Chapter 1: Strategic Management
and Strategic Competitiveness –
major concepts
• “strategic” management
• strategic management
process
• external strategic fit
• internal strategic fit
• sustainable competitive
advantage
• above-average returns
• hypercompetition
Transparency 1-1
• industrial-organizational
(I/O) model of aboveaverage returns
• resource-based model of
above-average returns
• mission statement
• strategic intent
• organizational values
• stakeholders
• social responsibility
“Strategic” Management
•
•
•
•
•
long-term, “planned”
forward-looking, “visionary”
externally responsive
internally realistic
FITS INTERNAL STRENGTHS TO
EXTERNAL OPPORTUNITIES
• involves product-market positioning
• “big picture”; major impact
Transparency 1-2
Strategic Management Process
Involves the full set of:
Commitments
Decisions
Actions
which are required for firms to achieve
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
Transparency 1-3
Strategic
Inputs
Chapter 2
External
Environment
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Strategy Implementation
Chapter 4
Business-Level
Strategy
Chapter 5
Competitive
Dynamics
Chapter 6
Corporate-Level
Strategy
Chapter 10
Corporate
Governance
Chapter 11
Structure
& Control
Chapter 7
Acquisitions &
Restructuring
Chapter 8
International
Strategy
Chapter 9
Cooperative
Strategies
Chapter 12
Strategic
Leadership
Chapter 13
Outcomes
Strategic
Strategic
Actions
Strategy Formulation
The Strategic
Management
Process
Feedback
Transparency 1-4
Strategic
Competitiveness
Above Average
Returns
Entrepreneurship
& Innovation
Strategic Management – “shooting at a moving
target of co-alignment” (Thompson, 1967)
External Strategic Fit =
Strategy formulation to
-match internal capabilities
with specific attractive
external opportunities;
-create strategies
that effectively adapt to
external (industry and
competitive) trends.
Transparency 1-5
Internal Strategic Fit =
Strategy implementation to
-match the skills and
resources of the firm to
requirements for successful
strategy execution;
-ensure that actions and
resources facilitate strategy
accomplishment.
Two Models of Superior Profitability;
Two different perspectives on how
to best achieve competitive advantage
Industrial Organization Model
Resource-Based Model
Transparency 1-6
I/O Model of Superior Returns
The Industrial Organization Model
suggests that above-average returns
for any firm are largely determined by
characteristics outside the firm.
The I/O model largely focuses on
industry structure or attractiveness of
the external environment rather than
internal characteristics of the firm.
Transparency 1-7
I/O Model of Superior Returns
External
Environment
General Environment
Industry Environment
Competitive
Environment
Transparency 1-8
Action required:
Study the external
environment, especially
the industry environment.
I/O Model of Superior Returns
External
Environment
An Attractive
GeneralIndustry
Environment
Industry Environment
An industry whose
Competitive
structural characteristics
Environment
suggest above-average
returns are possible
Transparency 1-9
Action required:
Locate an industry with
high potential for aboveaverage returns.
I/O Model of Superior Returns
External
Environment
Attractive
GeneralIndustry
Environment
Industry Environment
Strategy
An industry whose
Formulation
Competitive
structural characteristics
Environment
Selection of a strategy
suggest above-average
with abovereturns are linked
possible
average returns in a
particular industry
Transparency 1-10
Action required:
Identify strategy called for
by the industry to earn
above-average returns.
I/O Model of Superior Returns
Action required:
External
Develop or acquire assets
Environment
Attractive
and skills needed to
GeneralIndustry
Environment
implement the strategy.
Strategy
Industry Environment
An industry whose
Formulation
Competitive
structural characteristics
Environment
and Skills
Selection ofAssets
a strategy
suggest above-average
with abovereturns are linked
possible
Assetsinand
average returns
a skills
required to implement
particular industry
a chosen strategy
Transparency 1-11
I/O Model of Superior Returns
Action required:
External
Use the firm’s strengths
Environment
Attractive
(its assets or skills) to
GeneralIndustry
Environment
implement the strategy.
Strategy
Industry Environment
An industry whose
Formulation
Competitive
structural characteristics
Environment
and Skills
Selection ofAssets
a strategy
suggest above-average
with abovereturns are linked
possible
Assetsinand
skills
average returns
a Strategy
required to
implement
Implementation
particular industry
a chosen strategy
Selection of strategic
actions linked with
effective implementation
of the chosen strategy
Transparency 1-12
I/O Model of Superior Returns
Action required:
External
Maintain selected strategy
Environment
Attractive
in order to outperform
GeneralIndustry
Environment
industry rivals.
Strategy
Industry Environment
An industry whose
Formulation
Competitive
structural characteristics
Environment
and Skills
Selection ofAssets
a strategy
suggest above-average
with abovereturns are linked
possible
Assetsinand
skills
average returns
a Strategy
required to
implement
Implementation
particular industry
Superior Returns
a chosen strategy
Selection of strategic
actions linked with
Earning of aboveeffective implementation
average
returns
of the chosen
strategy
Transparency 1-13
Resource-Based Model of Superior Returns
The Resource-Based Model suggests
that above-average returns for any
firm are largely determined by
characteristics inside the firm.
The Resource-Based view focuses on
developing or obtaining valuable
resources and capabilities which are
difficult or impossible for rivals to
imitate.
Transparency 1-14
Resource-Based Model of Superior Returns
Resources
Inputs to a firm’s
production process.
Transparency 1-15
Action required:
Identify firm resources.
Study strengths and weaknesses relative to rivals.
Resource-Based Model of Superior Returns
Resources
Capability
Inputs to a firm’s
production
process.
Capacity
for an integrated
set of resources to
integratively perform a
task or activity.
Transparency 1-16
Action required:
Determine what firm
capabilities allow it to do
better than rivals.
Resource-Based Model of Superior Returns
Resources
Capability
Inputs to a firm’s
Competitive
production
process.
Capacity
for
an integrated
set of resources
to
Advantage
integratively perform a
Ability of a firm to
task or activity.
outperform its rivals
Transparency 1-17
Action required:
Determine how firm’s
resources and capabilities
may create competitive
advantage.
Resource-Based Model of Superior Returns
Resources
Capability
Action required:
Locate an attractive
industry.
Inputs to a firm’s
Competitive
production
process.
Capacity
for
an integrated
set of resources
to
Advantage
integratively perform aAn Attractive
Ability of aIndustry
firm to
task or activity.
outperform its rivals
Location of an industry
with opportunities that
can be exploited by the
firm’s resources and
capabilities
Transparency 1-18
Resource-Based Model of Superior Returns
Resources
Capability
Action required:
Select strategy that best
exploits resources and
capabilities relative to
opportunities in environs.
Inputs to a firm’s
Competitive
production
process.
Capacity
for
an integrated
set of resources
to
Advantage
integratively perform aAn Attractive
Ability of aIndustry
firm to
task or activity.
outperform its rivalsStrategy
Location of an industry
Formulation
with opportunities
that and
can be exploited
by the
Implementation
firm’s resources and
Strategic actions taken to
capabilities
earn above-average
returns
Transparency 1-19
Resource-Based Model of Superior Returns
Resources
Capability
Action required:
Maintain selected strategy
in order to outperform
industry rivals.
Inputs to a firm’s
Competitive
production
process.
Capacity
for
an integrated
set of resources
to
Advantage
integratively perform aAn Attractive
Ability of aIndustry
firm to
task or activity.
outperform its rivalsStrategy
Location of an industry
Formulation
with opportunities
that and
Superior Returns
can be exploited
by the
Implementation
firm’s resources and
Strategic actions
taken
to
Earning
of abovecapabilities
earn above-average
average returns
returns
Transparency 1-20
“Hypercompetition” =
fleeting competitive advantage due to
aggressive/relentless challengers
•
•
•
•
•
Globalization
more opportunities
more competitors
greater complexity
“liability of
foreignness”
increasing global
interdependencies
Transparency 1-21
•
•
•
•
Technology change
perpetual/disruptive
technology change
org’l learning, agility
are critical attributes
tap key information
and org’l intellect
role of org’l culture
Mission Statements
• typically the starting point for strategic planning
• provide a relatively enduring yet basic
description of an organization’s domain
• ideally express the “essence” or unique
personality of an organization
• should clearly include three core elements:
1. product
2. target market
3. differentiating feature
Transparency 1-22
Rape and Abuse Crisis Center
provides crisis intervention, advocacy,
and counseling services
– free of charge –
to all persons in the region who have
been victims of domestic violence or
sexual assault.
Transparency 1-23
To create meaningful and strategically
useful mission statements . . .
• PRODUCT description should be carefully
balanced - not too broad, not too narrow
• TARGET MARKET should be expressed
as specifically as possible
• DIFFERENTIATING FEATURE should be
meaningful and realistic
Transparency 1-24
To be the leader in providing
strategic business management solutions
to the midmarket
through a global network of partners
dedicated to lasting customer relationships
Transparency 1-25
Phoenix International
. . . designs and manufactures electronics
for harsh environments for the worldwide
original equipment manufacturer market.
Transparency 1-26
Mission Statement for NDSU’s
College of Business?
Be sure to clearly and appropriately include
1. Product(s)
2. Target market(s)
3. Differentiating feature(s)
Transparency 1-27
Why is it so difficult
to develop a concise, compelling, and
agreed-upon mission statement?
Transparency 1-28
Peter Drucker . . .
“Establishing a mission should never be
made on plausibility alone, should never
be made fast, and should never be made
painlessly.
“The mission decision is far too important
to be made by acclamation.”
Transparency 1-29
Mission Statements –
So what?
Who cares?
Why bother?
Transparency 1-30
Strategic Intent
• “leveraging the firm’s resources,
capabilities, and competencies to
accomplish the firm’s goals in a
competitive environment” (pg. 21)
• a passion to win that is widely shared by
organizational participants
• strong internal drive and commitment to
the organization and its goals
Transparency 1-31
ELDERHOSTEL’s mission statement
We are the nation’s first and the world’s
largest education and travel organization for
adults 55 and over, dedicated to providing
exceptional learning opportunities at
remarkable value.
We value stimulating, expert information;
adventure; and the spirit of camaraderie.
Transparency 1-32
Organizational Values
• values and beliefs that are widely shared
and endorsed by org’l participants
• can lead to an ingrained way of thinking
and acting within the org’n
• often linked to competitive advantage
Transparency 1-33
College of Business Values?
•
•
•
•
•
•
•
resourcefulness
individualistic
belongingness
bare bones efficiency
non-hierarchical
pragmatic
modest
Transparency 1-34
Stakeholders
Groups who are affected by a firm’s performance
and who have claims on its performance
The firm must maintain performance at
an adequate level in order to maintain
the participation of key stakeholders
Transparency 1-35
Stakeholders
Groups who are affected by a firm’s performance
and who have claims on its performance
The firm must maintain performance at
an adequate level in order to maintain
the participation of key stakeholders
Firm
Transparency 1-36
Capital Market
Stock market/Investors
Debt suppliers/Banks
Stakeholders
Groups who are affected by a firm’s performance
and who have claims on its performance
The firm must maintain performance at
an adequate level in order to maintain
the participation of key stakeholders
Firm
Product Market
Primary Customers
Suppliers
Transparency 1-37
Capital Market
Stock market/Investors
Debt suppliers/Banks
Stakeholders
Groups who are affected by a firm’s performance
and who have claims on its performance
The firm must maintain performance at
an adequate level in order to maintain
the participation of key stakeholders
Firm
Product Market
Primary Customers
Suppliers
Transparency 1-38
Capital Market
Stock market/Investors
Debt suppliers/Banks
Organizational
Employees
Managers
Non-Managers
Stakeholder Analysis =
• Identifying and prioritizing specific key
stakeholder groups
• Anticipating reactions of key
stakeholder groups
• Modifying strategic decisions in light of
key stakeholder groups
Transparency 1-39
Social Responsibility
• Uses a very broad view of stakeholders
• Considers the long-term interests of
society in strategic decision-making
• Involves ethical actions (which are often
beyond legal requirements)
• Responds to social expectations
• Strives for good corporate citizenship
• Difficult balancing of stakeholder interests
Transparency 1-40
Social Responsibility:
• Prominent issues today?
• How to address?
Transparency 1-41
Social Responsibility
So what?
Who cares?
Why bother?
Transparency 1-42
Hit a home run?
Touch all the bases?
1. Consider external environment
(“What MIGHT we do?”)
2. Consider internal environment
(“What CAN we do?”)
3. Consider organizational values
(“What do we WANT to do?”)
4. Consider social responsibility
(“What SHOULD we do?”)
Transparency 1-43