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