Chapter 1: Introduction Key Points: Chapter 1: Introduction Overview of the Strategic Management Process Competitive Advantage I/O Model of Above-Average Returns Resource-Based Model of Above-Average Returns Understand the importance and role of strategic intent and mission Identify the concerns, interests, and claims of key stakeholders Basic understanding of corporate culture

Competitive Advantage Competitive Advantage: implementing a value-creating strategy that other firms are unable or unwilling (e.g., too costly) to duplicate Allows a firm to achieve above-average returns How long does competitive advantage from a particular strategy last?

Why is creating a successful strategy and sustaining a competitive advantage so challenging?

The Strategic Management Process Chapter 2 External Figure 1.1: The Strategic Management Process Environment Strategic Inputs Strategic Intent Strategic Mission Chapter 3 Internal Environment Strategy Formulation Strategy Implementation Chapter 4 Chapter 5 Chapter 6 Chapter 10 Chapter 11 Business-Level Competitive Corporate-Level Corporate Structure Strategic Actions Strategy Dynamics Strategy Governance & Control Chapter 7 Chapter 8 Chapter 9 Chapter 12 Chapter 13 Acquisitions & International Cooperative Strategic Entrepreneurship & Innovation Restructuring Strategy Strategies Leadership Strategic Outcomes Strategic Competitiveness Above Average Returns

Figure 1.3: The I/O Model of Superior Returns The External Environment Study the general, industry, and competitive environment Assets and Skills Develop or acquire assets and skills to implement the strategy An Attractive Industry Find an industry in which your firm can get above-ave. returns Strategy Implementation Take actions to effectively implement the strategy Strategy Formulation Select the strategy linked with above-ave. returns for industry Superior Returns Earn above-average returns

An Attractive Industry Strategy Formulation and Competitive Advantage Figure 1.4: The Resource-Based Model of Superior Returns Resources Inputs into a firm’s production process An Attractive Industry An industry that allow a firm to exploit its resources and capabilities Capability Integrated set of resources that perform a task or activity Strategy Formulation and Implementation Take actions to compete in industry Competitive Advantage Resource and capabilities allow the firm to outperform rivals Superior Returns Earn above-average returns

Assumptions I/O Model Resource-Based Model External environment is the basis of strategy and profits Firms have similar resources and strategies Resource are highly mobile across firms Decision-makers are rational and act in best interest of firm Resource-Based Model Resources and capabilities are basis of strategy and profits Firms have different resources and strategies Resource may not be highly mobile across firms

Strategic Intent and Mission Leveraging of a firm’s internal resources, capabilities, and core competencies to accomplish the firm’s goals Stretch goals Internally focused Strategic Mission Statement of a firm’s unique purpose and the scope of its operations in product and market terms Externally focused

Stakeholders Stakeholders: People who are affected by a firm’s performance or who have claims on its performance Types Capital Market (shareholders and suppliers of capital) Product Market (external parties who are not capital market stakeholders) Customers, suppliers, host communities, unions Organizational (employees)

Organizational Culture Complex set of ideologies, symbols, and core values shared throughout the firm and that influence the way it conducts business Top managers role Difficult to change