Office
If you fail this course, this may become your office.
BUSN 6200
Strategy and
Competition
Dr. Bert Turner
Strategic Management:
Concepts and Cases 9e
Hitt, Michael A.
Ireland, R. Duane
Hoskisson, Robert E.
©2011 Cengage Learning. All Rights Reserved. May not be scanned,
copied or duplicated, or posted to a publicly accessible website, in
whole or in part.
Welcome to Strategy and Competition
• Introductions
– Instructor: Bert Turner
– Students: Introduce Yourself (2-5 minutes)
• Strategy and Competition
– Capstone Course for MBA
• Bringing it all together
• Simulate the real world
– One of my favorite courses because it is so close to real
world
– Slides and other material will be available on
www.websterchina.com or copy onto your thumb drive.
• My Style
– Application to real world
– Make you think and create your own management
style.
©2011 Cengage Learning. All rights reserved.
1–3
What Businesses Are Looking For In Managers And Leaders
• The ability to communicate orally and in writing one-on-one and in groups
• A basic understanding of math, particularly math for finances and risk
management
• The ability to acquire and integrate relevant information and then create
usable knowledge from it
• The ability to make decisions and judgments—with messy, incomplete,
isolated, and incoherent data—that solve problems
• The ability to productively work with others
• Exemplifying norms of ethical behavior
• Fluency in a variety of technologies and the foresight and ability to apply
those technologies to help solve a specific customer problem or pain. All of
which lead to:
• Self confidence and courage to make decisions
©2011 Cengage Learning. All rights reserved.
1–4
Where We Are Headed
• In this course, at the top level you are going to do four things:
–
–
–
–
Demonstrate your potential to manage from looking at the Big Picture
Demonstrate techniques for strategy formulation and implementation
Synthesize everything you have learned up to now
Compete against your classmates in running a simulated business
• Heavy focus on case studies and simulation
– Learn by doing (pre-OJT)
– Broad view of different industries, companies, and issues
– There is no single right answer, but there could be a lot of wrong ones
• Giving you the best tools possible to be a GREAT manager and
leader
– Make your employer and Webster proud
• Follow the Syllabus!
– Let’s review it now
• This class is going to move quickly. I won’t cover all slides, but they
are all important. Most of the simulation will be done outside of class.
• Slides are copyrighted, but I have added in Blue.
©2011 Cengage Learning. All rights reserved.
1–5
Course Philosophy
• Front-end loaded on learning, back-end loaded on doing.
Getting your first 10 combat missions done.
• Very heavy workload. 2-3 hours a week just on the CapSim
simulation. Work ahead, use the Capstone Simulation
Detailed Student Notes. Simulation decisions come even
before we cover the subject in the text.
• We will try to simulate real-world decision-making
• The business is world is highly competitive, so is this course.
Your job is to eat someone else’s lunch!
• Strategic Management is like changing the fan belt on a
moving car. It is the hardest part of management!!!
• You must personally show me that what you will do in the
workplace will demonstrate that a Webster MBA is an asset to
the organization.
©2011 Cengage Learning. All rights reserved.
1–6
Program Level Learning Outcomes
•
•
•
Webster University MBAs possess foundation
knowledge in each of the primary functional areas of
business.
Webster University MBAs can solve semi-structured
business problems.
a. The MBA can utilize statistical analysis to assess
product demand conditions.
b. The MBA can utilize financial analysis to assess an
organization’s financial condition.
c. The MBA can utilize competitive analysis to assess
market position.
The MBA can address unstructured business problems
that span multiple functional areas.
©2011 Cengage Learning. All rights reserved.
1–7
Introduce Yourself
• Name
• Where you work and what you do
there
• Where you want to work and what you
want to do
• What you could use help with in your
work/school
• How you can help the other students
• Q&A
©2011 Cengage Learning. All rights reserved.
1–8
Strategic Management:
Concepts and Cases 9e
Part I: Strategic Management Inputs
Chapter 1: Strategic Management and
Strategic Competitiveness
©2011 Cengage Learning. All Rights Reserved. May not be scanned,
copied or duplicated, or posted to a publicly accessible website, in
whole or in part.
X
KNOWLEDGE OBJECTIVES
Studying this chapter should provide you with the strategic
management knowledge needed to:
1. Define strategic competitiveness, strategy, competitive
advantage, above-average returns, and the strategic
management process.
2. Describe the 21st-century competitive landscape and
explain how globalization and technological changes
shape it.
3. Use the industrial organization (I/O) model to explain
how firms can earn above-average returns.
4. Use the resource-based model to explain how firms
can earn above-average returns.
X
©2011 Cengage Learning. All rights reserved.
1–10
X
KNOWLEDGE OBJECTIVES (cont’d)
Studying this chapter should provide you with the strategic
management knowledge needed to:
5. Describe vision and mission and discuss their value.
6. Define stakeholders and describe their ability to
influence organizations.
7. Describe the work of strategic leaders.
8. Explain the strategic management process.
X
©2011 Cengage Learning. All rights reserved.
1–11
Strategic Management Past
• Military Roots (Sun Tzu [孫子 Sūn Zǐ] and
Clausewitz primarily)
–
–
–
–
–
–
Win All Without Fighting
Avoid Strength, Attack Weakness
Deception and Foreknowledge
Speed and Preparation
Shape Your Opponent
Provide Effective Leadership
• Academic Roots
– Economic Theory
– Organizational Studies
• 1970s-1980s became business/management field
of study
©2011 Cengage Learning. All rights reserved.
1–12
Misconceptions
• Strategy and strategic planning are dead
– Myth: Internet time has made it obsolete
• Strategy is strictly for top management
– But, formation is top management responsibility
• Strategy is about planning
– A plan on the shelf is worthless
– Shy away from “Strategic Planners”
• Strategy is stable and constant
– Core Values and Purpose NEVER change—strategy does
• Strategic management creates final destination and
route
– Nope, just the curbs for getting there
– But, there can only be one strategic direction
– Plan for several possible futures
©2011 Cengage Learning. All rights reserved.
1–13
Important Definitions
• Strategy
– An integrated and coordinated set of commitments and actions
designed to exploit core competencies and gain a competitive
advantage.
– Attempts to match company strengths to the right customer,
market, or industry
• Competitive Advantage
– When a firm implements a strategy that its competitors are
unable to duplicate or find too costly to try to imitate.
– The key is to create a continuous stream of competitive
advantages to create an overall sustainable competitive
advantage
– Bottom Line—Only the customer can decide what is and is not a
competitive advantage
©2011 Cengage Learning. All rights reserved.
1–14
Pizza Strategy
•Domino’s
•Pizza Hut
•Little Caesar’s
•Shotgun Dan’s
•Papa John’s
•US Pizza
•DiGiorno’s
•Papa Murphy’s Take N’ Bake
Pizza—store assembles pizza,
you take it home and bake it
•CiCi’s Pizza
•Larry’s Pizza
•Pizza for Less
•What A Lot of Pizza
•NYPD Pizza Delicatessen
•Greek Pizza
•Chicago Pizza
• O’Naturals is the nation’s first all natural and organic quick casual restaurant
group
• Topper's Pizza On average 70% of sales come from menu items typically not
offered by the competition
• Bohemian Ovens gives you a pizza pan with dough already on it and lets you go
around a buffet of ingredients to put on it. Build your own pizza all for one price.
1–15
X
Important Definitions (cont’d)
• Risk
– An investor’s uncertainty about the economic gains
or losses that will result from a particular
investment.
• 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.
X
©2011 Cengage Learning. All rights reserved.
1–16
Important Definitions (cont’d)
• Strategic Management Process
– The full set of commitments, decisions, and
actions required for a firm to achieve strategic
competitiveness and earn above-average returns.
©2011 Cengage Learning. All rights reserved.
1–17
X
FIGURE 1.1
The Strategic
Management
Process
X
©2011 Cengage Learning. All rights reserved.
1–18
Roles and Missions for Strategic Management
• Board of Directors
– Legally obligated to represent and protect stockholders
– Govern
• Senior Management (C-Level Officers)
– Create, adopt, set, agree to, and plan to implement the top-level
strategy
• Actually “manage”, not just “administer”
– Provide effective leadership
• Managers and supervisors
– Implement
– Build their strategic (functional) plan to support corporate strategy
– Evaluate and provide feedback on their part of the strategy
©2011 Cengage Learning. All rights reserved.
1–19
The 21st-Century Competitive Landscape
• A Perilous Business World
– Rapid changes in industry boundaries and markets
– Conventional sources of competitive advantage losing
effectiveness
– Enormous investments required to compete globally
– Severe consequences for failure
• Developing and Implementing Strategy
– Allows for planned actions rather than reactions
– Helps coordinate business unit strategies
©2011 Cengage Learning. All rights reserved.
1–20
The Competitive Landscape
Hypercompetition
A condition of rapidly escalating
competition based on:
• Price-quality positioning
Dynamic
Global Economy
Rapid technological
change
Strategic maneuvering
among global and innovative
combatants
©2011 Cengage Learning. All rights reserved.
• Competition to create
new know-how and
establish first-mover
advantage
• Competition to protect or
invade established
product or geographic
markets
1–21
X
Global Economy
• The Global Economy
– Goods, people, skills, and ideas move freely across
geographic borders.
– Movement is relatively unfettered by artificial
constraints.
– Expansion into global arena complicates a firm’s
competitive environment.
• Short-term: Where is the fastest growth likely to occur?
• Long-term: Where will sustainable growth occur?
©2011 Cengage Learning. All rights reserved.
1–22
X
Global Economy (cont’d)
• The March of Globalization
– Increased economic interdependence among
countries—the flow of goods and services, financial
capital, and knowledge across country borders
• Higher performance levels—quality, cost, productivity,
product introduction time, and operational efficiency
– Increased range of opportunities for companies
competing in the 21st-century competitive landscape
• Liability of foreignness—the risks of participating outside of a
firm’s domestic country in the global economy
• The amount of time required for firms to learn how to
compete in markets that are new to them.
©2011 Cengage Learning. All rights reserved.
1–23
Sleeping Dragon Awakening
• Today, China is seen as an extremely
competitive market in which local market-seeking
MNCs (multinational corporations) fiercely
compete against other MNCs and local low-cost
producers.
• China has long been viewed as a low-cost
producer of goods, but China is now an exporter
of local management talent. (YOU!)
©2011 Cengage Learning. All rights reserved.
1–24
Technology and Technological Changes
• Technology Diffusion
– The speed at which new technologies become
available
• Disruptive Technologies
– Technologies that destroy the value of existing
technology and create new markets
• Perpetual Innovation
– The rapidity and consistency with which new,
information-intensive technologies replace older ones
©2011 Cengage Learning. All rights reserved.
1–25
X
Technological Changes
• The Information Age
– The ability to effectively and efficiently access and
use information has become an important source of
competitive advantage.
– Technology includes personal computers, cellular
phones, artificial intelligence, virtual reality, massive
databases, electronic networks, internet trade.
©2011 Cengage Learning. All rights reserved.
1–26
Technological Changes (cont’d)
• Increasing Knowledge Intensity
– Knowledge as a critical organizational resource for
creating an intangible competitive advantage
– Strategic flexibility: the set of capabilities used to
respond to various demands and opportunities in
dynamic and uncertain competitive environments
– Organizational slack: slack resources that allow the
firm flexibility to respond to environmental changes
– Organizational capacity to learn
©2011 Cengage Learning. All rights reserved.
1–27
Strategic Management Processes
• We’re in St. Louis (or Wuhan)
–Go east, west, north, south, or
stay put
–Fly, drive, train, walk
–Lease, rent, or buy vehicle
–Portland, San Francisco, San
Diego (Wulumuchi, Lhasa,
Kunming)
©2011 Cengage Learning. All rights reserved.
1–28
©2011 Cengage Learning. All rights reserved.
1–29
Hedgehog Concept of Jim Collins (Good to Great,
2001)
• What are you (collectively) deeply passionate
about?
– Why bother getting dressed (corporately)
each and every day?
• What can you be the best in the world at?
– Not “want” or “should”. An understanding of
what you can and can’t be. Not just a
competence, but truly the best.
• What drives your economic engine?
– One denominator (profit per x, or cash flow
per x) that has the single greatest impact.
©2011 Cengage Learning. All rights reserved.
1–30
Three Circles of Hedgehog Concept—Jim Collins
©2011 Cengage Learning. All rights reserved.
1–31
Industrial Organization (I/O) Model of AboveAverage Returns
• 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.
• Industry Properties Determining Performance
–
–
–
–
–
Economies of scale
Barriers to market entry
Diversification
Product differentiation
Degree of concentration of firms in the industry
©2011 Cengage Learning. All rights reserved.
1–32
X
Four Assumptions of the I/O Model
1
External environment imposes pressures and constraints
that determine strategies leading to above-average returns.
2
Most firms competing in an industry control similar
strategically relevant resources and pursue similar strategies.
3
Resources used to implement strategies are highly
mobile across firms.
4
Organizational decision makers are assumed to be rational
and committed to acting in the firm’s best interests (profitmaximizing).
X
©2011 Cengage Learning. All rights reserved.
1–33
X
FIGURE 1.2
The I/O Model of
Above-Average
Returns
X
©2011 Cengage Learning. All rights reserved.
1–34
X
I/O Model of Above-Average Returns
External Environments
General
Global
Industry
Environment
Competitor
Environment
1. Strategy is dictated by
the external environment
of the firm—what
opportunities exist in
these environments?
2. Firm develops internal
skills required by
external environment—
what can the firm do
about the opportunities?
Technological
Environment
©2011 Cengage Learning. All rights reserved.
X
1–35
Industrial Organization Model
The External Environment
1. Study the external
environment, especially the
industry environment:
• Economies of scale
• Barriers to market entry
• Diversification
• Product differentiation
• Degree of concentration of
firms in the industry
Don’t bother to analyze the situation, unless you
are going to do something with/about it!
–Applies to all calls for “analysis” in this course.
–Be very specific when telling employees to go
analyze something.
©2011 Cengage Learning. All rights reserved.
1–36
X
Industrial Organization Model
The External Environment
Attractive Industry
2. Locate an attractive
industry with a high
potential for aboveaverage returns.
Attractive industry:
One whose structural
characteristics suggest
above-average returns.
X
©2011 Cengage Learning. All rights reserved.
1–37
X
Industrial Organization Model
The External Environment
Attractive Industry
Strategy Formulation
3. Identify the strategy called for
by the attractive industry to
earn above-average returns.
Strategy formulation: Selection
of a strategy linked with aboveaverage returns in a particular
industry.
X
©2011 Cengage Learning. All rights reserved.
1–38
X
Industrial Organization Model
The External Environment
Attractive Industry
Strategy Formulation
Assets and Skills
4. Develop or acquire assets and
skills needed to implement a
chosen strategy.
Assets and skills: those assets
and skills required to
implement a chosen strategy.
X
©2011 Cengage Learning. All rights reserved.
1–39
X
Industrial Organization Model
The External Environment
Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
5. Use the firm’s strengths (its
developed or acquired assets
and skills) to implement the
strategy.
Strategy implementation: select
strategic actions linked with
effective implementation of the
chosen strategy.
X
©2011 Cengage Learning. All rights reserved.
1–40
X
Industrial Organization (I/O) Model
The External Environment
Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
Superior Returns
Superior returns: earning
above-average returns
X
©2011 Cengage Learning. All rights reserved.
1–41
Porter’s Five Forces Model of Competition
• Industry Profitability
– The industry’s rate of return on invested capital
relative to its cost of capital
– Porter’s Five Forces Model is used to predict
industry profitability
• An industry’s profitability results from interaction
among these five forces according to Porter:
– Suppliers
– Buyers
– Competitive rivalry among firms currently in the
industry
– Product substitutes
– Potential entrants to the industry
©2011 Cengage Learning. All rights reserved.
1–42
X
Five Forces Model of Competition (cont’d)
• Firms earn above-average returns by:
– Cost leadership
• Producing standardized products or services
– Differentiation
• Manufacturing differentiated products for which
customers are willing to pay a price premium
X
©2011 Cengage Learning. All rights reserved.
1–43
The Resource-Based Model of AboveAverage Returns
• Model Assumptions
– 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.
– Capabilities evolve and must be managed
dynamically.
• Dominance of the Internal Environment
– Differences in firms’ performances are due primarily
to their unique resources and capabilities rather than
structural characteristics of the industry.
– Firms acquire different resources and develop unique
capabilities.
©2011 Cengage Learning. All rights reserved.
1–44
X
FIGURE 1.3
The ResourceBased Model of
Above-Average
Returns
X
©2011 Cengage Learning. All rights reserved.
1–45
X
Resource-Based Model of Above-Average
Returns (cont’d)
Strategy:
Competitive Advantage
Resources
Capabilities
Core Competencies
1. Strategy is dictated by the
firm’s unique resources
and capabilities.
2. Find an environment in
which to exploit these
assets (where are the best
opportunities?)
Environment
X
©2011 Cengage Learning. All rights reserved.
1–46
Resources and Capabilities
• Resources
– Inputs into a firm’s
production process:
• Capital equipment
• Skills of individual
employees
• Patents or other
Intellectual Property
• Finances
• Talented managers
©2011 Cengage Learning. All rights reserved.
• Capabilities
– Capacity of a set of
resources to perform
in an integrative
manner
– A capability should not
be:
• So simple that it is
highly imitable.
• So complex that it
defies internal
steering and control.
1–47
X
Resource-Based Model (cont’d)
Resources
1. Identify the firm’s resources—
strengths and weaknesses
compared with competitors
Resources: inputs into a firm’s
production process
X
©2011 Cengage Learning. All rights reserved.
1–48
X
Resource-Based Model (cont’d)
Resources
Capability
Capability: capacity of an
integrated set of resources to
integratively perform a task or
activity.
2. Determine the firm’s
capabilities—what it can do
better than its competitors.
X
©2011 Cengage Learning. All rights reserved.
1–49
X
Resource-Based Model (cont’d)
Resources
Capability
Competitive Advantage
Competitive advantage:
ability of a firm to
outperform its rivals.
3. Determine the potential of
the firm’s resources and
capabilities in terms of a
competitive advantage.
X
©2011 Cengage Learning. All rights reserved.
1–50
X
Resource-Based Model (cont’d)
Resources
Capability
Competitive Advantage
Attractive Industry
4. Locate an attractive industry.
Attractive industry: an industry
with opportunities that can be
exploited by the firm’s resources
and capabilities.
X
©2011 Cengage Learning. All rights reserved.
1–51
X
Resource-Based Model (cont’d)
Resources
Capability
Competitive Advantage
Attractive Industry
Strategy Formulation
and Implementation
Strategy formulation and
implementation: strategic
actions taken to earn
above average returns.
©2011 Cengage Learning. All rights reserved.
5. Select a strategy that best
allows the firm to utilize its
resources and capabilities
relative to opportunities in
the external environment.
X
1–52
X
Resource-Based Model (cont’d)
Resources
Capability
Competitive Advantage
Attractive Industry
Strategy Formulation
and Implementation
Superior Returns
Superior returns: earning
above-average returns
©2011 Cengage Learning. All rights reserved.
X
1–53
X
Criteria for Resources and Capabilities That
Become Core Competencies
Valuable
Rare
Core
Competencies
Nonsubstitutable
©2011 Cengage Learning. All rights reserved.
Costly to Imitate
1–54
How Resources and Capabilities Provide
Competitive Advantage
Valuable Allow the firm to exploit opportunities or
neutralize threats in its external environment
Rare Possessed by few, if any, current and
potential competitors
Costly to imitate When other firms cannot obtain them or
must obtain them at a much higher cost
Nonsubstitutable The firm is organized appropriately to obtain
the full benefits of the resources in order to
realize a competitive advantage
©2011 Cengage Learning. All rights reserved.
1–55
Core Competencies
• When the four key criteria of resources and capabilities
are met, they become core competencies.
• Managerial competencies are especially important.
• Core competencies serve as a source of competitive
advantage, create value, and provide the opportunity for
above-average returns.
• Does it provide potential access to a wide variety of
markets?
• Does it significantly add to the customer value derived
from the end product?
• Can different elements of the company benefit from the
competency?
©2011 Cengage Learning. All rights reserved.
1–56
Why Two Models?
• Industrial Organization • Resource-Based
(I/O) Model
Model
– Focuses on the
environment outside
the firm.
– Focuses on the inside
of the firm
Successful strategy formulation and implementation
actions result only when the firm properly uses both
models.
©2011 Cengage Learning. All rights reserved.
1–57
Vision and Mission
• Vision
– A enduring picture of what the firm wants to be and, in
broad terms, what it wants to ultimately achieve.
• Stretches and challenges people and evokes
emotions and dreams.
• Effective vision statements are:
– Developed by a host of people from across the
organization.
– Clearly tied to external and internal environmental
conditions.
– Consistent with strategic leaders’ decisions and
actions.
©2011 Cengage Learning. All rights reserved.
1–58
Vision and Mission (cont’d)
• Mission
– Specifies the business or businesses in which the firm
intends to compete and the customers it intends to
serve.
– Is more concrete than the firm’s vision.
– Is more effective when it fosters strong ethical
standards.
©2011 Cengage Learning. All rights reserved.
1–59
Stakeholders
• Individuals and groups who can affect, and are
affected by, the strategic outcomes achieved and
who have enforceable claims on a firm’s
performance.
– Claims on the firm’s performance are enforced by the
stakeholder’s ability to withhold participation essential
to the firm’s survival.
– The more critical and valued a stakeholder’s
participation, the greater a firm’s dependency on it.
– Managers must find ways to either accommodate or
insulate the organization from the demands of
stakeholders controlling critical resources.
©2011 Cengage Learning. All rights reserved.
1–60
X
Stakeholder Involvement
• Two issues affect the extent of stakeholder
involvement in the firm:
– How to divide returns
to keep stakeholders
involved?
– How to increase
returns so everyone
has more to share?
©2011 Cengage Learning. All rights reserved.
1–61
FIGURE
1.4
The Three Stakeholder Groups
Which
stakeholder is
most important?
©2011 Cengage Learning. All rights reserved.
1–62
X
Stakeholders
Capital Market
Stakeholders
Capital Market Stakeholders
Shareholders
Major suppliers of capital
• Banks
• Private lenders
• Venture capitalists
X
©2011 Cengage Learning. All rights reserved.
1–63
Capital Market Stakeholders
• Shareholders and lenders expect the firm to
preserve and enhance the wealth they have
entrusted to it.
– Want the return on their investment (and, hence, their
wealth) to be maximized.
– Expect returns to be commensurate with the degree
of risk to the shareholder.
• Management must balance the interests of
shareholders and lenders with its concerns for
the firm’s future competitive ability.
©2011 Cengage Learning. All rights reserved.
1–64
X
Stakeholders (cont’d)
Capital Market
Stakeholders
Product Market
Stakeholders
Product Market Stakeholders
• Customers
• Suppliers
• Host communities
• Unions
X
©2011 Cengage Learning. All rights reserved.
1–65
Product Market Stakeholders
• Customers
– Demand reliable products at low prices
• Suppliers
– Seek loyal customers willing to pay highest
sustainable prices for goods and services
• Host communities
– Want companies willing to be long-term employers
and providers of tax revenues while minimizing
demands on public support services
• Union officials
– Want secure jobs and desirable working conditions
©2011 Cengage Learning. All rights reserved.
1–66
X
Stakeholders (cont’d)
Capital Market
Stakeholders
Product Market
Stakeholders
Organizational
Stakeholders
Organizational
Stakeholders
• Employees
• Managers
• Nonmanagers
X
©2011 Cengage Learning. All rights reserved.
1–67
Organizational Stakeholders
• Employees
– Expect a dynamic, stimulating, and rewarding work
environment.
– Are satisfied by a company that is growing and
actively developing their skills.
©2011 Cengage Learning. All rights reserved.
1–68
Strategic Leaders
• Strategic Leaders
– People located in different parts of the firm who are
using the strategic management process to help the
firm reach its vision and mission.
• Prerequisites for Effective Strategic Leadership
–
–
–
–
–
Hard work
Thorough analyses
Honesty
Desire for accomplishment
Common sense
©2011 Cengage Learning. All rights reserved.
1–69
Strategic Leaders (cont’d)
• Organizational Culture
– The complex set of ideologies, symbols, and core
values that are shared throughout the firm and that
influence how the firm conducts business.
• The Value of a Functional Organizational Culture
– Supports effective delegation of strategic
responsibilities
– Provides support for strategic leaders
– Encourages social energy
– Fosters respect for others
©2011 Cengage Learning. All rights reserved.
1–70
X
Predicting Outcomes of Strategic Decisions:
Profit Pools
• Profit Pool
– The total profits earned in an industry at all points
along the value chain
• Identifying the components of a profit pool:
– Define the pool’s boundaries.
– Estimate the pool’s overall size.
– Estimate size of each value-chain activity in the pool.
– Reconcile the calculations—which activity provides
the most profit potential?
©2011 Cengage Learning. All rights reserved.
1–71
Strategic Management Process
• Study the external and internal environments.
• Identify marketplace opportunities and threats.
• Determine your core competencies and how to
use them.
• Use strategic intent to leverage resources,
capabilities, and core competencies to win
competitive battles.
• Integrate formulation and implementation of
strategies.
• Seek feedback to improve strategies.
• Repeat
©2011 Cengage Learning. All rights reserved.
1–72
©2011 Cengage Learning. All rights reserved.
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Professional Reading List
• Local Daily Newspaper (Front Page and Business Section)
• Other current publications (Newsweek, WSJ, etc.)
• TV business shows and internet research
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Good to Great by Jim Collins
Built to Last by Jim Collins
Execution: The Discipline of Getting Things Done by Larry Bossidy
Competing for the Future by Gary Hamel
Leading the Revolution by Gary Hamel
The Discipline of Market Leaders by Michael Treacy
The 7 Habits of Highly Effective People by Stephen Covey
Who Moved My Cheese? By Spencer Johnson
– With Sniff, Scurry, Hem, and Haw (Who are You?)
©2011 Cengage Learning. All rights reserved.
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Discussion Questions
1. What is a strategy course about?
2. What is strategy?
3. What is happening in the strategic environment?
4. What is the industrial organization (IO) model?
5. What is the resource-based model?
6. Who are a firm’s key stakeholders?
7. What affects do firm stakeholders have on
strategy?
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©2011 Cengage Learning. All rights reserved.
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