1. Strategic Management and Strategic Competitiveness
Chapters 1 & 13
Strategic Management and Strategic Competitiveness
How do we begin?

2. The Strategic Management Process
Involves the full set of:
Commitments
Decisions
Actions
which are required for firms to achieve:
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns 9

3. Defining Entrepreneurship
Corporate Entrepreneurship
Firm’s capabilities to develop new goods or services and manage the innovation process
Creating or developing a new product or process idea
Invention
Creating a commercializable product from invention
Innovation
Adoption of innovation by a population of similar firms
Imitation 6

4. Internal Corporate Venturing
Corporate Intrapreneurship can occur as either a bottom-up process or as a top-down process
Autonomous strategic behavior is a bottom-up process through which Product Champions pursue new product ideas to commercialization
Induced strategic behavior is a top-down process in which the current strategy and structure foster product innovations that are closely associated with the current strategy
Product Champions are individuals who have an entrepreneurial vision for a new product and seek support for its commercialization 16

5. Strategic Intent Strategic Mission
Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies.
An application of strategic intent in terms of products to be offered and markets to be served.
Strategic Mission 55

6. The Strategic Management Process
Strategic Intent must ask:
Where are we now?
Involves thinking strategically about the company’s external market and internal situation and capabilities?
Involves thinking strategically about what top management wants to be like in 5-10 years
- what level of performance to reach
- what financial outcomes to achieve
- what strategic outcomes to achieve
Where do we want to go?
Involves thinking about what STRATEGY the company should pursue to perform successfully and get from where it wants to go?
How will we get there? 9

7. 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

8. I/O Model of Above-Average Returns
1. External Environments
General
Environment
Global
Technological
Economic
Sociocultural
Political/Legal
Demographic
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?)
Industry Environment
Competitor Environment

9. Industrial Organization Model
I/O Model of Above-Average Returns
Industrial Organization Model
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

10. Industrial Organization Model
I/O Model of Above-Average Returns
Industrial Organization Model
2. Locate an attractive industry with a high potential for above-average returns
The External Environment
An Attractive Industry
Attractive industry: one whose structural characteristics suggest above-average returns

11. Industrial Organization Model
I/O Model of Above-Average Returns
Industrial Organization Model
3. Identify the strategy called for by the attractive industry to earn above-average returns
The External Environment
An Attractive Industry
Strategy Formulation
Strategy formulation: selection of a strategy linked with above-average returns in a particular industry

12. Industrial Organization Model
I/O Model of Above-Average Returns
Industrial Organization Model
4. Develop or acquire assets and skills needed to implement the strategy
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Assets and skills: those assets and skills required to implement a chosen strategy

13. Industrial Organization Model
I/O Model of Above-Average Returns
Industrial Organization Model
5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy
Strategy Implementation

14. Industrial Organization Model
I/O Model of Above-Average Returns
Industrial Organization Model
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Superior returns: earning of above-average returns
Strategy Implementation
Superior Returns

15. Resource-based Model of Above Average Returns
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?)
1. Firm’s Resources
The Firm

16. Resource-based Model of Above Average Returns
1. Identify the firm’s resources-- strengths and weaknesses compared with competitors
Resources
Resources: inputs into a firm’s production process

17. Resource-based Model of Above Average Returns
2. Determine the firm’s capabilities--what it can do better than its competitors
Resources
Capability
Capability: capacity of an integrated set of resources to integratively perform a task or activity

18. Four Attributes of Resources and Capabilities (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
Resources and Capabilities
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

19. Resources and capabilities that meet these four criteria become a source of:
Valuable
Rare
Core Competencies
Core Competencies
Resources and Capabilities
Costly to imitate
Nonsubstitutable

20. Core Competencies are the basis for a firm’s
Competitive advantage
Strategic competitiveness
Core Competencies
Ability to earn above-average returns

21. Competitive Advantage
Resource-based Model of Above Average Returns
Resource-based
Model
3. Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage
Resources
Capability
Competitive Advantage
Competitive advantage: ability of a firm to outperform its rivals

22. Resource-based Model of Above Average Returns
4. Locate an attractive industry
Resources
Capability
Competitive Advantage
An Attractive Industry
An attractive industry: an industry with opportunities that can be exploited by the firm’s resources and capabilities

23. Resource-based Model of Above Average Returns
5. Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment
Resources
Capability
Competitive Advantage
An Attractive Industry
Strategy formulation and implementation: strategic actions taken to earn above average returns
Strategy Form/Impl

24. Resource-based Model of Above Average Returns
Resources
Capability
Competitive Advantage
An Attractive Industry
Superior returns: earning of above-average returns
Strategy Form/Impl
Superior Returns

25. Stakeholders:
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 maintain the participation of key stakeholders
Capital Market
Stock market/Investors
Debt suppliers/Banks
Firm
Product Market
Primary Customers
Suppliers
Organizational
Employees
Managers
Non-Managers 59

26. Stakeholder Involvement
Each of the key stakeholders wants a piece of the same pie 1
How do you divide the pie in order to keep all of the stakeholders involved? 2
How do you increase the size of the pie so that there is more to go around? 62