What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
• Competitive advantage — operating with an attribute or set of
attributes that allows an organization to outperform its rivals.
• Sustainable competitive advantage — one that is difficult for
competitors to imitate.
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What are the foundations of strategic
competitiveness?
 Basic concepts of strategy (cont.):
• Strategy — a comprehensive action plan that identifies long-
term direction for an organization and guides resource
utilization to accomplish organizational goals with sustainable
competitive advantage.
•
Strategic intent — focusing all organizational energies on a
unifying and compelling goal.
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What are the foundations of strategic
competitiveness?
 Basic concepts of strategy (cont.):
• Strategic management — the process of formulating
and implementing strategies to accomplish long-term
goals and sustain competitive advantage.
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What are the foundations of strategic
competitiveness?
Goal of strategic management is to create aboveaverage returns for investors.
•
Returns exceeding those for alternative opportunities at
equivalent risk.
•
Earning above-average returns depends in part on the
organization’s competitive environment.
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What are the foundations of strategic
competitiveness?
 Environments and competitive advantage:
•
Monopoly.
•
•
•
Creates absolute competitive advantage.
Oligopoly.
•
•
•
Only one player and no competition.
Few players not directly competing against each other.
Long-term competitive advantage in defined market
segment.
Hypercompetition.
•
•
Several players directly competing against each other.
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Any competitive advantage is only temporary.
5
What is the strategic management process?
 Strategy formulation
• The process of creating strategy.
• Involves assessing existing strategies, organization,
and environment to develop new strategies and
strategic plans capable of delivering future
competitive advantage.
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Figure 9.1 Strategy formulation and implementation in the
strategic management process.
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What is the strategic management process?
 Strategic question for strategy formulation:
•
What is our business mission?
•
Who are our customers?
•
What do our customers consider value?
•
What have been our results?
•
What is our plan?
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What is the strategic management process?
 Strategy implementation
•
The process of allocating resources and putting strategies into
action.
•
All organizational and management systems must be mobilized
to support and reinforce the accomplishment of strategies.
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What is the strategic management process?
 Essential tasks for strategy implementation:
•
•
•
•
•
Identify organizational mission and objectives.
Assess current performance vis-à-vis mission and objectives.
Create strategic plans to accomplish purpose and objectives.
Implement the strategic plans
Evaluate results; change strategic plans and/or implementation
processes as necessary.
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What is the strategic management process?
 Analysis of mission:
•
•
•
The reason for an organization’s existence.
Good mission statements identify:
•
•
•
•
Customers
Products and/or services
Location
Underlying philosophy
An important test of the mission is how well it serves the
organization’s stakeholders.
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What is the strategic management process?
 Analysis of mission:
•
•
•
What kind of difference do we want to make in the world?
What do we want to be known for?
Starbucks’s mission is “to be the premier purveyor of the finest
coffee in the world while maintaining our uncompromising
principles as we grow.”
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Figure 9.2 How external stakeholders can be valued as
strategic constituencies of organizations.
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What is the strategic management process?
 Analysis of values:
•
•
Values are broad beliefs about what is or is not appropriate.
Strong core values for an organization helps build institutional
identity, gives character to an organization, and it backs up the
mission statement.
•
Organizational culture reflects the dominant value system of the
organization as a whole.
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What is the strategic management process?
Organizational culture 
•
•
•
•
•
•
Shapes the values of managers and other organization
members.
Points people in common directions.
Helps build institutional identity.
Gives character to the organization in the eyes of
employees and external stakeholders.
Backs up the mission statement.
Guides the behavior of organizational members in
meaningful and consistent ways.
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What is the strategic management process?
Analysis of objectives:
• Objectives are specific results that organizations try to
accomplish (like their goals)
• Whereas a mission statement sets forth an official
purpose for the organization
• And the core values describe the appropriate
standards of behavior for a company’s
accomplishments.
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What is the strategic management process?
Analysis of objectives:
•
Typical operating objectives according to Peter Drucker:
•
•
•
•
•
•
•
•
Profitability (make money)
Market share (increase customers)
Human talent (top talent)
Financial health (positive cash flow)
Cost efficiency (low cost)
Product quality (high quality)
Innovation (leading edge)
Social responsibility (positive contribution to society)
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SWOT ANALYSIS
• A SWOT analysis is performed in order to determine the
strengths, weaknesses, opportunities and threats of an
organization
• A major goal of a SWOT analysis is to find out what a
company’s core competency is.
• A core competency is a special strength that gives an
organization a competitive advantage.
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Figure 9.3 SWOT analysis of strengths,
weaknesses, opportunities,and threats.
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SWAT ANALYSIS
Note that the strengths and weaknesses stem from
internal sources (within the company) whereas the
opportunities and threats stem from external or
environmental factors.
External factors include technology, government, social
structures, population demographics, competitors, and
customers. Opportunities usually exist as new markets,
strong economy or weakness in competitors
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SWOT ANALYSIS
What are our Opportunities?
• Possible new markets?
• Strong economy?
• Weak market rivals?
• Emerging technologies?
• Growth of existing
market?
What are our Threats?
• New competitors?
• Shortage of resources?
• Changing market tastes?
• New regulations?
• Substitute products?
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Figure 9.4 Porter’s model of five strategic
forces affecting industry competition.
Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).
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How are strategies formulated?
 Porter’s generic strategies model
•
Michael Porter developed a five force model for industry analysis
to help answer the question “Is this an attractive industry for us
to compete in? and “How can we best compete for customers in
this industry?
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Porter’s Generic Strategies
• According to Porter, business-level strategic decisions are
driven by two basic factors:
• 1) Market scope: How broad or how narrow is the target
market (niche market?)
• 2) Competitive advantage: How will you compete – by
lower price or by product uniqueness?
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Figure 9.6 Porter’s generic strategies
framework: soft-drink industry examples.
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Porter’s Generic Strategies
 Porter’s generic strategies for gaining competitive
advantage:
•
•
•
•
Differentiation strategy
Cost leadership strategy
Focused differentiation strategy
Focused cost leadership strategy
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Porter’s Generic Strategies
•
•
Differentiation – where the organization’s resources and
attention are directed toward making its products appear
different from those of the competition (example, Coke, Pepsi,
Starbucks)
Organizations pursuing differentiation strategy seek
competitive advantage by making their products clearly
different from their competitors. The objective is to attract
customers who become loyal. This strategy requires
organization strength in marketing and creativity. Its success
depends on continuing customer perceptions of product
quality and uniqueness (i.e. Polo, Ralph Lauren)
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Porter’s Generic Strategies
• Cost Leadership – Where the organization’s
resources an attention are directed toward
minimizing costs to operate more efficiently than
the competition (example, President’s Choice
Cola, No Frills)
• Organizations pursuing a cost leadership strategy try to
have lower costs than their competitors and therefore
achieve higher profits. The objective is to continually
improve efficiency with tight cost controls. (Walmart)
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Porter’s Generic Strategies
• Focused Differentiation: where the organization
concentrates on one special market segment and
tries to offer customers in that segment a unique
product (A&W Root Beer, Canada Dry). The
objective is to serve the customer’s needs better
than anyone else.
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Porter’s Generic Strategies
• Focused cost leadership: Where the organization
concentrates on one special market segment and
tries in that segment to be the provider with the
lowest costs (ex. Red Cherry Pop). Another example
is West Jet. They are a successful low cost airline.
They took out business class and food services to
keep costs low and they fly into smaller airports. This
no-frills approach, has helped West Jet to become
Canada’s second largest airline.
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Corporate Governance
 Corporate governance:
• System of control and performance monitoring of top
management.
• Done by boards of directors and other major stakeholder
representatives.
• The BOD and the shareholders ensure that an organization
operates in the best interests of its owners.
• Increasing emphasis on corporate governance in
contemporary businesses.
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