Strategic Management & Competitiveness <ul><li>Knowledge Objectives </li></ul><ul><li>Define strategic competitiveness, competitive advantage and above average returns. </li></ul><ul><li>Describe the 21 st century competitive landscape & ex-plain how globalization & technological changes shape it. </li></ul><ul><li>Use the industrial organization (I/O) model to explain how firms can earn above average returns. </li></ul><ul><li>Use the resource-based model to explain how firms can earn above-average returns. </li></ul><ul><li>Describe strategic intent and strategic mission and discuss their value. </li></ul><ul><li>6. Describe stakeholders & their ability to influence firms. </li></ul><ul><li>Describe strategists’ work & the strategic mgmt. process. </li></ul>0
Desired Strategic Outcomes Provides benefits which current and potential competitors are unable to duplicate. 0 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. Sustained Competitive Advantage Above-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk.
Important Definitions 0 Risk An investor’s uncertainty about the economic gains or losses resulting from a particular investment. Returns equal to what an investor expects from other investments with similar amount of risk. Average returns Strategic management process The full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns.
What is Strategy? <ul><li>An integrated and coordinated set of commitments & actions designed to exploit core competencies and gain a competitive advantage. </li></ul>0
What is Strategy? “ A unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.” (Glueck, 1980:9) “ The pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.” (Quinn, 1980) 0 “ A good strategy… neutralizes threats and exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses.” (Barney, 1997:17) “ A pattern of resource allocation that enables firms to maintain or improve their performance.
Intended, Emergent & Realized Strategies Intended Strategies Realized Strategies Deliberate Strategies Emergent Strategies Unrealized Strategies Thus, strategy can emerge from “ a Pattern in the stream of decisions or actions”
Alternative Models of Superior Returns Industrial Organization Model Strategy Formulation Assets and Skills Strategy Implementation Superior Returns An Attractive Industry Strategy Implementation Superior Returns O I O I 0 The External Environment An Attractive Industry Resource-Based Model Resources Capabilities Competitive Advantage
Four Attributes of Resources and Capabilities (Competitive Advantage) * an * Rare possessed by few, if any, current and potential competitors Costly to when other firms either can’t obtain them Imitate or must obtain at a much higher cost Organized supported by the appropriate structure, to be controls, and rewards Exploited Resources and Capabilities Valuable allow firm to neutralize threats or exploit opportunities in its external environment
Resources and capabilities that meet these four criteria become a source of: * an * Core Competencies Core Competencies Resources and Capabilities Rare Costly to Imitate Organized to be Exploited Valuable
Core Competencies are the basis for a firm’s: * an * Core Competencies Core Competencies Competitive advantage Strategic competitiveness Ability to earn above-average returns 0
CEO’s ranking of business importance 0 <ul><li>A strong & well thought out strategy </li></ul><ul><li>Maximizing customer satisfaction & loyalty </li></ul><ul><li>Business leadership, quality products & services </li></ul><ul><li>Concern for consistent profits </li></ul><ul><li>Strong & consistent profits </li></ul>
21 st Century Values <ul><li>Flexibility </li></ul><ul><li>Speed to market </li></ul><ul><li>Innovation </li></ul><ul><li>Integration </li></ul><ul><li>Handling challenges from constantly changing conditions </li></ul><ul><li>Hypercompetition </li></ul>0
The Global Economy <ul><li>One in which goods, services, people, skills, and ideas move freely across geographic borders </li></ul>0
World competitiveness ratings 0 9 14 12 12 Norway 11 12 12 12 China 5 8 9 11 Ireland 10 9 11 11 Japan 12 9 8 10 Austria 13 14 13 10 Thailand 11 11 11 9 Iceland 8 7 8 9 Spain 1 1 1 8 Netherlands 7 8 9 8 France 7 7 7 7 Sweden 5 6 5 7 U.K. 6 5 5 6 Luxembourg 8 5 7 6 Taiwan 4 6 3 5 Switzerland 4 4 4 5 Germany 8 2 10 4 Hong Kong 9 10 6 4 Malaysia 10 10 4 3 Denmark 2 2 2 3 Canada 2 3 6 2 Singapore 3 3 3 2 Australia 3 4 2 1 Finland 1 1 1 1 USA 2000 2001 2002 2003 Country 2000 2001 2002 2003 Country Population < 20 million (Ranks) Population > 20 million (Ranks)
Technology and Technological Change <ul><li>Increasing rate of tech. change and diffusion </li></ul><ul><li>Perpetual innovation </li></ul><ul><li>The information age </li></ul><ul><li>Personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, e-business </li></ul><ul><li>Increasing knowledge intensity </li></ul><ul><li>Information, intelligence, expertise, strategic flexibility. </li></ul>0
Strategic Intent Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies. 0 Internally focused, it is the leveraging of a firms resources, capabilities, and core competencies to establish the firms goals in the competitive environment. Externally focused, it is a statement of a firms unique purpose and the scope of it’s operations in product and market terms. Strategic Mission
Stakeholders The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders Groups who are affected by firm’s performance & who have claims on its performance Firm Capital Market Stock market/Investors Debt suppliers/Banks Product Market Primary Customers Host Communities Unions Suppliers Organizational Employees Managers Nonmanagers
Organizational strategists <ul><li>Top level managers, executives, top management team, or general managers </li></ul>0 Organizational culture A complex set of ideologies, symbols and core values that influence how the firm conducts it’s business.
Predicting Outcomes of Strategic Decisions <ul><li>Define the profit pool’s boundaries. </li></ul><ul><li>2. Estimate the pool’s overall size. </li></ul><ul><li>3. Estimate the size of the value chain. </li></ul><ul><li>Reconcile the calculations. </li></ul><ul><li>The strategic management process calls for disciplined approaches to the development of competitive advantage. </li></ul>0