SlideShare a Scribd company logo

1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt

•Download as PPT, PDF•
•
N
NITINMehta95

The document discusses strategic management and strategic competitiveness. It provides definitions for key terms like strategic management process, strategic competitiveness, and above-average returns. It also summarizes two models for achieving above-average returns: the industrial organization model and resource-based model. The industrial organization model focuses on analyzing external environments to identify attractive industries while the resource-based model focuses on exploiting a firm's internal resources and capabilities.

Business
1 of 376
©2003 Southwestern Publishing Company 1 Strategic Management and Strategic Competitiveness Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 1
2 Strategy Implementation Chapter 13 Strategic Entrepreneurship Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
3 Important Definitions Strategic Management Process The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns
4 Important Definitions Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategy 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
5 Important Definitions Risk An investor’s uncertainty about the economic gains or losses that will result from a particular investment Returns that are equal to those an investor expects to earn from other investments with a similar amount of risk Average Returns
6 Fundamental nature of competition is changing Competitive Landscape Hypercompetitive environments Dynamics of strategic maneuvering among global and innovative combatants Price-quality positioning, new know- how, first mover Protect or invade established product or geographic markets
7 Fundamental nature of competition is changing Hypercompetitive environments Competitive Landscape Emergence of global economy Goods, services, people, skills, and ideas move freely across geographic borders. Spread of economic innovations around the world. Political and cultural adjustments are required.
8 Fundamental nature of competition is changing Hypercompetitive environments Competitive Landscape Emergence of global economy Rapid technological change Increasing rate of technological change and diffusion The information age Increasing knowledge intensity
9 Strategic Flexibility A set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment It involves coping with uncertainty and the accompanying risks
10 Strategic Flexibility Strategic Flexibility Strategic Flexibility Strategic flexibility Strategic reorientation Capacity to learn Organizational slack
11 1. Strategy dictated by the external environments of the firm (what opportunities exist in these environments?) 2. Firm develops internal skills required by external environment (what can the firm do about the opportunities?) General Environment Global Technological 1. External Environments Industry Environment Competitor Environment I/O Model of Above-Average Returns
12 Four Assumptions of the I/O Model 1.The external environment is assumed to possess pressures and constraints that determine the strategies that would result in above-average returns 2.Most firms competing within a particular or within a certain segment of it are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources
13 Four Assumptions of the I/O Model 3.Resources used to implement strategies are highly mobile across firms 4.Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interests, as shown by their profit-maximizing behaviors
14 Industrial Organization Model I/O Model of Above-Average Returns 1. Study the external environment, especially the industry environment • economies of scale • barriers to market entry • diversification • product differentiation • degree of concentration of firms in the industry The External Environment
15 I/O Model of Above-Average Returns 2. Locate an attractive industry with a high potential for above-average returns Attractive industry: one whose structural characteristics suggest above-average returns Industrial Organization Model The External Environment An Attractive Industry
16 I/O Model of Above-Average Returns 3. Identify the strategy called for by the attractive industry to earn above-average returns Strategy formulation: selection of a strategy linked with above-average returns in a particular industry Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation
17 I/O Model of Above-Average Returns 4. Develop or acquire assets and skills needed to implement the strategy Assets and skills: those assets and skills required to implement a chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills
18 I/O Model of Above-Average Returns 5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation
19 I/O Model of Above-Average Returns Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns Superior returns: earning of above-average returns
20 1. Strategy dictated by unique resources and capabilities of the firm (what can the firm do best?) 2. Find an environment in which to exploit these assets (where are the best opportunities?) Resource-based Model of Above Average Returns 1. Firm’s Resources
21 1. Identify the firm’s resources-- strengths and weaknesses compared with competitors Resources: inputs into a firm’s production process Resource-based Model of Above Average Returns Resource-based Model Resources
22 2. Determine the firm’s capabilities--what it can do better than its competitors Capability: capacity of an integrated set of resources to integratively perform a task or activity Resource-based Model of Above Average Returns Resource-based Model Resources Capability
23 Four Attributes of Resources and Capabilities (Competitive Advantage) the firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage Valuable allow the firm to exploit opportunities or neutralize threats in its external environment Rare possessed by few, if any, current and potential competitors Costly to imitate when other firms cannot obtain them or must obtain them at a much higher cost Nonsubstitutable Resources and Capabilities
24 Core Competencies Resources and capabilities that meet these four criteria become a source of: Valuable Rare Costly to imitate Nonsubstitutable Core Competencies Resources and Capabilities
25 Core Competencies are the basis for a firm’s Competitive advantage Strategic competitiveness Ability to earn above-average returns Core Competencies
26 3. Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage Competitive advantage: ability of a firm to outperform its rivals Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage
27 4. Locate an attractive industry An attractive industry: an industry with opportunities that can be exploited by the firm’s resources and capabilities Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage An Attractive Industry
28 5. Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment Strategy formulation and implementation: strategic actions taken to earn above average returns Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage An Attractive Industry Strategy Form/Impl
29 Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage An Attractive Industry Strategy Form/Impl Superior Returns Superior returns: earning of above-average returns
30 Strategic Intent & Mission  Strategic Intent  Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies  Strategic Mission  An application of strategic intent in terms of products to be offered and markets to be served
31 Groups who are affected by a firm’s performance and who have claims on its wealth The firm must maintain performance at an adequate level in order to retain the participation of key stakeholders The Firm and Its Stakeholders Stakeholders
32 Capital Market Stakeholders The Firm and Its Stakeholders Shareholders Major suppliers of capital •Banks •Private lenders •Venture capitalists Stakeholders
33 Capital Market Stakeholders Product Market Stakeholders The Firm and Its Stakeholders Primary customers Suppliers Host communities Unions Stakeholders
34 Capital Market Stakeholders Product Market Stakeholders Organizational Stakeholders The Firm and Its Stakeholders Employees Managers Nonmanagers Stakeholders
35 Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm How do you divide the returns to keep stakeholders involved? 1 Capital Market Product Market Organizational
36 Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm How do you increase the returns so everyone has more to share? 2 Capital Market Product Market Organizational
©2003 Southwestern Publishing Company 37 The External Environment: Opportunities, Threats, and Industry Competition, and Competitor Analysis Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 2
38 Strategy Implementation Chapter 13 Strategic Entrepreneurship Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes
39 General Environment Sociocultural Technological The External Environment Industry Environment Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry Competitor Environment
40 External Environmental Analysis A continuous process which includes  Scanning: Identifying early signals of environmental changes and trends  Monitoring: Detecting meaning through ongoing observations of environmental changes and trends  Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends  Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
41 External Environmental Analysis Strategic Intent Strategic Mission The External Environment Analysis of general environment Analysis of industry environment Analysis of competitor environment The External Environment
42 General Environment  Sociocultural segment  Women in the workplace  Workforce diversity  Attitudes about quality of worklife  Concerns about environment  Shifts in work and career preferences  Shifts in product and service preferences
43  Economic segment General Environment  Inflation rates  Interest rates  Trade deficits or surpluses  Budget deficits or surpluses  Personal savings rate  Business savings rates  Gross domestic product
44 General Environment  Political/Legal Segment  Antitrust laws  Taxation laws  Deregulation philosophies  Labor training laws  Educational philosophies and policies
45 General Environment  Technological Segment  Product innovations  Applications of knowledge  Focus of private and government-supported R&D expenditures  New communication technologies
46 General Environment  Global Segment  Important political events  Critical global markets  Newly industrialize countries  Different cultural and institutional attributes
47 General Environment  Demographic Segment  Population size  Age structure  Geographic distribution  Ethnic mix  Income distribution
48 Industry Environment  A set of factors that directly influences a company and its competitive actions and responses.  Interaction among these factors determine an industry’s profit potential.  Threat of new entrants  Power of suppliers  Power of buyers  Product substitutes  Intensity of rivalry
49 Five Forces Model of Competition  Identify current and potential competitors and determine which firms serve them.  Conduct competitive analysis.  Recognize that suppliers and buyers can become competitors.  Recognize that producers of potential substitutes may become competitors.
50 Bargaining Power of Buyers Five Forces Model of Competition Five Forces of Competition
51 Threat of New Entrants  Barriers to entry  Economies of scale  Product differentiation  Capital requirements  Switching costs  Access to distribution channels  Cost disadvantages independent of scale  Government policy  Expected retaliation
52 Bargaining Power of Suppliers  A supplier group is powerful when:  it is dominated by a few large companies  satisfactory substitute products are not available to industry firms  industry firms are not a significant customer for the supplier group  suppliers’ goods are critical to buyers’ marketplace success  effectiveness of suppliers’ products has created high switching costs  suppliers are a credible threat to integrate forward into the buyers’ industry
53 Bargaining Power of Buyers  Buyers (customers) are powerful when:  they purchase a large portion of an industry’s total output  the sales of the product being purchased account for a significant portion of the seller’s annual revenues  they could easily switch to another product  the industry’s products are undifferentiated or standardized, and buyers pose a credible threat if they were to integrate backward into the seller’s industry
54 Threat of Substitute Products  Product substitutes are strong threat when:  customers face few switching costs  substitute product’s price is lower  substitute product’s quality and performance capabilities are equal to or greater than those of the competing product
55 Intensity of Rivalry  Intensity of rivalry is stronger when competitors:  are numerous or equally balanced  experience slow industry growth  have high fixed costs or high storage costs  lack differentiation or low switching costs  experience high strategic stakes  have high exit barriers
56 High Exit Barriers  Common exit barriers include:  specialized assets (assets with values linked to a particular business or location)  fixed costs of exit such as labor agreements  strategic interrelationships (relationships of mutual dependence between one business and other parts of a company’s operation, such as shared facilities and access to financial markets)  emotional barriers (career concerns, loyalty to employees, etc.)  government and social restrictions
57 Strategic Groups Strategic group: a group of firms in an industry following the same or similar strategy along the same strategic dimensions. The strategy followed by a strategic group differs from strategies being implemented by other companies in the industry.
58 Competitor Environment Competitor intelligence is the ethical gathering of needed information and data about competitors’ objectives, strategies, assumptions, and capabilities  what drives the competitor as shown by its future objectives  what the competitor is doing and can do as revealed by its current strategy  What the competitor believes about itself and the industry, as shown by its assumptions  What the the competitor may be able to do, as shown by its capabilities
59 Competitor Analysis Future Objectives: Future objectives  How do our goals compare with our competitors’ goals?  Where will the emphasis be placed in the future?  What is the attitude toward risk?
60 Competitor Analysis Current strategy Current Strategy: Future objectives  How are we currently competing?  Does this strategy support changes in the competitive structure?
61 Competitor Analysis Assumptions Current strategy Future objectives Assumptions:  Do we assume the future will be volatile?  Are we operating under a status quo?  What assumptions do our competitors hold about the industry and themselves?
62 Competitor Analysis Capabilities Assumptions Current strategy Future objectives Capabilities:  What are our strengths and weaknesses?  How do we rate compared to our competitors?
63 Competitor Analysis Capabilities Assumptions Current strategy Future objectives Response Response:  What will our competitors do in the future?  Where do we hold an advantage over our competitors?  How will this change our relationship with our competitors?
©2003 Southwestern Publishing Company 64 The Internal Environment: Resources, Capabilities and Core Competence Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 3
65 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
66 Sustainability of a Competitive Advantage  Sustainability of a competitive advantage is a function of: – the rate of core-competence obsolescence due to environmental changes – the availability of substitutes for the core competence – the imitability of the core competence
67 External and Internal Analyses General Environment Sociocultural Technological Industry Environment Competitor Environment By studying the external environment, firms identify what they might choose to do Opportunities and threats
68 External and Internal Analyses By studying the internal environment, firms identify what they can do Unique resources, capabilities, and core competencies (sustainable competitive advantage) External and Internal Analyses
69 Challenge of Internal Analysis  How do we effectively manage current core competencies while simultaneously developing new ones?  How do we assemble bundles of resources, capabilities and core competencies to create value for customers?  How do we learn to change rapidly?
70 Three Conditions Affecting Managerial Decisions About Resources, Capabilities, and Core Competencies  Uncertainty regarding characteristics of the general and the industry environments, competitors’ actions, and customers’ preferences  Complexity regarding the interrelated causes shaping a firm’s environments and perceptions of the environments  Intraorganizational Conflicts among people making managerial decisions and those affected by them
71 Components of Internal Analysis Discovering Core Competencies Resources • Tangible • Intangible Capabilities Core Competencies Competitive Advantage Strategic Competitiveness Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Value Chain Analysis • Outsource
72 Discovering Core Competencies Resources • Tangible • Intangible Resources are what a firm has to work with--its assets-- including its people and the value of its brand name Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers
73 Discovering Core Competencies Resources • Tangible • Intangible Tangible Resources • Financial • Physical • Human resources • Organizational Intangible Resources • Technological • Innovation • Reputation
74 Discovering Core Competencies Capabilities Capabilities become important when they are combined in unique combinations which create core competencies which have strategic value and can lead to competitive advantage
75 Discovering Core Competencies Capabilities Capabilities are what a firm does, and represent the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective
76 Discovering Core Competencies Core Competencies Core competencies are resources and capabilities that serve as a source of competitive advantage over rivals Core competencies distinguish a company competitively and make it distinctive McKinsey and Co. recommends using three to four competencies when framing strategic actions
77 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Valuable: Capabilities that help a firm neutralize threats or exploit opportunities
78 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Rare: Capabilities that are not possessed by many others
79 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Costly to imitate: capabilities that other firms cannot develop easily, usually due to • Unique historical conditions • Causal ambiguity • Social complexity
80 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Nonsubstitutable: capabilities that do not have strategic equivalents • Invisible to competitors • Firm specific knowledge • Trust-based working relationships between managers and nonmanagerial personnel
81 Core Competence as a Strategic Capability Resources • Inputs to a firm’s production process Capability • A nonstrategic team or resource Core Competence • A strategic capability The source of Does it satisfy the criteria of sustainable competitive advantage? Yes No Capability • An integration of a team of resources
82 Performance Implications Competitive Consequences Performance Implications No No No No Competitive Disadvantage Below Average Returns Yes No No Yes/ No Competitive Parity Average Returns Yes Yes No Yes/ No Temporary Com- petitive Advantage Above Average to Average Returns Yes Yes Yes Yes Sustainable Com- petitive Advantage Above Average Returns
83 Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Primary Activities Support Activities The Basic Value Chain
84 Primary Activities Support Activities Outsourcing Outsourcing is the purchase of some or all of a value- creating activity from an external supplier Usually this is because the specialty supplier can provide these functions more efficiently Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement
85 Strategic Rationales for Outsourcing  Improve Business Focus – lets company focus on broader business issues by having outside experts handle various operational details  Provide Access to World-Class Capabilities – the specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications
86 Strategic Rationales for Outsourcing  Accelerate Business Re-Engineering Benefits – achieves re-engineering benefits more quickly by having outsiders--who have already achieved world-class standards--take over process  Share Risks – reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities
87 Strategic Rationales for Outsourcing  Free Resources for Other Purposes – permits firm to redirect efforts from non-core activities toward those that serve customers more effectively
88 Outsourcing Issues  Greatest Value – outsource only to firms possessing a core competence in terms of performing the primary or support activity being outsourced  Evaluating Resources and Capabilities – don’t outsource activities in which the firm itself can create and capture value  Environmental Threats and Ongoing Tasks – do not outsource primary and support activities that are used to neutralize environmental threats or complete necessary ongoing organizational tasks
89 Outsourcing Issues  Nonstrategic Team of Resources – do not outsource capabilities that are critical to their success, even though the capabilities are not actual sources of competitive advantage  Firm’s Knowledge Base – do not outsource activities that stimulate the development of new capabilities and competencies
90 Core Competencies: Cautions and Reminders  Never take for granted that core competencies will continue to provide a source of competitive advantage  All core competencies have the potential to become core rigidities  Core rigidities are former core competencies that now generate inertia and stifle innovation
©2003 Southwestern Publishing Company 91 Business-Level Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 4
92 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Chapter 4 Business-Level Strategy Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship
93 Business-Level Strategy Business-level strategy: an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets
94 Core Competencies and Strategy The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets Business-level strategy Strategy Core competencies
95 Key Issues of Business-Level Strategy  What good or service to offer customers  How to manufacture or create the good or service  How to distribute the good or service in the marketplace
96 The Central Role of Customers In selecting a business-level strategy, the firm determines 1. who it will serve 2. what needs those target customers have that it will satisfy 3. how those needs will be satisfied
97 Managing Relationships With Customers  Customer relationships are strengthened by offering them superior value – help customers to develop a new competitive advantage – enhance the value of existing competitive advantages
98 Managing Relationships With Customers  Establish a competitive advantage along these dimensions: Reach – the firm’s access and connection to customers Richness – the depth and detail of the two-way flow of information between the firm and customers Affiliation – facilitating useful interactions with customers
99 Customers Market Segmentation Consumer Markets Industrial Markets
100 Market Segmentation: Consumer Markets Demographic factors Consumer Markets Socioeconomic factors Geographic factors Psychological factors Consumption patterns Perceptual factors Dem. Soc. Geo. Psy. Con. Per.
101 Market Segmentation: Industrial Markets Industrial Markets End-use segments Product segments Geographic segments Common buying factor segments Customer size segments End Pro. Geo. Buy. Size
102 Types of Business-Level Strategies  Business-level strategies are intended to create differences between the firm’s position relative to those of its rivals  To position itself, the firm must decide whether it intends to perform activities differently or to perform different activities as compared to its rivals
103 Five Generic Strategies Competitive Advantage Competitive Scope Cost Uniqueness Broad target Narrow target Cost Leadership Differentiation Focused Cost Leadership Focused Differentiation Integrated Cost Leadership/ Differentiation
104 Cost Leadership Strategy An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers – relatively standardized products – features acceptable to many customers – lowest competitive price
105 Cost Leadership Strategy Cost saving actions required by this strategy: – building efficient scale facilities – tightly controlling production costs and overhead – minimizing costs of sales, R&D and service – building efficient manufacturing facilities – monitoring costs of activities provided by outsiders – simplifying production processes
106 How to Obtain a Cost Advantage Cost Drivers Value Chain Determine and control Reconfigure, if needed • Alter production process • Change in automation • New distribution channel • Direct sales in place of indirect sales • New advertising media • New raw material • Backward integration • Forward integration • Change location relative to suppliers or buyers
107  Product features  Performance  Mix & variety of products  Service levels  Small vs. large buyers  Process technology  Wage levels  Product features  Hiring, training, motivation Factors That Drive Costs  Economies of scale  Asset utilization  Capacity utilization pattern • Seasonal, cyclical  Interrelationships  Order processing and distribution  Value chain linkages • Advertising & sales • Logistics & operations
108 Questions Leading to Lower Costs 1. How can an activity be performed differently or even eliminated? 2. How can a group of linked value activities be regrouped or reordered? 3. How might coalitions with other firms lower or eliminate costs?
109 Cost Leadership Strategy and the Five Forces of Competition Rivalry Among Competing Firms Can use cost leadership strategy to advantage since:  competitors avoid price wars with cost leaders, creating higher profits for the entire industry Bargaining Power of Suppliers Five Forces of Competition
110 Cost Leadership Strategy and the Five Forces of Competition Bargaining Power of Buyers Can mitigate buyers’ power by:  driving prices far below competitors, causing them to exit and shifting power with buyers back to the firm Bargaining Power of Suppliers Five Forces of Competition
111 Cost Leadership Strategy and the Five Forces of Competition Bargaining Power of Suppliers Can mitigate suppliers’ power by:  being able to absorb cost increases due to low cost position  being able to make very large purchases, reducing chance of supplier using power Bargaining Power of Suppliers Five Forces of Competition
112 Cost Leadership Strategy and the Five Forces of Competition Bargaining Power of Suppliers Five Forces of Competition Threat of New Entrants Can frighten off new entrants due to:  their need to enter on a large scale in order to be cost competitive  the time it takes to move down the learning curve
113 Cost Leadership Strategy and the Five Forces of Competition Threat of Substitute Products Cost leader is well positioned to:  make investments to be first to create substitutes  buy patents developed by potential substitutes  lower prices in order to maintain value position Bargaining Power of Suppliers Five Forces of Competition
114 Major Risks of Cost Leadership Strategy  Dramatic technological change could take away your cost advantage  Competitors may learn how to imitate value chain  Focus on efficiency could cause cost leader to overlook changes in customer preferences
115 Differentiation Strategy An integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them – price for product can exceed what the firm’s target customers are willing to pay – nonstandardized products – customers value differentiated features more than they value low cost
116 Differentiation Strategy  Value provided by unique features and value characteristics  Command premium price  High customer service  Superior quality  Prestige or exclusivity  Rapid innovation
117 Differentiation Strategy Differentiation actions required by this strategy: – developing new systems and processes – shaping perceptions through advertising – quality focus – capability in R&D – maximize human resource contributions through low turnover and high motivation
118 How to Obtain a Differentiation Advantage Cost Drivers Value Chain Control if needed Reconfigure to maximize customer perceptions of uniqueness customer reluctance to switch to non-unique product • Raise performance of product or service • Lower buyers’ costs • Create sustainability through:
119 Factors That Drive Differentiation  Unique product features  Unique product performance  Exceptional services  New technologies  Quality of inputs  Exceptional skill or experience  Detailed information
120 Differentiation Strategy and the Five Forces of Competition Rivalry Among Competing Firms Can defend against competition because:  brand loyalty to differentiated product offsets price competition Bargaining Power of Suppliers Five Forces of Competition
121 Differentiation Strategy and the Five Forces of Competition Bargaining Power of Buyers Can mitigate buyer power because:  well differentiated products reduce customer sensitivity to price increases Bargaining Power of Suppliers Five Forces of Competition
122 Differentiation Strategy and the Five Forces of Competition Bargaining Power of Suppliers Can mitigate suppliers’ power by:  absorbing price increases due to higher margins  passing along higher supplier prices because buyers are loyal to differentiated brand Bargaining Power of Suppliers Five Forces of Competition
123 Differentiation Strategy and the Five Forces of Competition Threat of New Entrants Can defend against new entrants because:  new products must surpass proven products or,  new products must be at least equal to performance of proven products, but offered at lower prices Bargaining Power of Suppliers Five Forces of Competition
124 Differentiation Strategy and the Five Forces of Competition Threat of Substitute Products Well positioned relative to substitutes because:  brand loyalty to a differentiated product tends to reduce customers’ testing of new products or switching brands Bargaining Power of Suppliers Five Forces of Competition
125 Major Risks of Differentiation Strategy  Customers may decide that the price differential between the differentiated product and the cost leader’s product is too large  Means of differentiation may cease to provide value for which customers are willing to pay
126 Major Risks of Differentiation Strategy  Experience may narrow customer’s perceptions of the value of differentiated features of the firm’s products  Makers of counterfeit goods may attempt to replicate differentiated features of the firm’s products
127 Focused Business-Level Strategies A focus strategy must exploit a narrow target’s differences from the balance of the industry by: – isolating a particular buyer group – isolating a unique segment of a product line – concentrating on a particular geographic market – finding their “niche”
128 Factors That May Drive Focused Strategies  Large firms may overlook small niches  Firm may lack resources to compete in the broader market  May be able to serve a narrow market segment more effectively than can larger industry-wide competitors  Focus may allow the firm to direct resources to certain value chain activities to build competitive advantage
129 Major Risks of Focused Strategies  Firm may be “outfocused” by competitors  Large competitor may set its sights on your niche market  Preferences of niche market may change to match those of broad market
130 Advantages of Integrated Strategy A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to: – adapt quickly to environmental changes – learn new skills and technologies more quickly – effectively leverage its core competencies while competing against its rivals
131 Benefits of Integrated Strategy  Successful firms using this strategy have above-average returns  Firm offers two types of values to customers – some differentiated features (but less than a true differentiated firm) – relatively low cost (but now as low as the cost leader’s price)
132 Major Risks of Integrated Strategy  An integrated cost/differentiation business level strategy often involves compromises (neither the lowest cost nor the most differentiated firm)  The firm may become “stuck in the middle” lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy
©2003 Southwestern Publishing Company 133 Competitive Rivalry and Competitive Dynamics Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 5
134 Strategy Implementation Chapter 13 Strategic Entrepreneurship Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 4 Business-Level Strategy
135 Definitions  Competitors – firms operating in the same market, offering similar products and targeting similar customers  Competitive rivalry – the ongoing set of competitive actions and responses occurring between competitors – competitive rivalry influences an individual firm’s ability to gain and sustain competitive advantages
136 Definitions  Competitive behavior – the set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position  Competitive dynamics – the total set of actions and responses taken by all firms competing within a market
137 From Competitors to Competitive Dynamics Competitors • Through competitive behavior • Competitive actions • Competitive responses • To gain an advantageous market position Competitive Dynamics • Competitive actions and responses taken by all firms competing in a market Competitive rivalry Engage in What results? What results? Why? How?
138 Effect of Competitive Rivalry on a Firm’s Strategies  Success of a strategy is determined by: – the firm’s initial competitive actions – how well it anticipates competitors’ responses to them – how well the firm anticipates and responds to its competitors’ initial actions  Competitive rivalry – affects all types of strategies – most dominant influence is on the firm’s business-level strategy or strategies.
139 A Model of Competitive Rivalry Competitive Analysis • Market commonality • Resource similarity Drivers of Competitive Behavior • Awareness • Motivation • Ability Interim Rivalry • Likelihood of Attack • First mover incentives • Organizational size • Quality • Likelihood of Response • Type of competitive action • Reputation • Market dependence Outcomes • Market position • Financial performance feedback
140 Competitive Rivalry  Firms are mutually interdependent – one firm’s competitive actions have noticeable effects on competitors – one firm’s competitive actions elicit competitive responses from competitors – competitors feel each other’s actions and responses  Marketplace success is a function of both individual strategies and the consequences of their use
141 Competitor Analysis  Competitor analysis – a technique firms use to understand their competitive environment. Along with the general and industry environments, the competitive environment comprises the firm’s external environment – a technique used to help the firm understand its competitors – the first step to being able to predict competitors’ behavior in the form of its competitive actions and responses
142 Market Commonality  Market Commonality is concerned with – the number of markets with which a firm and a competitor are jointly involved – the degree of importance of the individual markets to each competitor  Most industries’ markets are somewhat related in terms of – technologies – core competencies  Multimarket competition – Firms competing in several markets
143 Resource Similarity  Resource similarity – the extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount  Firms with similar types and amounts of resources are likely to – have similar strengths and weaknesses – use similar strategies  Assessing resource similarity can be difficult if critical resources are intangible rather than tangible
144 A Framework of Competitor Analysis Market Commonality High Low Low High Resource Similarity The shaded area represents degree of market commonality between two firms Resource endowment B Resource endowment A KEY I II III IV
145 Drivers of Competitive Actions and Responses:  Awareness is the extent to which competitors recognize the degree of their mutual interdependence – mutual interdependence results from • market commonality • resource similarity Awareness Awareness Drivers of competitive behavior
146 Motivation Drivers of Competitive Actions and Responses:  Motivation concerns the firm’s incentive – to take action – or to respond to a competitor’s attack – and relates to perceived gains and losses Awareness Drivers of competitive behavior Motivation
147 Ability Drivers of Competitive Actions and Responses:  Ability relates – to each firm’s resources – the flexibility these resources provide  Without available resources the firm lacks the ability – to attack a competitor – to respond to the competitor’s actions Awareness Drivers of competitive behavior Motivation Ability
148 Drivers of Competitive Actions and Responses:  A firm is more likely to attack the rival with whom it has low market commonality than the one with whom it competes in multiple markets  Because of the high stakes of competition under the condition of market commonality, there is a high probability that the attacked firm will respond to its competitor’s action in an effort to protect its position in one or more markets Market commonality Drivers of competitive behavior influenced by Market Commonality
149 Resource similarity Drivers of Competitive Actions and Responses:  The greater the resource imbalance between the acting firm and competitors or potential responders, the greater will be the delay in response by the firm with a resource disadvantage  When facing competitors with greater resources or more attractive market positions, firms should eventually respond, no matter how challenging the response Drivers of competitive behavior influenced by Market commonality Resource Similarity
150 Competitive Rivalry  Competitive action – a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position  Competitive response – a strategic or tactical action the firm takes to counter the effects of a competitor’s competitive action
151 Strategic and Tactical Actions  Strategic action or a strategic response – a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse  Tactical action or a tactical response – market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse
152 Factors Affecting Likelihood of Attack:  First movers allocate funds for – product innovation and development – aggressive advertising – advanced research and development  First movers can gain – the loyalty of customers who may become committed to the firm’s goods or services – market share that can be difficult for competitors to take during future competitive rivalry First mover incentives First Mover Incentives
153 Size Factors Affecting Likelihood of Attack:  Small firms are more likely – to launch competitive actions – to be quicker in doing so  Small firms are perceived as – nimble and flexible competitors – relying on speed and surprise to defend their competitive advantages or develop new ones while engaged in competitive rivalry  Small firms have the flexibility needed to launch a greater variety of competitive actions First mover incentives Size
154 Factors Affecting Likelihood of Attack:  Large firms are likely to initiate more competitive actions as well as strategic actions during a given time period  Large organizations commonly have the slack resources required to launch a larger number of total competitive actions First mover incentives Size Size “Think and act big and we’ll get smaller. Think and act small and we’ll get bigger.” - Herb Kelleher, Former CEO, Southwest Airlines
155 Quality Factors Affecting Likelihood of Attack:  Quality exists when the firm’s goods or services meet or exceed customers’ expectations First mover incentives Size Quality  Product quality dimensions include – Performance – Features – Flexibility – Durability – Conformance – Serviceability – Aesthetics – Perceived quality
156 Quality Factors Affecting Likelihood of Attack:  Quality exists when the firm’s goods or services meet or exceed customers’ expectations First mover incentives Size Quality  Service quality dimensions include – Timeliness – Courtesy – Consistency – Convenience – Completeness – Accuracy
157 Factors Affecting Likelihood of Response  Firms study three factors to predict how a competitor is likely to respond to competitive actions – type of competitive action – reputation – market dependence
158 Factors Affecting Likelihood of Response:  Strategic actions receive strategic responses  Tactical responses are taken to counter the effects of tactical actions  Strategic actions elicit fewer total competitive responses  A competitor likely will respond quickly to a tactical action  The time needed to implement and assess a strategic action delays competitors’ responses Type of competitive action Type of Competitive Action
159 Reputation Factors Affecting Likelihood of Response:  An actor is the firm taking an action or response  Reputation is the positive or negative attribute ascribed by one rival to another based on past competitive behavior  The firm studies responses that a competitor has taken previously when attacked to predict likely responses Type of competitive action Reputation
160 Market dependence Factors Affecting Likelihood of Response:  Market dependence is – the extent to which a firm’s revenues or profits are derived from a particular market  In general, firms can predict that competitors with high market dependence are likely to respond strongly to attacks threatening their market position Type of competitive action Reputation Market Dependence
161 Competition  Competitive Dynamics – competitive dynamics concerns the ongoing actions and responses taking place among all firms competing within a market for advantageous positions  Competitive Rivalry – building and sustaining competitive advantages are at the core of competitive rivalry – competitive advantages are the link to an advantageous market position
162 Strategic Conduct is Dynamic • A firm’s strategic conduct is dynamic in nature • Actions and responses shape the competitive positions of each firm’s business level strategy Firm B Firm A
163 Firm B Firm A Strategic Conduct is Dynamic • Actions taken by one firm elicits responses from competitors • Competitive responses lead to additional actions from the firm that acted originally Actions Response New Actions New Response
164 Competitive Dynamics:  Slow-cycle markets – the firm’s competitive advantages are shielded from imitation for long periods of time – imitation is costly  Competitive advantages are sustainable in slow-cycle markets  A proprietary, one-of-a-kind competitive advantage leads to competitive success in a slow-cycle market Slow-cycle markets Slow-Cycle Markets
165 Gradual Erosion of a Sustainable Competitive Advantage Returns from a Sustainable Competitive Advantage Time (Years) 0 5 10 Launch Exploitation Counterattack
166 Fast-cycle markets Competitive Dynamics:  Fast-cycle markets – the firm’s competitive advantages aren’t shielded from imitation – imitation happens quickly and somewhat inexpensively  Competitive advantages aren’t sustainable  Competitors use reverse engineering to quickly imitate or improve on the firm’s products  Non-proprietary technology is diffused rapidly Slow-cycle markets Fast-Cycle Markets
167 Obtaining Temporary Advantages to Create Sustained Advantage Returns from a Series of Replicable Actions Time (Years) 0 5 10 15 Launch Exploitation Counterattack Firm has already moved to next advantage
168 Competitive Dynamics:  Standard-cycle markets – the firm’s competitive advantages may be shielded from imitation – imitation is moderately costly  Competitive advantages are partially sustainable if the firm is able to continuously upgrade the quality of its competitive advantages  Firms – seek large market shares – gain customer loyalty through brand names – carefully control operations Slow-cycle markets Fast-cycle markets Standard-cycle markets Standard-Cycle Markets
©2003 Southwestern Publishing Company 169 Corporate-Level Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 6
170 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Chapter 6 Corporate- Level Strategy Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 4 Business-Level Strategy
171 Two Levels of Strategy A diversified company has two levels of strategy 1. Business-Level Strategy (Competitive Strategy) How to create competitive advantage in each business in which the company competes - low cost - differentiation - focused low cost - focused differentiation - integrated low cost/ differentiation 2. Corporate-Level Strategy (Company-wide Strategy) How to create value for the corporation as a whole
172 Key Questions in Corporate Strategy 1. What businesses should the corporation be in? 2. How should the corporate office manage the array of business units? Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts
173 Levels and Types of Diversification Low Levels of Diversification Single Business > 95% of business from a single business unit Dominant Business Between 70 and 95% of business from a single business unit
174 Related Constrained <70% of revenues from dominant business; all businesses share product, technological and distribution linkages Levels and Types of Diversification Moderate to High Levels of Diversification
175 Related Linked (Mixed) < 70% of revenues from dominant business, and only limited links exist Levels and Types of Diversification Moderate to High Levels of Diversification
176 Levels and Types of Diversification Unrelated < 70% of revenue comes from the dominant business, and there are no common links between businesses Very High Levels of Diversification
177 Reasons for Diversification Reasons to Enhance Strategic Competitiveness • Economies of scope • Market power • Financial economics Incentives Resources Managerial Motives
178 Incentives with Neutral Effects on Strategic Competitiveness • Anti-trust regulation • Tax laws • Low performance • Uncertain future cash flows • Firm risk reduction Incentives Resources Managerial Motives Reasons for Diversification
179 Resources with varying effects on value creation and strategic competitiveness • Tangible resources  financial resources  physical assets • Intangible resources  tacit knowledge  customer relations  image and reputation Incentives Resources Managerial Motives Reasons for Diversification
180 Managerial Motives (Value Reduction) • Diversifying managerial employment risk • Increasing managerial compensation Incentives Resources Managerial Motives Reasons for Diversification
181 Value-creating Strategies of Diversification: Operational and Corporate Readiness Related Constrained Diversification Vertical Integration (Market Power) Unrelated Diversification (Financial Economies) Both Operational and Corporate Relatedness (Rare Capability and can Create Diseconomies of Scope) Related Linked Diversification (Economies of Scope) Corporate Readiness: Transferring Skills into Businesses Through Corporate Headquarters Low High Sharing: Operational Relatedness Between Businesses Low High
182 Adding Value by Diversification Diversification most effectively adds value by either of two mechanisms: – Economies of scope: cost savings attributed to transferring the capabilities and competencies developed in one business to a new business – Market power: when a firm is able to sell its products above the existing competitive level or reduce the costs of its primary and support activities below the competitive level, or both
183 Alternative Diversification Strategies Related Diversification Strategies – sharing activities – transferring core competencies Unrelated Diversification Strategies – efficient internal capital market allocation – restructuring
184 Alternative Diversification Strategies Related Diversification Strategies – sharing activities
185 Sharing Activities:  Sharing activities often lowers costs or raises differentiation  Sharing activities can lower costs if it: – achieves economies of scale – boosts efficiency of utilization – helps move more rapidly down the Learning Curve  Sharing activities can enhance potential for or reduce the cost of differentiation  Must involve activities that are crucial to competitive advantage Key Characteristics
186 Sharing Activities:  Strong sense of corporate identity  Clear corporate mission that emphasizes the importance of integrating business units  Incentive system that rewards more than just business unit performance Assumptions
187 Related Diversification Strategies – sharing activities – transferring core competencies Alternative Diversification Strategies
188 Transferring Core Competencies:  Exploits interrelationships among divisions  Start with value chain analysis – identify ability to transfer skills or expertise among similar value chains – exploit ability to transfer activities Key Characteristics
189 Transferring Core Competencies:  Transferring core competencies leads to competitive advantage only if the similarities among business units meet the following conditions: – activities involved in the businesses are similar enough that sharing expertise is meaningful – transfer of skills involves activities which are important to competitive advantage – the skills transferred represent significant sources of competitive advantage for the receiving unit Assumptions
190 Related Diversification Strategies – sharing activities – transferring core competencies Alternative Diversification Strategies Unrelated Diversification Strategies – efficient internal capital market allocation
191 Efficient Internal Capital Market Allocation:  Firms pursuing this strategy frequently diversify by acquisition: – acquire sound, attractive companies – acquired units are autonomous – acquiring corporation supplies needed capital – portfolio managers transfer resources from units that generate cash to those with high growth potential and substantial cash needs – add professional management & control to sub-units – sub-unit managers compensation based on unit results Key Characteristics
192 Efficient Internal Capital Market Allocation:  Managers have more detailed knowledge of firm relative to outside investors  Firm need not risk competitive edge by disclosing sensitive competitive information to investors  Firm can reduce risk by allocating resources among diversified businesses, although shareholders can generally diversify more economically on their own Assumptions
193 Related Diversification Strategies – sharing activities – transferring core competencies Unrelated Diversification Strategies – efficient internal capital market allocation Alternative Diversification Strategies – restructuring
194 Restructuring:  Seek out undeveloped, sick or threatened organizations or industries  Parent company (acquirer) intervenes and frequently: – changes sub-unit management team – shifts strategy – infuses firm with new technology – enhances discipline by changing control systems – divests part of firm – makes additional acquisitions to achieve critical mass Key Characteristics
195 Restructuring:  Frequently sell unit after making one-time changes since parent no longer adds value to ongoing operations Key Characteristics
196 Restructuring:  Requires keen management insight in selecting firms with depressed values or unforeseen potential  Must do more than restructure companies  Need to initiate restructuring of industries to create a more attractive environment Assumptions
197 Incentives to Diversify External Incentives:  Relaxation of anti-trust regulation allows more related acquisitions than in the past  Before 1986, higher taxes on dividends favored spending retained earnings on acquisitions  After 1986, firms made fewer acquisitions with retained earnings, shifting to the use of debt to take advantage of tax deductible interest payments
198 Incentives to Diversify Internal Incentives:  Poor performance may lead some firms to diversify to attempt to achieve better returns  Firms may diversify to balance uncertain future cash flows  Firms may diversify into different businesses in order to reduce risk
199 Resources and Diversification  Besides strong incentives, firms are more likely to diversify if they have the resources to do so  Value creation is determined more by appropriate use of resources than incentives to diversify
200 Managerial Motives to Diversify Managers have motives to diversify – diversification increases size; size is associated with executive compensation – diversification reduces employment risk – effective governance mechanisms may restrict such motives
201 Relationship Between Diversification and Performance Performance Level of Diversification Dominant Business Unrelated Business Related Constrained
202 Relationship Between Firm Performance and Diversification Incentives Managerial Motives Resources Diversification Strategy Firm Performance Internal Governance Strategy Implementation Capital Market Intervention and the Market for Managerial Talent
©2003 Southwestern Publishing Company 203 Acquisition and Restructuring Strategies Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 7
204 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 6 Corporate- Level Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
205 Mergers and Acquisitions  Merger: a strategy through which two firms agree to integrate their operations on a relatively co-equal basis  Acquisition: a strategy through which one firm buys a controlling interest in another firm with the intent of making the acquired firm a subsidiary business within its own portfolio  Takeover: a special type of an acquisition strategy wherein the target firm did not solicit the acquiring firm’s bid
206 Acquisitions Reasons for Making Acquisitions Increase market power Overcome entry barriers Cost of new product development Increase speed to market Increase diversification Reshape firm’s competitive scope Lower risk compared to developing new products Learn and develop new capabilities
207 Reasons for Making Acquisitions:  Factors increasing market power – when a firm is able to sell its goods or services above competitive levels or – when the costs of its primary or support activities are below those of its competitors – usually is derived from the size of the firm and its resources and capabilities to compete  Market power is increased by – horizontal acquisitions – vertical acquisitions – related acquisitions Increased Market Power
208 Reasons for Making Acquisitions:  Barriers to entry include – economies of scale in established competitors – differentiated products by competitors – enduring relationships with customers that create product loyalties with competitors  acquisition of an established company – may be more effective than entering the market as a competitor offering an unfamiliar good or service that is unfamiliar to current buyers – provides a new entrant with immediate market access Overcome Barriers to Entry
209 Reasons for Making Acquisitions:  Significant investments of a firm’s resources are required to – Develop new products internally – introduce new products into the marketplace  Acquisition of a competitor may result in – more predictable returns – faster market entry – rapid access to new capabilities Cost of New Product Development and Speed to Market
210 Reasons for Making Acquisitions:  An acquisition’s outcomes can be estimated more easily and accurately compared to the outcomes of an internal product development process  Therefore managers may view acquisitions as lowering risk Lower Risk Compared to Developing New Products
211 Reasons for Making Acquisitions:  It may be easier to develop and introduce new products in markets currently served by the firm  It may be difficult to develop new products for markets in which a firm lacks experience – it is uncommon for a firm to develop new products internally to diversify its product lines – acquisitions are the quickest and easiest way to diversify a firm and change its portfolio of business Increased Diversification
212 Reasons for Making Acquisitions:  Firms may use acquisitions to reduce their dependence on one or more products or markets  Reducing a company’s dependence on specific markets alters the firm’s competitive scope Reshaping the Firms’ Competitive Scope
213 Reasons for Making Acquisitions:  Acquisitions may gain capabilities that the firm does not possess  Acquisitions may be used to – acquire a special technological capability – broaden a firm’s knowledge base – reduce inertia Learning and Developing New Capabilities
214 Acquisitions Problems With Acquisitions Integration difficulties Inadequate evaluation of target Large or extraordinary debt Inability to achieve synergy Too much diversification Managers overly focused on acquisitions Resulting firm is too large
215 Problems With Acquisitions  Integration challenges include – melding two disparate corporate cultures – linking different financial and control systems – building effective working relationships (particularly when management styles differ) – resolving problems regarding the status of the newly acquired firm’s executives – loss of key personnel weakens the acquired firm’s capabilities and reduces its value Integration Difficulties
216 Problems With Acquisitions  Evaluation requires that hundreds of issues be closely examined, including – financing for the intended transaction – differences in cultures between the acquiring and target firm – tax consequences of the transaction – actions that would be necessary to successfully meld the two workforces  Ineffective due-diligence process may – result in paying excessive premium for the target company Inadequate Evaluation of Target
217 Problems With Acquisitions  Firm may take on significant debt to acquire a company  High debt can – increase the likelihood of bankruptcy – lead to a downgrade in the firm’s credit rating – preclude needed investment in activities that contribute to the firm’s long-term success Large or Extraordinary Debt
218 Problems With Acquisitions  Synergy exists when assets are worth more when used in conjunction with each other than when they are used separately  Firms experience transaction costs when they use acquisition strategies to create synergy  Firms tend to underestimate indirect costs when evaluating a potential acquisition Inability to Achieve Synergy
219 Problems With Acquisitions  Diversified firms must process more information of greater diversity  Scope created by diversification may cause managers to rely too much on financial rather than strategic controls to evaluate business units’ performances  Acquisitions may become substitutes for innovation Too Much Diversification
220 Problems With Acquisitions  Managers in target firms may operate in a state of virtual suspended animation during an acquisition  Executives may become hesitant to make decisions with long-term consequences until negotiations have been completed  Acquisition process can create a short- term perspective and a greater aversion to risk among top-level executives in a target firm Managers Overly Focused on Acquisitions
221 Problems With Acquisitions  Additional costs may exceed the benefits of the economies of scale and additional market power  Larger size may lead to more bureaucratic controls  Formalized controls often lead to relatively rigid and standardized managerial behavior  Firm may produce less innovation Too Large
222 Attributes of Effective Acquisitions Attributes Results Complementary Assets or Resources Buying firms with assets that meet current needs to build competitiveness Friendly Acquisitions Friendly deals make integration go more smoothly Careful Selection Process Deliberate evaluation and negotiations are more likely to lead to easy integration and building synergies Maintain Financial Slack Provide enough additional financial resources so that profitable projects would not be foregone
223 Attributes of Effective Acquisitions Attributes Results Low-to-Moderate Debt Merged firm maintains financial flexibility Flexibility Has experience at managing change and is flexible and adaptable Sustain Emphasis on Innovation Continue to invest in R&D as part of the firm’s overall strategy
224 Restructuring Activities  Downsizing – Wholesale reduction of employees  Downscoping – Selectively divesting or closing non-core businesses – Reducing scope of operations – Leads to greater focus  Leveraged Buyout (LBO) – A party buys a firm’s entire assets in order to take the firm private.
225 Lower performance Higher performance Higher risk Loss of human capital Restructuring and Outcomes Emphasis on strategic controls High debt costs Reduced debt costs Reduced labor costs Downsizing Downscoping Leveraged buyout
©2003 Southwestern Publishing Company 226 International Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 8
227 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Chapter 13 Strategic Entrepreneurship Strategic Outcomes Chapter 6 Corporate- Level Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
228 Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary International business-level strategy Multidomestic strategy Global strategy Transnational strategy Opportunities and Outcomes of International Strategy Increased market size Return on investment Economies of scale and learning Advantage in location Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Strategies Modes of Entry
229 Better performance Innovation Opportunities and Outcomes of International Strategy: Continued Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary Use Core Competence Modes of Entry Management problems and risk Management problems and risk Strategic Competitiveness Outcomes
230 International Strategy Life Cycle Production Becomes Standardized and is Relocated to Low Cost Countries Product Demand Develops and Firm Exports Products Firm Introduces Innovation in Domestic Market Foreign Competition Begins Production Firm Begins Production Abroad Selling Products or Services Outside a Firm’s Domestic Market
231 Motivations for International Expansion  Increase Market Share – domestic market may lack the size to support efficient scale manufacturing facilities  Return on Investment – large investment projects may require global markets to justify the capital outlays – weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators
232 Motivations for International Expansion  Economies of Scale or Learning – expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution – can spread costs over a larger sales’ base – increase profit per unit  Location Advantages – low cost markets may aid in developing competitive advantage – may achieve better access to: • Raw materials • Lower cost labor • Key customers • Energy
233 International Business-Level Strategy: Determinants of National Advantage Factors of production Related and supporting industries Demand conditions Firm strategy, structure, and rivalry
234 International Business-Level Strategy: Determinants of National Advantage  Factors of production: the inputs necessary to compete in any industry – labor – land – natural resources – capital – infrastructure – basic factors include natural and labor resources – advanced factors include digital communication systems and educated workforce
235 International Business-Level Strategy: Determinants of National Advantage  Demand conditions: characterized by the nature and size of buyers’ needs in the home market for the industry’s goods or services – size of market segment can lead to scale- efficient facilities – efficiency can lead to domination of the industry in other countries – specialized demand may create opportunities beyond national boundaries
236 International Business-Level Strategy: Determinants of National Advantage  Related and supporting industries: supporting services, facilities, suppliers and so on – support in design – support in distribution – related industries as suppliers and buyers
237 International Business-Level Strategy: Determinants of National Advantage  Firm strategy, structure, and rivalry: the pattern of strategy, structure, and rivalry among firms – common technical training – methodological product and process improvement – cooperative and competitive systems
238 International Corporate-Level Strategy Need for Local Responsiveness Need for Global Integration Low High Low High Global strategy Transnational strategy Multidomestic strategy
239 International Corporate-Level Strategy  Type of corporate strategy selected will have an impact on the selection and implementation of the business-level strategies  Some corporate strategies provide individual country units with flexibility to choose their own strategies  Others dictate business-level strategies from the home office and coordinate resource sharing across units
240 Multidomestic strategy International Corporate-Level Strategy: Multidomestic Strategy • Strategy and operating decisions are decentralized to strategic business units (SBU) in each country • Products and services are tailored to local markets • Business units in one country are independent of each other • Assumes markets differ by country or regions • Focus on competition in each market • Prominent strategy among European firms due to broad variety of cultures and markets in Europe
241 International Corporate-Level Strategy: Global Strategy Global strategy • Products are standardized across national markets • Decisions regarding business-level strategies are centralized in the home office • Strategic business units (SBU) are assumed to be interdependent • Emphasizes economies of scale • Often lacks responsiveness to local markets • Requires resource sharing and coordination across borders (which also makes it difficult to manage)
242 Transnational strategy International Corporate-Level Strategy: Transnational Strategy • Seeks to achieve both global efficiency and local responsiveness • Difficult to achieve because of simultaneous requirements  strong central control and coordination to achieve efficiency  decentralization to achieve local market responsiveness • Must pursue organizational learning to achieve competitive advantage
243 Type of Entry Characteristics Exporting High cost, low control Licensing Low cost, low risk, little control, low returns Strategic alliances Shared costs, shared resources, shared risks, problems of integration Acquisition Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations New wholly owned subsidiary Complex, often costly, time consuming, high risk, maximum control, potential above-average returns Global Market Entry: Choice of Entry Mode
244 Strategic Competitiveness Outcomes: Returns  International diversification and returns: firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets – may increase a firm’s returns – such firms usually achieve the most positive stock returns – firm may achieve economies of scale and experience, location advantages, increased market size and opportunity to stabilize returns
245 Strategic Competitiveness Outcomes: Innovation  International diversification and innovation: firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets – potentially greater returns on innovations (larger markets) – generate additional resources for investment in innovation – exposed to new products and processes in international markets, generates additional knowledge leading to innovations
246 Risks in an International Environment Political Risks Economic Risks Political risks include • instability in national governments • war, both civil and international • potential nationalization of a firm’s resources Political Risks
247 Risks in an International Environment Economic Risks Economic risks are interdependent with political risks and include • differences and fluctuations in the value of different currencies • differences in prevailing wage rates • difficulties in enforcing property rights • unemployment Political Risks
248 Limits to International Expansion: Management Problems  Cost of coordination across diverse geographical business units  Institutional and cultural barriers  Understanding strategic intent of competitors  The overall complexity of competition
©2003 Southwestern Publishing Company 249 Cooperative Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 9
250 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
251 Cooperative Strategy  Cooperative strategy is a strategy in which firms – work together – to achieve a shared objective  Cooperating with other firms is a strategy that – creates value for a customer – exceeds the cost of constructing customer value in other ways – establishes a favorable position relative to competition
252 Strategic Alliance  A strategic alliance is a cooperative strategy in which – firms combine some of their resources and capabilities – to create a competitive advantage  A strategic alliance involves – exchange and sharing of resources and capabilities – co-development or distribution of goods or services
253 Combined Resources Capabilities Core Competencies Resources Capabilities Core Competencies Resources Capabilities Core Competencies Strategic Alliance Firm A Firm B Mutual interests in designing, manufacturing, or distributing goods or services
254 Types of Cooperative Strategies  Joint venture: two or more firms create an independent company by combining parts of their assets  Equity strategic alliance: partners who own different percentages of equity in a new venture  Nonequity strategic alliances: contractual agreements given to a company to supply, produce, or distribute a firm’s goods or services without equity sharing
255 Market Reason Slow Cycle • Gain access to a restricted market • Establish a franchise in a new market • Maintain market stability (e.g., establishing standards) Reasons for Strategic Alliances by Market Type
256 Market Reason Fast Cycle • Speed up development of new goods or service • Speed up new market entry • Maintain market leadership • Form an industry technology standard • Share risky R&D expenses • Overcome uncertainty Reasons for Strategic Alliances by Market Type
257 Market Reason Standard Cycle • Gain market power (reduce industry overcapacity) • Gain access to complementary resources • Establish economies of scale • Overcome trade barriers • Meet competitive challenges from other competitors • Pool resources for very large capital projects • Learn new business techniques Reasons for Strategic Alliances by Market Type
258 Business-Level Cooperative Strategies: Complementary Alliances • complementary strategic alliances are designed to take advantage of market opportunities by combining partner firms’ assets in complementary ways to create new value – these include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage Complementary Strategic Alliances
259 Business-Level Cooperative Strategies: Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Vertical Alliance Supplier • vertical complementary strategic alliance is formed between firms that agree to use their skills and capabilities in different stages of the value chain to create value for both firms • outsourcing is one example of this type of alliance Buyer Complementary Strategic Alliances
260 Business-Level Cooperative Strategies: Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Horizontal Alliance Buyer Potential Competitors • horizontal complementary strategic alliance is formed between partners who agree to combine their resources and skills to create value in the same stage of the value chain • focus on long-term product development and distribution opportunities • the partners may become competitors • requires a great deal of trust between the partners Buyer Complementary Strategic Alliances
261 Business-Level Cooperative Strategies: • competition response strategic alliances occur when firms join forces to respond to a strategic action of another competitor • because they can be difficult to reverse and expensive to operate, competition response strategic alliances are primarily formed to respond to strategic rather than tactical actions Competition Response Alliances Competition Response Alliances Complementary Alliances
262 Business-Level Cooperative Strategies: • uncertainty reducing strategic alliances are used to hedge against risk and uncertainty • these alliances are most noticed in fast-cycle markets • alliance may be formed to reduce the uncertainty associated with developing new product or technology standards Uncertainty Reducing Alliances Competition Response Alliances Uncertainty Reducing Alliances Complementary Alliances
263 Business-Level Cooperative Strategies: • competition reducing strategic alliances may be created to avoid destructive or excessive competition • explicit collusion exists when firms directly negotiate production output and pricing agreements in order to reduce competition (illegal) • tacit collusion exists when several firms in an industry indirectly coordinate their production and pricing decisions by observing each other’s competitive actions and responses Competition Reducing Alliances Competition Reducing Alliances Competition Response Alliances Uncertainty Reducing Alliances Complementary Alliances
264 Business-Level Cooperative Strategies: • mutual forbearance is a form of tacit collusion in which firms avoid competitive attacks against those rivals they meet in multiple markets • competition reducing strategic alliances may require governments to find ways to permit collaboration among rivals without violating antitrust laws Competition Reducing Alliances Competition Reducing Alliances Competition Response Alliances Uncertainty Reducing Alliances Complementary Alliances
265 Corporate-Level Cooperative Strategies • Corporate-level cooperative strategies are designed to facilitate product and/or market diversification - diversifying strategic alliance - synergistic strategic alliance - franchising • Diversifying alliances and synergistic alliances allow firms - to grow and diversify their operations - through a means other than a merger or acquisition
266 Corporate-Level Cooperative Strategies: Diversifying Alliances • diversifying strategic alliance allows a firm to expand into new product or market areas without completing a merger or an acquisition • provides some of the potential synergistic benefits of a merger or acquisition, but with less risk and greater levels of flexibility • permits a “test” of whether a future merger between the partners would benefit both parties Diversifying Alliances
267 Corporate-Level Cooperative Strategies: • synergistic strategic alliances create joint economies of scope between two or more firms • create synergy across multiple functions or multiple businesses between partner firms Synergistic Alliances Synergistic Alliances Diversifying Alliances
268 Corporate-Level Cooperative Strategies: • franchising spreads risks and uses resources, capabilities, and competencies without merging or acquiring another company • contractual relationship concerning the franchise that is developed between two parties, the franchisee and the franchisor • an alternative to pursuing growth through mergers and acquisitions Franchising Franchising Diversifying Alliances Synergistic Alliances
269 International Cooperative Strategies  Cross-border strategic alliance – an international cooperative strategy in which firms with headquarters in different nations combine some of their resources and capabilities to create a competitive advantage – a firm may form cross-border strategic alliances to leverage core competencies that are the foundation of its domestic success to expand into international markets
270 International Cooperative Strategies  Allows risk sharing by reducing financial investment  Host partner knows local market and customs  International alliances can be difficult to manage due to differences in management styles, cultures or regulatory constraints  Must gauge partner’s strategic intent so they do not gain access to important technology and become a competitor
271 Network Cooperative Strategies  A network strategy is a cooperative strategy wherein several firms agree to form multiple partnerships to achieve shared objectives – stable alliance network – dynamic alliance network  Effective social relationships and interactions among partners are keys to a successful network cooperative strategy
272 Network Cooperative Strategies: Stable Alliance Network • long term relationships that often appear in mature industries where demand is relatively constant and predictable • stable networks are built for exploitation of the economies available between firms Stable Alliance Network
273 Network Cooperative Strategies: Dynamic Alliance Network • arrangements that evolve in industries with rapid technological change leading to short product life cycles • primarily used to stimulate rapid, value-creating product innovations and subsequent successful market entries • purpose is often exploration of new ideas Dynamic Alliance Network Stable Alliance Network
274 Competitive Risks with Cooperative Strategies Competitive Risks • Partner may act opportunistically • Misrepresentation of competencies brought to the partnership • Partner fails to make committed resources and capabilities available to its partners • Firm may make investments that are specific to the alliance while its partner does not
275 Competitive Risks with Cooperative Strategies Risk and Asset Management Approaches Competitive Risks • Manage the balance between learning from partners while protecting knowledge and sources of competitive advantages from excessive learning by partners • Assign managerial responsibility for a firm’s cooperative strategies to a high-level executive or team • Specify resources and capabilities that will be shared and those that will not be shared (detailed contracts and monitoring) • Develop trusting relationships
276 Approaches for Managing Cooperative Strategies  cost minimization – formal contracts specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled  opportunity maximization – maximize partnership’s value-creation opportunities – partners take advantage of unexpected opportunities to learn from each other and to explore additional marketplace possibilities – fewer formal, limiting, contracts
277 Competitive Risks with Cooperative Strategies Risk and Asset Management Approaches Competitive Risks Desired Outcome • Creating value • Above-average returns
©2003 Southwestern Publishing Company 278 Corporate Governance Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 10
279 Strategy Implementation Chapter 10 Corporate Governance Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
280 Corporate Governance  Corporate governance is – a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations – concerned with identifying ways to ensure that strategic decisions are made effectively – used in corporations to establish order between the firm’s owners and its top-level managers
281 Corporate Governance Mechanisms Ownership concentration – relative amounts of stock owned by individual shareholders and institutional investors Board of Directors – individuals responsible for representing the firm’s owners by monitoring top-level managers’ strategic decisions Internal Governance Mechanisms
282 Corporate Governance Mechanisms Executive Compensation – use of salary, bonuses, and long- term incentives to align managers’ interests with shareholders’ interests  Monitoring by top-level managers – they may obtain Board seats (not in financial institutions) – they may elect Board representatives Internal Governance Mechanisms
283 Corporate Governance Mechanisms Market for Corporate Control – the purchase of a firm that is underperforming relative to industry rivals in order to improve its strategic competitiveness External Governance Mechanisms
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt
1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt

Recommended

Introduction to strategic management
Introduction to strategic managementIntroduction to strategic management
Introduction to strategic management
Hammad Hashmi
 
Ch01 Discussion Light
Ch01 Discussion LightCh01 Discussion Light
Ch01 Discussion Light
Avinash Kumar
 
Chapter 1 introduction to strategic management
Chapter 1 introduction to strategic managementChapter 1 introduction to strategic management
Chapter 1 introduction to strategic management
jrkotnal
 
Chapter 1 introduction to strategic management
Chapter 1 introduction to strategic managementChapter 1 introduction to strategic management
Chapter 1 introduction to strategic management
happysingh1991
 
Strategic management
Strategic managementStrategic management
Strategic management
Ch Irfan
 
Man stratejik introduction
Man stratejik introductionMan stratejik introduction
Man stratejik introduction
Yesica Adicondro
 
Managing strategy, strategic planning
Managing strategy, strategic planningManaging strategy, strategic planning
Managing strategy, strategic planningViktoria Kachaluba
 
2 Ch01
2 Ch012 Ch01
2 Ch01Mr BBoy
 

Recommended

Introduction to strategic management
Introduction to strategic managementIntroduction to strategic management
Introduction to strategic management
Hammad Hashmi
 
Ch01 Discussion Light
Ch01 Discussion LightCh01 Discussion Light
Ch01 Discussion Light
Avinash Kumar
 
Chapter 1 introduction to strategic management
Chapter 1 introduction to strategic managementChapter 1 introduction to strategic management
Chapter 1 introduction to strategic management
jrkotnal
 
Chapter 1 introduction to strategic management
Chapter 1 introduction to strategic managementChapter 1 introduction to strategic management
Chapter 1 introduction to strategic management
happysingh1991
 
Strategic management
Strategic managementStrategic management
Strategic management
Ch Irfan
 
Man stratejik introduction
Man stratejik introductionMan stratejik introduction
Man stratejik introduction
Yesica Adicondro
 
Managing strategy, strategic planning
Managing strategy, strategic planningManaging strategy, strategic planning
Managing strategy, strategic planningViktoria Kachaluba
 
2 Ch01
2 Ch012 Ch01
2 Ch01Mr BBoy
 
Mid term (apple inc keeping the ‘i’ in innovation)
Mid term (apple inc keeping the ‘i’ in innovation)Mid term (apple inc keeping the ‘i’ in innovation)
Mid term (apple inc keeping the ‘i’ in innovation)
Christian Tobing
 
All about strategy
All about strategyAll about strategy
All about strategy
Babasab Patil
 
Notes on marketing stratergy @ BEC-DOMS
Notes on marketing stratergy @ BEC-DOMSNotes on marketing stratergy @ BEC-DOMS
Notes on marketing stratergy @ BEC-DOMS
Babasab Patil
 
corporate level strategies
corporate level strategiescorporate level strategies
corporate level strategies
Mohammed shebeer VP
 
Chapter 2.2 Types of strategies (3).ppt teaching material
Chapter 2.2 Types of strategies (3).ppt teaching materialChapter 2.2 Types of strategies (3).ppt teaching material
Chapter 2.2 Types of strategies (3).ppt teaching material
TeferiGeta2
 
Strategic Management Ch03
Strategic Management Ch03Strategic Management Ch03
Strategic Management Ch03
Chuong Nguyen
 
International business project on mnc by muhammad talha
International business project on mnc by muhammad talhaInternational business project on mnc by muhammad talha
International business project on mnc by muhammad talha
Muhammad Talha
 
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTFINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTMary Rose Habagat
 
marketing strategies
marketing strategiesmarketing strategies
marketing strategies
Shimranz Skillls
 
16243054 marketing-strategies
16243054 marketing-strategies16243054 marketing-strategies
16243054 marketing-strategies
dawnps
 
Strategic Management And Strategic Competitiveness
Strategic Management And Strategic CompetitivenessStrategic Management And Strategic Competitiveness
Strategic Management And Strategic Competitiveness
Mrirfan
 
Strategic Management
Strategic ManagementStrategic Management
Strategic Management
CharlynMaeBaldonaza
 
Corporate Lavel Strategy
Corporate Lavel StrategyCorporate Lavel Strategy
Corporate Lavel Strategy
Rahul Mukherjee
 
Slides week 8
Slides week 8Slides week 8
Slides week 8
faalnuimi
 
Crafting & Executing Strategy
Crafting & Executing StrategyCrafting & Executing Strategy
Crafting & Executing Strategy
Harsh Parekh
 
Corporate and Growth Strategy
Corporate and Growth StrategyCorporate and Growth Strategy
Corporate and Growth Strategy
Prakash Joshi
 
Io & resource based model
Io & resource based modelIo & resource based model
Io & resource based modelSagar Mistry
 
Strategic Management Ch07
Strategic Management Ch07Strategic Management Ch07
Strategic Management Ch07Chuong Nguyen
 
Module 1
Module 1Module 1
Module 1
Raju Raj
 
Sm qb new
Sm qb newSm qb new
Sm qb newArul Dass
 
p2_6_deciding.ppt
p2_6_deciding.pptp2_6_deciding.ppt
p2_6_deciding.ppt
NITINMehta95
 
Chap017(Debbie)(2).ppt
Chap017(Debbie)(2).pptChap017(Debbie)(2).ppt
Chap017(Debbie)(2).ppt
NITINMehta95
 

More Related Content

Similar to 1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt

Mid term (apple inc keeping the ‘i’ in innovation)
Mid term (apple inc keeping the ‘i’ in innovation)Mid term (apple inc keeping the ‘i’ in innovation)
Mid term (apple inc keeping the ‘i’ in innovation)
Christian Tobing
 
All about strategy
All about strategyAll about strategy
All about strategy
Babasab Patil
 
Notes on marketing stratergy @ BEC-DOMS
Notes on marketing stratergy @ BEC-DOMSNotes on marketing stratergy @ BEC-DOMS
Notes on marketing stratergy @ BEC-DOMS
Babasab Patil
 
corporate level strategies
corporate level strategiescorporate level strategies
corporate level strategies
Mohammed shebeer VP
 
Chapter 2.2 Types of strategies (3).ppt teaching material
Chapter 2.2 Types of strategies (3).ppt teaching materialChapter 2.2 Types of strategies (3).ppt teaching material
Chapter 2.2 Types of strategies (3).ppt teaching material
TeferiGeta2
 
Strategic Management Ch03
Strategic Management Ch03Strategic Management Ch03
Strategic Management Ch03
Chuong Nguyen
 
International business project on mnc by muhammad talha
International business project on mnc by muhammad talhaInternational business project on mnc by muhammad talha
International business project on mnc by muhammad talha
Muhammad Talha
 
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTFINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTMary Rose Habagat
 
marketing strategies
marketing strategiesmarketing strategies
marketing strategies
Shimranz Skillls
 
16243054 marketing-strategies
16243054 marketing-strategies16243054 marketing-strategies
16243054 marketing-strategies
dawnps
 
Strategic Management And Strategic Competitiveness
Strategic Management And Strategic CompetitivenessStrategic Management And Strategic Competitiveness
Strategic Management And Strategic Competitiveness
Mrirfan
 
Strategic Management
Strategic ManagementStrategic Management
Strategic Management
CharlynMaeBaldonaza
 
Corporate Lavel Strategy
Corporate Lavel StrategyCorporate Lavel Strategy
Corporate Lavel Strategy
Rahul Mukherjee
 
Slides week 8
Slides week 8Slides week 8
Slides week 8
faalnuimi
 
Crafting & Executing Strategy
Crafting & Executing StrategyCrafting & Executing Strategy
Crafting & Executing Strategy
Harsh Parekh
 
Corporate and Growth Strategy
Corporate and Growth StrategyCorporate and Growth Strategy
Corporate and Growth Strategy
Prakash Joshi
 
Io & resource based model
Io & resource based modelIo & resource based model
Io & resource based modelSagar Mistry
 
Strategic Management Ch07
Strategic Management Ch07Strategic Management Ch07
Strategic Management Ch07Chuong Nguyen
 
Module 1
Module 1Module 1
Module 1
Raju Raj
 

Similar to 1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt (20)

Mid term (apple inc keeping the ‘i’ in innovation)
Mid term (apple inc keeping the ‘i’ in innovation)Mid term (apple inc keeping the ‘i’ in innovation)
Mid term (apple inc keeping the ‘i’ in innovation)
 
All about strategy
All about strategyAll about strategy
All about strategy
 
Notes on marketing stratergy @ BEC-DOMS
Notes on marketing stratergy @ BEC-DOMSNotes on marketing stratergy @ BEC-DOMS
Notes on marketing stratergy @ BEC-DOMS
 
corporate level strategies
corporate level strategiescorporate level strategies
corporate level strategies
 
Chapter 2.2 Types of strategies (3).ppt teaching material
Chapter 2.2 Types of strategies (3).ppt teaching materialChapter 2.2 Types of strategies (3).ppt teaching material
Chapter 2.2 Types of strategies (3).ppt teaching material
 
Strategic Management Ch03
Strategic Management Ch03Strategic Management Ch03
Strategic Management Ch03
 
International business project on mnc by muhammad talha
International business project on mnc by muhammad talhaInternational business project on mnc by muhammad talha
International business project on mnc by muhammad talha
 
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPTFINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
FINANCIAL CONTROLLERSHIP CHAPTER 2 PPT
 
marketing strategies
marketing strategiesmarketing strategies
marketing strategies
 
16243054 marketing-strategies
16243054 marketing-strategies16243054 marketing-strategies
16243054 marketing-strategies
 
Strategic Management And Strategic Competitiveness
Strategic Management And Strategic CompetitivenessStrategic Management And Strategic Competitiveness
Strategic Management And Strategic Competitiveness
 
Strategic Management
Strategic ManagementStrategic Management
Strategic Management
 
Corporate Lavel Strategy
Corporate Lavel StrategyCorporate Lavel Strategy
Corporate Lavel Strategy
 
Slides week 8
Slides week 8Slides week 8
Slides week 8
 
Crafting & Executing Strategy
Crafting & Executing StrategyCrafting & Executing Strategy
Crafting & Executing Strategy
 
Corporate and Growth Strategy
Corporate and Growth StrategyCorporate and Growth Strategy
Corporate and Growth Strategy
 
Io & resource based model
Io & resource based modelIo & resource based model
Io & resource based model
 
Strategic Management Ch07
Strategic Management Ch07Strategic Management Ch07
Strategic Management Ch07
 
Module 1
Module 1Module 1
Module 1
 
Sm qb new
Sm qb newSm qb new
Sm qb new
 

More from NITINMehta95

p2_6_deciding.ppt
p2_6_deciding.pptp2_6_deciding.ppt
p2_6_deciding.ppt
NITINMehta95
 
Chap017(Debbie)(2).ppt
Chap017(Debbie)(2).pptChap017(Debbie)(2).ppt
Chap017(Debbie)(2).ppt
NITINMehta95
 
WiMax Share.pdf
WiMax Share.pdfWiMax Share.pdf
WiMax Share.pdf
NITINMehta95
 
WiMax 2 Slideshare.pdf
WiMax 2 Slideshare.pdfWiMax 2 Slideshare.pdf
WiMax 2 Slideshare.pdf
NITINMehta95
 
WiMax 2 1111.pdf
WiMax 2 1111.pdfWiMax 2 1111.pdf
WiMax 2 1111.pdf
NITINMehta95
 
david_sm13_ppt_01.ppt
david_sm13_ppt_01.pptdavid_sm13_ppt_01.ppt
david_sm13_ppt_01.ppt
NITINMehta95
 
stratmgmt.ppt
stratmgmt.pptstratmgmt.ppt
stratmgmt.ppt
NITINMehta95
 

More from NITINMehta95 (8)

p2_6_deciding.ppt
p2_6_deciding.pptp2_6_deciding.ppt
p2_6_deciding.ppt
 
Chap017(Debbie)(2).ppt
Chap017(Debbie)(2).pptChap017(Debbie)(2).ppt
Chap017(Debbie)(2).ppt
 
WiMax 21.pdf
WiMax 21.pdfWiMax 21.pdf
WiMax 21.pdf
 
WiMax Share.pdf
WiMax Share.pdfWiMax Share.pdf
WiMax Share.pdf
 
WiMax 2 Slideshare.pdf
WiMax 2 Slideshare.pdfWiMax 2 Slideshare.pdf
WiMax 2 Slideshare.pdf
 
WiMax 2 1111.pdf
WiMax 2 1111.pdfWiMax 2 1111.pdf
WiMax 2 1111.pdf
 
david_sm13_ppt_01.ppt
david_sm13_ppt_01.pptdavid_sm13_ppt_01.ppt
david_sm13_ppt_01.ppt
 
stratmgmt.ppt
stratmgmt.pptstratmgmt.ppt
stratmgmt.ppt
 

Recently uploaded

Skye Residences | Extended Stay Residences Near Toronto Airport
Skye Residences | Extended Stay Residences Near Toronto AirportSkye Residences | Extended Stay Residences Near Toronto Airport
Skye Residences | Extended Stay Residences Near Toronto Airport
marketingjdass
 
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...Accpac to QuickBooks Conversion Navigating the Transition with Online Account...
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...
PaulBryant58
 
Set off and carry forward of losses and assessment of individuals.pptx
Set off and carry forward of losses and assessment of individuals.pptxSet off and carry forward of losses and assessment of individuals.pptx
Set off and carry forward of losses and assessment of individuals.pptx
HARSHITHV26
 
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...
BBPMedia1
 
Enterprise Excellence is Inclusive Excellence.pdf
Enterprise Excellence is Inclusive Excellence.pdfEnterprise Excellence is Inclusive Excellence.pdf
Enterprise Excellence is Inclusive Excellence.pdf
KaiNexus
 
Cracking the Workplace Discipline Code Main.pptx
Cracking the Workplace Discipline Code Main.pptxCracking the Workplace Discipline Code Main.pptx
Cracking the Workplace Discipline Code Main.pptx
Workforce Group
 
PriyoShop Celebration Pohela Falgun Mar 20, 2024
PriyoShop Celebration Pohela Falgun Mar 20, 2024PriyoShop Celebration Pohela Falgun Mar 20, 2024
PriyoShop Celebration Pohela Falgun Mar 20, 2024
PriyoShop.com LTD
 
Role of Remote Sensing and Monitoring in Mining
Role of Remote Sensing and Monitoring in MiningRole of Remote Sensing and Monitoring in Mining
Role of Remote Sensing and Monitoring in Mining
Naaraayani Minerals Pvt.Ltd
 
falcon-invoice-discounting-a-premier-platform-for-investors-in-india
falcon-invoice-discounting-a-premier-platform-for-investors-in-indiafalcon-invoice-discounting-a-premier-platform-for-investors-in-india
falcon-invoice-discounting-a-premier-platform-for-investors-in-india
Falcon Invoice Discounting
 
Business Valuation Principles for Entrepreneurs
Business Valuation Principles for EntrepreneursBusiness Valuation Principles for Entrepreneurs
Business Valuation Principles for Entrepreneurs
Ben Wann
 
Project File Report BBA 6th semester.pdf
Project File Report BBA 6th semester.pdfProject File Report BBA 6th semester.pdf
Project File Report BBA 6th semester.pdf
RajPriye
 
Pitch Deck Teardown: RAW Dating App's $3M Angel deck
Pitch Deck Teardown: RAW Dating App's $3M Angel deckPitch Deck Teardown: RAW Dating App's $3M Angel deck
Pitch Deck Teardown: RAW Dating App's $3M Angel deck
HajeJanKamps
 
Memorandum Of Association Constitution of Company.ppt
Memorandum Of Association Constitution of Company.pptMemorandum Of Association Constitution of Company.ppt
Memorandum Of Association Constitution of Company.ppt
seri bangash
 
Premium MEAN Stack Development Solutions for Modern Businesses
Premium MEAN Stack Development Solutions for Modern BusinessesPremium MEAN Stack Development Solutions for Modern Businesses
Premium MEAN Stack Development Solutions for Modern Businesses
SynapseIndia
 
The Parable of the Pipeline a book every new businessman or business student ...
The Parable of the Pipeline a book every new businessman or business student ...The Parable of the Pipeline a book every new businessman or business student ...
The Parable of the Pipeline a book every new businessman or business student ...
awaisafdar
 
Filing Your Delaware Franchise Tax A Detailed Guide
Filing Your Delaware Franchise Tax A Detailed GuideFiling Your Delaware Franchise Tax A Detailed Guide
Filing Your Delaware Franchise Tax A Detailed Guide
YourLegal Accounting
 
Search Disrupted Google’s Leaked Documents Rock the SEO World.pdf
Search Disrupted Google’s Leaked Documents Rock the SEO World.pdfSearch Disrupted Google’s Leaked Documents Rock the SEO World.pdf
Search Disrupted Google’s Leaked Documents Rock the SEO World.pdf
Arihant Webtech Pvt. Ltd
 
20240425_ TJ Communications Credentials_compressed.pdf
20240425_ TJ Communications Credentials_compressed.pdf20240425_ TJ Communications Credentials_compressed.pdf
20240425_ TJ Communications Credentials_compressed.pdf
tjcomstrang
 
anas about venice for grade 6f about venice
anas about venice for grade 6f about veniceanas about venice for grade 6f about venice
anas about venice for grade 6f about venice
anasabutalha2013
 
Buy Verified PayPal Account | Buy Google 5 Star Reviews
Buy Verified PayPal Account | Buy Google 5 Star ReviewsBuy Verified PayPal Account | Buy Google 5 Star Reviews
Buy Verified PayPal Account | Buy Google 5 Star Reviews
usawebmarket
 

Recently uploaded (20)

Skye Residences | Extended Stay Residences Near Toronto Airport
Skye Residences | Extended Stay Residences Near Toronto AirportSkye Residences | Extended Stay Residences Near Toronto Airport
Skye Residences | Extended Stay Residences Near Toronto Airport
 
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...Accpac to QuickBooks Conversion Navigating the Transition with Online Account...
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...
 
Set off and carry forward of losses and assessment of individuals.pptx
Set off and carry forward of losses and assessment of individuals.pptxSet off and carry forward of losses and assessment of individuals.pptx
Set off and carry forward of losses and assessment of individuals.pptx
 
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...
 
Enterprise Excellence is Inclusive Excellence.pdf
Enterprise Excellence is Inclusive Excellence.pdfEnterprise Excellence is Inclusive Excellence.pdf
Enterprise Excellence is Inclusive Excellence.pdf
 
Cracking the Workplace Discipline Code Main.pptx
Cracking the Workplace Discipline Code Main.pptxCracking the Workplace Discipline Code Main.pptx
Cracking the Workplace Discipline Code Main.pptx
 
PriyoShop Celebration Pohela Falgun Mar 20, 2024
PriyoShop Celebration Pohela Falgun Mar 20, 2024PriyoShop Celebration Pohela Falgun Mar 20, 2024
PriyoShop Celebration Pohela Falgun Mar 20, 2024
 
Role of Remote Sensing and Monitoring in Mining
Role of Remote Sensing and Monitoring in MiningRole of Remote Sensing and Monitoring in Mining
Role of Remote Sensing and Monitoring in Mining
 
falcon-invoice-discounting-a-premier-platform-for-investors-in-india
falcon-invoice-discounting-a-premier-platform-for-investors-in-indiafalcon-invoice-discounting-a-premier-platform-for-investors-in-india
falcon-invoice-discounting-a-premier-platform-for-investors-in-india
 
Business Valuation Principles for Entrepreneurs
Business Valuation Principles for EntrepreneursBusiness Valuation Principles for Entrepreneurs
Business Valuation Principles for Entrepreneurs
 
Project File Report BBA 6th semester.pdf
Project File Report BBA 6th semester.pdfProject File Report BBA 6th semester.pdf
Project File Report BBA 6th semester.pdf
 
Pitch Deck Teardown: RAW Dating App's $3M Angel deck
Pitch Deck Teardown: RAW Dating App's $3M Angel deckPitch Deck Teardown: RAW Dating App's $3M Angel deck
Pitch Deck Teardown: RAW Dating App's $3M Angel deck
 
Memorandum Of Association Constitution of Company.ppt
Memorandum Of Association Constitution of Company.pptMemorandum Of Association Constitution of Company.ppt
Memorandum Of Association Constitution of Company.ppt
 
Premium MEAN Stack Development Solutions for Modern Businesses
Premium MEAN Stack Development Solutions for Modern BusinessesPremium MEAN Stack Development Solutions for Modern Businesses
Premium MEAN Stack Development Solutions for Modern Businesses
 
The Parable of the Pipeline a book every new businessman or business student ...
The Parable of the Pipeline a book every new businessman or business student ...The Parable of the Pipeline a book every new businessman or business student ...
The Parable of the Pipeline a book every new businessman or business student ...
 
Filing Your Delaware Franchise Tax A Detailed Guide
Filing Your Delaware Franchise Tax A Detailed GuideFiling Your Delaware Franchise Tax A Detailed Guide
Filing Your Delaware Franchise Tax A Detailed Guide
 
Search Disrupted Google’s Leaked Documents Rock the SEO World.pdf
Search Disrupted Google’s Leaked Documents Rock the SEO World.pdfSearch Disrupted Google’s Leaked Documents Rock the SEO World.pdf
Search Disrupted Google’s Leaked Documents Rock the SEO World.pdf
 
20240425_ TJ Communications Credentials_compressed.pdf
20240425_ TJ Communications Credentials_compressed.pdf20240425_ TJ Communications Credentials_compressed.pdf
20240425_ TJ Communications Credentials_compressed.pdf
 
anas about venice for grade 6f about venice
anas about venice for grade 6f about veniceanas about venice for grade 6f about venice
anas about venice for grade 6f about venice
 
Buy Verified PayPal Account | Buy Google 5 Star Reviews
Buy Verified PayPal Account | Buy Google 5 Star ReviewsBuy Verified PayPal Account | Buy Google 5 Star Reviews
Buy Verified PayPal Account | Buy Google 5 Star Reviews
 

1588381160-76198137-hoskisson-and-hitt-strategic-management-all-chapters-ppt.ppt

  • 1. ©2003 Southwestern Publishing Company 1 Strategic Management and Strategic Competitiveness Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 1
  • 2. 2 Strategy Implementation Chapter 13 Strategic Entrepreneurship Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
  • 3. 3 Important Definitions Strategic Management Process The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns
  • 4. 4 Important Definitions Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategy 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
  • 5. 5 Important Definitions Risk An investor’s uncertainty about the economic gains or losses that will result from a particular investment Returns that are equal to those an investor expects to earn from other investments with a similar amount of risk Average Returns
  • 6. 6 Fundamental nature of competition is changing Competitive Landscape Hypercompetitive environments Dynamics of strategic maneuvering among global and innovative combatants Price-quality positioning, new know- how, first mover Protect or invade established product or geographic markets
  • 7. 7 Fundamental nature of competition is changing Hypercompetitive environments Competitive Landscape Emergence of global economy Goods, services, people, skills, and ideas move freely across geographic borders. Spread of economic innovations around the world. Political and cultural adjustments are required.
  • 8. 8 Fundamental nature of competition is changing Hypercompetitive environments Competitive Landscape Emergence of global economy Rapid technological change Increasing rate of technological change and diffusion The information age Increasing knowledge intensity
  • 9. 9 Strategic Flexibility A set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment It involves coping with uncertainty and the accompanying risks
  • 11. 11 1. Strategy dictated by the external environments of the firm (what opportunities exist in these environments?) 2. Firm develops internal skills required by external environment (what can the firm do about the opportunities?) General Environment Global Technological 1. External Environments Industry Environment Competitor Environment I/O Model of Above-Average Returns
  • 12. 12 Four Assumptions of the I/O Model 1.The external environment is assumed to possess pressures and constraints that determine the strategies that would result in above-average returns 2.Most firms competing within a particular or within a certain segment of it are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources
  • 13. 13 Four Assumptions of the I/O Model 3.Resources used to implement strategies are highly mobile across firms 4.Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interests, as shown by their profit-maximizing behaviors
  • 14. 14 Industrial Organization Model I/O Model of Above-Average Returns 1. Study the external environment, especially the industry environment • economies of scale • barriers to market entry • diversification • product differentiation • degree of concentration of firms in the industry The External Environment
  • 15. 15 I/O Model of Above-Average Returns 2. Locate an attractive industry with a high potential for above-average returns Attractive industry: one whose structural characteristics suggest above-average returns Industrial Organization Model The External Environment An Attractive Industry
  • 16. 16 I/O Model of Above-Average Returns 3. Identify the strategy called for by the attractive industry to earn above-average returns Strategy formulation: selection of a strategy linked with above-average returns in a particular industry Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation
  • 17. 17 I/O Model of Above-Average Returns 4. Develop or acquire assets and skills needed to implement the strategy Assets and skills: those assets and skills required to implement a chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills
  • 18. 18 I/O Model of Above-Average Returns 5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation
  • 19. 19 I/O Model of Above-Average Returns Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns Superior returns: earning of above-average returns
  • 20. 20 1. Strategy dictated by unique resources and capabilities of the firm (what can the firm do best?) 2. Find an environment in which to exploit these assets (where are the best opportunities?) Resource-based Model of Above Average Returns 1. Firm’s Resources
  • 21. 21 1. Identify the firm’s resources-- strengths and weaknesses compared with competitors Resources: inputs into a firm’s production process Resource-based Model of Above Average Returns Resource-based Model Resources
  • 22. 22 2. Determine the firm’s capabilities--what it can do better than its competitors Capability: capacity of an integrated set of resources to integratively perform a task or activity Resource-based Model of Above Average Returns Resource-based Model Resources Capability
  • 23. 23 Four Attributes of Resources and Capabilities (Competitive Advantage) the firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage Valuable allow the firm to exploit opportunities or neutralize threats in its external environment Rare possessed by few, if any, current and potential competitors Costly to imitate when other firms cannot obtain them or must obtain them at a much higher cost Nonsubstitutable Resources and Capabilities
  • 24. 24 Core Competencies Resources and capabilities that meet these four criteria become a source of: Valuable Rare Costly to imitate Nonsubstitutable Core Competencies Resources and Capabilities
  • 25. 25 Core Competencies are the basis for a firm’s Competitive advantage Strategic competitiveness Ability to earn above-average returns Core Competencies
  • 26. 26 3. Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage Competitive advantage: ability of a firm to outperform its rivals Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage
  • 27. 27 4. Locate an attractive industry An attractive industry: an industry with opportunities that can be exploited by the firm’s resources and capabilities Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage An Attractive Industry
  • 28. 28 5. Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment Strategy formulation and implementation: strategic actions taken to earn above average returns Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage An Attractive Industry Strategy Form/Impl
  • 29. 29 Resource-based Model of Above Average Returns Resource-based Model Resources Capability Competitive Advantage An Attractive Industry Strategy Form/Impl Superior Returns Superior returns: earning of above-average returns
  • 30. 30 Strategic Intent & Mission  Strategic Intent  Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies  Strategic Mission  An application of strategic intent in terms of products to be offered and markets to be served
  • 31. 31 Groups who are affected by a firm’s performance and who have claims on its wealth The firm must maintain performance at an adequate level in order to retain the participation of key stakeholders The Firm and Its Stakeholders Stakeholders
  • 32. 32 Capital Market Stakeholders The Firm and Its Stakeholders Shareholders Major suppliers of capital •Banks •Private lenders •Venture capitalists Stakeholders
  • 33. 33 Capital Market Stakeholders Product Market Stakeholders The Firm and Its Stakeholders Primary customers Suppliers Host communities Unions Stakeholders
  • 34. 34 Capital Market Stakeholders Product Market Stakeholders Organizational Stakeholders The Firm and Its Stakeholders Employees Managers Nonmanagers Stakeholders
  • 35. 35 Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm How do you divide the returns to keep stakeholders involved? 1 Capital Market Product Market Organizational
  • 36. 36 Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm How do you increase the returns so everyone has more to share? 2 Capital Market Product Market Organizational
  • 37. ©2003 Southwestern Publishing Company 37 The External Environment: Opportunities, Threats, and Industry Competition, and Competitor Analysis Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 2
  • 38. 38 Strategy Implementation Chapter 13 Strategic Entrepreneurship Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes
  • 39. 39 General Environment Sociocultural Technological The External Environment Industry Environment Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry Competitor Environment
  • 40. 40 External Environmental Analysis A continuous process which includes  Scanning: Identifying early signals of environmental changes and trends  Monitoring: Detecting meaning through ongoing observations of environmental changes and trends  Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends  Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management
  • 41. 41 External Environmental Analysis Strategic Intent Strategic Mission The External Environment Analysis of general environment Analysis of industry environment Analysis of competitor environment The External Environment
  • 42. 42 General Environment  Sociocultural segment  Women in the workplace  Workforce diversity  Attitudes about quality of worklife  Concerns about environment  Shifts in work and career preferences  Shifts in product and service preferences
  • 43. 43  Economic segment General Environment  Inflation rates  Interest rates  Trade deficits or surpluses  Budget deficits or surpluses  Personal savings rate  Business savings rates  Gross domestic product
  • 44. 44 General Environment  Political/Legal Segment  Antitrust laws  Taxation laws  Deregulation philosophies  Labor training laws  Educational philosophies and policies
  • 45. 45 General Environment  Technological Segment  Product innovations  Applications of knowledge  Focus of private and government-supported R&D expenditures  New communication technologies
  • 46. 46 General Environment  Global Segment  Important political events  Critical global markets  Newly industrialize countries  Different cultural and institutional attributes
  • 47. 47 General Environment  Demographic Segment  Population size  Age structure  Geographic distribution  Ethnic mix  Income distribution
  • 48. 48 Industry Environment  A set of factors that directly influences a company and its competitive actions and responses.  Interaction among these factors determine an industry’s profit potential.  Threat of new entrants  Power of suppliers  Power of buyers  Product substitutes  Intensity of rivalry
  • 49. 49 Five Forces Model of Competition  Identify current and potential competitors and determine which firms serve them.  Conduct competitive analysis.  Recognize that suppliers and buyers can become competitors.  Recognize that producers of potential substitutes may become competitors.
  • 50. 50 Bargaining Power of Buyers Five Forces Model of Competition Five Forces of Competition
  • 51. 51 Threat of New Entrants  Barriers to entry  Economies of scale  Product differentiation  Capital requirements  Switching costs  Access to distribution channels  Cost disadvantages independent of scale  Government policy  Expected retaliation
  • 52. 52 Bargaining Power of Suppliers  A supplier group is powerful when:  it is dominated by a few large companies  satisfactory substitute products are not available to industry firms  industry firms are not a significant customer for the supplier group  suppliers’ goods are critical to buyers’ marketplace success  effectiveness of suppliers’ products has created high switching costs  suppliers are a credible threat to integrate forward into the buyers’ industry
  • 53. 53 Bargaining Power of Buyers  Buyers (customers) are powerful when:  they purchase a large portion of an industry’s total output  the sales of the product being purchased account for a significant portion of the seller’s annual revenues  they could easily switch to another product  the industry’s products are undifferentiated or standardized, and buyers pose a credible threat if they were to integrate backward into the seller’s industry
  • 54. 54 Threat of Substitute Products  Product substitutes are strong threat when:  customers face few switching costs  substitute product’s price is lower  substitute product’s quality and performance capabilities are equal to or greater than those of the competing product
  • 55. 55 Intensity of Rivalry  Intensity of rivalry is stronger when competitors:  are numerous or equally balanced  experience slow industry growth  have high fixed costs or high storage costs  lack differentiation or low switching costs  experience high strategic stakes  have high exit barriers
  • 56. 56 High Exit Barriers  Common exit barriers include:  specialized assets (assets with values linked to a particular business or location)  fixed costs of exit such as labor agreements  strategic interrelationships (relationships of mutual dependence between one business and other parts of a company’s operation, such as shared facilities and access to financial markets)  emotional barriers (career concerns, loyalty to employees, etc.)  government and social restrictions
  • 57. 57 Strategic Groups Strategic group: a group of firms in an industry following the same or similar strategy along the same strategic dimensions. The strategy followed by a strategic group differs from strategies being implemented by other companies in the industry.
  • 58. 58 Competitor Environment Competitor intelligence is the ethical gathering of needed information and data about competitors’ objectives, strategies, assumptions, and capabilities  what drives the competitor as shown by its future objectives  what the competitor is doing and can do as revealed by its current strategy  What the competitor believes about itself and the industry, as shown by its assumptions  What the the competitor may be able to do, as shown by its capabilities
  • 59. 59 Competitor Analysis Future Objectives: Future objectives  How do our goals compare with our competitors’ goals?  Where will the emphasis be placed in the future?  What is the attitude toward risk?
  • 60. 60 Competitor Analysis Current strategy Current Strategy: Future objectives  How are we currently competing?  Does this strategy support changes in the competitive structure?
  • 61. 61 Competitor Analysis Assumptions Current strategy Future objectives Assumptions:  Do we assume the future will be volatile?  Are we operating under a status quo?  What assumptions do our competitors hold about the industry and themselves?
  • 62. 62 Competitor Analysis Capabilities Assumptions Current strategy Future objectives Capabilities:  What are our strengths and weaknesses?  How do we rate compared to our competitors?
  • 63. 63 Competitor Analysis Capabilities Assumptions Current strategy Future objectives Response Response:  What will our competitors do in the future?  Where do we hold an advantage over our competitors?  How will this change our relationship with our competitors?
  • 64. ©2003 Southwestern Publishing Company 64 The Internal Environment: Resources, Capabilities and Core Competence Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 3
  • 65. 65 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
  • 66. 66 Sustainability of a Competitive Advantage  Sustainability of a competitive advantage is a function of: – the rate of core-competence obsolescence due to environmental changes – the availability of substitutes for the core competence – the imitability of the core competence
  • 67. 67 External and Internal Analyses General Environment Sociocultural Technological Industry Environment Competitor Environment By studying the external environment, firms identify what they might choose to do Opportunities and threats
  • 68. 68 External and Internal Analyses By studying the internal environment, firms identify what they can do Unique resources, capabilities, and core competencies (sustainable competitive advantage) External and Internal Analyses
  • 69. 69 Challenge of Internal Analysis  How do we effectively manage current core competencies while simultaneously developing new ones?  How do we assemble bundles of resources, capabilities and core competencies to create value for customers?  How do we learn to change rapidly?
  • 70. 70 Three Conditions Affecting Managerial Decisions About Resources, Capabilities, and Core Competencies  Uncertainty regarding characteristics of the general and the industry environments, competitors’ actions, and customers’ preferences  Complexity regarding the interrelated causes shaping a firm’s environments and perceptions of the environments  Intraorganizational Conflicts among people making managerial decisions and those affected by them
  • 71. 71 Components of Internal Analysis Discovering Core Competencies Resources • Tangible • Intangible Capabilities Core Competencies Competitive Advantage Strategic Competitiveness Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Value Chain Analysis • Outsource
  • 72. 72 Discovering Core Competencies Resources • Tangible • Intangible Resources are what a firm has to work with--its assets-- including its people and the value of its brand name Resources represent inputs into a firm’s production process... such as capital equipment, skills of employees, brand names, finances and talented managers
  • 73. 73 Discovering Core Competencies Resources • Tangible • Intangible Tangible Resources • Financial • Physical • Human resources • Organizational Intangible Resources • Technological • Innovation • Reputation
  • 74. 74 Discovering Core Competencies Capabilities Capabilities become important when they are combined in unique combinations which create core competencies which have strategic value and can lead to competitive advantage
  • 75. 75 Discovering Core Competencies Capabilities Capabilities are what a firm does, and represent the firm’s capacity or ability to integrate individual firm resources to achieve a desired objective
  • 76. 76 Discovering Core Competencies Core Competencies Core competencies are resources and capabilities that serve as a source of competitive advantage over rivals Core competencies distinguish a company competitively and make it distinctive McKinsey and Co. recommends using three to four competencies when framing strategic actions
  • 77. 77 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Valuable: Capabilities that help a firm neutralize threats or exploit opportunities
  • 78. 78 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Rare: Capabilities that are not possessed by many others
  • 79. 79 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Costly to imitate: capabilities that other firms cannot develop easily, usually due to • Unique historical conditions • Causal ambiguity • Social complexity
  • 80. 80 Four Criteria of Sustainable Advantages • Valuable • Rare • Costly to Imitate • Nonsubstitutable Discovering Core Competencies Nonsubstitutable: capabilities that do not have strategic equivalents • Invisible to competitors • Firm specific knowledge • Trust-based working relationships between managers and nonmanagerial personnel
  • 81. 81 Core Competence as a Strategic Capability Resources • Inputs to a firm’s production process Capability • A nonstrategic team or resource Core Competence • A strategic capability The source of Does it satisfy the criteria of sustainable competitive advantage? Yes No Capability • An integration of a team of resources
  • 82. 82 Performance Implications Competitive Consequences Performance Implications No No No No Competitive Disadvantage Below Average Returns Yes No No Yes/ No Competitive Parity Average Returns Yes Yes No Yes/ No Temporary Com- petitive Advantage Above Average to Average Returns Yes Yes Yes Yes Sustainable Com- petitive Advantage Above Average Returns
  • 83. 83 Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Primary Activities Support Activities The Basic Value Chain
  • 84. 84 Primary Activities Support Activities Outsourcing Outsourcing is the purchase of some or all of a value- creating activity from an external supplier Usually this is because the specialty supplier can provide these functions more efficiently Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement
  • 85. 85 Strategic Rationales for Outsourcing  Improve Business Focus – lets company focus on broader business issues by having outside experts handle various operational details  Provide Access to World-Class Capabilities – the specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications
  • 86. 86 Strategic Rationales for Outsourcing  Accelerate Business Re-Engineering Benefits – achieves re-engineering benefits more quickly by having outsiders--who have already achieved world-class standards--take over process  Share Risks – reduces investment requirements and makes firm more flexible, dynamic and better able to adapt to changing opportunities
  • 87. 87 Strategic Rationales for Outsourcing  Free Resources for Other Purposes – permits firm to redirect efforts from non-core activities toward those that serve customers more effectively
  • 88. 88 Outsourcing Issues  Greatest Value – outsource only to firms possessing a core competence in terms of performing the primary or support activity being outsourced  Evaluating Resources and Capabilities – don’t outsource activities in which the firm itself can create and capture value  Environmental Threats and Ongoing Tasks – do not outsource primary and support activities that are used to neutralize environmental threats or complete necessary ongoing organizational tasks
  • 89. 89 Outsourcing Issues  Nonstrategic Team of Resources – do not outsource capabilities that are critical to their success, even though the capabilities are not actual sources of competitive advantage  Firm’s Knowledge Base – do not outsource activities that stimulate the development of new capabilities and competencies
  • 90. 90 Core Competencies: Cautions and Reminders  Never take for granted that core competencies will continue to provide a source of competitive advantage  All core competencies have the potential to become core rigidities  Core rigidities are former core competencies that now generate inertia and stifle innovation
  • 91. ©2003 Southwestern Publishing Company 91 Business-Level Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 4
  • 92. 92 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Chapter 4 Business-Level Strategy Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship
  • 93. 93 Business-Level Strategy Business-level strategy: an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets
  • 94. 94 Core Competencies and Strategy The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals An integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets Business-level strategy Strategy Core competencies
  • 95. 95 Key Issues of Business-Level Strategy  What good or service to offer customers  How to manufacture or create the good or service  How to distribute the good or service in the marketplace
  • 96. 96 The Central Role of Customers In selecting a business-level strategy, the firm determines 1. who it will serve 2. what needs those target customers have that it will satisfy 3. how those needs will be satisfied
  • 97. 97 Managing Relationships With Customers  Customer relationships are strengthened by offering them superior value – help customers to develop a new competitive advantage – enhance the value of existing competitive advantages
  • 98. 98 Managing Relationships With Customers  Establish a competitive advantage along these dimensions: Reach – the firm’s access and connection to customers Richness – the depth and detail of the two-way flow of information between the firm and customers Affiliation – facilitating useful interactions with customers
  • 100. 100 Market Segmentation: Consumer Markets Demographic factors Consumer Markets Socioeconomic factors Geographic factors Psychological factors Consumption patterns Perceptual factors Dem. Soc. Geo. Psy. Con. Per.
  • 101. 101 Market Segmentation: Industrial Markets Industrial Markets End-use segments Product segments Geographic segments Common buying factor segments Customer size segments End Pro. Geo. Buy. Size
  • 102. 102 Types of Business-Level Strategies  Business-level strategies are intended to create differences between the firm’s position relative to those of its rivals  To position itself, the firm must decide whether it intends to perform activities differently or to perform different activities as compared to its rivals
  • 103. 103 Five Generic Strategies Competitive Advantage Competitive Scope Cost Uniqueness Broad target Narrow target Cost Leadership Differentiation Focused Cost Leadership Focused Differentiation Integrated Cost Leadership/ Differentiation
  • 104. 104 Cost Leadership Strategy An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers – relatively standardized products – features acceptable to many customers – lowest competitive price
  • 105. 105 Cost Leadership Strategy Cost saving actions required by this strategy: – building efficient scale facilities – tightly controlling production costs and overhead – minimizing costs of sales, R&D and service – building efficient manufacturing facilities – monitoring costs of activities provided by outsiders – simplifying production processes
  • 106. 106 How to Obtain a Cost Advantage Cost Drivers Value Chain Determine and control Reconfigure, if needed • Alter production process • Change in automation • New distribution channel • Direct sales in place of indirect sales • New advertising media • New raw material • Backward integration • Forward integration • Change location relative to suppliers or buyers
  • 107. 107  Product features  Performance  Mix & variety of products  Service levels  Small vs. large buyers  Process technology  Wage levels  Product features  Hiring, training, motivation Factors That Drive Costs  Economies of scale  Asset utilization  Capacity utilization pattern • Seasonal, cyclical  Interrelationships  Order processing and distribution  Value chain linkages • Advertising & sales • Logistics & operations
  • 108. 108 Questions Leading to Lower Costs 1. How can an activity be performed differently or even eliminated? 2. How can a group of linked value activities be regrouped or reordered? 3. How might coalitions with other firms lower or eliminate costs?
  • 109. 109 Cost Leadership Strategy and the Five Forces of Competition Rivalry Among Competing Firms Can use cost leadership strategy to advantage since:  competitors avoid price wars with cost leaders, creating higher profits for the entire industry Bargaining Power of Suppliers Five Forces of Competition
  • 110. 110 Cost Leadership Strategy and the Five Forces of Competition Bargaining Power of Buyers Can mitigate buyers’ power by:  driving prices far below competitors, causing them to exit and shifting power with buyers back to the firm Bargaining Power of Suppliers Five Forces of Competition
  • 111. 111 Cost Leadership Strategy and the Five Forces of Competition Bargaining Power of Suppliers Can mitigate suppliers’ power by:  being able to absorb cost increases due to low cost position  being able to make very large purchases, reducing chance of supplier using power Bargaining Power of Suppliers Five Forces of Competition
  • 112. 112 Cost Leadership Strategy and the Five Forces of Competition Bargaining Power of Suppliers Five Forces of Competition Threat of New Entrants Can frighten off new entrants due to:  their need to enter on a large scale in order to be cost competitive  the time it takes to move down the learning curve
  • 113. 113 Cost Leadership Strategy and the Five Forces of Competition Threat of Substitute Products Cost leader is well positioned to:  make investments to be first to create substitutes  buy patents developed by potential substitutes  lower prices in order to maintain value position Bargaining Power of Suppliers Five Forces of Competition
  • 114. 114 Major Risks of Cost Leadership Strategy  Dramatic technological change could take away your cost advantage  Competitors may learn how to imitate value chain  Focus on efficiency could cause cost leader to overlook changes in customer preferences
  • 115. 115 Differentiation Strategy An integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them – price for product can exceed what the firm’s target customers are willing to pay – nonstandardized products – customers value differentiated features more than they value low cost
  • 116. 116 Differentiation Strategy  Value provided by unique features and value characteristics  Command premium price  High customer service  Superior quality  Prestige or exclusivity  Rapid innovation
  • 117. 117 Differentiation Strategy Differentiation actions required by this strategy: – developing new systems and processes – shaping perceptions through advertising – quality focus – capability in R&D – maximize human resource contributions through low turnover and high motivation
  • 118. 118 How to Obtain a Differentiation Advantage Cost Drivers Value Chain Control if needed Reconfigure to maximize customer perceptions of uniqueness customer reluctance to switch to non-unique product • Raise performance of product or service • Lower buyers’ costs • Create sustainability through:
  • 119. 119 Factors That Drive Differentiation  Unique product features  Unique product performance  Exceptional services  New technologies  Quality of inputs  Exceptional skill or experience  Detailed information
  • 120. 120 Differentiation Strategy and the Five Forces of Competition Rivalry Among Competing Firms Can defend against competition because:  brand loyalty to differentiated product offsets price competition Bargaining Power of Suppliers Five Forces of Competition
  • 121. 121 Differentiation Strategy and the Five Forces of Competition Bargaining Power of Buyers Can mitigate buyer power because:  well differentiated products reduce customer sensitivity to price increases Bargaining Power of Suppliers Five Forces of Competition
  • 122. 122 Differentiation Strategy and the Five Forces of Competition Bargaining Power of Suppliers Can mitigate suppliers’ power by:  absorbing price increases due to higher margins  passing along higher supplier prices because buyers are loyal to differentiated brand Bargaining Power of Suppliers Five Forces of Competition
  • 123. 123 Differentiation Strategy and the Five Forces of Competition Threat of New Entrants Can defend against new entrants because:  new products must surpass proven products or,  new products must be at least equal to performance of proven products, but offered at lower prices Bargaining Power of Suppliers Five Forces of Competition
  • 124. 124 Differentiation Strategy and the Five Forces of Competition Threat of Substitute Products Well positioned relative to substitutes because:  brand loyalty to a differentiated product tends to reduce customers’ testing of new products or switching brands Bargaining Power of Suppliers Five Forces of Competition
  • 125. 125 Major Risks of Differentiation Strategy  Customers may decide that the price differential between the differentiated product and the cost leader’s product is too large  Means of differentiation may cease to provide value for which customers are willing to pay
  • 126. 126 Major Risks of Differentiation Strategy  Experience may narrow customer’s perceptions of the value of differentiated features of the firm’s products  Makers of counterfeit goods may attempt to replicate differentiated features of the firm’s products
  • 127. 127 Focused Business-Level Strategies A focus strategy must exploit a narrow target’s differences from the balance of the industry by: – isolating a particular buyer group – isolating a unique segment of a product line – concentrating on a particular geographic market – finding their “niche”
  • 128. 128 Factors That May Drive Focused Strategies  Large firms may overlook small niches  Firm may lack resources to compete in the broader market  May be able to serve a narrow market segment more effectively than can larger industry-wide competitors  Focus may allow the firm to direct resources to certain value chain activities to build competitive advantage
  • 129. 129 Major Risks of Focused Strategies  Firm may be “outfocused” by competitors  Large competitor may set its sights on your niche market  Preferences of niche market may change to match those of broad market
  • 130. 130 Advantages of Integrated Strategy A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to: – adapt quickly to environmental changes – learn new skills and technologies more quickly – effectively leverage its core competencies while competing against its rivals
  • 131. 131 Benefits of Integrated Strategy  Successful firms using this strategy have above-average returns  Firm offers two types of values to customers – some differentiated features (but less than a true differentiated firm) – relatively low cost (but now as low as the cost leader’s price)
  • 132. 132 Major Risks of Integrated Strategy  An integrated cost/differentiation business level strategy often involves compromises (neither the lowest cost nor the most differentiated firm)  The firm may become “stuck in the middle” lacking the strong commitment and expertise that accompanies firms following either a cost leadership or a differentiated strategy
  • 133. ©2003 Southwestern Publishing Company 133 Competitive Rivalry and Competitive Dynamics Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 5
  • 134. 134 Strategy Implementation Chapter 13 Strategic Entrepreneurship Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 4 Business-Level Strategy
  • 135. 135 Definitions  Competitors – firms operating in the same market, offering similar products and targeting similar customers  Competitive rivalry – the ongoing set of competitive actions and responses occurring between competitors – competitive rivalry influences an individual firm’s ability to gain and sustain competitive advantages
  • 136. 136 Definitions  Competitive behavior – the set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position  Competitive dynamics – the total set of actions and responses taken by all firms competing within a market
  • 137. 137 From Competitors to Competitive Dynamics Competitors • Through competitive behavior • Competitive actions • Competitive responses • To gain an advantageous market position Competitive Dynamics • Competitive actions and responses taken by all firms competing in a market Competitive rivalry Engage in What results? What results? Why? How?
  • 138. 138 Effect of Competitive Rivalry on a Firm’s Strategies  Success of a strategy is determined by: – the firm’s initial competitive actions – how well it anticipates competitors’ responses to them – how well the firm anticipates and responds to its competitors’ initial actions  Competitive rivalry – affects all types of strategies – most dominant influence is on the firm’s business-level strategy or strategies.
  • 139. 139 A Model of Competitive Rivalry Competitive Analysis • Market commonality • Resource similarity Drivers of Competitive Behavior • Awareness • Motivation • Ability Interim Rivalry • Likelihood of Attack • First mover incentives • Organizational size • Quality • Likelihood of Response • Type of competitive action • Reputation • Market dependence Outcomes • Market position • Financial performance feedback
  • 140. 140 Competitive Rivalry  Firms are mutually interdependent – one firm’s competitive actions have noticeable effects on competitors – one firm’s competitive actions elicit competitive responses from competitors – competitors feel each other’s actions and responses  Marketplace success is a function of both individual strategies and the consequences of their use
  • 141. 141 Competitor Analysis  Competitor analysis – a technique firms use to understand their competitive environment. Along with the general and industry environments, the competitive environment comprises the firm’s external environment – a technique used to help the firm understand its competitors – the first step to being able to predict competitors’ behavior in the form of its competitive actions and responses
  • 142. 142 Market Commonality  Market Commonality is concerned with – the number of markets with which a firm and a competitor are jointly involved – the degree of importance of the individual markets to each competitor  Most industries’ markets are somewhat related in terms of – technologies – core competencies  Multimarket competition – Firms competing in several markets
  • 143. 143 Resource Similarity  Resource similarity – the extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount  Firms with similar types and amounts of resources are likely to – have similar strengths and weaknesses – use similar strategies  Assessing resource similarity can be difficult if critical resources are intangible rather than tangible
  • 144. 144 A Framework of Competitor Analysis Market Commonality High Low Low High Resource Similarity The shaded area represents degree of market commonality between two firms Resource endowment B Resource endowment A KEY I II III IV
  • 145. 145 Drivers of Competitive Actions and Responses:  Awareness is the extent to which competitors recognize the degree of their mutual interdependence – mutual interdependence results from • market commonality • resource similarity Awareness Awareness Drivers of competitive behavior
  • 146. 146 Motivation Drivers of Competitive Actions and Responses:  Motivation concerns the firm’s incentive – to take action – or to respond to a competitor’s attack – and relates to perceived gains and losses Awareness Drivers of competitive behavior Motivation
  • 147. 147 Ability Drivers of Competitive Actions and Responses:  Ability relates – to each firm’s resources – the flexibility these resources provide  Without available resources the firm lacks the ability – to attack a competitor – to respond to the competitor’s actions Awareness Drivers of competitive behavior Motivation Ability
  • 148. 148 Drivers of Competitive Actions and Responses:  A firm is more likely to attack the rival with whom it has low market commonality than the one with whom it competes in multiple markets  Because of the high stakes of competition under the condition of market commonality, there is a high probability that the attacked firm will respond to its competitor’s action in an effort to protect its position in one or more markets Market commonality Drivers of competitive behavior influenced by Market Commonality
  • 149. 149 Resource similarity Drivers of Competitive Actions and Responses:  The greater the resource imbalance between the acting firm and competitors or potential responders, the greater will be the delay in response by the firm with a resource disadvantage  When facing competitors with greater resources or more attractive market positions, firms should eventually respond, no matter how challenging the response Drivers of competitive behavior influenced by Market commonality Resource Similarity
  • 150. 150 Competitive Rivalry  Competitive action – a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position  Competitive response – a strategic or tactical action the firm takes to counter the effects of a competitor’s competitive action
  • 151. 151 Strategic and Tactical Actions  Strategic action or a strategic response – a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse  Tactical action or a tactical response – market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse
  • 152. 152 Factors Affecting Likelihood of Attack:  First movers allocate funds for – product innovation and development – aggressive advertising – advanced research and development  First movers can gain – the loyalty of customers who may become committed to the firm’s goods or services – market share that can be difficult for competitors to take during future competitive rivalry First mover incentives First Mover Incentives
  • 153. 153 Size Factors Affecting Likelihood of Attack:  Small firms are more likely – to launch competitive actions – to be quicker in doing so  Small firms are perceived as – nimble and flexible competitors – relying on speed and surprise to defend their competitive advantages or develop new ones while engaged in competitive rivalry  Small firms have the flexibility needed to launch a greater variety of competitive actions First mover incentives Size
  • 154. 154 Factors Affecting Likelihood of Attack:  Large firms are likely to initiate more competitive actions as well as strategic actions during a given time period  Large organizations commonly have the slack resources required to launch a larger number of total competitive actions First mover incentives Size Size “Think and act big and we’ll get smaller. Think and act small and we’ll get bigger.” - Herb Kelleher, Former CEO, Southwest Airlines
  • 155. 155 Quality Factors Affecting Likelihood of Attack:  Quality exists when the firm’s goods or services meet or exceed customers’ expectations First mover incentives Size Quality  Product quality dimensions include – Performance – Features – Flexibility – Durability – Conformance – Serviceability – Aesthetics – Perceived quality
  • 156. 156 Quality Factors Affecting Likelihood of Attack:  Quality exists when the firm’s goods or services meet or exceed customers’ expectations First mover incentives Size Quality  Service quality dimensions include – Timeliness – Courtesy – Consistency – Convenience – Completeness – Accuracy
  • 157. 157 Factors Affecting Likelihood of Response  Firms study three factors to predict how a competitor is likely to respond to competitive actions – type of competitive action – reputation – market dependence
  • 158. 158 Factors Affecting Likelihood of Response:  Strategic actions receive strategic responses  Tactical responses are taken to counter the effects of tactical actions  Strategic actions elicit fewer total competitive responses  A competitor likely will respond quickly to a tactical action  The time needed to implement and assess a strategic action delays competitors’ responses Type of competitive action Type of Competitive Action
  • 159. 159 Reputation Factors Affecting Likelihood of Response:  An actor is the firm taking an action or response  Reputation is the positive or negative attribute ascribed by one rival to another based on past competitive behavior  The firm studies responses that a competitor has taken previously when attacked to predict likely responses Type of competitive action Reputation
  • 160. 160 Market dependence Factors Affecting Likelihood of Response:  Market dependence is – the extent to which a firm’s revenues or profits are derived from a particular market  In general, firms can predict that competitors with high market dependence are likely to respond strongly to attacks threatening their market position Type of competitive action Reputation Market Dependence
  • 161. 161 Competition  Competitive Dynamics – competitive dynamics concerns the ongoing actions and responses taking place among all firms competing within a market for advantageous positions  Competitive Rivalry – building and sustaining competitive advantages are at the core of competitive rivalry – competitive advantages are the link to an advantageous market position
  • 162. 162 Strategic Conduct is Dynamic • A firm’s strategic conduct is dynamic in nature • Actions and responses shape the competitive positions of each firm’s business level strategy Firm B Firm A
  • 163. 163 Firm B Firm A Strategic Conduct is Dynamic • Actions taken by one firm elicits responses from competitors • Competitive responses lead to additional actions from the firm that acted originally Actions Response New Actions New Response
  • 164. 164 Competitive Dynamics:  Slow-cycle markets – the firm’s competitive advantages are shielded from imitation for long periods of time – imitation is costly  Competitive advantages are sustainable in slow-cycle markets  A proprietary, one-of-a-kind competitive advantage leads to competitive success in a slow-cycle market Slow-cycle markets Slow-Cycle Markets
  • 165. 165 Gradual Erosion of a Sustainable Competitive Advantage Returns from a Sustainable Competitive Advantage Time (Years) 0 5 10 Launch Exploitation Counterattack
  • 166. 166 Fast-cycle markets Competitive Dynamics:  Fast-cycle markets – the firm’s competitive advantages aren’t shielded from imitation – imitation happens quickly and somewhat inexpensively  Competitive advantages aren’t sustainable  Competitors use reverse engineering to quickly imitate or improve on the firm’s products  Non-proprietary technology is diffused rapidly Slow-cycle markets Fast-Cycle Markets
  • 167. 167 Obtaining Temporary Advantages to Create Sustained Advantage Returns from a Series of Replicable Actions Time (Years) 0 5 10 15 Launch Exploitation Counterattack Firm has already moved to next advantage
  • 168. 168 Competitive Dynamics:  Standard-cycle markets – the firm’s competitive advantages may be shielded from imitation – imitation is moderately costly  Competitive advantages are partially sustainable if the firm is able to continuously upgrade the quality of its competitive advantages  Firms – seek large market shares – gain customer loyalty through brand names – carefully control operations Slow-cycle markets Fast-cycle markets Standard-cycle markets Standard-Cycle Markets
  • 169. ©2003 Southwestern Publishing Company 169 Corporate-Level Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 6
  • 170. 170 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Chapter 6 Corporate- Level Strategy Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 4 Business-Level Strategy
  • 171. 171 Two Levels of Strategy A diversified company has two levels of strategy 1. Business-Level Strategy (Competitive Strategy) How to create competitive advantage in each business in which the company competes - low cost - differentiation - focused low cost - focused differentiation - integrated low cost/ differentiation 2. Corporate-Level Strategy (Company-wide Strategy) How to create value for the corporation as a whole
  • 172. 172 Key Questions in Corporate Strategy 1. What businesses should the corporation be in? 2. How should the corporate office manage the array of business units? Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts
  • 173. 173 Levels and Types of Diversification Low Levels of Diversification Single Business > 95% of business from a single business unit Dominant Business Between 70 and 95% of business from a single business unit
  • 174. 174 Related Constrained <70% of revenues from dominant business; all businesses share product, technological and distribution linkages Levels and Types of Diversification Moderate to High Levels of Diversification
  • 175. 175 Related Linked (Mixed) < 70% of revenues from dominant business, and only limited links exist Levels and Types of Diversification Moderate to High Levels of Diversification
  • 176. 176 Levels and Types of Diversification Unrelated < 70% of revenue comes from the dominant business, and there are no common links between businesses Very High Levels of Diversification
  • 177. 177 Reasons for Diversification Reasons to Enhance Strategic Competitiveness • Economies of scope • Market power • Financial economics Incentives Resources Managerial Motives
  • 178. 178 Incentives with Neutral Effects on Strategic Competitiveness • Anti-trust regulation • Tax laws • Low performance • Uncertain future cash flows • Firm risk reduction Incentives Resources Managerial Motives Reasons for Diversification
  • 179. 179 Resources with varying effects on value creation and strategic competitiveness • Tangible resources  financial resources  physical assets • Intangible resources  tacit knowledge  customer relations  image and reputation Incentives Resources Managerial Motives Reasons for Diversification
  • 180. 180 Managerial Motives (Value Reduction) • Diversifying managerial employment risk • Increasing managerial compensation Incentives Resources Managerial Motives Reasons for Diversification
  • 181. 181 Value-creating Strategies of Diversification: Operational and Corporate Readiness Related Constrained Diversification Vertical Integration (Market Power) Unrelated Diversification (Financial Economies) Both Operational and Corporate Relatedness (Rare Capability and can Create Diseconomies of Scope) Related Linked Diversification (Economies of Scope) Corporate Readiness: Transferring Skills into Businesses Through Corporate Headquarters Low High Sharing: Operational Relatedness Between Businesses Low High
  • 182. 182 Adding Value by Diversification Diversification most effectively adds value by either of two mechanisms: – Economies of scope: cost savings attributed to transferring the capabilities and competencies developed in one business to a new business – Market power: when a firm is able to sell its products above the existing competitive level or reduce the costs of its primary and support activities below the competitive level, or both
  • 183. 183 Alternative Diversification Strategies Related Diversification Strategies – sharing activities – transferring core competencies Unrelated Diversification Strategies – efficient internal capital market allocation – restructuring
  • 185. 185 Sharing Activities:  Sharing activities often lowers costs or raises differentiation  Sharing activities can lower costs if it: – achieves economies of scale – boosts efficiency of utilization – helps move more rapidly down the Learning Curve  Sharing activities can enhance potential for or reduce the cost of differentiation  Must involve activities that are crucial to competitive advantage Key Characteristics
  • 186. 186 Sharing Activities:  Strong sense of corporate identity  Clear corporate mission that emphasizes the importance of integrating business units  Incentive system that rewards more than just business unit performance Assumptions
  • 187. 187 Related Diversification Strategies – sharing activities – transferring core competencies Alternative Diversification Strategies
  • 188. 188 Transferring Core Competencies:  Exploits interrelationships among divisions  Start with value chain analysis – identify ability to transfer skills or expertise among similar value chains – exploit ability to transfer activities Key Characteristics
  • 189. 189 Transferring Core Competencies:  Transferring core competencies leads to competitive advantage only if the similarities among business units meet the following conditions: – activities involved in the businesses are similar enough that sharing expertise is meaningful – transfer of skills involves activities which are important to competitive advantage – the skills transferred represent significant sources of competitive advantage for the receiving unit Assumptions
  • 190. 190 Related Diversification Strategies – sharing activities – transferring core competencies Alternative Diversification Strategies Unrelated Diversification Strategies – efficient internal capital market allocation
  • 191. 191 Efficient Internal Capital Market Allocation:  Firms pursuing this strategy frequently diversify by acquisition: – acquire sound, attractive companies – acquired units are autonomous – acquiring corporation supplies needed capital – portfolio managers transfer resources from units that generate cash to those with high growth potential and substantial cash needs – add professional management & control to sub-units – sub-unit managers compensation based on unit results Key Characteristics
  • 192. 192 Efficient Internal Capital Market Allocation:  Managers have more detailed knowledge of firm relative to outside investors  Firm need not risk competitive edge by disclosing sensitive competitive information to investors  Firm can reduce risk by allocating resources among diversified businesses, although shareholders can generally diversify more economically on their own Assumptions
  • 193. 193 Related Diversification Strategies – sharing activities – transferring core competencies Unrelated Diversification Strategies – efficient internal capital market allocation Alternative Diversification Strategies – restructuring
  • 194. 194 Restructuring:  Seek out undeveloped, sick or threatened organizations or industries  Parent company (acquirer) intervenes and frequently: – changes sub-unit management team – shifts strategy – infuses firm with new technology – enhances discipline by changing control systems – divests part of firm – makes additional acquisitions to achieve critical mass Key Characteristics
  • 195. 195 Restructuring:  Frequently sell unit after making one-time changes since parent no longer adds value to ongoing operations Key Characteristics
  • 196. 196 Restructuring:  Requires keen management insight in selecting firms with depressed values or unforeseen potential  Must do more than restructure companies  Need to initiate restructuring of industries to create a more attractive environment Assumptions
  • 197. 197 Incentives to Diversify External Incentives:  Relaxation of anti-trust regulation allows more related acquisitions than in the past  Before 1986, higher taxes on dividends favored spending retained earnings on acquisitions  After 1986, firms made fewer acquisitions with retained earnings, shifting to the use of debt to take advantage of tax deductible interest payments
  • 198. 198 Incentives to Diversify Internal Incentives:  Poor performance may lead some firms to diversify to attempt to achieve better returns  Firms may diversify to balance uncertain future cash flows  Firms may diversify into different businesses in order to reduce risk
  • 199. 199 Resources and Diversification  Besides strong incentives, firms are more likely to diversify if they have the resources to do so  Value creation is determined more by appropriate use of resources than incentives to diversify
  • 200. 200 Managerial Motives to Diversify Managers have motives to diversify – diversification increases size; size is associated with executive compensation – diversification reduces employment risk – effective governance mechanisms may restrict such motives
  • 201. 201 Relationship Between Diversification and Performance Performance Level of Diversification Dominant Business Unrelated Business Related Constrained
  • 202. 202 Relationship Between Firm Performance and Diversification Incentives Managerial Motives Resources Diversification Strategy Firm Performance Internal Governance Strategy Implementation Capital Market Intervention and the Market for Managerial Talent
  • 203. ©2003 Southwestern Publishing Company 203 Acquisition and Restructuring Strategies Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 7
  • 204. 204 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 6 Corporate- Level Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
  • 205. 205 Mergers and Acquisitions  Merger: a strategy through which two firms agree to integrate their operations on a relatively co-equal basis  Acquisition: a strategy through which one firm buys a controlling interest in another firm with the intent of making the acquired firm a subsidiary business within its own portfolio  Takeover: a special type of an acquisition strategy wherein the target firm did not solicit the acquiring firm’s bid
  • 206. 206 Acquisitions Reasons for Making Acquisitions Increase market power Overcome entry barriers Cost of new product development Increase speed to market Increase diversification Reshape firm’s competitive scope Lower risk compared to developing new products Learn and develop new capabilities
  • 207. 207 Reasons for Making Acquisitions:  Factors increasing market power – when a firm is able to sell its goods or services above competitive levels or – when the costs of its primary or support activities are below those of its competitors – usually is derived from the size of the firm and its resources and capabilities to compete  Market power is increased by – horizontal acquisitions – vertical acquisitions – related acquisitions Increased Market Power
  • 208. 208 Reasons for Making Acquisitions:  Barriers to entry include – economies of scale in established competitors – differentiated products by competitors – enduring relationships with customers that create product loyalties with competitors  acquisition of an established company – may be more effective than entering the market as a competitor offering an unfamiliar good or service that is unfamiliar to current buyers – provides a new entrant with immediate market access Overcome Barriers to Entry
  • 209. 209 Reasons for Making Acquisitions:  Significant investments of a firm’s resources are required to – Develop new products internally – introduce new products into the marketplace  Acquisition of a competitor may result in – more predictable returns – faster market entry – rapid access to new capabilities Cost of New Product Development and Speed to Market
  • 210. 210 Reasons for Making Acquisitions:  An acquisition’s outcomes can be estimated more easily and accurately compared to the outcomes of an internal product development process  Therefore managers may view acquisitions as lowering risk Lower Risk Compared to Developing New Products
  • 211. 211 Reasons for Making Acquisitions:  It may be easier to develop and introduce new products in markets currently served by the firm  It may be difficult to develop new products for markets in which a firm lacks experience – it is uncommon for a firm to develop new products internally to diversify its product lines – acquisitions are the quickest and easiest way to diversify a firm and change its portfolio of business Increased Diversification
  • 212. 212 Reasons for Making Acquisitions:  Firms may use acquisitions to reduce their dependence on one or more products or markets  Reducing a company’s dependence on specific markets alters the firm’s competitive scope Reshaping the Firms’ Competitive Scope
  • 213. 213 Reasons for Making Acquisitions:  Acquisitions may gain capabilities that the firm does not possess  Acquisitions may be used to – acquire a special technological capability – broaden a firm’s knowledge base – reduce inertia Learning and Developing New Capabilities
  • 214. 214 Acquisitions Problems With Acquisitions Integration difficulties Inadequate evaluation of target Large or extraordinary debt Inability to achieve synergy Too much diversification Managers overly focused on acquisitions Resulting firm is too large
  • 215. 215 Problems With Acquisitions  Integration challenges include – melding two disparate corporate cultures – linking different financial and control systems – building effective working relationships (particularly when management styles differ) – resolving problems regarding the status of the newly acquired firm’s executives – loss of key personnel weakens the acquired firm’s capabilities and reduces its value Integration Difficulties
  • 216. 216 Problems With Acquisitions  Evaluation requires that hundreds of issues be closely examined, including – financing for the intended transaction – differences in cultures between the acquiring and target firm – tax consequences of the transaction – actions that would be necessary to successfully meld the two workforces  Ineffective due-diligence process may – result in paying excessive premium for the target company Inadequate Evaluation of Target
  • 217. 217 Problems With Acquisitions  Firm may take on significant debt to acquire a company  High debt can – increase the likelihood of bankruptcy – lead to a downgrade in the firm’s credit rating – preclude needed investment in activities that contribute to the firm’s long-term success Large or Extraordinary Debt
  • 218. 218 Problems With Acquisitions  Synergy exists when assets are worth more when used in conjunction with each other than when they are used separately  Firms experience transaction costs when they use acquisition strategies to create synergy  Firms tend to underestimate indirect costs when evaluating a potential acquisition Inability to Achieve Synergy
  • 219. 219 Problems With Acquisitions  Diversified firms must process more information of greater diversity  Scope created by diversification may cause managers to rely too much on financial rather than strategic controls to evaluate business units’ performances  Acquisitions may become substitutes for innovation Too Much Diversification
  • 220. 220 Problems With Acquisitions  Managers in target firms may operate in a state of virtual suspended animation during an acquisition  Executives may become hesitant to make decisions with long-term consequences until negotiations have been completed  Acquisition process can create a short- term perspective and a greater aversion to risk among top-level executives in a target firm Managers Overly Focused on Acquisitions
  • 221. 221 Problems With Acquisitions  Additional costs may exceed the benefits of the economies of scale and additional market power  Larger size may lead to more bureaucratic controls  Formalized controls often lead to relatively rigid and standardized managerial behavior  Firm may produce less innovation Too Large
  • 222. 222 Attributes of Effective Acquisitions Attributes Results Complementary Assets or Resources Buying firms with assets that meet current needs to build competitiveness Friendly Acquisitions Friendly deals make integration go more smoothly Careful Selection Process Deliberate evaluation and negotiations are more likely to lead to easy integration and building synergies Maintain Financial Slack Provide enough additional financial resources so that profitable projects would not be foregone
  • 223. 223 Attributes of Effective Acquisitions Attributes Results Low-to-Moderate Debt Merged firm maintains financial flexibility Flexibility Has experience at managing change and is flexible and adaptable Sustain Emphasis on Innovation Continue to invest in R&D as part of the firm’s overall strategy
  • 224. 224 Restructuring Activities  Downsizing – Wholesale reduction of employees  Downscoping – Selectively divesting or closing non-core businesses – Reducing scope of operations – Leads to greater focus  Leveraged Buyout (LBO) – A party buys a firm’s entire assets in order to take the firm private.
  • 225. 225 Lower performance Higher performance Higher risk Loss of human capital Restructuring and Outcomes Emphasis on strategic controls High debt costs Reduced debt costs Reduced labor costs Downsizing Downscoping Leveraged buyout
  • 226. ©2003 Southwestern Publishing Company 226 International Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 8
  • 227. 227 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Chapter 13 Strategic Entrepreneurship Strategic Outcomes Chapter 6 Corporate- Level Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
  • 228. 228 Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary International business-level strategy Multidomestic strategy Global strategy Transnational strategy Opportunities and Outcomes of International Strategy Increased market size Return on investment Economies of scale and learning Advantage in location Identify International Opportunities Explore Resources and Capabilities Use Core Competence International Strategies Modes of Entry
  • 229. 229 Better performance Innovation Opportunities and Outcomes of International Strategy: Continued Exporting Licensing Strategic alliances Acquisitions Establishment of a new subsidiary Use Core Competence Modes of Entry Management problems and risk Management problems and risk Strategic Competitiveness Outcomes
  • 230. 230 International Strategy Life Cycle Production Becomes Standardized and is Relocated to Low Cost Countries Product Demand Develops and Firm Exports Products Firm Introduces Innovation in Domestic Market Foreign Competition Begins Production Firm Begins Production Abroad Selling Products or Services Outside a Firm’s Domestic Market
  • 231. 231 Motivations for International Expansion  Increase Market Share – domestic market may lack the size to support efficient scale manufacturing facilities  Return on Investment – large investment projects may require global markets to justify the capital outlays – weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators
  • 232. 232 Motivations for International Expansion  Economies of Scale or Learning – expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution – can spread costs over a larger sales’ base – increase profit per unit  Location Advantages – low cost markets may aid in developing competitive advantage – may achieve better access to: • Raw materials • Lower cost labor • Key customers • Energy
  • 233. 233 International Business-Level Strategy: Determinants of National Advantage Factors of production Related and supporting industries Demand conditions Firm strategy, structure, and rivalry
  • 234. 234 International Business-Level Strategy: Determinants of National Advantage  Factors of production: the inputs necessary to compete in any industry – labor – land – natural resources – capital – infrastructure – basic factors include natural and labor resources – advanced factors include digital communication systems and educated workforce
  • 235. 235 International Business-Level Strategy: Determinants of National Advantage  Demand conditions: characterized by the nature and size of buyers’ needs in the home market for the industry’s goods or services – size of market segment can lead to scale- efficient facilities – efficiency can lead to domination of the industry in other countries – specialized demand may create opportunities beyond national boundaries
  • 236. 236 International Business-Level Strategy: Determinants of National Advantage  Related and supporting industries: supporting services, facilities, suppliers and so on – support in design – support in distribution – related industries as suppliers and buyers
  • 237. 237 International Business-Level Strategy: Determinants of National Advantage  Firm strategy, structure, and rivalry: the pattern of strategy, structure, and rivalry among firms – common technical training – methodological product and process improvement – cooperative and competitive systems
  • 238. 238 International Corporate-Level Strategy Need for Local Responsiveness Need for Global Integration Low High Low High Global strategy Transnational strategy Multidomestic strategy
  • 239. 239 International Corporate-Level Strategy  Type of corporate strategy selected will have an impact on the selection and implementation of the business-level strategies  Some corporate strategies provide individual country units with flexibility to choose their own strategies  Others dictate business-level strategies from the home office and coordinate resource sharing across units
  • 240. 240 Multidomestic strategy International Corporate-Level Strategy: Multidomestic Strategy • Strategy and operating decisions are decentralized to strategic business units (SBU) in each country • Products and services are tailored to local markets • Business units in one country are independent of each other • Assumes markets differ by country or regions • Focus on competition in each market • Prominent strategy among European firms due to broad variety of cultures and markets in Europe
  • 241. 241 International Corporate-Level Strategy: Global Strategy Global strategy • Products are standardized across national markets • Decisions regarding business-level strategies are centralized in the home office • Strategic business units (SBU) are assumed to be interdependent • Emphasizes economies of scale • Often lacks responsiveness to local markets • Requires resource sharing and coordination across borders (which also makes it difficult to manage)
  • 242. 242 Transnational strategy International Corporate-Level Strategy: Transnational Strategy • Seeks to achieve both global efficiency and local responsiveness • Difficult to achieve because of simultaneous requirements  strong central control and coordination to achieve efficiency  decentralization to achieve local market responsiveness • Must pursue organizational learning to achieve competitive advantage
  • 243. 243 Type of Entry Characteristics Exporting High cost, low control Licensing Low cost, low risk, little control, low returns Strategic alliances Shared costs, shared resources, shared risks, problems of integration Acquisition Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations New wholly owned subsidiary Complex, often costly, time consuming, high risk, maximum control, potential above-average returns Global Market Entry: Choice of Entry Mode
  • 244. 244 Strategic Competitiveness Outcomes: Returns  International diversification and returns: firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets – may increase a firm’s returns – such firms usually achieve the most positive stock returns – firm may achieve economies of scale and experience, location advantages, increased market size and opportunity to stabilize returns
  • 245. 245 Strategic Competitiveness Outcomes: Innovation  International diversification and innovation: firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets – potentially greater returns on innovations (larger markets) – generate additional resources for investment in innovation – exposed to new products and processes in international markets, generates additional knowledge leading to innovations
  • 246. 246 Risks in an International Environment Political Risks Economic Risks Political risks include • instability in national governments • war, both civil and international • potential nationalization of a firm’s resources Political Risks
  • 247. 247 Risks in an International Environment Economic Risks Economic risks are interdependent with political risks and include • differences and fluctuations in the value of different currencies • differences in prevailing wage rates • difficulties in enforcing property rights • unemployment Political Risks
  • 248. 248 Limits to International Expansion: Management Problems  Cost of coordination across diverse geographical business units  Institutional and cultural barriers  Understanding strategic intent of competitors  The overall complexity of competition
  • 249. ©2003 Southwestern Publishing Company 249 Cooperative Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 9
  • 250. 250 Strategy Implementation Chapter 11 Organizational Structure and Controls Chapter 10 Corporate Governance Chapter 12 Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 13 Strategic Entrepreneurship Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
  • 251. 251 Cooperative Strategy  Cooperative strategy is a strategy in which firms – work together – to achieve a shared objective  Cooperating with other firms is a strategy that – creates value for a customer – exceeds the cost of constructing customer value in other ways – establishes a favorable position relative to competition
  • 252. 252 Strategic Alliance  A strategic alliance is a cooperative strategy in which – firms combine some of their resources and capabilities – to create a competitive advantage  A strategic alliance involves – exchange and sharing of resources and capabilities – co-development or distribution of goods or services
  • 253. 253 Combined Resources Capabilities Core Competencies Resources Capabilities Core Competencies Resources Capabilities Core Competencies Strategic Alliance Firm A Firm B Mutual interests in designing, manufacturing, or distributing goods or services
  • 254. 254 Types of Cooperative Strategies  Joint venture: two or more firms create an independent company by combining parts of their assets  Equity strategic alliance: partners who own different percentages of equity in a new venture  Nonequity strategic alliances: contractual agreements given to a company to supply, produce, or distribute a firm’s goods or services without equity sharing
  • 255. 255 Market Reason Slow Cycle • Gain access to a restricted market • Establish a franchise in a new market • Maintain market stability (e.g., establishing standards) Reasons for Strategic Alliances by Market Type
  • 256. 256 Market Reason Fast Cycle • Speed up development of new goods or service • Speed up new market entry • Maintain market leadership • Form an industry technology standard • Share risky R&D expenses • Overcome uncertainty Reasons for Strategic Alliances by Market Type
  • 257. 257 Market Reason Standard Cycle • Gain market power (reduce industry overcapacity) • Gain access to complementary resources • Establish economies of scale • Overcome trade barriers • Meet competitive challenges from other competitors • Pool resources for very large capital projects • Learn new business techniques Reasons for Strategic Alliances by Market Type
  • 258. 258 Business-Level Cooperative Strategies: Complementary Alliances • complementary strategic alliances are designed to take advantage of market opportunities by combining partner firms’ assets in complementary ways to create new value – these include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage Complementary Strategic Alliances
  • 259. 259 Business-Level Cooperative Strategies: Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Vertical Alliance Supplier • vertical complementary strategic alliance is formed between firms that agree to use their skills and capabilities in different stages of the value chain to create value for both firms • outsourcing is one example of this type of alliance Buyer Complementary Strategic Alliances
  • 260. 260 Business-Level Cooperative Strategies: Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Primary Activities Support Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Firm Infrastructure Human Resource Mgmt. Technological Development Procurement Horizontal Alliance Buyer Potential Competitors • horizontal complementary strategic alliance is formed between partners who agree to combine their resources and skills to create value in the same stage of the value chain • focus on long-term product development and distribution opportunities • the partners may become competitors • requires a great deal of trust between the partners Buyer Complementary Strategic Alliances
  • 261. 261 Business-Level Cooperative Strategies: • competition response strategic alliances occur when firms join forces to respond to a strategic action of another competitor • because they can be difficult to reverse and expensive to operate, competition response strategic alliances are primarily formed to respond to strategic rather than tactical actions Competition Response Alliances Competition Response Alliances Complementary Alliances
  • 262. 262 Business-Level Cooperative Strategies: • uncertainty reducing strategic alliances are used to hedge against risk and uncertainty • these alliances are most noticed in fast-cycle markets • alliance may be formed to reduce the uncertainty associated with developing new product or technology standards Uncertainty Reducing Alliances Competition Response Alliances Uncertainty Reducing Alliances Complementary Alliances
  • 263. 263 Business-Level Cooperative Strategies: • competition reducing strategic alliances may be created to avoid destructive or excessive competition • explicit collusion exists when firms directly negotiate production output and pricing agreements in order to reduce competition (illegal) • tacit collusion exists when several firms in an industry indirectly coordinate their production and pricing decisions by observing each other’s competitive actions and responses Competition Reducing Alliances Competition Reducing Alliances Competition Response Alliances Uncertainty Reducing Alliances Complementary Alliances
  • 264. 264 Business-Level Cooperative Strategies: • mutual forbearance is a form of tacit collusion in which firms avoid competitive attacks against those rivals they meet in multiple markets • competition reducing strategic alliances may require governments to find ways to permit collaboration among rivals without violating antitrust laws Competition Reducing Alliances Competition Reducing Alliances Competition Response Alliances Uncertainty Reducing Alliances Complementary Alliances
  • 265. 265 Corporate-Level Cooperative Strategies • Corporate-level cooperative strategies are designed to facilitate product and/or market diversification - diversifying strategic alliance - synergistic strategic alliance - franchising • Diversifying alliances and synergistic alliances allow firms - to grow and diversify their operations - through a means other than a merger or acquisition
  • 266. 266 Corporate-Level Cooperative Strategies: Diversifying Alliances • diversifying strategic alliance allows a firm to expand into new product or market areas without completing a merger or an acquisition • provides some of the potential synergistic benefits of a merger or acquisition, but with less risk and greater levels of flexibility • permits a “test” of whether a future merger between the partners would benefit both parties Diversifying Alliances
  • 267. 267 Corporate-Level Cooperative Strategies: • synergistic strategic alliances create joint economies of scope between two or more firms • create synergy across multiple functions or multiple businesses between partner firms Synergistic Alliances Synergistic Alliances Diversifying Alliances
  • 268. 268 Corporate-Level Cooperative Strategies: • franchising spreads risks and uses resources, capabilities, and competencies without merging or acquiring another company • contractual relationship concerning the franchise that is developed between two parties, the franchisee and the franchisor • an alternative to pursuing growth through mergers and acquisitions Franchising Franchising Diversifying Alliances Synergistic Alliances
  • 269. 269 International Cooperative Strategies  Cross-border strategic alliance – an international cooperative strategy in which firms with headquarters in different nations combine some of their resources and capabilities to create a competitive advantage – a firm may form cross-border strategic alliances to leverage core competencies that are the foundation of its domestic success to expand into international markets
  • 270. 270 International Cooperative Strategies  Allows risk sharing by reducing financial investment  Host partner knows local market and customs  International alliances can be difficult to manage due to differences in management styles, cultures or regulatory constraints  Must gauge partner’s strategic intent so they do not gain access to important technology and become a competitor
  • 271. 271 Network Cooperative Strategies  A network strategy is a cooperative strategy wherein several firms agree to form multiple partnerships to achieve shared objectives – stable alliance network – dynamic alliance network  Effective social relationships and interactions among partners are keys to a successful network cooperative strategy
  • 272. 272 Network Cooperative Strategies: Stable Alliance Network • long term relationships that often appear in mature industries where demand is relatively constant and predictable • stable networks are built for exploitation of the economies available between firms Stable Alliance Network
  • 273. 273 Network Cooperative Strategies: Dynamic Alliance Network • arrangements that evolve in industries with rapid technological change leading to short product life cycles • primarily used to stimulate rapid, value-creating product innovations and subsequent successful market entries • purpose is often exploration of new ideas Dynamic Alliance Network Stable Alliance Network
  • 274. 274 Competitive Risks with Cooperative Strategies Competitive Risks • Partner may act opportunistically • Misrepresentation of competencies brought to the partnership • Partner fails to make committed resources and capabilities available to its partners • Firm may make investments that are specific to the alliance while its partner does not
  • 275. 275 Competitive Risks with Cooperative Strategies Risk and Asset Management Approaches Competitive Risks • Manage the balance between learning from partners while protecting knowledge and sources of competitive advantages from excessive learning by partners • Assign managerial responsibility for a firm’s cooperative strategies to a high-level executive or team • Specify resources and capabilities that will be shared and those that will not be shared (detailed contracts and monitoring) • Develop trusting relationships
  • 276. 276 Approaches for Managing Cooperative Strategies  cost minimization – formal contracts specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled  opportunity maximization – maximize partnership’s value-creation opportunities – partners take advantage of unexpected opportunities to learn from each other and to explore additional marketplace possibilities – fewer formal, limiting, contracts
  • 277. 277 Competitive Risks with Cooperative Strategies Risk and Asset Management Approaches Competitive Risks Desired Outcome • Creating value • Above-average returns
  • 278. ©2003 Southwestern Publishing Company 278 Corporate Governance Michael A. Hitt R. Duane Ireland Robert E. Hoskisson Chapter 10
  • 279. 279 Strategy Implementation Chapter 10 Corporate Governance Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Mission Chapter 2 The External Environment Chapter 3 The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Chapter 6 Corporate- Level Strategy Chapter 9 Cooperative Strategy Chapter 5 Competitive Rivalry and Competitive Dynamics Chapter 8 International Strategy Chapter 4 Business-Level Strategy Chapter 7 Acquisition and Restructuring Strategies
  • 280. 280 Corporate Governance  Corporate governance is – a relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations – concerned with identifying ways to ensure that strategic decisions are made effectively – used in corporations to establish order between the firm’s owners and its top-level managers
  • 281. 281 Corporate Governance Mechanisms Ownership concentration – relative amounts of stock owned by individual shareholders and institutional investors Board of Directors – individuals responsible for representing the firm’s owners by monitoring top-level managers’ strategic decisions Internal Governance Mechanisms
  • 282. 282 Corporate Governance Mechanisms Executive Compensation – use of salary, bonuses, and long- term incentives to align managers’ interests with shareholders’ interests  Monitoring by top-level managers – they may obtain Board seats (not in financial institutions) – they may elect Board representatives Internal Governance Mechanisms
  • 283. 283 Corporate Governance Mechanisms Market for Corporate Control – the purchase of a firm that is underperforming relative to industry rivals in order to improve its strategic competitiveness External Governance Mechanisms