THE CONTEXT OF MANAGING STRATEGICALLY Katie Klingele John Stewart Heather Hignojos

Learning Outcomes  The different perspectives on competitive advantage  The driving forces, implications, and critical success factors of the business environment  Two organizational elements that guide strategic decision makers in managing strategically in today’s context

What is a Competitive Advantage?  This is what sets an organization apart or what is its competitive edge.  Managing strategically- formulating and implementing strategies that allow an organization to develop and maintain a competitive advantage.  A key concept in strategic management, competitive advantage is necessary for an organization’s long-term success and survival.

Perspectives on Competitive Advantage  Industrial Organization View (I/O)  Suggests organizations look at the impact of external factors. Coca-Cola regionalizes their recipes for different areas.  Resource-based View (RBV)  Emphasizes exploiting organizational resources in order to develop and maintain competitive advantage.  Guerrilla View  It proposes that an organization's competitive advantage is temporary and can be gained only by peppering the competitive marketplace with rapid radical surprises.

I/O ViewRBVGuerrilla View Competitive Advantage Positioning in industry Possessing unique organizational assets or capabilities Temporary Determinants of Profitability Characteristics of industry, firm’s position within industry Type, amount, and nature of firm’s resources Ability to change and radically surprise competitors with strategic actions Focus of AnalysisExternalInternalExternal and Internal Major ConcernCompetitionResources- capabilities Continual, radical, and chaotic conditions Strategic ChoicesChoosing attractive industry; appropriate position Developing unique resources and distinctive capabilities Rapidly and repeatedly disrupting current situation and surprising competitors Comparing the I/O, RBV, and Guerilla View

The Business Environment  What forces are driving it?  1. The Information Revolution  2. Technology  3. Globalization  What are the implications?  1. Continual Change  2. Reduced need for physical assets  3. Vanishing Distance and Compressed Time  4. Increased Vulnerability  What are the critical success factors?  1. Ability to embrace change  2. Creativity and innovation capabilities  3. Being a world-class organization

Drivers of the Business Environment  The Information Revolution  The instant availability of information has radically changed the nature of the business environment, which, in turn, affects the context of strategic management.  Technology  Technology continues to have far-reaching effects on how organizations do their work. We can see this in three areas: innovation, bottom-up capability and organizational performance.  Globalization  Globalization has transformed and continues to transform the business environment. Globalization influences strategic management in two ways: (1) global markets and (2) global competitors.

Implications  Continual Change  Change is the order of business in today’s context as all organizations deal with changing conditions.  Reduced Need for Physical Assets  Physical assets are no longer the main power companies have, it’s also value in intangible factors such as information, people, ideas, and knowledge  Vanishing Distance and Compressed Time  The limitations of physical distance and time have disappeared.  Vulnerability  Organizations face increased vulnerability from being more connected and open.

Critical Success Factors  Ability to Embrace Change  Being successful in a business environment means not only being tolerant of change but seeking it out and embracing it.  Creativity and Innovation Capabilities  “Create and innovate or fail”.  Being a World-Class Organization  Strategic decision makers take actions to help it’s organization be the best in the world at what it does.

Two Organizational Elements in Managing Strategically  Organizational Vision and Mission  Organizational vision is a broad comprehensive picture of what a leader wants an organization to become  Mission statement is a statement of what specific organizational units do and what they hope to accomplish  Corporate Social Responsibility (CSR) and Ethics.  CSR is the obligation of organizational decision makers to make decisions and act in ways that recognize the interrelatedness of business and society.  Ethics involves the principles that define right and wrong decisions and behavior

Organizational Vision and Mission  An effective organizational vision should include 4 components:  (1) Be built on a foundation of the organization’s core values and beliefs  (2) Elaborate a purpose for the organization  (3) Include a brief summary of what the organization does  (4) Specify broad goals A mission statement provides a focus for employees as they make and implement strategic decisions.

Corp. Social Responsibility and Ethics  CSR recognizes the organization’s various stakeholders and how they’re dealt with. What this means for managing strategically is making decisions in ways that will enhance the various stakeholder relationships.  Ethical considerations should play a role in managing strategically. Some individuals believe ethics is both a personal and an organizational issue and should be part of the strategic management process.

Stakeholders Coca- Cola Company Trade Associations Political Action Groups ShareholdersGovernmentsCustomers Social Action Groups EmployeesCommunitiesSuppliers Many organizations believe that strong and socially responsible stakeholder relationships make them more competitive. The figure below identifies potential stakeholders with whom the Coca-Cola Company may have to contend.

Recap  Competitive Advantage  Necessary for a company’s long-term success and survival  Driving Forces of the Business Environment  Information revolution, Technology, Globalization  Organizational Vision and Mission  Essential for long-term growth and direction  CSR/Ethics  Keeps companies accountable, and builds positive image