Strategic MGT & Strategic Competitiveness 1

Strategy: is an integrated and coordinated set of commitments and actions designed to exploit
core competencies and gain a competitive advantage.

Above-Average Returns: are returns in excess of what an investor expects to earn from other
investments with a similar amount of risk.
Strategic Competitiveness : is achieved when a firm successfully formulates and implements a
value-creating strategy.
Strategic Management Process: The full set of commitments, decisions, and actions required for
a firm to achieve strategic competitiveness and earn above-average returns.
Twenty-First Century Competition

Today’s competitive markets
• The global economy
• Globalization
• Rapid technological change
• Increasing importance of knowledge
and people
Competitive Advantage
Formulation and implementation of
a superior value-creating strategy
Commitments and actions to achieve

Performance and above-average returns
What the firm will do Competitive advantage What the firm will not do
The Strategic Management Process
• Analyses
– The external environment vision and
– The internal organization mission
• Strategies
Strategy Formulation:
– Business-level strategies
– Marketplace competition
– Corporate-level strategies
– Diversified portfolio management
– International strategies
– Cooperative strategies
Strategy Implementation:
– Governance mechanisms
– Organizational structure
– Strategic leadership
– Strategic entrepreneurship
• Performance
– Strategic competitiveness
– Strategic Above-average returns
The Global Competitive Landscape

Increasing：
• 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
Decreasing:
• Traditional time for adapting to change
• Traditional sources of competitive advantage
• Traditional managerial mindset
Technology and Technological Changes

Technology trends impacting the global competitive environment:
• Increasing rate of technology diffusion and the emergence of disruptive technologies
• The information age: Internet and the global proliferation of low-cost computing power
• Increasing knowledge intensity as an intangible source of competitive advantage
Hypercompetition
Global economy Strategic options in Technology

hypercompetitive environments
▪ Use of price-quality positioning to build market presence

▪ Creation of new know-how and use of first-mover advantage
▪ Protection or invasion of established geographic or product markets
Competitive Success Factors
Top corporate performers
• Have an entrepreneurial/opportunistic mindset
• Are market/ customer-needs oriented
• Make effective use of valuable competencies
• Offer new and innovative products and services
Strategic Flexibility
• Strategic Flexibility:
– Involves coping with the uncertainty and risks of hypercompetitive
environments.
– Must first overcome built-up organizational inertia.
– Requires developing the capacity for continuous learning and applying the new
and updated skills sets and competencies to the firm’s competitive advantage.
Strategic Choices
• Economies of scale
• The firm’s strategic choices
• Diversification Strategic
• Product differentiation Choices
• Industry concentration
• Market frictions
The Industry Organization (I/O) Model of Above-Average Returns

I/O Model Assumptions
• The external environment imposes pressures and constraints that determine strategic
choices.
• Similarity in strategically relevant resources causes competitors to pursue similar
strategies.
• Resource differences among competitors are short-lived due to resource mobility across
firms.
• Strategic decision makers are rational and engage in profit-maximizing behaviors.
Five Forces Model of Competition
Substitutes
Suppliers Industry rivalry Buyers
Potential entrants
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 above-average
returns by:
– producing standardized goods or services at costs below competitor costs (a cost
leadership strategy).
– producing differentiated goods or services for which customers are willing to pay
a price premium (a differentiation strategy).
The Resource-Based Model of Above-Average Returns

Building competitive advantage:
Core competence
A source of competitive advantage
Capability
An integrated set of resources
Resources
Physical, human, and organizational capital
(tangible and intangible)
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
firm’s performance rather than its industry’s structural characteristics.
Resources As Core Competencies

How resources become core competencies
▪ Costly to imitate
▪ Rare
▪ Valuable
▪ No substitutable
The Resource-Based Model of Above-Average Returns

Strategic Decision Making
Industry organization (I/O) model Resource-based model
Competitive strategy
decision

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Strategy: is an integrated and coordinated set of commitments and actions designed to exploit

core competencies and gain a competitive advantage.

Twenty-First Century Competition

Commitments and actions to achieve

The Strategic Management Process

The Global Competitive Landscape

Technology and Technological Changes

Global economy Strategic options in Technology

▪ Use of price-quality positioning to build market presence

The Industry Organization (I/O) Model of Above-Average Returns

Five Forces Model of Competition

Suppliers Industry rivalry Buyers

The Resource-Based Model of Above-Average Returns

Resource-Based Model Assumptions

Resources As Core Competencies

The Resource-Based Model of Above-Average Returns

Industry organization (I/O) model Resource-based model

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