4195 Chapter 1

Chapter 1
Strategic Management and

Strategic Competitiveness
Twenty-First Century
Competition
Globalization
The global
economy
Rapid
technological
change
Todays
Competitiv
e Markets
Increasing
importance
of
knowledge
and people
Strategic Competitiveness
Formulation and
implementation of
a superior valuecreating strategy
Commitments and actions to achieve

above-average performance and returns
What the firm

will do
Competitive
advantage
What the firm

will not do
Increasing
Increasing
The Global Competitive

Landscape
Market volatility and instability due to
the rapid pace of change in markets
Blurring of market boundaries
Globalized flow of financial capital
Need for flexibility, speed, innovation,
and integration in the use of technology
Strategic and operational complexity
of global-scale competition
Rising product quality standards
Decreasi
Decreasi
ng
ng
Traditional time for adapting to change

Traditional sources of competitive advantage
Traditional managerial mindset
Hypercompetition
Global
economy
Use of
price-quality
positioning to
build market
presence
Strategic options in
hypercompetitive
environments
Creation of new
know-how and
use of first-mover
advantage
Technology
Protection or
invasion of
established
geographic or
product markets
Competitive Success Factors

Are market/
customerneeds
oriented
Have an
entrepreneurial
/
opportunistic
mindset
Make effective
use of valuable
competencies
Top
Corporate
Performer
s
Offer new
and innovative
products and
services
Technology and Technological

Changes
Increasing rate of technology
diffusion and the emergence
of disruptive technologies
Technology trends
impacting the
global competitive
environment
The information age: Internet

and the global proliferation of
low-cost computing power
Increasing knowledge intensity
as an intangible source of
competitive advantage
The Industry Organization (I/O) Model

of Above-Average Returns
Diversificatio
n
Product
differentiatio
n
Industry
concentratio
n
Barriers to
market entry
Economies
of scale
The Firms
Strategic
Choices
Market
frictions
Figure 1.2
The I/O Model of
Above-Average
Returns
I/O Model Assumptions

1.The external environment imposes pressures
and constraints that determine strategic
choices.
2.Similarity in strategically relevant resources
causes competitors to pursue similar strategies.
3.Resource differences among competitors are
short-lived due to resource mobility across firms.
4.Strategic decision makers are rational and
engage in profit-maximizing behaviors.
Five Forces Model of

Competition
Substitutes
Substitutes
Supplier
Supplier
ss
Industry
Industry
Rivalry
Rivalry
Potential
Potential
Entrants
Entrants
Buyers
Buyers
Five Forces Model

Assumptions
Industry profitability (i.e., rate of return on
invested capital relative to cost of capital) is a
function of interactions among the five forces.
Industry attractiveness equates to its
profitability potential for earning aboveaverage returns by:
Producing standardized goods or services at costs
below competitor costs (a cost leadership strategy).
Producing differentiated goods or services for which
2015 Cengage
customers
are willing to pay a price premium (a
Learning.
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reserved. May not be
strategy).
copied, differentiation
scanned, or
duplicated, in whole or in
part, except for use as
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distributed with a certain
112
The Resource-Based Model

of Above-Average Returns
e
v
i
t
i
t
e
p
m
o
c
e
g
g
n
a
i
Core
t
d
l
n
i
a
u
v
B
ad Capability competenc
e
An integrated
set of
Resources
resources
Physical, human, and
organizational
capital
(tangible and
intangible)
A source of
competitive
advantage
Resource-Based Model Assumptions

1. Firms acquire different resources.
2. Firms develop unique capabilities based
on how they combine and use
resources.
3. Resources and certain capabilities are
not highly mobile across firms.
4. Differences in resources and capabilities
are the bases of competitive advantage
and a firms performance rather than its
industrys structural characteristics.
Resources As Core
Competencies
Costly to imitate
Rare
How resources
become core
competencies
Nonsubstitutable
Valuable
Figure 1.3
The Resource-Based
Model of Above-Average
Returns
Strategic Decision Making

Industry Organization
(I/O) Model
Competitive
Strategy
Decision
Resource-Based
Model
Vision Statement
A
Success
ful
Vision
is an enduring word picture of

what the firm wants to be and
expects to achieve in the future.
stretches and challenges its
people.
reflects the firms values and
aspirations.
is most effective when its
development includes all
stakeholders.
recognizes the firms internal and
external competitive
environments.
is supported by upper
management decisions and
actions.
Sample Vision Statements
Mission Statement
An
Effecti
ve
Missio
n
specifies the present business

or businesses in which the firm
intends to compete and
customers it intends to serve.
has a more concrete, nearterm focus on current product
markets and customers than
the firms vision.
should be inspiring and
relevant to all stakeholders.
Mission Statement Examples
Stakeholders
Can affect development of the
firms vision and mission
Primary
stakeholders
(individuals,
groups, and
organizations)
Are affected by the strategic

outcomes achieved by the firm
Can have enforceable claims
on the firms performance
Are influential when in control
of critical or valued resources
Figure 1.4
The Three
Stakeholder
Groups
The Strategic Management Process:

The ASP Process
Analyses
C2: The external environment
Strategies (contd)
C3: The internal organization
C7: Diversified portfolio
Strategies
management
C4: Business-level strategies
C8: International strategies
C5: Marketplace competition
C9: Cooperative strategies
C6: Corporate-level
strategies
Performance
C10:
C11:
C12:
C13:
Governance mechanisms
Organizational structure
Strategic leadership
Strategic entrepreneurship

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Chapter 1

Strategic Management and

Commitments and actions to achieve

What the firm

What the firm

The Global Competitive

Traditional time for adapting to change

Competitive Success Factors

Technology and Technological

The information age: Internet

The Industry Organization (I/O) Model

I/O Model Assumptions

Five Forces Model of

Five Forces Model

The Resource-Based Model

Resource-Based Model Assumptions

Strategic Decision Making

is an enduring word picture of

Sample Vision Statements

specifies the present business

Mission Statement Examples

Are affected by the strategic

The Strategic Management Process:

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