1 chapter 2 chapter 2 strategic leadership strategic leadership chapter 4 chapter 4 the internal the...
TRANSCRIPT
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Chapter 2Chapter 2Strategic LeadershipStrategic Leadership
Chapter 4Chapter 4The InternalThe InternalOrganizationOrganization
Chapter 6Chapter 6Competitive Rivalry andCompetitive Rivalry andCompetitive DynamicsCompetitive Dynamics
Chapter 9Chapter 9International StrategyInternational Strategy
Chapter 1Chapter 1Introduction toIntroduction to
Strategic ManagementStrategic Management
Chapter 3Chapter 3The ExternalThe ExternalEnvironmentEnvironment
Chapter 5Chapter 5Business-LevelBusiness-Level
StrategyStrategy
Chapter 8Chapter 8Acquisition andAcquisition and
Restructuring StrategiesRestructuring Strategies
Chapter 11Chapter 11Corporate GovernanceCorporate Governance
Strategic IntentStrategic IntentStrategic MissionStrategic Mission
Chapter 7Chapter 7Corporate-Level StrategyCorporate-Level Strategy
Chapter 10Chapter 10Cooperative StrategyCooperative Strategy
Chapter 12Chapter 12Strategic EntrepreneurshipStrategic Entrepreneurship
StrategicAnalysis
StrategicThinking
CreatingCompetitiveAdvantage
MonitoringAnd CreatingEntrepreneurialOpportunities
The Strategic Management ProcessThe Strategic Management Process
©2004 by South-Western/Thomson Learning 2
Introduction toIntroduction toStrategic ManagementStrategic Management
Robert E. Hoskisson
Michael A. Hitt
R. Duane Ireland
Chapter 1Chapter 1
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Determinants of Firm RespectabilityDeterminants of Firm Respectability
1.1. Strong and well-thought-out strategyStrong and well-thought-out strategy
2. Maximize customer satisfaction and2. Maximize customer satisfaction and loyaltyloyalty
3. Business leadership3. Business leadership
4. Quality products and services4. Quality products and services
5. Strong and consistent profits5. Strong and consistent profits
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DefinitionsDefinitions
Strategic Management ProcessStrategic Management ProcessThe full set of commitments, decisions, The full set of commitments, decisions, and actions required for a firm to create and actions required for a firm to create value and earn above-average returnsvalue and earn above-average returns
Value CreationValue CreationWhat is achieved when a firm What is achieved when a firm successfully formulates and implements a successfully formulates and implements a strategy that other companies are unable strategy that other companies are unable to duplicate or find too costly to imitate.to duplicate or find too costly to imitate.
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Groups who are affected by a Groups who are affected by a firm’s performance and who firm’s performance and who have claims on its wealthhave claims on its wealth
The firm must maintain The firm must maintain performance at an adequate performance at an adequate level in order to retain the level in order to retain the participation of key participation of key stakeholdersstakeholders
The Firm and Its StakeholdersThe Firm and Its Stakeholders
StakeholdersStakeholders
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Capital Market StakeholdersCapital Market Stakeholders
The Firm and Its StakeholdersThe Firm and Its Stakeholders
ShareholdersShareholdersMajor suppliers of capitalMajor suppliers of capital
•BanksBanks•Private lendersPrivate lenders•Venture capitalistsVenture capitalists
StakeholdersStakeholders
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Capital Market StakeholdersCapital Market Stakeholders
Product Market StakeholdersProduct Market Stakeholders
The Firm and Its StakeholdersThe Firm and Its Stakeholders
Primary customersPrimary customersSuppliersSuppliersHost communitiesHost communitiesUnionsUnions
StakeholdersStakeholders
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Capital Market StakeholdersCapital Market Stakeholders
Product Market StakeholdersProduct Market Stakeholders
Organizational StakeholdersOrganizational Stakeholders
The Firm and Its StakeholdersThe Firm and Its Stakeholders
EmployeesEmployeesManagersManagersNonmanagersNonmanagers
StakeholdersStakeholders
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Stakeholder InvolvementStakeholder Involvement
Two issues affect the Two issues affect the extent of stakeholder extent of stakeholder involvement in the firminvolvement in the firm
How do you divide the How do you divide the returns to keep returns to keep stakeholders involved?stakeholders involved?
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Capital Capital MarketMarket
Product Product MarketMarket
OrganizationalOrganizational
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Stakeholder InvolvementStakeholder Involvement
Two issues affect the Two issues affect the extent of stakeholder extent of stakeholder involvement in the firminvolvement in the firm
How do you increase the How do you increase the returns so everyone has returns so everyone has more to share?more to share?
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Capital Capital MarketMarket
Product Product MarketMarket
OrganizationalOrganizational
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Fundamental nature of competition is changing
Hypercompetitive Hypercompetitive environmentsenvironments
Competitive LandscapeCompetitive Landscape
Emergence of global economy
Goods, services, people, skills, and ideas move freely across geographic borders
Spread of economic innovations around the world
Political and cultural adjustments are required
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Hypercompetitive Hypercompetitive environmentsenvironments
Competitive LandscapeCompetitive Landscape
Emergence of global economy
Rapid technological change
Increasing rate of technological change and diffusion
The information age
Increasing knowledge intensity
Fundamental nature of competition is changing
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Strategic FlexibilityStrategic Flexibility
A set of capabilities used to respond to A set of capabilities used to respond to various demands and opportunities various demands and opportunities existing in a dynamic and uncertain existing in a dynamic and uncertain competitive environmentcompetitive environment
Andrew Grove, Intel’s former CEO: Andrew Grove, Intel’s former CEO:
““Only paranoid companies survive and Only paranoid companies survive and succeedsucceed.”.”
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1.1. Strategy dictated by the Strategy dictated by the external environment of external environment of the firm (what the firm (what opportunities exist in opportunities exist in these environments?)these environments?)
2.2. Firm develops internal Firm develops internal skills required by skills required by external environment external environment (what can the firm do (what can the firm do about the opportunities?)about the opportunities?)
GeneralGeneral
EnvironmentEnvironment
GlobalGlobal
TechnologicalTechnological
Eco
nom
ic
Eco
nom
ic
Sociocultural
Sociocultural
Polit
ical
/Leg
al
Polit
ical
/Leg
al Dem
ographic
Dem
ographic
1. External Environments
Industry Environment
Competitor Environment
I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
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Four Assumptions of the I/O ModelFour Assumptions of the I/O Model
1.1. The external environment is assumed to The external environment is assumed to possess pressures and constraints that possess pressures and constraints that determine the strategies that would result determine the strategies that would result in above-average returnsin above-average returns
2.2. Most firms competing within a particular Most firms competing within a particular industry or within a certain segment of it industry or within a certain segment of it are assumed to control similar are assumed to control similar strategically relevant resources and to strategically relevant resources and to pursue similar strategies in light of those pursue similar strategies in light of those resourcesresources
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Four Assumptions of the I/O ModelFour Assumptions of the I/O Model
3.3. Resources used to implement strategies Resources used to implement strategies are highly mobile across firmsare highly mobile across firms
4.4. Organizational decision makers are Organizational decision makers are assumed to be rational and committed to assumed to be rational and committed to acting in the firm’s best interests, as acting in the firm’s best interests, as shown by their profit-maximizing shown by their profit-maximizing behaviorsbehaviors
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Industrial Organization Industrial Organization ModelModel
I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
1.1. Study the external Study the external environment, especially the environment, especially the industry environmentindustry environment• economies of scaleeconomies of scale• barriers to market entrybarriers to market entry• degree of concentration of degree of concentration of
firms in the industryfirms in the industry• etc.etc.
The External EnvironmentThe External Environment
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I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
2.2. Locate an attractive industry Locate an attractive industry with a high potential for with a high potential for above-average returnsabove-average returns
Attractive industry: one whose Attractive industry: one whose structural characteristics structural characteristics suggest above-average returnssuggest above-average returns
Industrial Organization Industrial Organization ModelModel
The External EnvironmentThe External Environment
An Attractive IndustryAn Attractive Industry
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I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
3.3. Identify the strategy called Identify the strategy called for by the attractive industry for by the attractive industry to earn above-average returnsto earn above-average returns
Strategy formulation: selection Strategy formulation: selection of a strategy linked with of a strategy linked with above-average returns in a above-average returns in a particular industryparticular industry
Industrial Organization Industrial Organization ModelModel
The External EnvironmentThe External Environment
An Attractive IndustryAn Attractive Industry
Strategy FormulationStrategy Formulation
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I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
4.4. Develop or acquire assets and Develop or acquire assets and skills needed to implement skills needed to implement the strategythe strategy
Assets and skills: those assets Assets and skills: those assets and skills required to and skills required to implement a chosen strategyimplement a chosen strategy
Industrial Organization Industrial Organization ModelModel
The External EnvironmentThe External Environment
An Attractive IndustryAn Attractive Industry
Strategy FormulationStrategy Formulation
Assets and SkillsAssets and Skills
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I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
5. Use the firm’s strengths (its 5. Use the firm’s strengths (its developed or acquired assets developed or acquired assets and skills) to implement the and skills) to implement the strategystrategy
Strategy implementation: Strategy implementation: select strategic actions linked select strategic actions linked with effective implementation with effective implementation of the chosen strategyof the chosen strategy
Industrial Organization Industrial Organization ModelModel
The External EnvironmentThe External Environment
An Attractive IndustryAn Attractive Industry
Strategy FormulationStrategy Formulation
Assets and SkillsAssets and Skills
Strategy ImplementationStrategy Implementation
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I/O Model of Above-Average ReturnsI/O Model of Above-Average Returns
Industrial Organization Model
The External EnvironmentThe External Environment
An Attractive IndustryAn Attractive Industry
Strategy FormulationStrategy Formulation
Assets and SkillsAssets and Skills
Strategy ImplementationStrategy Implementation
Superior ReturnsSuperior Returns
Superior returns: earning of above-average returns
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1.1. Strategy dictated by the Strategy dictated by the firm’s unique resources firm’s unique resources and capabilitiesand capabilities
2.2. Find an environment in Find an environment in which to exploit these which to exploit these assets (where are the best assets (where are the best opportunities?)opportunities?)
Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
1. Firm’s Resources1. Firm’s Resources
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1.1. Identify the firm’s Identify the firm’s resources-- strengths and resources-- strengths and weaknesses compared with weaknesses compared with competitorscompetitorsResources: inputs into a firm’s Resources: inputs into a firm’s production processproduction process
Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
Resource-based Resource-based ModelModel
ResourcesResources
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2.2. Determine the firm’s Determine the firm’s capabilities--what it can do capabilities--what it can do better than its competitorsbetter than its competitors
Capability: capacity of an Capability: capacity of an integrated set of resources to integrated set of resources to integratively perform a task or integratively perform a task or activityactivity
Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
Resource-based Resource-based ModelModel
ResourcesResources
CapabilityCapability
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Four Attributes of Resources and Four Attributes of Resources and Capabilities (Competitive Advantage)Capabilities (Competitive Advantage)
when there are no structural equivalents, when there are no structural equivalents, i.e., no strategically equivalent resourcesi.e., no strategically equivalent resources
ValuableValuable allow the firm to exploit opportunities or allow the firm to exploit opportunities or neutralize threats in its external neutralize threats in its external environmentenvironment
RareRare possessed by few, if any, current and possessed by few, if any, current and potential competitorspotential competitors
Costly to imitateCostly to imitate when other firms cannot obtain them or when other firms cannot obtain them or must obtain them at a much higher costmust obtain them at a much higher cost
NonsubstitutableNonsubstitutable
Res
ourc
es a
nd C
apab
ilit
ies
Res
ourc
es a
nd C
apab
ilit
ies
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Core CompetenciesCore Competencies
Resources and capabilities that meet these four criteria become:
ValuableValuable
RareRare
Costly to imitateCostly to imitate
NonsubstitutableNonsubstitutable
Core CompetenciesCore Competencies
Res
ourc
es a
nd C
apab
ilit
ies
Res
ourc
es a
nd C
apab
ilit
ies
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Core Competencies are the basis for a firm’s
Competitive Competitive advantageadvantage
Value CreationValue Creation
Ability to earn Ability to earn above-average above-average
returnsreturns
Core CompetenciesCore Competencies
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3.3. Determine the potential of the Determine the potential of the firm’s resources and firm’s resources and capabilities in terms of a capabilities in terms of a competitive advantagecompetitive advantage
Competitive advantage: ability Competitive advantage: ability of a firm to outperform its of a firm to outperform its rivalsrivals
Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
Resource-based Resource-based ModelModel
ResourcesResources
CapabilityCapability
Competitive AdvantageCompetitive Advantage
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4.4. Locate an attractive industryLocate an attractive industry
An attractive industry: an An attractive industry: an industry with opportunities that industry with opportunities that can be exploited by the firm’s can be exploited by the firm’s resources and capabilitiesresources and capabilities
Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
Resource-based Resource-based ModelModel
ResourcesResources
CapabilityCapability
Competitive AdvantageCompetitive Advantage
An Attractive IndustryAn Attractive Industry
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5.5. Select a strategy that best Select a strategy that best allows the firm to utilize its allows the firm to utilize its resources and capabilities resources and capabilities relative to opportunities in relative to opportunities in the external environmentthe external environment
Strategy formulation and Strategy formulation and implementation: strategic implementation: strategic actions taken to earn above actions taken to earn above average returnsaverage returns
Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
Resource-based Resource-based ModelModel
ResourcesResources
CapabilityCapability
Competitive AdvantageCompetitive Advantage
An Attractive IndustryAn Attractive Industry
Strategy Form/ImplStrategy Form/Impl
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Resource-based Model of Above Resource-based Model of Above Average ReturnsAverage Returns
Resource-based Resource-based ModelModel
ResourcesResources
CapabilityCapability
Competitive AdvantageCompetitive Advantage
An Attractive IndustryAn Attractive Industry
Strategy Form/ImplStrategy Form/Impl
Superior ReturnsSuperior Returns
Superior returns: earning Superior returns: earning of above-average returnsof above-average returns
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Four Assumptions of the Resource-Four Assumptions of the Resource-Based ModelBased Model
1. Differences in firms’ performances are 1. Differences in firms’ performances are primarily due to unique core competences primarily due to unique core competences rather than industry characteristicsrather than industry characteristics
2.2. Across time, firms acquire different Across time, firms acquire different resources and develop unique capabilitiesresources and develop unique capabilities
3. Resources are not highly mobile across 3. Resources are not highly mobile across firmsfirms
4. Each firm is a unique collection of 4. Each firm is a unique collection of resources and capabilitiesresources and capabilities
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Strategic Intent & MissionStrategic Intent & MissionStrategic IntentStrategic Intent
Winning competitive battles by leveraging the Winning competitive battles by leveraging the firm’s resources, capabilities, and core firm’s resources, capabilities, and core competenciescompetencies
Strategic MissionStrategic Mission An application of strategic intent in terms of An application of strategic intent in terms of
products to be offered and markets to be products to be offered and markets to be servedserved