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© 2006 by Nelson, a division of Thomson Canada Limited. 1-1
Strategic Management & Strategic Competitiveness
Chapter One
© 2006 by Nelson, a division of Thomson Canada Limited. 1-2
Chapter 5Bus. - Level
Strategy
Chapter 6Competitive
Dynamics
Chapter 7Corp. - Level
Strategy
Chapter 9International
Strategy
Chapter 10CooperativeStrategies
Chapter 8Acquisitions &Restructuring
Chapter 11
CorporateGovernance
Chapter 12Structure& Control
Chapter 13Strategic
Leadership
Chapter 14Entrepreneurship & Innovation
Str
ateg
icIn
pu
ts
Str
ateg
icA
ctio
ns
Str
ateg
ic O
utc
om
esChapter 4Internal
Environment
Chapter 3External
Environment Strat. Intent
Strat. Mission
The Strategic .
Management .
Process
Strategy Formulation Strategy Implementation
Strategic Competitiveness
Chapter 1
Above Average Returns
Chapter 2 Feedback
Strategic Competitiveness
Chapter 1
“Canada is rather cool”**The Economist 2003
Canada is home not only to world-class commercial competitors but to
dominant companies in their industries
© 2006 by Nelson, a division of Thomson Canada Limited. 1-3
© 2006 by Nelson, a division of Thomson Canada Limited. 1-4
Strategic Management and Strategic Competitiveness
Knowledge objectives1. Define strategic competitiveness, competitive
advantage and above average returns.
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.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-5
Strategic Management and Strategic Competitiveness
Knowledge objectives – continued…
5. Describe strategic intent and strategic mission and discuss their value.
6. Define stakeholders and describe their ability to influence organizations.
7. Describe strategists’ work.
8. Explain the strategic management process.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-6
Desired Strategic Outcomes
Strategic CompetitivenessAchieved when a firm successfully formulates and implements a value-creating strategy.
Occurs when a firm develops a strategy that competitors are not simultaneously implementing.
Sustained Competitive Advantage
Above-Average ReturnsReturns in excess of what an investor expects to earn from other investments with similar risk.
Provides benefits which current and potential competitors are unable to duplicate.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-7
Important definitions
RiskAn investor’s uncertainty about the economic gains or losses resulting from a particular investment.
Returns equal to what an investor expects from other investments with similar amount of risk.
Average returns
Strategic management processThe full set of committee's decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-8
The Strategic Management Process
The full set of commitments, decisions, The full set of commitments, decisions, and actions required for a firm to and actions required for a firm to
achieve strategic competitiveness and achieve strategic competitiveness and earn above-average returns.earn above-average returns.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-9
The Strategic Management Process
© 2006 by Nelson, a division of Thomson Canada Limited. 1-10
What is Strategy?
• An integrated and coordinated set of commitments & actions designed to exploit core competencies and gains and gain a
competitive advantage.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-11
What is Strategy?“A unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.” (Glueck, 1980:9)
“The pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.” (Quinn, 1980)
“A good strategy… neutralizes threats and exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses.” (Barney, 1997:17)
“A pattern of resource allocation that enables firms to maintain or improve their performance.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-12
Intended, Emergent and Realized Strategies
© 2006 by Nelson, a division of Thomson Canada Limited. 1-13
Alternative Models of Superior Returns
Industrial Organization Model
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
Superior Returns
Resource-BasedModel
Resources
Capabilities
Competitive Advantage
An Attractive Industry
Strategy Implementation
Superior Returns
OIOI
© 2006 by Nelson, a division of Thomson Canada Limited. 1-14
Four Attributes of Resources and Capabilities (Competitive Advantage)
The firm is organized appropriately to The firm is organized appropriately to obtain the full benefits of the resources in obtain the full benefits of the resources in order to realize a competitive advantage. order to realize a competitive advantage.
ValuableValuable Allow the firm to exploit opportunities or Allow the firm to exploit opportunities or neutralize threats in its external neutralize threats in its external environment.environment.
RareRare Possessed by few, if any, current and Possessed by few, if any, current and potential competitors.potential competitors.
Costly to imitateCostly to imitate When other firms cannot obtain them or When other firms cannot obtain them or must obtain them at a much higher cost.must obtain them at a much higher cost.
Organized to be Organized to be exploited exploited
Res
ourc
es a
nd C
apab
ilit
ies
Res
ourc
es a
nd C
apab
ilit
ies
© 2006 by Nelson, a division of Thomson Canada Limited. 1-15
Core CompetenciesCore Competencies
Resources and capabilities that meet these four criteria become a source
of:
ValuableValuable
RareRare
Costly to imitateCostly to imitate
Organized to be Organized to be exploitedexploited
Core CompetenciesCore Competencies
Res
ourc
es a
nd C
apab
ilit
ies
Res
ourc
es a
nd C
apab
ilit
ies
© 2006 by Nelson, a division of Thomson Canada Limited. 1-16
Core Competencies are the basis for a firm’s
Competitive Competitive advantageadvantage
Strategic Strategic competitivenesscompetitiveness
Ability to earn Ability to earn above-average above-average
returnsreturns
Core CompetenciesCore Competencies
© 2006 by Nelson, a division of Thomson Canada Limited. 1-17
CEO’s ranking of business importance
1. A strong & well thought out strategy
2. Maximizing customer satisfaction & loyalty
3. Business leadership, quality products & services
4. Concern for consistent profits
5. Strong & consistent profits
© 2006 by Nelson, a division of Thomson Canada Limited. 1-18
21st Century Values
• Flexibility
• Speed to market
• Innovation
• Integration
• Handling challenges from constantly changing conditions
• Hypercompetition
© 2006 by Nelson, a division of Thomson Canada Limited. 1-19
The Global Economy
One in which goods, services, people, skills, and ideas move freely across geographic
borders
© 2006 by Nelson, a division of Thomson Canada Limited. 1-20
World competitiveness ratings
© 2006 by Nelson, a division of Thomson Canada Limited. 1-21
Technology and Technological Change
• Increasing rate of technological change and diffusion
Perpetual innovation
• The information agePersonal computers, cellular phones, artificial
intelligence, virtual reality, massive databases, electronic networks, e-business
• Increasing knowledge intensityInformation, intelligence, expertise, strategic
flexibility.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-22
Internally focused, it is the leveraging of a firms resources, capabilities, and
core competencies to establish the firms goals in the competitive
environment.
Strategic Intent
Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies. Externally focused, it is a statement of a
firms unique purpose and the scope of it’s operations in product and market
terms.
Strategic Mission
© 2006 by Nelson, a division of Thomson Canada Limited. 1-23
Stakeholders
© 2006 by Nelson, a division of Thomson Canada Limited. 1-24
Organizational strategists
Top level managers, executives, top management team, or general managers
© 2006 by Nelson, a division of Thomson Canada Limited. 1-25
Organizational culture
A complex set of ideologies, symbols and core values that influence how the firm conducts it’s business.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-26
Predicting Outcomes of Strategic Decisions
1. Define the profit pool’s boundaries.2. Estimate the pool’s overall size.3. Estimate the size of the value chain.4. Reconcile the calculations.
The strategic management process calls for disciplined approaches to the development of competitive advantage.