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Ch1-1Dr. Virendra Swarup Institute of Computer Studies, Kanpur
Chapter 1
Strategic Management and
Strategic Competitiveness
Mr. Anuj Srivastava
M.Com, MBAAsstt. Professor
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Ch1-2
Sustained Competitive Advantage
Above-Average Returns
Returns in excess of what an investor expects to
earn from other investments with similar risk
Occurs when a firm develops a strategy thatcompetitors are not simultaneously implementing
Provides benefits which current and potentialcompetitors are unable to duplicate
Strategic Competitiveness
Achieved when a firm successfully formulates
and implements a value-creating strategy
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Ch1-3
which are required for firms to achieve:
Above-Average Returns
Strategic Competitiveness
Sustained Competitive Advantage
The Strategic Management Process
Involves the full set of:
ActionsCommitments Decisions
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Ch1-4
Chapter One: Key Themes
Industrial Organization Model
Resource-Based Model
Challenge of Strategic Management
Changing Competitive Landscape
Two Models of Superior Profitability
Key Stakeholder Groups
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Ch1-5
Competitive success is transient...unless care is
taken to preserve competitive position
Only 16 of the 100 largest U.S. companies atthe start of the 20th century are still
identifiable today!
In a recent year, 44,367 businesses filed for
bankruptcy and many more U.S. businesses failed
Challenge of Strategic Management
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Ch1-6
Rapid technological changes
Rapid technology diffusions
Dramatic changes in
information and
communication technologies
Increasing importance of
knowledge
Fundamental nature of
competition is changingThe pace of change
is relentless....
and increasing
Traditional industry
boundaries are
blurring, such as... Computers
Telecommunications
21st Century Competitive Landscape
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The global economy is
changing
People, goods, services andideas move freely across
geographic boundaries
New opportunities emerge
in multiple global markets
Markets and industries
become more
internationalized
Traditional sources of
competitive advantage
no longer guarantee
success
New keys to success
include:
Flexibility
Innovation
Speed
Integration
21st Century Competitive Landscape
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Alternative Models of Superior Returns
Resource-Based
Model
Industrial Organization
Model
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
Superior Returns
Resources
Capability
Competitive Advantage
An Attractive Industry
Strategy Implementation
Superior Returns
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I/O Model of Superior Returns
The Industrial Organization modelsuggests that above-average returns
for any firm are largely determined
by characteristics outside the firm.
This model largely focuses on industry
structure or attractiveness of the
external environment rather than
internal characteristics of the firm.
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Action required:External
Environment
General Environment
Industry Environment
Competitive
Environment
Study the externalenvironment, especially
the industry environment.
I/O Model of Superior Returns
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External
Environment
General Environment
Industry Environment
Competitive
Environment
An Attractive
Industry
An industry whose
structural characteristics
suggest above-average
returns are possible
Action required:
Locate an industry withhigh potential for above-
average returns.
I/O Model of Superior Returns
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External
Environment
General Environment
Industry Environment
Competitive
Environment
Attractive
Industry
An industry whose
structural characteristics
suggest above-average
returns are possible
Action required:
Identify strategy called forby the industry to earn
above-average returns.
Selection of a strategy
linked with above-
average returns in a
particular industry
Strategy
Formulation
I/O Model of Superior Returns
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External
Environment
General Environment
Industry Environment
Competitive
Environment
Attractive
Industry
An industry whose
structural characteristics
suggest above-average
returns are possible
Strategy
Formulation
Selection of a strategy
linked with above-
average returns in a
particular industry
Action required:
Develop or acquire assetsand skills needed to
implement the strategy.
Assets and Skills
Assets and skills
required to implement
a chosen strategy
I/O Model of Superior Returns
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External
Environment
General Environment
Industry Environment
Competitive
Environment
Attractive
Industry
An industry whose
structural characteristics
suggest above-average
returns are possible
Strategy
Formulation
Selection of a strategy
linked with above-
average returns in a
particular industry
Assets and Skills
Assets and skills
required to implement
a chosen strategy
Action required:
Use the firms strengths(its assets or skills) to
implement the strategy.
Strategy
Implementation
Selection of strategic
actions linked with
effective implementation
of the chosen strategy
I/O Model of Superior Returns
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External
Environment
General Environment
Industry Environment
Competitive
Environment
Attractive
Industry
An industry whose
structural characteristics
suggest above-average
returns are possible
Strategy
Formulation
Selection of a strategy
linked with above-
average returns in a
particular industry
Assets and Skills
Assets and skills
required to implement
a chosen strategy
Action required:
Strategy
Implementation
Selection of strategic
actions linked with
effective implementation
of the chosen strategy
Superior Returns
Earning of above-
average returns
Maintain selected strategyin order to outperform
industry rivals.
I/O Model of Superior Returns
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The Resource-Based model suggeststhat above-average returns for any
firm are largely determined by
characteristics inside the firm.
This model focuses on developing or
obtaining valuable resources and
capabilities which are difficult or
impossible for rivals to imitate.
Resource-Based Model of Superior Returns
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Resources
Inputs to a firms
production process.
Action required:
Identify firm resources.Study strengths and weak-
nesses relative to rivals.
Resource-Based Model of Superior Returns
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Resources
Inputs to a firms
production process.
Action required:
Determine what firmcapabilities allow it to dobetter than rivals.
Capability
Capacity for an integrated
set of resources to perform
a task or activity.
Resource-Based Model of Superior Returns
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Resources
Inputs to a firms
production process.
Capability
Capacity for an integrated
set of resources to
integratively perform atask or activity.
Competitive
Advantage
Ability of a firm to
outperform its rivals
Action required:
Determine how firmsresources and capabilities
may create competitive
advantage.
Resource-Based Model of Superior Returns
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Resources
Inputs to a firms
production process.
Capability
Capacity for an integrated
set of resources to
integratively perform atask or activity.
Competitive
Advantage
Ability of a firm to
outperform its rivals
An AttractiveIndustry
Location of an industry
with opportunities that
can be exploited by the
firms resources andcapabilities
Action required:
Locate an attractiveindustry.
Resource-Based Model of Superior Returns
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Resources
Inputs to a firms
production process.
Capability
Capacity for an integrated
set of resources to
integratively perform atask or activity.
Competitive
Advantage
Ability of a firm to
outperform its rivals
An AttractiveIndustry
Location of an industry
with opportunities that
can be exploited by the
firms resources andcapabilities
Action required:
Select strategy that bestexploits resources and
capabilities relative to
opportunities in environs.
Strategy
Formulation and
Implementation
Strategic actions taken to
earn above-average
returns
Resource-Based Model of Superior Returns
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Ch1-22
Resources
Inputs to a firms
production process.
Capability
Capacity for an integrated
set of resources to
integratively perform atask or activity.
Competitive
Advantage
Ability of a firm to
outperform its rivals
An AttractiveIndustry
Location of an industry
with opportunities that
can be exploited by the
firms resources andcapabilities
Action required:
Maintain selected strategyin order to outperform
industry rivals.
Strategy
Formulation and
Implementation
Strategic actions taken to
earn above-average
returns
Superior Returns
Earning of above-
average returns
Resource-Based Model of Superior Returns
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Ch1-23
Nonsubstitutable the firm must be organized appropriately toobtain the full benefits of the resources inorder to realize a competitive advantage
Valuable allow the firm to exploit opportunities orneutralize threats in its externalenvironment
Rare possessed by few, if any, current andpotential competitors
Costly to Imitate when other firms either cannot obtain themor must obtain them at a much higher cost
Resources and capabilities lead to
Competitive Advantagewhen they are:
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Core Competencies
When these four
criteria are met,
Resources andCapabilities
become:
Core Competencies are resources and capabilitiesthat can serve as a source ofCompetitive Advantage.
The Resource-Based model argues that CoreCompetencies are the basis for a firms Competitive
Advantage, Strategic Competitiveness and Ability to
Earn Above-average Returns.
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Ch1-25
Winning competitive battles through deciding
how to leverage internal resources, capabilities,
and core competencies.
Strategic Intent
An application of strategic intent in terms of
products to be offered and markets to be served.
Strategic Mission
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Ch1-26
BUSINESS WEEKSS 10 Top Managers of the Year, 1999Name Company Strategic Accomplishment
Minoru Arakawa Nintendo America Scored huge hit by bringing Pok mon to U.S.
over objections of co-workers and negativemarket research
Bernard Arnault LVMH From just 23 in Oct. 98, LVMHs U.S. shareshave vaulted 280%, to about 87
Arthur Blank Home Depot Profits should jump 46%, to $2.3 billion forfiscal year 1999. Sales are expected to grow25%, to $38 billion
Peter Bijur Texaco After his company was labeled racist, attracted
minorities to key jobs, including treasurer IraHall, a former IBM executive
Gordon Binder Amgen Boosted stock price by around 100% last year, toabout $54
Steve Case America Online Deals to broaden AOLs availability and serviceswill help boost income 102% this fiscal year, to$800 million
John Chambers Cisco Systems Broadened Cisco into strategic businesses such
as software, consulting, and fiber-opticcommunications
Jim Curvey Fidelity Investments Reduced internal conflicts and spurred growththrough management changes
Thierry Desmarest Totalfina Acquired rival French oil company ELFAquitaine for $44 billion. Shares up about 35%in 99, as profits expected to grow 20%, to $3.1billion
Bernie Ebbers MCI Worldcom Turned toward more profitable data, Internet,and international operations
The most
effectivestrategists provide
a vision (strategic
intent) to
effectively elicitthe help of others
in creating a
firm's competitive
advantage.
Strategic Intent
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Stakeholders: Groups who are affected by a firmsperformance and who have claims on itswealth
The firm must maintainperformance at an adequate level inorder to maintain the participationof key stakeholders
Organizational
EmployeesManagers
Non-Managers
Firm
Capital Market
Stock market/Investors
Debt suppliers/Banks
Product Market
Primary CustomersSuppliers
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Ch1-28
Stakeholder InvolvementEach of the key stakeholderswants a piece of the same pie
1 How do you divide the piein order to keep all of the
stakeholders involved?
2
How do you increase thesize of the pie so that thereis more to go around?
Chapter 2
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Chapter 3
InternalEnvironment
Chapter 2
External
EnvironmentThe Strategic
Management
Process
Strategic Intent
Strategic Mission
Strategic
Competitiveness
Above Average
ReturnsFeedback
Strategy Formulation
Chapter 4Business-LevelStrategy
Chapter 5CompetitiveDynamics
Chapter 6Corporate-LevelStrategy
Chapter 8
International
Strategy
Chapter 9
CooperativeStrategies
Chapter 7
Acquisitions &
Restructuring
Strategy Implementation
Chapter 10CorporateGovernance
Chapter 11Structure
& Control
Chapter 12
Strategic
Leadership
Chapter 13Entrepreneurship
& Innovation
Strategic
Inputs
Strategic
Actions
Strategic
Outcomes