time, one major competitor, Barnes
& Noble, was pulling back. Instead, they were “beefing up”
their online sales and eventually developed an e-reader called
Nook.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
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OPENING CASE: BORDERS, A FAILURE
EXAMPLE
• Meanwhile, Borders expanded its physical plant, refurbished its
stores and outsourced its online sales operations to AMAZON!
• This was actually when Borders handed over its
competitiveness to a direct competitor!
• Borders missed the mark altogether – they remained in its
paperback mode and did not read the signs of the times,
noting the new way to read and purchase books.
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THE STRATEGIC MANAGEMENT
PROCESS
Continuously
changing markets and industry conditions must match evolving
strategic inputs.
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THE STRATEGIC MANAGEMENT
PROCESS
FIGURE 1.1
The Strategic
Management
Process
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
THE COMPETITIVE LANDSCAPE
emergence of a global
economy
rapid technological changes
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THE COMPETITIVE LANDSCAPE
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THE COMPETITIVE LANDSCAPE
THE MARCH OF GLOBALIZATION
Globalization is
increasing economic Highly globalized firms
Globalization is the
interdependence must anticipate ever-
product of a large
among countries and increasing complexities
number of firms
their organizations as in their operations as
competing against
reflected in the flow of goods, services,
one another in an
goods and services, people, etc. move
increasing number of
financial capital, and freely across
global economies.
knowledge across geographic borders.
country borders.
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THE COMPETITIVE LANDSCAPE
THE MARCH OF GLOBALIZATION
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THE COMPETITIVE LANDSCAPE
THE RISKS OF GLOBALIZATION
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THE COMPETITIVE LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL CHANGES
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THE COMPETITIVE LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL CHANGES
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THE COMPETITIVE LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL CHANGES
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THE COMPETITIVE LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL CHANGES
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THE COMPETITIVE LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL CHANGES
EXTERNAL INTERNAL
I/O RESOURCE-
BASED
MODEL MODEL
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THE I/O MODEL OF ABOVE-AVERAGE
RETURNS
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THE I/O MODEL of ABOVE-
AVERAGE RETURNS
The Five Forces Model (Porter’s) of
competition is an analytical tool used to help firms
find the industry that is the most attractive, as
measured by its profitability potential.
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THE I/O MODEL of ABOVE-AVERAGE
RETURNS
FIRMS CAN EARN ABOVE-AVERAGE RETURNS:
Cost Leadership Strategy – producing standardized
goods or services at costs below those of competitors
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THE RESOURCE-BASED MODEL
OF ABOVE-AVERAGE RETURNS
The resource-based model assumes that each
organization is a collection of unique resources and
capabilities.
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THE RESOURCE-BASED MODEL
OF ABOVE-AVERAGE RETURNS
When these four criteria are met, resources and
capabilities become core competencies:
•They are valuable when they allow a firm to
VALUABLE take advantage of opportunities or
neutralize threats.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
THE RESOURCE-BASED MODEL
OF ABOVE-AVERAGE RETURNS
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
THE RESOURCE-BASED MODEL
of ABOVE-AVERAGE RETURNS
The Resource-
Based Model
of Above
Average
Returns
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
TWO MODELS OF STRATEGIC
DECISION MAKING
Evidence indicates that both models yield insights
that are linked to successfully selecting and using
strategies.
EXTERNAL INTERNAL
I/O RESOURCE-
BASED
MODEL MODEL
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VISION
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
VISION
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VISION
Examples:
Our vision is to be the world’s best quick service
restaurant. (McDonald’s)
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MISSION
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
MISSION
Examples:
Be the best employer for our people in each
community around the world and deliver
operational excellence to our customers in each of
our restaurants. (McDonald’s)
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VISION, MISSION AND ETHICS
Business
ethics VISION •Deciding what a firm wants to
become
are a
vital
•Deciding who it intends to
part
of:
MISSION serve and how it wants to
serve those individuals and
groups
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STAKEHOLDERS
Competitive Advantage
Firms effectively managing stakeholder relationships
outperform those that do not.
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STAKEHOLDERS
• Organizations are not equally dependent on
all stakeholders, so not every stakeholder has
the same level of influence.
FIGURE 1.4
The Three
Stakeholder
Groups
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CLASSIFICATION OF STAKEHOLDERS
POWER
URGENCY
IMPORTANCE
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MANAGING STAKEHOLDER CONFLICT
CHALLENGES:
When earning above-average returns, a firm can more
easily satisfy multiple stakeholders simultaneously.
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CAPITAL MARKET STAKEHOLDERS
BALANCING CONFLICTING
SHAREHOLDER GOALS
The returns that shareholders expect are
commensurate with the degree of risk accepted with
those investments.
CHALLENGING FOR MANAGERS:
Some shareholders want short-term
increases in returns
Others desire building long-term
competitiveness
Often large shareholders prefer that the firm minimize
its use of debt because of the risk of debt, its cost, and
the possibility that debt holders have first call over
shareholders on the firm’s assets in case of default.
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PRODUCT MARKET STAKEHOLDERS
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PRODUCT MARKET STAKEHOLDERS
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STRATEGIC LEADERS
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STRATEGIC LEADERS
Increasingly, CEOs delegate
strategic responsibilities to
include decision-makers
closest to the action due to
the changing competitive • Globalization
landscape: • Rapid technological
change
• Increasing
importance of
The global knowledge
economy • People as sources
of competitive
advantage
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
STRATEGIC LEADERS AND
ORGANIZATIONAL CULTURE