1. Definitions Strategic Competitiveness
When a firm successfully formulates and implements a value-creating strategy
Sustainable Competitive Advantage
When competitors are unable to duplicate a company’s value-creating strategy
Strategic Management Process
The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns
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2. Definitions (cont’d) Risk Average Returns Above-average Returns
An investor’s uncertainty about the economic gains or losses that will result from a particular investment
Average Returns
Returns equal to those an investor expects to earn from other investments with a similar amount of risk
Above-average Returns
Returns in excess of what an investor expects to earn from other investments with a similar amount of risk
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3. Competitive Landscape
Strategic maneuvering among global and innovative combatants
Global economy
Rapid technological change
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4. Competitive Landscape: Hypercompetition
Hypercompetition A condition of rapidly escalating competition based on
Hypercompetition
Price-quality positioning
Competition to create new know-how and establish first-mover advantage
Competition to protect or invade established product or geographic markets
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5. The External Environment
Study the external environment, especially the industry environment
The general environment
The industry environment
The competitor environment
Adapted from Figure 1.2
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6. The External Environment An Attractive Industry
2. Locate an attractive industry with a high potential for above-average returns
An industry whose structural characteristics suggest above-average returns
Adapted from Figure 1.2
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7. The External Environment An Attractive Industry
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
Adapted from Figure 1.2
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8. The External Environment An Attractive Industry
4. Develop or acquire assets and skills needed to implement the strategy
Strategy Formulation
Assets and skills required to implement a chosen strategy
Assets and Skills
Adapted from Figure 1.2
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9. The External Environment
An Attractive Industry
5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy
Strategy Formulation
Selection of strategic actions linked with effective implementation of the chosen strategy
Assets and Skills
Strategy Implementation
Adapted from Figure 1.2
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10. Resources and Capabilities
Inputs into a firm’s production process
Capital equipment
Skills of individual employees
Patents
Finances
Talented managers
Capabilities
Capacity of a set of resources to perform in an integrative manner
A capability should not be
So simple that it is highly imitable
So complex that it defies internal steering and control
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11. Inputs into a firm’s production process
Resources
Identify the firm’s resources. Study its strengths and weaknesses compared with those of competitors
Inputs into a firm’s production process
Adapted from Figure 1.3
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12. Resources
Capability
2. Determine the firm’s capabilities. What do the capabilities allow the firm to do better than its competitors.
Capacity of an integrated set of resources to perform a task or activity
Adapted from Figure 1.3
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13. Competitive Advantage
Resources
Capability
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
Adapted from Figure 1.3
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14. Competitive Advantage An Attractive Industry
Resources
Capability
4. Locate an attractive industry.
Competitive Advantage
An industry with opportunities that can be exploited by the firm’s resources and capabilities
An Attractive Industry
Adapted from Figure 1.3
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15. Competitive Advantage An Attractive Industry Strategy Implementation
Resources
Capability
5. Select a strategy that best allow the firm to utilize its resources and capabilities relative to opportunities in the external environment.
Competitive Advantage
An Attractive Industry
Strategic actions taken
Strategy Implementation
Adapted from Figure 1.3
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16. Key Criteria of Resources and Capabilities
Valuable
Resources and capabilities are valuable when they allow a firm to take advantage of opportunities or neutralize threats in external environment
Rare
Resources and capabilities are rare when possessed by few, if any, current and potential competitors
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17. Key Criteria of Resources and Capabilities
Costly to Imitate
Resources and capabilities are costly to imitate when other firms either cannot obtain them or are at a cost disadvantage in obtaining them
Nonsubstitutable
Resources and capabilities are nonsubstitutable when they have no structural equivalents
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18. Core Competencies
When the four key criteria of resources and capabilities are met, they become core competencies
Core competencies serve as a source of competitive advantage
Managerial competencies are especially important
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19. How Resources and Capabilities Provide 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
The firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage
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20. Resources and Capabilities, Core Competencies, and Outcomes
Valuable
Core Competencies
Rare
Competitive Advantage
Costly to Imitate
Value Creation
Nonsubstitutable
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21. Strategic Intent Internally focused
The leveraging of a firm’s resources, capabilities and core competencies to accomplish the firm’s goals
Exists when all employees and levels of a firm are committed to the pursuit of a specific, significant performance criterion
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22. Strategic Mission Externally focused
A statement of a firm’s unique purpose and the scope of its operations in product and market terms
Establishes a firm’s individuality and is inspiring and relevant to all stakeholders
Provides general descriptions of the firm’s intended products and its markets
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23. The Three Stakeholder Groups
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Figure 1.4

24. Stakeholder Involvement
Two issues affect the extent of stakeholder involvement in the firm
How to divide returns to keep stakeholders involved?
How to increase returns so everyone has more to share?
Capital Market
Organizational
Product Market
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25. Strategic Managers
People responsible for the design and execution of strategic management processes
Decisions they make include
How resources will be developed or acquired
At what price resources will be obtained
How resources will be used
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26. Organizational Culture
The complex set of
Ideologies
Symbols
Core values
that are shared throughout the firm,
that influence how the firm conducts business
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27. Strategic Management Process
Study the external and internal environments
Identify marketplace opportunities and threats
Determine how to use core competencies
Use strategic intent to leverage resources, capabilities and core competencies and win competitive battles
Integrate formulation and implementation of strategies
Seek feedback to improve strategies
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