You are on page 1of 25

The Management of Strategy: Concepts and Cases 9e

Part I: Strategic Management Inputs Chapter 1: Strategic Management and Strategic Competitiveness

Chapter 1: Strategic Management and Strategic Competitiveness


Overview: Eight content areas
Nature of Competition The Competitive Landscape I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process

What is Strategy?

Strategy is the great work of the organization. In situations of life or death, it is the Tao of survival or extinction. Sun Tzu, The Art of War

Working Definition of Strategy (1970s)

The determination of the long-run goals & objectives of an enterprise, & the adoption of courses of action & the allocation of resources necessary for carrying out these goals. Alfred Chandler, Strategy and Structure

What is strategy? (1980s)

Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.
That what the rivals CANT do!

Michael Porter, Harvard Business Review

What is strategy? (current)

Strategy is an integrated and coordinated set of commitment and actions designed to


exploit core competencies and gain a sustainable competitive advantage.

Nature of Competition: Basic concepts


Strategic Competitiveness
Achieved when a firm formulate & implements a valuecreating strategy

Strategy
Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage

Competitive Advantage (CA)


Implemented strategy that competitors are unable to duplicate or find too costly to imitate

Above Average Returns


Returns in excess of what investor expects in comparison to other investments with similar risk
7

The Strategic Management Process

The Competitive Landscape


Introduction: The Competitive Landscape (CL)
Pace of change is rapid Industry boundaries are blurring Financial capital is more scarce and markets are increasingly volatile Other CL characteristics: Economies of scale, change in managerial mind-set from traditional to more flexible and innovative

The Competitive Landscape (Contd)


Introduction: The Competitive Landscape (CL)
Hypercompetition extremely intense rivalry among competing firms, characterized by
Escalating & increasingly aggressive competitive moves Assumptions of market stability replaced with notion of INstability and change

Two primary drivers of the competitive landscape:


The global economy Technology
10

The Competitive Landscape (Contd)


The Global Economy
Goods, services, people, skills and ideas move freely across geographic borders Europe, through the European Union (EU) is the worlds largest single market Emerging major competitive forces: China & India In summary: globalization increased economic interdependence among countries as reflected in the flow of goods and services, financial capital, and knowledge across country borders

11

The Competitive Landscape (Contd)


Technology and Technological Changes
3 categories:
1. Technology diffusion & disruptive technologies 2. The information age 3. Increasing knowledge intensity

12

The Competitive Landscape (Contd)


Technology and Technology Changes (Contd)
Technology diffusion
Perpetual innovation: describes how new information-intensive technologies are replacing older forms Speed to market may be primary competitive advantage 12 18 month timeframe to gather info re: competitor R&D

Disruptive technologies Technologies that


Destroy value of existing technology Create new markets

13

The Competitive Landscape (Contd)


Technology and Technology Changes (Contd)
The information age
Dramatic changes over last several years Major technological developments affect how information is used and disseminated Internet provides infrastructure for information anytime, anywhere

Increasing knowledge intensity


Defined as information, intelligence & expertise Strategic Flexibility set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment

14

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)

15

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)


Underlying Assumptions
External environment imposes pressures and constraints that determine the strategies resulting in AAR Most firms compete within a particular industry/segment
Control similar strategically relevant resources Pursue similar strategies in light of those resources

Resources for implementing strategies are highly mobile across firms


Therefore any resource differences between firms will be short-lived

Organizational decision makers are rational and committed to acting in the firm's best interests, as shown by their profit-maximizing behaviors

16

Industrial Organizational (I/O) Model of Above-Average Returns (AAR)


Five-Forces Model (Michael Porter)
The 5 Forces includes
Suppliers, buyers, competitive rivalry, product substitutes and potential entrants

Determines the nature/level of competition and profit potential in an industry

17

The Resource-Based Model of AAR

18

The Resource-Based Model of AAR (Contd)


Basic Premise - a firm's unique [internal] resources & capabilities, in combination, are the basis for firm strategy and AAR
Each firms performance difference across time emerges (vs industrys structural characteristics) Combined uniqueness should define the firms strategic actions Resources are tangible and intangible

19

Vision and Mission


Vision
Picture of what the firm wants to be and, in broad terms, what it ultimately wants to achieve An effective vision statement is the responsibility of the leader who should work with others to form it Foundation for the mission

Mission
Specifics business(es) in which firm intends to compete and customers it intends to serve More concrete than the vision

20

Strategic Vision and Mission of CUHK


Our Vision To be acknowledged locally, nationally and internationally as a firstclass comprehensive research university whose bilingual and multicultural dimensions of student education, scholarly output and contribution to the community consistently meet standards of excellence. Our Mission To assist in the preservation, creation, application and dissemination of knowledge by teaching, research and public service in a comprehensive range of disciplines, thereby serving the needs and enhancing the wellbeing of the citizens of Hong Kong, China as a whole, and the wider world community.

To Combine Tradition with Modernity, To Bring Together China and the West.

21

Stakeholders
Stakeholders are both individuals and groups
They can affect, and are affected by, the strategic outcomes/performance a firm achieves

Firms are not equally dependent on all stakeholders

22

The Three Stakeholder Groups

23

Strategic Leaders
People located in different parts of the firm using the strategic management process to help the firm reach its vision and mission
Decisive and committed to nurturing those around them Organizational culture emerges from & sustained by leaders
Complex set of ideologies, symbols and core values shared throughout the firm Affects leaders/their work which in-turn shapes culture Influences how the firm conducts business

24

Strategic Management Process


Rational approach used by firms to achieve strategic competitiveness and earn above-average returns (AAR) Figure 1.1 (Diagram of chapter relationships)
Part 1: Strategic Mgmt Inputs Part 2: Strategic Actions: Strategy Formulation Part 3: Strategic Actions: Strategy Implementation

25