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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.
“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. 1-2
© 2006 by Nelson, a division of Thomson Canada Limited. 1-3
Strategic Management & Competitiveness
Knowledge Objectives1. Define strategic competitiveness, competitive advantage
and above average returns.2. Describe the 21st century competitive landscape & ex-
plain how globalization & 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.5. Describe strategic intent and strategic mission and
discuss their value.6. Describe stakeholders & their ability to influence firms.7. Describe strategists’ work & the strategic mgmt. process.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-4
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. 1-5
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 commitments, 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. 1-6
The Strategic Management
Process
Chapter 5: Bus.-Level Strategy
Chapter 6:Competitive Dynamics
Chapter 7:Corp.-Level
Strategy
Chapter 8:Acquisition & Restructuring
Chapter 9:International
Strategy
Chapter 10:Cooperative
Strategy
Strategy Formulation
Chapter 11:Corporate
Governance
Ch. 12: Org. Structure & Controls
Chapter 13:Strategic
Leadership
Chapter 14:Org. Renewal & Innovation
Strategy Implementation
StrategicActions
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . &
Performance
Chapter 3:The External Environment
Chapter 4:The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 1: Strategic
ManagementStrategic
Competitiveness
Chapter 1: Strategic
ManagementStrategic
CompetitivenessStrategic Mission & Strategic Intent
© 2006 by Nelson, a division of Thomson Canada Limited. 1-7
What is Strategy?
• An integrated and coordinated set of commitments & actions designed to exploit core competencies and gain a
competitive advantage.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-8
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. 1-9
Intended, Emergent & Realized Strategies
IntendedStrategies
RealizedStrategiesDeliberate
Strategies
EmergentStrategies
UnrealizedStrategies
Thus, strategy can emerge from“a Pattern in the stream of decisions or actions”
© 2006 by Nelson, a division of Thomson Canada Limited. 1-10
Alternative Models of Superior ReturnsIndustrial 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. 1-11
Four Attributes of Resources and Capabilities (Competitive Advantage)
Rare possessed by few, if any, current and potential competitors
Costly to when other firms either can’t obtain them Imitate or must obtain at a much higher cost
Organized supported by the appropriate structure, to be controls, and rewards Exploited
* an *
Res
ourc
es a
nd C
apab
ilit
ies
Res
ourc
es a
nd C
apab
ilit
ies
Valuable allow firm to neutralize threats or exploit opportunities in its external environment
© 2006 by Nelson, a division of Thomson Canada Limited. 1-12
Resources and capabilities that meet these four criteria become a source of:
Rare
Costly to Imitate
Organized to be
Exploited
Valuable
* an *
Core CompetenciesCore CompetenciesCore Core CompetenciesCompetencies
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. 1-13
* an *
Core CompetenciesCore CompetenciesCore Core CompetenciesCompetencies
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
© 2006 by Nelson, a division of Thomson Canada Limited. 1-14
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. 1-15
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. 1-16
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. 1-17
World competitiveness ratingsPopulation > 20 million (Ranks) Population < 20 million (Ranks)
Country 2003 2002 2001 2000 Country 2003
2002 2001 2000
USA 1 1 1 1 Finland 1 2 4 3
Australia 2 3 3 3 Singapore 2 6 3 2
Canada 3 2 2 2 Denmark 3 4 10 10
Malaysia 4 6 10 9 Hong Kong 4 10 2 8
Germany 5 4 4 4 Switzerland 5 3 6 4
Taiwan 6 7 5 8 Luxembourg 6 5 5 6
U.K. 7 5 6 5 Sweden 7 7 7 7
France 8 9 8 7 Netherlands 8 1 1 1
Spain 9 8 7 8 Iceland 9 11 11 11
Thailand 10 13 14 13 Austria 10 8 9 12
Japan 11 11 9 10 Ireland 11 9 8 5
China 12 12 12 11 Norway 12 12 14 9
© 2006 by Nelson, a division of Thomson Canada Limited. 1-18
Technology and Technological Change
• Increasing rate of tech. change and diffusionPerpetual 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. 1-19
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. 1-20
StakeholdersGroups who are affected by firm’s performance & who
have claims on its performance
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders
Firm
Capital Market
Stock market/Investors
Debt suppliers/Banks
Product Market
Primary Customers Host CommunitiesUnionsSuppliers
Organizational
EmployeesManagersNonmanagers
© 2006 by Nelson, a division of Thomson Canada Limited. 1-21
Organizational strategists
Top level managers, executives, top management team, or general managers
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. 1-22
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.
© 2006 by Nelson, a division of Thomson Canada Limited. 1-23
The Strategic Management Process
Chapter 5: Bus.-Level Strategy
Chapter 6:Competitive Dynamics
Chapter 7:Corp.-Level
Strategy
Chapter 8:Acquisition & Restructuring
Chapter 9:International
Strategy
Chapter 10:Cooperative
Strategy
Strategy Formulation
Chapter 11:Corporate
Governance
Ch. 12: Org. Structure & Controls
Chapter 13:Strategic
Leadership
Chapter 14:Org. Renewal & Innovation
Strategy Implementation
StrategicActions
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . &
Performance
Chapter 3:The External Environment
Chapter 4:The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 1: Strategic
ManagementStrategic
Competitiveness
Chapter 1: Strategic
ManagementStrategic
CompetitivenessStrategic Mission & Strategic Intent
Chapter 1: Strategic
ManagementStrategic
CompetitivenessStrategic Mission & Strategic Intent