Strategic Management & Strategic Competitiveness Chapter One

2006 by Nelson, a division of Thomson Canada Limited.

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Strategic Inputs

Chapter 3 External Environment Chapter 4 Internal Environment

Strat. Intent Strat. Mission

The Strategic

Management Process
Chapter 11 Chapter 12 Corporate Structure Governance & Control

Strategic Actions

Strategy Formulation
Chapter 5 Bus. - Level Strategy Chapter 6 Chapter 7 Competitive Corp. - Level Dynamics Strategy Chapter 10 Cooperative Strategies

Strategy Implementation

Chapter 9 Chapter 8 Acquisitions & International Strategy Restructuring Strategic Outcomes

Chapter 13 Chapter 14 Strategic Entrepreneurship Leadership & Innovation

Chapter 2 Above Average Returns

Chapter 1 Chapter 1 Strategic Strategic Competitiveness Competitiveness

Feedback

2006 by Nelson, a division of Thomson Canada Limited.

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Canada is rather cool*

*The Economist 2003

Canada is home not only to worldclass commercial competitors but to dominant companies in their industries

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Strategic Management and Strategic Competitiveness Knowledge objectives

1. 2. Define strategic competitiveness, competitive advantage and above average returns. Describe the 21st century 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.

3. 4.

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Strategic Management and Strategic Competitiveness Knowledge objectives continued

5. 6. 7. 8. Describe strategic intent and strategic mission and discuss their value. Define stakeholders and describe their ability to influence organizations. Describe strategists work. Explain the strategic management process.

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Desired Strategic Outcomes Strategic Competitiveness

Achieved when a firm successfully formulates and 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.

Strategic management process

The full set of committee's decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns.
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The Strategic Management Process

The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns. above-

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The Strategic Management Process

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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. (Glueck, 1980:9) The pattern or plan that integrates an 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 performance. A good strategy neutralizes threats and exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses. (Barney, 1997:17)
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Intended, Emergent and Realized Strategies

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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

O I

ResourceBased Model
Resources Capabilities Competitive Advantage An Attractive Industry Strategy Implementation Superior Returns
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2006 by Nelson, a division of Thomson Canada Limited.

Four Attributes of Resources and Capabilities (Competitive Advantage)

Resources and Capabilities

Valuable

Allow the firm to exploit opportunities or neutralize threats in its external environment. Possessed by few, if any, current and potential competitors. When other firms cannot obtain them or must obtain them at a much higher cost. The firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage.
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Rare Costly to imitate Organized to be exploited

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Resources and capabilities that

meet these four criteria become a source of:
Valuable
Resources and Capabilities

Rare Costly to imitate Organized to be exploited

Core Competencies

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Core Competencies are the basis for

a firms
Competitive advantage Strategic competitiveness Ability to earn aboveabove-average returns
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Core Competencies

CEOs ranking of business importance

1. 2. 3. 4. 5. A strong & well thought out strategy Maximizing customer satisfaction & loyalty Business leadership, quality products & services Concern for consistent profits Strong & consistent profits
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21st Century 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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World competitiveness ratings

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Technology and Technological Change

Increasing rate of technological change and 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 Intent
Internally focused, it is the leveraging of a firms resources, capabilities, and core competencies to establish the firms goals in the competitive environment.

Strategic Mission
Externally focused, it is a statement of a firms unique purpose and the scope of its operations in product and market terms.

Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies.

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Stakeholders

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

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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. 2. 3. 4. Define the profit pools boundaries. Estimate the pools overall size. Estimate the size of the value chain. Reconcile the calculations. The strategic management process calls for disciplined approaches to the development of competitive advantage.
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