NEW STRATEGIC MANAGEMENT NOTES
STRATEGIC MANAGEMENT AND STRATEGIC COMPETITIVENESS
Strategic Competitiveness is achieved when a firm successfully formulates and implements a
value-creating strategy.
Sustained Competitive advantage is when a firm implements such a strategy and other
companies are unable to duplicate it or find it too costly to imitate.
Average Returns are returns equal to those an investor expects to earn from other investments
with similar amount of risks.
Above –Average Returns are returns in excess of what an investor expects to earn from other
investments with similar amount of risks.
Risk – is the investor’s uncertainty about the economic gains or losses that will result from
particular investments.
Strategic Management Process is a fully set of commitments, decision and actions required for
a firm to achieve strategic competitiveness and earn above average returns.
The Challenge of Strategic Management
These are:
 The rapid changing environment
 Business failure are rather common
 The environment is getting more and more competitive
The Current Competitive Landscape
Conventional source of competitive advantage such as economies of scale and huge advertising
budget are not as effective as they once were. Also the conventional manager mindset is unlikely
to lead the company into strategic competitiveness.
What are required are managers with new mindset that values:
 Flexibility
 Speed
 Innovation
 Integration and
 Challenges that evolve from constantly changing conditions.
Hyper-competition results from the dynamics of strategic maneuvering among global and
innovative combatants. It is a condition of rapidly escalating competition based on:
 Price
 Quality
 Positioning
 Competition to present new know-how and establish first mover advantage.
The Global Economy
The Global economy is one in which goods, services, people, skills, and ideas move freely
across geographic borders. Relatively unfettered by artificial constraints such as tariffs. (The
removal of trade barriers and the world becoming one big marketplace).
The March of Globalization
Globalization is the increased economic interdependence among countries as reflected in the
flow of goods and services, financial capital, and knowledge across borders.
Technology and Technological Changes
 Perpetual Innovation
The Industrial Organization (I/O) model of Above-Average Rate of Returns
The I/O model of above average rate of returns specifies that the industry in which the firm
chooses to compete has a stronger influence on the firm’s performance than the choices
managers make within the organization. The firms performance is believed to be determined
by:
 Economies of scale
 Barriers to market entry
 Diversification
 Product differentiation &
 The degree of concentration of the firm in the industry.
The I/O model has four underlying assumptions:
 The external environment is assumed to impose pressure and constraints that determine
the strategies that will result in above average returns
 Firms competing within an industry is assumed to have similar strategic resources and
pursue similar strategies considering the resources.
 Resources used to implement these strategies are highly mobile among firms.
 Organization decision makers are said to be rational and operate in the best interest of the
firm to maximize shareholders wealth.
The Resource-Based Model of Above Average Returns
The Resource-Based Model of Above-average Returns assumes that each organization is a
collection of unique resources and capabilities that provides the basis for its strategy and that
is the primary source of its returns.
Resources – are inputs into a firm’s production process such as capital equipment, the skills
of employees, patents, finance and talented strategic managers.
Capability is the capacity for a set of resources to perform a task or an activity in an
integrative manner.
Core Competencies are resources and capabilities that serve as a source of competitive
advantage for a firm over its rivals.
Strategic Intent and Strategic Mission and Goals
Strategic Intent is the leveraging of a firm’s resources, capabilities and core competencies to
accomplish the firm’s goals in the competitive environment.
Strategic Mission is a statement of firm unique purpose and the scope of its operation in
product and market terms. A strategic mission provides general description of the products a
firm intends to produce and the market it will serve using the core competencies.
Stakeholders
Stakeholders are the individuals and groups who can affect and be affected by the strategic
outcomes achieved and who have enforceable claims on the firm’s performance. They are
separated into three groups:

a.
b.

a.
b.
c.
d.

a.
b.
c.
Capital Market Stakeholders
Shareholders
Major supplier of Capital
The product market stakeholders
the firm’s primary customers
Suppliers
Host communities
Trade unions
Organizations stakeholders
Employees\
Government
Environment
THE EXTERNAL ENVIRONMENT: OPPORTUNITIES, THREATS,
INDUSTRY COMPETITION AND COMPETITOR ANALYSIS
The General, Industry, and Competitor Environment
The General Environment
 Demographic Segment (Population size, age and geographic distribution)
 Economic Segment (Inflation rates, exchange rates, interest rates, trade deficit and surplus and
budget deficit and surplus.
 Political and legal Segment (Laws and political stability/instability)
 Socio-cultural Segment (Women in the workforce, Workforce diversity and attitude about the
quality of work life).
 Technological Segment (Product innovation)
 Global Segment (Application of knowledge, important political events and critical global
markets).
External Environmental Analysis
The importance of studding the external environment is to identify opportunities and threats.
Opportunity is a condition in the general environment that if exploited helps the company to achieve
strategic competencies.
Threat is a condition in the general environment that hinder a company’s effort to gain strategic
competitiveness.
External environmental analysis process includes four activities. These are:
 Scanning – Identifying early signals of environmental changes and trends
 Monitoring – Detecting meaning through ongoing observation of environmental changes and
trends
 Forecasting – Developing projections of anticipated outcomes based on monitored changes and
trends.
 Assessing – Determining the timing and importance of environmental changes and trends for
firms’ strategies and their management.

Segments of the General Environment
 The Demographic Segment – The Population size age structure geographic distribution, ethnic
mix and income distribution.
 The Economic Segment – The economic segment speaks to the health of the nation’s economy
and how it affects firms and industries. The economic environment refers to the nature and
directions of the economy in which a firm competes or may compete.
 Political/Legal Segment – Is the arena in which organizations and interest groups competes for
attention, resources, and a voice in overseeing the body of laws and regulation guiding the
interactions among nations.
 The Socio-cultural Segment – is concerned with a society’s attitude and cultural values.
 The Technological Segments – this includes institutions and activities involved in creating new
knowledge and translating that knowledge into new outputs, products, processes and materials.
 The Global Segment – This includes relevant new global markets, existing markets that are
changing, important political events and critical culture and institutional characteristics of global
markets.
The Industry Environment Analysis
An industry is a group of firms producing products and services that are the same or close substitute.
The Industry analysis is discussed from five forces of competition. These are:
 Threat of new entrants
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threats of Substitute
 Intensity of Rivalry and Competitors
Barriers to Entry
 Economies of scale – economic benefits derived from producing in large quantities.
 Product Differentiation – Over time consumers may come to realize that supplier’s product is
unique.
 Capital Requirements
 Switching costs – The one off costs that customers incur when they buy from another supplier
 Access to Distribution Channels
 Government Policy
 Cost Disadvantages Independent of Scale – Sometimes, established companies have costs
advantage that new entrants cannot duplicate.
Factors that influence the Intensity of Industry Rivalry
 Numerous or Equally balanced competitors
 Slow Industry Growth
 High Fixed costs or high storage costs
 Lack of Differentiation or Low switching costs
 High strategic stakes
 High exit barriers
Strategic Groups
A strategic group is a set of firms emphasizing similar strategic dimensions to use similar strategies.
Competitor Analysis
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What drives the competitor
What is the competitor is doing and can do.
What the competitor believes about the industry
What the competitor capabilities are.
Competitors intelligence.