Ch 1 Strategic Management and Strategic Competitiveness
Capability
The capacity for a set of resources to perform a task or an activity in an integrated manner.
DYNAMIC PROCESS
Continuously changing markets and industry conditions must match evolving strategic inputs
Core Competencies
capabilities that serve as a source of competitive advantage for a firm over its rivals
Global Economy
Goods, services, people, skills, and ideas move freely across geographical borders.
Hypercompetition
extremely intense rivalry among competing firms, characterized by -market instability and change -rapidly escalating competition -aggressive challengers -maneuver for firstmover advan. -technology industries
perpetual innovation
rapidity and consistancy with which new information technologies replace older ones
Organizational Culture
refers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business
according to I/O model firms earn above average return by
-cost leadership -differentiation
3 Stakeholder Groups
-Capital Market Stakeholders (shareholders&suppliers of capital) -Product Market Stakeholders (customers, suppliers, host communities, unions) -Organizational Stakeholders (employees)
Industry Properties Determining Performance for I/O Model
-Economies of scale -Barriers to market entry -Diversification -Product differentiation -Degree of concentration of firms in the industry
Two models of Strategy Development
-External (I/O) Model -Internal Resource-Based Model
3 Categories of technological change
1. Disruptive Technology & Diffusion 2. The information age 3. Increasing knowledge intensity
Five Steps of the Resource-Based Model
1. Identify the firm's resources 2. Determine the firm's capabilities 3. Determine the potential of the firm's resources and capabilities in terms of a competitive advantage. 4. Locate an attractive industry. 5. Select a strategy that fits capabilities relative to external environment.
Five Steps of the I/O Model
1. Study the external environment 2. Locate an industry with high potential for profits 3. Identify the strategy called for by the industry 4. Develop or acquire assets and skills needed for strategy 5. Use firm's strengths to implement the strategy
Vision
A picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. Short and Concise. Ideal description of org. and gives shape to its intended future.
Strategic Competitiveness
Achieved when a firm successfully formulates and implements a value-creating strategy
Strategy
An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
Risk
An investor's uncertainty about the economic gains or losses that will result from a particular investment.
Stakeholders
Individuals and groups who can affect the firm's vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm's performance.
Resources
Inputs into a firm's production process, such as capital, equipment, the skills of individual employees, patents, finances, and talented managers.
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.
Mission
Specifies the business or businesses in which the firm intends to compete and the customers it intends to serve. More concrete than vision. Vision is foundation for Mission.
Strategic Management Process
The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Two primary drivers of the competitive landscape
The global economy Technology - strategic flexibility is tool
Dominance of the External Environment
The industry in which a firm competes has a stronger influence on the firm's performance than do the choices managers make inside their organizations.
Competitive Advantage
When a firm implements a strategy competitors are unable to duplicate or find too costly to try to imitate. - if effectively manage stakeholder relationships
I/O model suggests
above-average returns are earned when firms are able to effectively study the external environment as the foundation for identifying an attractive industry and implementing the appropriate strategy.
Sustainable Competitive Advantage
an advantage over the competition that is not easily copied and thus can be maintained over a long period of time
globalization
economic interdependence among countries-> leads to increased range of opportunities
Profit Pool
entails the total profits earned in an industry at all points along the value chain
Strategic Leaders
people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission -successful leaders are decisive, committed to help firm create value for stakeholder groups
Strategic Flexibility
set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment
resource based model assumptions
slide 27
technology diffusion
speed at which new technologies become available
Study 4 assumptions slide 16
study
disruptive technologies
technologies that destroy the value of existing and create new markets
Strategic Management Process Model
■ FIRST: External environment and internal organization are analyzed to determine resources, capabilities, and core competencies—the sources of "strategic inputs." ■ NEXT: Vision and mission are developed; strategies are formulated. ■ THEN: Strategies are implemented with the goal of achieving strategic competitiveness and above-average returns.
FOUR components to the Resource- Based Model
● Resources ● Capabilities ● Core Competencies ● Competitive Advantage
4 criteria for becoming core competencies
● Valuable ● Rare ● Costly to Imitate ● Nonsubstitutable