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Chapter One: Strategic Management & Strategic Competitiveness

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Canada is rather cool*

*The Economist 2003

Canada is home not only to world-class commercial competitors but to dominant companies in their industries

2009 Nelson

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Strategic Management & Competitiveness

Knowledge Objectives

1. Define Strategic Competitiveness, Competitive Advantage, Strategy and Above Average Returns. 2. Describe the 21st century competitive landscape & explain how globalization & tech. change shape it. 3. See how Industrial Organization & Resource-Based models show how firms earn above average returns. 4. Discuss the value of strategic vision & mission. 5. Describe stakeholders ability to influence firms. 6. Describe strategists work & the strat. mgmt. process. 7. Know how Business Models differ from Strategies.
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Desired Strategic Outcomes

Strategic Competitiveness

Achieved when a firm successfully formulates & implements a value-creating strategy.

Sustained Competitive Advantage

Occurs when a firm develops a strategy that competitors are not simultaneously implementing. Provides benefits which current and potential competitors are unable to duplicate.

Above-Average Returns

Returns in excess of what an investor expects to earn from other investments with similar risk.
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Important Definitions
Risk
An investors uncertainty about the economic gains or losses resulting from a particular investment.

Average returns

Returns equal to what an investor expects from other investments with similar amount of risk. The full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness & earn above average returns.
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Strategic management process

The Strategic Management Process

Strategic Objectives & Chapter Chapter Ch. 1: Strat. 1: Inputs 3: Strategic Mgmt. & The Strategic Managem External ComStrategic Competitiv petitiven Chapter ent Environ Vision Mission & Ch. 2: eness ess ment & Intent / Strategic 4: Strat. Mission Intent The Mgmt . & Performa Internal Strategy Environ nce ment Implementa Chapter Chapter Strategic Strategy 13: tion 14: Actions Formulation Strategi Org. Chapter Chapter c Renewal 6: 5: Ch. Leaders 12: & Competi Bus.Innovatio hip Org. tive Level Structurn Chapter Strategy Dynamic Chapter e& 7: 8: s Chapter Controls Corp.Acquisiti 11: Level on & Corporat Chapter Chapter Strategy Restructu e 9: 10: ring Governa Internati Coopera nce onal tive Strategy Strategy

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What is Strategy?
An integrated and coordinated set of commitments & actions designed to exploit core competencies and gains and gain a competitive advantage.

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What is Strategy?
A unified, comprehensive, and

integrated plan designed to ensure that the basic objectives of the enterprise are achieved. The pattern or plan that integrates an (Glueck, 1980:9) organizations major goals, policies, and action sequences into a cohesive whole. (Quinn, 1980) A pattern of resource allocation that enables firms to maintain or improve their A good strategy neutralizes threats & performance. exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses. 1-8 (Barney, 1997:17)

Intended, Emergent & Realized Strategies

Intended Strategies Deliberate Strategies Realized Strategies

Unrealized Strategies

Emergent Strategies

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Intended, Emergent & Realized Strategies Example # 1: ___________________

Break into the Market Got into the Market New Ads & channels

Sell to current types of customers

New Customers

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Intended, Emergent & Realized Strategies Example # 2: ___________________

Break into the Market Got into the Market Build Mfg. & Dist. Op.s

Sell to through current channels

New Channels

Thus, strategy can emerge from a Pattern in the stream of decisions or actions
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Alternative Models of Superior Returns

Industrial Organization Model

The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns

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ResourceBased Model
Resources Capabilities Competitive Advantage An Attractive Industry Strategy Implementation Superior Returns
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Four Attributes of Resources and Capabilities (Competitive Advantage)

Resources and Capabilities

Valuable Rare Costly to Imitate Organized to be Exploited

Allow firm to neutralize threats or exploit opportunities in its external environment Possessed by few, if any, current and potential competitors When other firms either cant obtain them or must obtain at a much higher cost Supported by the appropriate structure, controls, and rewards
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Resources and capabilities

meeting these 4 criteria become a source of:
Valuable Rare Costly to Imitate Organized to be Exploited
Resources and Capabilities

Core Competencies

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Core Competencies
are the basis for a firms:

Competitiv e advantage Strategic competitive ness Ability to earn aboveaverage returns

Core Competencies

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21st Century Business Values

Flexibility Speed to market Innovation Integration Handling challenges from constantly changing conditions Hypercompetition

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The Global Economy

One in which goods, services, people, skills, and ideas move freely across geographic borders

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Technology & Technological Change

Increasing rate of tech. change & diffusion
Perpetual innovation.

The information age

Personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, e-business.

Increasing knowledge intensity

Information, intelligence, expertise, strategic flexibility.
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Strategic Vision
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.

The mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve.

Strategic Intent / Mission

Together, strategic vision & strategic mission yield the insights required to formulate and implement strategies.
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Tim Hortons Strategic Vision

Our vision is to be the quality leader in everything we do.

Tim Hortons Strategic Mission

Our guiding mission is to deliver superior quality products and services for our customers and communities through leadership, innovation and partnerships. 1-20

Stakeholde Groups who are affected who by firms performance & have claims on its performance rs

Firm
Capital Market
Stock market/Investors Debt suppliers/Banks

Organizational Product Market

Primary Customers Host Communities Unions Suppliers Employees Managers Nonmanagers

The firm must maintain performance at an adequate level 1-21 in order to maintain the participation of key stakeholders

Organizational strategists
Top level managers, executives, top management team, or general managers.

Organizational culture
A complex set of ideologies, symbols and core values that influence how the firm conducts its business.
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Predicting Outcomes of Strategic Decisions

1. Define the profit pools boundaries. 2. Estimate the pools overall size. Whats the total value of all business segments? 3. Estimate the size of the value chain. Are some parts of the pool deeper than others?
(Are some market segments more profitable?)

4. Reconcile the calculations.

Find a fit with the deepest parts of the profit pool. (Strategic management calls for a disciplined approach to developing competitive advantage.)
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What are Business Models?

Business models are at heart, stories that explain how enterprises work.

They answer the critical questions of: Who, What, When, Where, Why, How, and Are-you-sure. The Razor & Blade Model King Gillette practically gave razors away & made money on the blades.
2009 by J. Sheppard 1-24

What are Business Models?

Todays version of the Razor & Blade Model

Who are the customers Whats the value

proposition
Why When Are-you-sure

Upfront price sensitive buyers Low to no investment Attract the most buyers New product purchases Lower buyer investment
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2009 by J. Sheppard

How do Business Models Differ from Strategies?

1. differences Porter notes 3 mainBusiness models address a series of broad functions between business models and strategies: that create value for the customer, rather than activities; 2.Business models do not show how an organizations activities are related, but the strategic value chain does; 3.Unlike the strategic value chain, business models 1-26 2009 by J. Sheppard

The Strategic Management Process

Strategic Objectives & Chapter Chapter Ch. 1: 1: Inputs 3: Strat. Strategic Mgmt. & The Strategic Strategic Managem External ComCompetitiv Vision ent petitiven Chapter Environ Mission & Ch. 2: eness ess ment & Intent / Intent Strategic/ 4: Strat. Mission Mission Intent The Mgmt . & Performa Internal Strategy Environ nce ment Implementa Chapter Chapter Strategic Strategy 13: tion 14: Actions Formulation Strategi Org. Chapter Chapter c Renewal 6: 5: Ch. Leaders 12: & Competi Bus.Innovatio hip Org. tive Level Structurn Chapter Strategy Dynamic Chapter e& 7: 8: s Chapter Controls Corp.Acquisiti 11: Level on & Corporat Chapter Chapter Strategy Restructu e 9: 10: ring Governa Internati Coopera nce onal tive Strategy Strategy

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