Mahmood Qasim Strategic Management Chap001


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strategic management for BBA and MBA students

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Mahmood Qasim Strategic Management Chap001

  1. 1. CHAPTER - 1 Strategic Management and Strategic Competitiveness
  2. 2. After this lecture you should be able to: • Define strategic competitiveness, strategy, competitive advantage, above-average returns, and the strategic management process • Describe the competitive landscape and explain how globalization and technology 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. • Describe vision and mission and discuss their values. • Define stakeholders and describe their ability to influence organizations. • Describe the work of strategic leaders. • Explain the strategic management process
  3. 3. Strategic Competitiveness Is achieved when a firm successfully formulates and implements a value-creating strategy.
  4. 4. Strategy Is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
  5. 5. Competitive advantage A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate.
  6. 6. Above-Average Returns Returns in excess of what an investor expects to earn from other investments with a similar amount of risk
  7. 7. Risk Is an investor’s uncertainty about the economic gains or losses that will result from a particular investment.
  8. 8. Average Returns Are returns equal to those an investor expects to earn from other investments with a similar amount of risk.
  9. 9. 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.
  10. 10. The Competitive Landscape  The Global Economy  Technology and Technological Changes  Technology Diffusion and Disruptive Technologies  Information Age
  11. 11. Vision Mission Strategic Strategy Corporate Governance Org. Structures and Controls Strategic Entrepreneurship Strategic Competitiveness Above-Average Returns Merger and Acquisition Strategies Business- Level Strategy Competitive Rivalry and Competitive Dynamics Internationa l Strategy Cooperative Strategy Competitive -Level Strategy The Internal Environment The External Environment Strategy Formulation Strategy Implementation Feedback StrategicOutcomesStrategicActionsStrategicInputs The Strategic Management Process
  12. 12. The I/O Model of Above –Average Returns The External Environment •The general environment •The industry environment •The competitor environment An Attractive Industry •An industry whose structural characteristics suggest above-average returns. Strategy Formulation •Selection of a strategy linked with above- average returns in a particular industry Assets and Skills •Assets and skills required to implement a chosen strategy Strategy Implementation •Selection of strategic actions linked with effective implementation of the chosen strategy Superior Returns •Earning of above-average returns 1. Study the external environment, especially the industry environment 2. Locate an industry with high potential for above-average returns. 3. Identify the strategy called for by the attractive industry to earn above-average returns. 4. Develop or acquire assets and skills needed to implement the strategy. 5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy.
  13. 13. The Resource-Based Model of Above –Average Returns Resources •Inputs into a firm’s production process Capability •Capacity of an integrated set of resources to integratively perform a task or activity. Competitive Advantage •Ability of a firm to outperform its rivals An Attractive Industry •An industry with opportunities that can be explored by the firm’s resources and capabilities. Strategy Formulation and Implementation •Strategic actions taken to earn above- average returns Superior Returns •Earning of above-average returns 1. Identify the firm’s resources. Study its strengths and weaknesses compared with those of competitors. 2. Determine the firm’s capabilities. What do the capabilities allow the firm to do better than its competitors? 3. Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage. 4. Locate an attractive industry. 5. Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment
  14. 14. John W. Teets Quote “Management’s job is not to see the company as it is….but as it can become.”
  15. 15. Corporate Values Corporate values are the underlying principles which guide and also drive the actions and activities of individual companies. – A set of principles that further clarifying what we stand for. – A compass for individual and collective behavior. – A clarification of what we are prepared to be judged on by audiences.
  16. 16. Corporate Values Each company or organization has their own set of values. • “Heart and Soul” of the organization – Performance – Reputation • Endure throughout the life of the organization.
  17. 17. Developing a Corporate Values • Question: What values or beliefs do you want to represent your company? • Facilitator selected top managers and key personnel to complete values form. • Brainstorming Exercise • Final agreement by consensus on the best values to represent company.
  19. 19. Important values Customers Management & Employees Living values
  20. 20. Vision statement Is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. “What do we want to become?”
  21. 21. Vision & Mission Many organizations develop both vision & mission statements. Vision statement-- • Should be established first and foremost • Short – preferably one sentence • Broad management involvement
  22. 22. Vision Statement Examples Fauji Cement Company Limited: To be a role model cement manufacturing Company, benefiting all stake holders and fulfilling Corporate Social Responsibilities while enjoying public respect and goodwill.
  23. 23. Mission statement -- 90% of all companies have used a mission statement in the previous five years. “What is our business?” •Enduring statement of purpose •Distinguishes one firm from another •Declares the firm’s reason for being
  24. 24. Mission Statements •Creed statement •Statement of purpose •Statement of philosophy •Statement of business principles Also referred to as:
  25. 25. Mission Statements Reveal what an organization wants to be and whom it wants to serve Essential for effectively establishing objectives and formulating strategies.
  26. 26. Developing Vision & Mission Clear mission is needed before alternative strategies can be formulated and implemented Participation from diverse managers is important in developing the mission.
  27. 27. Developing Vision & Mission Approach to developing -- – Select several articles about vision or mission – Read as background information – Ask to prepare a draft statement – A facilitator merge into document – Request for modifications, Additions, and deletions – Revise the document • Reach final agreement by consensus on vision or mission of the company.
  28. 28. Mission Statement Examples REEBOK'S MISSION Always Challenge and Lead through Creativity At Reebok, they see the world a little differently and throughout their history have made their mark when they've had the courage to challenge convention. Reebok creates products and marketing programs that reflect the brand's unlimited creative potential.
  29. 29. Mission Statement Examples Nike’s mission statement : “To bring inspiration and innovation to every athlete* in the world.” The legendary University of Oregon track and field coach, and Nike co-founder, Bill Bowerman said, “If you have a body, you are an athlete.” Bowerman was a teacher who showed athletes the secrets to achievement. Nike invites you to experience our innovative and inspiring Nike Products.
  30. 30. Mission Statement Examples Adidas’ Mission Statement The adidas Group strives to be the global leader in the sporting goods industry with brands built on a passion for sports and a sporting lifestyle. We are committed to continuously strengthening our brands and products to improve our competitive position.
  31. 31. Importance of Mission Mission Resource Allocation Unanimity of Purpose Organizational Climate Focal point for work structure Benefits from a strong mission
  32. 32. Effective Missions Broad in scope Generate strategic alternatives Not overly specific Reconciles interests among diverse stakeholders Finely balanced between specificity & generality
  33. 33. Effective Missions Arouse positive feelings & emotions Motivate readers to action Generate favorable impression of the firm
  34. 34. Elements of Missions Statements Mission Elements Customers Markets Employees Public Image Self-Concept Philosophy Survival Growth Profit Products Services Technology
  35. 35. PepsiCo Mission PepsiCo’s mission is to increase the value of our shareholders’ investment. We do this through sales growth, cost controls, and wise investment resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.
  36. 36. Ben & Jerry’s Mission Ben & Jerry’s mission is to make, distribute and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community—local, national and international.
  37. 37. Mission Statement Evaluation Matrix COMPONENTS Organization Customers Products Services Markets Concern for Survival, Growth, Profitability Technology PepsiCo Yes No No Yes No Ben & Jerry's No Yes Yes Yes No
  38. 38. Mission Statement Evaluation Matrix COMPONENTS Organization Philosophy Self- Concept Concern for Public Image Concern for Employees PepsiCo Yes No No No Ben & Jerry's No Yes Yes Yes
  39. 39. Summary Values, Vision, Mission • The reason for preparing Values, Vision and Mission statements is to provide a sense of purpose and direction for the organization which is much greater than simply making a profit. • Once completed, these statements should be shared with the company’s management, employees and primary customers. • These statements should also serve to both motivate and guide the actions of the company’s managers and employees.
  40. 40. Strategic Leaders Are people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission. • The Work of Effective Strategic Leaders • Predicting Outcomes of Strategic Decisions: Profit Pools
  41. 41. Organizational Culture Refers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business.
  42. 42. Review Questions 1. What are strategic competitiveness, strategy, competitive advantages, above-average returns, and the strategic management process? 2. What are the characteristics of the current competitive landscape? What two factors are the primary drivers of this landscape? 3. According to the I/O model, what should a firm do to earn above-average returns? 4. What does the resource-based model suggest a firm should do to earn above-average returns? 5. What are vision and mission? What is their value for the strategic management process? 6. How would you describe the work of strategic leaders? 7. What are the elements of the strategic management process? How are they interrelated?