Gm105chapter1 10e

PART 1:
STRATEGIC
MANAGEMENT
INPUTS
CHAPTER 1:
STRATEGIC
MANAGEMENT &
STRATEGIC
COMPETITIVENESS
Authored by:
Marta Szabo White. Ph.D
Georgia State University
THE STRATEGIC MANAGEMENT
PROCESS
FIGURE 1.1
The Strategic
Management
Process
©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.
KNOWLEDGE OBJECTIVES
● Define strategic competitiveness,
strategy, competitive advantage,
above-average returns, and the
strategic management process.
● Describe the competitive

landscape and explain how
globalization and technological
changes shape it.
● Use the industrial organization (I/O)

model to explain how firms can earn
above-average returns.
● Use the resource-based model to

explain how firms can earn above-
average returns.
KNOWLEDGE OBJECTIVES
● Describe vision and mission and

discuss their value.
● Define stakeholders and describe

their ability to influence
organizations.
● Describe the work of strategic

leaders.
● Explain the strategic management

process.
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 - when

a firm implements a strategy that creates
superior value for customers; competitors
IMPORTANT DEFINITIONS
● RISK - an investor’s uncertainty about

the economic gains or losses that will
result from a particular investment
● ABOVE-AVERAGE RETURNS -
returns in excess of what an investor
expects to earn from other investments
with a similar amount of risk
● AVERAGE RETURNS - returns

equal to those an investor expects to earn
from other investments with a similar
amount of risk
OPENING CASE
ONCE A “GIANT,” BORDERS BECAME A “WEAKLING”
ON ITS KNEES
INABILITY TO EARN AVERAGE RETURNS

resulted first in decline and, eventually, failure
BORDERS - OPENING CASE -
FAILURE EXAMPLE
●Enjoyed considerable success early on
●Tried to enrich its traditional approach with more
marketing and more attractive stores, demonstrating
a lack of market understanding
● Declining book sales for large chain store retailers
●Should have been entrepreneurial, innovative, and
market-oriented
THE STRATEGIC
MANAGEMENT PROCESS
■ FIRST: External environment and internal

organization are analyzed to determine resources, capabilities,
and core competencies—the sources of “strategic inputs.”
■ NEXT: Vision and mission are developed; strategies

are formulated.
■ THEN: Strategies are implemented with the goal of

achieving strategic competitiveness and above-average
returns.
■ DYNAMIC PROCESS: Continuously

changing markets and industry conditions must match evolving
strategic inputs.
PROCESS
Rational: the approach firms use to

achieve strategic competitiveness and earn
above-average returns
FORMULATION and
IMPLEMENTATION:
the two types of strategic actions that must
be simultaneously integrated to successfully
employ the strategic management process
PROCESS
t e xt
The is
iv i ded
d
into
h re e
t
rts.
pa
THE COMPETITIVE
LANDSCAPE
■ GLOBALIZATION - emergence of a global
economy
■ TECHNOLOGY - rapid technological
changes
■ INDUSTRY BOUNDARIES BLURRING

■ EXAMPLES - computer networks and
telecommunications have blurred the boundaries of
the entertainment industry
■ MSNBC is co-owned by NBC Universal and
Microsoft
■ General Electric owns 49 percent of NBC
Universal and Comcast owns the remaining 51 percent
■ STRATEGIC MANAGEMENT PROCESS - effective use

ofCengage
©2013 theLearning.
strategic management
All Rights Reserved. May not be copied, scanned,process reduces
or duplicated, in whole the
or in part, except for use as
THE COMPETITIVE
LANDSCAPE
■ HYPERCOMPETITION - characterized by
■ Market instability and change
■ Rapidly escalating competition
■ Aggressive challengers
■ Strategic maneuvering to establish
first- mover advantage
■ Technology industries
■ TWO DRIVERS
- GLOBALIZATION
- TECHNOLOGY
■ Strategic flexibility - important tool
THE COMPETITIVE
LANDSCAPE
THE GLOBAL ECONOMY
■ Goods, services, people, skills,
and ideas move freely across
geographic borders
■ New opportunities and

challenges emerge
■ Competitive environments are

broader and increasingly more
complex
THE COMPETITIVE
LANDSCAPE
THE GLOBAL ECONOMY
■ The European Union has
become one of the world’s largest
markets, with 700 million
potential customers
■ China has become the second
largest economy in the world
surpassing Japan
India, the world’s largest
■
democracy, has an economy that
THE COMPETITIVE
LANDSCAPE
STRATEGIC
Huawei FOCUS
also needs Guanxi
in the United States
GUANXI
■ Strong relationships in which each
party feels obligated to help the other
■ Key element of doing business in
China
■ Building strong relationships is an
important dimension of Chinese
culture; Guanxi is also important when
conducting business in the United
THE COMPETITIVE
LANDSCAPE
THE GLOBAL business
■ Hypercompetitive ECONOMY environment
challenges firms to reconsider which markets
to compete in; this positioning is more critical
than ever
■ GE - headquartered in the U.S., yet up to

60% of its revenue growth through 2015 will
be generated from rapidly developing
economies such as China and India
■ Jeffrey Immelt - suggests that we have
entered a new economic era in which the
global economy will be more volatile and
emerging economies such as Brazil, China,
and India will be the major drivers of growth
THE COMPETITIVE
LANDSCAPE
THE MARCH OF
GLOBALIZATION
THE COMPETITIVE
LANDSCAPE
THE MARCH OF
GLOBALIZATION
THE COMPETITIVE
LANDSCAPE
THE RISKS OF
GLOBALIZATION
THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
CHANGES
THREE CATEGORIES for TECHNOLOGY
TRENDS
Technology is significantly altering the nature of
competition and enabling unstable competitive
environments
■Technology Diffusion & Disruptive
Technologies
■ Information Age
■ Increasing Knowledge Intensity
THE COMPETITIVE
LANDSCAPE
CHANGES
Technology Diffusion -
Category 1
■ Technology Diffusion – the speed at
which new technologies become available and
are used; has increased substantially over the
past 15 to 20 year.
■ Examples of technology diffusion: How
long it took to get the following into 25
percent of U.S. homes:
● Telephone — 35 years
● TV — 26 years
● Radio — 22 years
THE COMPETITIVE
LANDSCAPE
Technology CHANGES
Diffusion - Category
1
Perpetual Innovation
■ Perpetual Innovation - describes how
rapidly and consistently new, information-
intensive technologies replace older ones
■ Competitive Premium - the shorter product
life cycles resulting from rapid diffusions of new
technologies place a competitive premium on
being able to quickly introduce new, innovative
goods and services
■ Competitive Advantage - speed to market
with innovative products is a primary source of
THE COMPETITIVE
LANDSCAPE
CHANGES
Category 1
■ Innovations must be derived from an
understanding of global standards and global
expectations in terms of product functionality
■ Apple - an excellent example of radical
innovation by a large established firm
■ Technology Diffusion - to diffuse the
technology and enhance the innovation value,
firms need to be innovative in incorporating the
new technology into their product
THE COMPETITIVE
LANDSCAPE
CHANGES
Category 1
■ Rapid Technology Diffusion - now may take
only 12 to 18 months for firms to gather
information about research and development and
product decisions for their competitors
■ Patents - may be an effective protection of
proprietary technology in a small number of
industries, e.g., pharmaceuticals
■ Proprietary Strategies - many firms often do
not apply for patents to prevent competitors from
THE COMPETITIVE
LANDSCAPE
CHANGES
Category 1
Disruptive Technologies
■ Disruptive Technologies - technologies that
destroy the value of an existing technology and
create new markets, many times representing
radical or breakthrough innovation
■ Examples: iPods, iPads, WiFi, and the browser
■ Industry Incumbents Harmed or
Destroyed – a disruptive or radical technology
creates a new industry, thereby destroying the
existing industry; with superior resources,
THE COMPETITIVE
LANDSCAPE
CHANGES
Category 1
Technology and Innovation
Strategic Focus: Apple
■ Apple’s “legendary” market power,
phenomenal growth rate, and impressive financial
performance stem from its new technology
development and innovation
■ Imitators - Apple is expected to retain at least
80% of the tablet computer market even with the
many imitative products on the market
■ International- Apple’s stores in China handle
THE COMPETITIVE LANDSCAPE
CHANGES
Category 1
Technology and Innovation
Strategic Focus: Apple
■ Versatility - Apple provides an example of
technological entrepreneurship across multiple
industries
■ Disruptive Technologies
● Innovation and industry transformation, e.g.,
iPod, iPad, and the iPhone
● iPod and the complementary iTunes have
revolutionized how music is sold and used by
consumers
THE COMPETITIVE
LANDSCAPE
CHANGES
The Information Age -
Category 2
■ Dramatic Changes - in information technology
have occurred in recent years, e.g., personal
computers, cellular phones, artificial intelligence,
virtual reality, massive databases, and multiple
social networking sites
■ Competitive Advantage - the ability to
effectively and efficiently access and use information
has become an important source of competitive
advantage in virtually all industries
■ Cengage
©2013 Information Technology
Learning. All Rights Reserved. - enables
May not be copied, scanned, or duplicated, small
in whole or in part, except for usefirms
as
THE COMPETITIVE
LANDSCAPE
CHANGES
The Information Age -
Category 2
■ Change - both the pace of change in
information technology and its diffusion will
continue to increase
■ Cost - the declining costs of information
technologies and the increased accessibility to
them are evident in the current competitive
landscape
■ Internet - contributing factor to
hypercompetition
THE COMPETITIVE
LANDSCAPE
CHANGES
Increasing Knowledge
Intensity - Category 3
■ Knowledge - information, intelligence, and
expertise are the basis of technology and its
application
■ Competitive Advantage - in the 1980s, the
basis of competition shifted from hard assets to
intangible resources; knowledge is a critical
organizational resource and an increasingly
valuable source of competitive advantage
■ Intangible Resource – knowledge gained
through experience, observation, and inference is
an intangible resource; the value of intangible
THE COMPETITIVE
LANDSCAPE
CHANGES
■ Strategic Competitiveness - enhanced for
the firm that develops the ability to capture
intelligence, transform it into usable knowledge,
and diffuse it rapidly throughout the firm
■ Competitive Advantage - firms must
develop (e.g., through training programs) and
acquire (e.g., by hiring educated and
experienced employees) knowledge, integrate it
into the organization to create capabilities, and
then apply it to gain a competitive advantage
THE COMPETITIVE
LANDSCAPE
CHANGES
■ Knowledge Spillovers - knowledge falls
into competitor’s hands, e.g., hiring of
professional staff/managers by competitors
■ Knowledge Diffusion - because of the
potential for spillovers, firms must act quickly to
use their knowledge in productive ways
■ Strategic Flexibility - facilitates knowledge
diffusion to where it has value
THE COMPETITIVE
LANDSCAPE
CHANGES
STRATEGIC FLEXIBILITY
■ Set of capabilities used to respond to various
demands and opportunities existing in a
dynamic and uncertain competitive environment
■ Enables the capacity to learn
■ Facilitates coping with hypercompetition,
uncertainty, and risk
■ Firms should try to develop strategic
flexibility in all areas of operations
TWO MODELS OF STRATEGIC
DECISION MAKING
Firms use two major models to help develop
their vision and mission and then choose one
or more strategies in pursuit of strategic
competitiveness and above-average returns.
THE I/O MODEL OF ABOVE-
AVERAGE RETURNS
Grounded in economics, the I/O model has

Four Underlying Assumptions
First, the external environment is assumed to
impose pressures and constraints that
determine the strategies that would result in
above-average returns.
Second, most firms competing within an

industry or within a segment of that industry
are assumed to control similar strategically
relevant resources and to pursue similar
strategies in light of those resources.
THE I/O MODEL of ABOVE-AVERAGE
RETURNS
Third, resources used to implement
strategies are assumed to be highly mobile
across firms, so any resource differences that
might develop between firms will be short-
lived.
Fourth, organizational decision-makers are

assumed to be rational and committed to
acting in the firm’s best interests, as shown
by their profit-maximizing behavior.
THE I/O MODEL of ABOVE-
AVERAGE RETURNS
T he Five Forces Model of competition is
an analytical tool used to help firms find the industry
that is the most attractive, as measured by its
profitability potential.
T he Five Forces Model suggests that an

industry’s profitability (i.e., its rate of return on
invested capital relative to its cost of capital) is a
function of interactions among the Five Forces:
suppliers, buyers, rivalry, product substitutes, and
potential entrants to the industry.
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
● Differentiation Strategy - producing differentiated

goods or services for which customers are willing to
pay a price premium
The I/O model suggests that above-average returns are

earned when firms are able to effectively study the external
environment as the foundation for identifying an attractive
industry and implementing the appropriate strategy.
AVERAGE RETURNS
R esearch findings support the I/O model, in that

approximately 20% of a firm’s profitability is explained
by the industry in which it chooses to compete.
H owever, this research also shows that 36% of the

variance in firm profitability can be attributed to the
firm’s characteristics and actions.
T hese findings suggest that the External AND Internal

environments influence the company’s ability to
achieve strategic competitiveness and earn above-
average returns.
AVERAGE RETURNS
FIGURE 1.2
The I/O Model

of Above
Average
Returns
THE RESOURCE-BASED MODEL
OF ABOVE-AVERAGE
RETURNS
The resource-based model assumes that
each organization is a collection of unique
resources and capabilities.
The uniqueness of its resources and

capabilities is the basis of a firm’s strategy
and its ability to earn above-average
returns.
The core assumption of the resource-based

model is that the firm’s unique resources,
capabilities, and core competencies have
more influence on selecting and using
strategies than does the firm’s external
OF ABOVE-AVERAGE
RETURNS
There are FOUR components to the
Resource- Based Model:
● Resources
● Capabilities
● Core Competencies
● Competitive Advantage
There are FOUR criteria that if
resources and capabilities fulfill, then
they become Core Competencies:
● Valuable
● Rare
● Costly to Imitate
● Nonsubstitutable
OF ABOVE-AVERAGE
•Resources areRETURNS
inputs into a firm’s
production process, such as capital
equipment, the skills of individual
employees, patents, finances, and talented
managers.
•A firm’s resources are either tangible or

intangible and are classified into three
categories: physical, human, and
organizational capital.
•Resources alone may not yield a

competitive advantage. Many resources
can either be imitated or substituted over
time, therefore, it is difficult to achieve and
of ABOVE-AVERAGE RETURNS
A capability is the capacity for a set of

resources to perform a task or an activity in
an integrative manner.
KEY WORD: INTEGRATIVE
Capabilities evolve over time and must be

managed dynamically in pursuit of above-
average returns.
Core competencies are resources and

capabilities that serve as a source of
competitive advantage.
OF ABOVE-AVERAGE
RETURNS
When these four criteria are met, resources
and capabilities become core competencies:
OF ABOVE-AVERAGE
RETURNS
Four Underlying
Assumptions
First, differences in firms’ performances
across time are due primarily to their unique
resources and capabilities rather than the
industry’s structural characteristics.
Second, firms acquire different resources

and develop unique capabilities based on
how they combine and use the resources.
of ABOVE-AVERAGE RETURNS
Third, that resources and capabilities are

NOT highly mobile across firms.
Fourth, that the differences in resources
and capabilities are the basis of
competitive advantages.
Above-average returns are
earned when the firm uses
its valuable, rare, costly-to-
imitate, and non-
substitutable resources and
capabilities to compete
against its rivals in one or
OF ABOVE-AVERAGE
FIGURE 1.3 RETURNS
The Resource-
Based Model
of Above
Average
Returns
TWO MODELS OF STRATEGIC
DECISION MAKING
Evidence indicates that both models yield
insights that are linked to successfully
selecting and using strategies.
VISION
• Vision is a picture of what the firm

wants to be and, in broad terms, what it
wants to ultimately achieve.
• A vision statement is short and concise,

making it easy to remember.
• It articulates the ideal description of the

organization and gives shape to its intended
future.
VISION
• A firm’s vision tends to be enduring,

whereas its mission can change in light of
changing environmental conditions.
• vision statements reflect a firm’s values

and aspirations and are intended to capture
the heart and mind of each stakeholder.
• Executives and top-level managers must

formulate and implement strategies
consistent with the vision.
VISION
Examples:
Our vision is to be the world’s best quick
service restaurant. (McDonald’s)
To make the automobile accessible to

every American.
(Ford Motor Company’s vision when
established by Henry Ford)
MISSION
• The vision is the foundation for the

firm’s mission.
• The firm’s mission is more concrete

than its vision.
• A mission specifies the business or

businesses in which the firm intends to
compete and the customers it intends to
serve.
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)
Our mission is to be recognized by our

customers as the leader in applications
engineering. We always focus on the
activities customers desire; we are highly
motivated and strive to advance our
technical knowledge in the areas of
material, part design, and fabrication
MISSION
• Similar to the vision, a mission should

establish a firm’s individuality and should
be inspirational to all stakeholders.
•A firm’s vision and mission are critical

aspects of the strategic inputs required to
engage in strategic actions that help
achieve strategic competitiveness and
earn above-average returns.
VISION, MISSION AND
ETHICS
The probability of forming an effective mission
increases when employees have a strong sense of
the ethical standards that guide their behaviors.
Business
ethics
are a
vital
part
of:
STAKEHOLDERS
HORT
Are there individuals, groups, and
organizations who have a stake in the
organization
● Who can affect the firm’s vision and
mission?
● Are affected by the strategic outcomes
achieved?
● Have enforceable claims on the firm’s
performance?
Competitive Advantage
Firms effectively managing stakeholder
STAKEHOLDERS
HORT
• Organizations are not equally
dependent on all stakeholders, so not
every stakeholder has the same level
of influence.
• The more critical and valued a

stakeholder’s participation, the
greater a firm’s dependence on it,
which gives the stakeholder more
potential influence over the firm.
• Managers must find ways to

accommodate or insulate the
organization from the demands of
CLASSIFICATION OF
STAKEHOLDERS
T hree groups of stakeholders:
Capital market stakeholders
C
● S hareholders and the major suppliers of a firm’s

capital
Product market stakeholders
● A firm’s primary customers, suppliers, host
communities, and unions representing the workforce
Organizational stakeholders
● F irm’s employees, including both non-managerial
and managerial personnel
CLASSIFICATION OF
STAKEHOLDERS
FIGURE 1.4
The Three
Stakeholder
Groups
CLASSIFICATION OF
STAKEHOLDERS
Trade-offs must be made in situations where the objectives of
various stakeholder groups differ or conflict.
Conflict
examples:
● Shareholders – individuals and groups who have invested
capital in a firm in the expectation of earning a positive
return on their investments. These stakeholders’ rights are
grounded in laws governing private property and private
enterprise.
● Consumers – interests are maximized when the quality
and reliability of a firm’s products are improved, but without
high prices.
● High returns to customers might come at the expense of
lower returns for capital market stakeholders and vice-versa.
MANAGING STAKEHOLDER
S
CONFLICT
• First, a firm must thoroughly identify
and understand all important
stakeholders.
• Second, it must prioritize them, in
case it cannot satisfy all of them.
• Power is the most critical criterion in
prioritizing stakeholders.
• Other criteria might include the
urgency of satisfying each particular
stakeholder group and the degree of
importance of each to the firm’s above-
S
CONFLICT
LD
HO
S
TIE
ER KE
RI
A
IO
ST
PR
CONFLICT
CHALLENGES:
W hen earning above-average returns, a firm can more
easily satisfy multiple stakeholders simultaneously.
W hen earning only average returns, a firm is unable to

maximize the interests of all stakeholders, thus
stakeholders should be at least minimally satisfied.
C ultural differences and societal values also influence

stakeholder priorities.
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.
PRODUCT MARKET
STAKEHOLDERS
• T hough all product market stakeholders are

important, without customers, the other product
market stakeholders are of little value.
• C ustomers demand reliable products at the

lowest possible prices.
• H ost communities want companies willing to be

long-term employers and providers of tax revenue
without placing excessive demands on public
support services.
PRODUCT MARKET
STAKEHOLDERS
• Suppliers seek loyal customers who are willing to
pay the highest sustainable prices for the goods and
services they receive.
• U nion officials are interested in secure jobs, under

highly desirable working conditions, for the
employees they represent.
• P roduct market stakeholders are generally

satisfied when a firm’s profit margin reflects at least
a balance between the returns to capital market
stakeholders and goals of product market
stakeholders.
ORGANIZATIONAL STAKEHOLDERS
• E mployees expect the firm to provide a

dynamic, stimulating, and rewarding work
environment.
• E mployees are usually satisfied working for
a company that is:
● Growing
● Actively developing their skills to be
effective team members
● Meeting or exceeding global work
standards
ORGANIZATIONAL STAKEHOLDERS
• I nternational assignments help cultivate

employee skills for the global competitive
landscape.
• T he process of managing expatriate
employees and helping them build
knowledge can have significant effects on a
firm’s global competence.
• T o be successful, strategic leaders must
effectively leverage a firm’s human capital.
STRATEGIC LEADERS
• Strategic leaders are people
located in different areas and
levels of the firm using the
strategic management process
to select strategic actions that
help the firm achieve its vision
and fulfill its mission.
• Successful strategic leaders are

decisive, committed to nurturing
those around them, and are
committed to helping the firm
create value for all stakeholder
STRATEGIC LEADERS
Increasingly, CEOs delegate
strategic responsibilities to
include decision-makers
closest to the action due to
the changing competitive
landscape:
STRATEGIC LEADERS AND
ORGANIZATIONAL CULTURE
• V isionary Strategic Leaders emphasize not only

maximizing shareholder wealth, but maximizing the
interests of all stakeholders, underscoring a civic
and personal commitment to corporate citizenship.
• O rganizational culture affects strategic leaders and

their work. In turn, strategic leaders’ decisions and
actions shape a firm’s culture.
• O rganizational culture is the social energy that

drives—or fails to drive—the organization, the
ideologies, symbols, and shared core values.
THE WORK OF EFFECTIVE
STRATEGIC LEADERS
SUCCESSFUL STRATEGIC LEADERSHIP
CHARACTERISTICS
• Hard working
● Embraces dynamic competitive
landscape
• Brutally honest
• Tenacious
• Penchant for wanting the firm and its
people to accomplish more
• Strong strategic orientation
THE WORK OF EFFECTIVE
STRATEGIC LEADERS
SUCCESSFUL STRATEGIC LEADERSHIP
CHARACTERISTICS
• Innovative thinker
• Exploratory learning of new and unique
forms of knowledge
• Exploitative learning, which adds
incremental knowledge to existing
knowledge bases
• Global mindset
• Dreams that challenges and energizes a
company, i.e., vision

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PART 1:

● Describe the competitive

● Use the industrial organization (I/O)

● Use the resource-based model to

● Describe vision and mission and

● Define stakeholders and describe

● Describe the work of strategic

● Explain the strategic management

● STRATEGY - an integrated and

● COMPETITIVE ADVANTAGE - when

● RISK - an investor’s uncertainty about

● AVERAGE RETURNS - returns

INABILITY TO EARN AVERAGE RETURNS

■ FIRST: External environment and internal

■ NEXT: Vision and mission are developed; strategies

■ THEN: Strategies are implemented with the goal of

■ DYNAMIC PROCESS: Continuously

Rational: the approach firms use to

■ INDUSTRY BOUNDARIES BLURRING

■ STRATEGIC MANAGEMENT PROCESS - effective use

■ New opportunities and

■ Competitive environments are

■ GE - headquartered in the U.S., yet up to

Grounded in economics, the I/O model has

Second, most firms competing within an

Fourth, organizational decision-makers are

T he Five Forces Model suggests that an

● Differentiation Strategy - producing differentiated

The I/O model suggests that above-average returns are

R esearch findings support the I/O model, in that

H owever, this research also shows that 36% of the

T hese findings suggest that the External AND Internal

The I/O Model

The uniqueness of its resources and

The core assumption of the resource-based

•A firm’s resources are either tangible or

•Resources alone may not yield a

A capability is the capacity for a set of

Capabilities evolve over time and must be

Core competencies are resources and

Second, firms acquire different resources

Third, that resources and capabilities are

• Vision is a picture of what the firm

• A vision statement is short and concise,

• It articulates the ideal description of the

• A firm’s vision tends to be enduring,

• vision statements reflect a firm’s values

• Executives and top-level managers must

To make the automobile accessible to

• The vision is the foundation for the

• The firm’s mission is more concrete

• A mission specifies the business or

Our mission is to be recognized by our

• Similar to the vision, a mission should

•A firm’s vision and mission are critical

• The more critical and valued a

• Managers must find ways to

● S hareholders and the major suppliers of a firm’s

W hen earning only average returns, a firm is unable to

C ultural differences and societal values also influence

• T hough all product market stakeholders are

• C ustomers demand reliable products at the

• H ost communities want companies willing to be