PUJA

PART 1:

STRATEGIC MANAGEMENT INPUTS

CHAPTER 1: Strategic Management & Strategic Competitiveness

Edgar R. Ramírez Solís Ph.D.

Authored by:

Marta Szabo White. Ph.D

Georgia State University

KNOWLEDGE OBJECTIVES

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

KNOWLEDGE OBJECTIVES

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

IMPORTANT DEFINITIONS

● STRATEGIC COMPETITIVENESS - achieved when a firm successfully formulates and implements a value-creating strategy

● STRATEGY - an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage

● COMPETITIVE ADVANTAGE - when a firm implements a strategy that creates superior value for customers; competitors are unable to duplicate it or find too costly to imitate it

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

IMPORTANT DEFINITIONS

● RISK - an investor’s uncertainty about the economic gains or losses that will result from a particular investment

● ABOVE-AVERAGE RETURNS - returns in excess of what an investor expects to earn from other investments with a similar amount of risk

● AVERAGE RETURNS - returns equal to those an investor expects to earn from other investments with a similar amount of risk

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

THE STRATEGIC MANAGEMENT PROCESS

■ FIRST: External environment and internal organization are analyzed to determine resources, capabilities, and core competencies—the sources of “strategic inputs.”

■ NEXT: Vision and mission are developed; strategies are formulated.

■ THEN: Strategies are implemented with the goal of achieving strategic competitiveness and above-average returns.

■ DYNAMIC PROCESS: Continuously changing markets and industry conditions must match evolving strategic inputs.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

THE STRATEGIC MANAGEMENT PROCESS

The text

is divided into three parts.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

FIRMS CAN EARN ABOVE-AVERAGE RETURNS:

● Cost Leadership Strategy – producing standardized goods or services at costs below those of competitors

● Differentiation Strategy - producing differentiated goods or services for which customers are willing to pay a price premium

The I/O model suggests that above-average returns are earned when firms are able to effectively study the external environment as the foundation for identifying an attractive industry and implementing the appropriate strategy.

THE I/O MODEL of ABOVE-AVERAGE RETURNS

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

THE RESOURCE-BASED MODEL of ABOVE-AVERAGE RETURNS

A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner.

Capabilities evolve over time and must be managed dynamically in pursuit of above-average returns.

Core competencies are resources and capabilities that serve as a source of competitive advantage.

KEY WORD: INTEGRATIVE

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THE RESOURCE-BASED MODEL OF ABOVE-AVERAGE RETURNS

When these four criteria are met, resources and capabilities become core competencies:

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

TWO MODELS OF STRATEGIC DECISION MAKING

Evidence indicates that both models yield insights that are linked to successfully selecting and using strategies.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

VISION, MISSION AND ETHICS

The probability of forming an effective mission increases when employees have a strong sense of the ethical standards that guide their behaviors.

Business ethics

are a

vital

part

of:

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hort

STAKEHOLDERS

Are there individuals, groups, and organizations who have a stake in the organization

● Who can affect the firm’s vision and mission?

● Are affected by the strategic outcomes achieved?

● Have enforceable claims on the firm’s performance?

Competitive Advantage

Firms effectively managing stakeholder relationships outperform those that do not.

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

THE COMPETITIVE LANDSCAPE

THE GLOBAL ECONOMY

■ The European Union has become one of the world’s largest markets, with 700 million potential customers

■ China has become the second largest economy in the world surpassing Japan

■ India, the world’s largest democracy, has an economy that now ranks as the fourth largest in the world

©2013 Cengage Learning.  All Rights Reserved.  May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.