competitive strategy
Alku_1301
PowerPointLecture121.pptx
Lecture 1: Strategic Management Process
HI6006 Competitive Strategy
An Overview
Learning Objectives of this lecture
Gain an overview of the subject
Understand the importance of Vision, Values, Mission and Strategy
Appreciate the conflicting priorities of various stakeholders
Gain an introduction to some stock models used in strategy formulation
Terminology
Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.
Strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
Competitive advantage occurs when a firm implements a strategy that creates superior value for customers, which competitors are unable to duplicate it or find too costly to imitate it.
Strategy Development and Implementation Process
Analyse the External Environment and the Internal Organization
Goal: To determine Resources, Capabilities and Core Competencies
Formulate Vision and Mission and Develop the Company Strategy
Proceed with Strategy Implementation
Goal: Achieving Strategic Competitiveness and Above Average returns
Vison, Values, Mission, Strategy
Vision – a clear picture of what the company is striving to become
Values – principles and beliefs that are to be upheld and not violated in this firm
Mission – a specific statement describing where and how the firm intends to compete
Strategy – a set of plans to accomplish the above
Stakeholders
Activity
Consider the Vision of McDonalds:
‘To be the world’s leading quick-service restaurant’
Consider McDonald’s core values ?
What is McDonald’s mission?
What Stakeholder groups can we identify?
Conflicting Priorities
Different stakeholder groups have different goals
Managing stakeholder conflict is part of strategy
Activity: consider the stakeholders of McDonalds and any conflicts that could occur
A Changing Landscape
Fundamental Changes Occuring:
Globalisation
Technology
Industry boundaries blurring
E.g.: Entertainment Industry
Traditional sources of competitive advantage
New managerial mindset needed
Hyper-Competitive Business Environment
Hyper-competitive Business Environment
Market Instability
Strategic Maneuvering
New Industries based on technology advances
Escalating Competition
Dynamic, Rational, Two-Stage Process
Dynamic Process
Ever-changing markets and competition need to be coordinated with a firm’s evolving inputs
Rational Approach
Used to achieve strategic competitiveness and earn above-average returns.
Formulation and implementation
Must be simultaneously integrated to successfully employ the strategic management process.
Risks and Returns
Risk refers to an investor’s uncertainty about the economic gains or losses that will result from a particular investment.
Average returns are returns equal to what investors can expect to earn from other investments with a similar amount of risk.
Above-average returns are returns greater than those investors can expect to earn from other investments with a similar amount of risk.
The Increasing Role of Technology
Technology Trends
Technology Diffusion and Disruptive Technologies
The Information Age
Increasing Knowledge Intensity
Some Strategy Formulation Tools
External Environment Analysis (PESTEL)
Input-Output Model
Five Forces Model
Generic Strategies
Resource-Based View
External Environment
PESTEL
Political aspects
Economic considerations
Social dynamics
Technology advances
Environmental concerns
Legal and ethical matters
Input-Output Model (I/O)
Grounded in economics, the I/O model has four underlying assumptions:
The external environment is assumed to impose pressures and constraints that determine strategies that will result in above-average returns.
Most firms competing within an industry or a segment of that industry are assumed to possess similar resources and pursue similar strategies.
Input-Output Model (I/O)
Resources are highly mobile (similar) across firms, so any resource differences that might develop between firms will be short lived.
Organisational decision makers are assumed to be rational and committed to acting in the firm’s best interests, i.e. will use ‘profit-maximising behaviour’.
The Five Forces Model
The Five Forces Model (Porter)
An analytical tool used to help firms understand the attractiveness of an industry as measured by its profitability potential
Assumes that an industry’s profitability is a function of interactions among the five forces
Suppliers, buyers, rivalry, product substitutes and potential new entrants to the industry.
Two Generic Strategies
1. Cost leadership strategy - produce standardised goods and services at costs below those of competitors
2. Differentiation strategy - produce differentiated goods or services for which customers are willing to pay a price premium
Resource-Based View
An organisation has its resources and capabilities
When combined these represent a unique set of ‘core competencies’
Those ‘core competencies’ allow a firm to compete and develop ‘sustainable competitive advantage’
[more detail in week 3]
Introduction to Case Analysis
Read the Case – looking to identify (highlight) key strategic issues
Decide which Strategy Model or theoretical concepts are relevant to this case
Use the model as your ‘template’ to summarise the key issues identified in the case
Form a picture of how this company (case) applies the strategy model or theoretical concepts
Evaluate how well the company (case) has applied Strategy Theory
Tutorial Activities in small groups
Examine the Zara mini-case (p73) and comment on Zara’s vision, values, mission, and strategies
Examine the Welspun mini-case (p80) and comment on the firm’s resources and capabilities
Examine the Proctor and Gamble case (p85) and comment on the core competencies and how they are used to create customer value
