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Chapter 1

Strategic Management and

Strategic Competitiveness

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Twenty-First CenturyCompetition

TodaysCompetitive Markets

The globaleconomy

GlobalizationRapid

technologicalchange

Increasingimportance

ofknowledge

and people

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Strategic Competitiveness

Formulation and

implementation of

a superior value-

creating strategy

Commitments and actions to achieve

above-average performance and returns

What the firm

will do

What the firm

will not do

Competitive

advantage

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The Global CompetitiveLandscape

Increasing

Market volatility and instability due tothe rapid pace of change in markets

Blurring of market boundaries

lobali!ed flow of financial capital

"eed for fle#ibility$ speed$ innovation$

and integration in the use of technology Strategic and operational comple#ity

of global-scale competition

%ising product &uality standards

Decreasi

ng 'raditional time for adapting to change

'raditional sources of competitive advantage

'raditional managerial mindset

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Hypercompetition

Creation of new

know-how and

use of first-moveradvantage

(se of

price-&uality

positioning tobuild market

presence

)rotection or

invasion of

establishedgeographic or

product markets

Strategic options in

hypercompetitive

environments

lobal

economy'echnology

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Competitive Success Factors

TopCorporate

erformers

!ave anentreprene"rial

#opport"nistic

mindset

$re market#c"stomer%

needsoriented

Make e&ective"se of val"ablecompetencies

'&er newand innovativeprod"cts and

services

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ec no ogy an ec no og caChanges

'he information age* Internet

and the global proliferation of

low-cost computing power

Increasing rate of technology

diffusion and the emergence

of disruptive technologies

Increasing knowledge intensityas an intangible source of

competitive advantage

'echnology trendsimpacting the

global competitive

environment

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The Industry Organiation !I"O# $odelo% &bove-&verage 'eturns

The (irms

)trategicChoices

*conomiesof scale

+arriers tomarket entry

Diversi,cation

rod"ctdi&erentiatio

n

Ind"stryconcentratio

n

Marketfrictions

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Figure +,

'he I./ Model of

0bove-0verage

%eturns

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I"O $odel &ssumptions

()The e*ternal environment imposes pressuresand constraints that determine strategicchoices)

+)Similarity in strategically relevant resourcescauses competitors to pursue similar strategies)

,)'esource dierences among competitors areshort-lived due to resource mobility across .rms)

/)Strategic decision ma0ers are rational andengage in pro.t-ma*imiing behaviors)

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Five Forces $odel o%Competition

)"ppliers

Substitutes

+"yers

otential*ntrants

Ind"stryRivalry

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Five Forces $odel&ssumptions

Industry pro.tability !i)e)1 rate o% return oninvested capital relative to cost o% capital# is a%unction o% interactions among the .ve %orces)

Industry attractiveness e2uates to itspro.tability potential %or earning above-average returns by3

4roducing standardied goods or services at costs

below competitor costs !a cost leadership strategy#) 4roducing dierentiated goods or services %or which

customers are willing to pay a price premium !adierentiation strategy#)

5 +6(7 CengageLearning) &ll rightsreserved) $ay not becopied1 scanned1 orduplicated1 in whole or in

part1 e*cept %or use aspermitted in a licensedistributed with a certain

(8(+

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The 'esource-9ased $odelo% &bove-&verage 'eturns

Reso"rcesPhysical, human, andorganizationalcapital(tangible andintangible)

CapabilityAn integrated

set ofresources

Corecompetence

A source ofcompetitiveadvantage

9uildin

gcompetit

ive

advant

age

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'esource-9ased $odel &ssumptions

() Firms ac2uire dierent resources)+) Firms develop uni2ue capabilities based

on how they combine and useresources)

,) 'esources and certain capabilities arenot highly mobile across .rms)

/) :ierences in resources and capabilities

are the bases o% competitive advantageand a .rm;s per%ormance rather than itsindustry;s structural characteristics)

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'esources &s CoreCompetencies

Costly to imitate

%are

"onsubstitutable

1aluable

2ow resources

become core

competencies

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Figure +,3

'he %esource-Based

Model of 0bove-0verage

%eturns

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Strategic :ecision $a0ing

Industry /rgani!ation

4I./5 Model

%esource-Based

Model

Competitive

Strategy

6ecision

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Sample

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$ission Statement

speci.es the present businessor businesses in which the .rmintends to compete andcustomers it intends to serve)

has a more concrete1 near-term %ocus on current productmar0ets and customers than

the .rm;s vision) should be inspiring andrelevant to all sta0eholders)

&n

>ective

$ission

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$ission Statement >*amples

http://www.missionstatements.com/fortune_500_mission_statements.htmlhttp://www.missionstatements.com/fortune_500_mission_statements.html

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Sta0eholders

0re affected by the strategic

outcomes achieved by the firm

Can affect development of the

firm7s vision and mission

Can have enforceable claims

on the firm7s performance

0re influential when in control

of critical or valued resources

)rimary

stakeholders4individuals$

groups$ and

organi!ations5

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Figure +,8

'he 'hree

Stakeholder

roups

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The Strategic $anagement 4rocess3The &S4 4rocess

&nalyses

C+3 The e*ternal environment

C,3 The internal organiation

Strategies

C/3 9usiness-level strategies C73 $ar0etplace competition

C?3 Corporate-levelstrategies

Strategies !cont;d#

C@3 :iversi.ed port%oliomanagement

CA3 International strategies CB3 Cooperative strategies

4er%ormance

C(63 Governance mechanisms

C((3 Organiational structure

C(+3 Strategic leadership C(,3 Strategic entrepreneurship