Maral Jamalova

Lecture 1. Strategic Management and Strategic

Competitiveness Monday, September 16,
2024
Introduction
What is Strategic Management?
• Strategic Management is the set of actions
and decisions that determine the long-term
performance of a firm.
• Helps firms achieve strategic
competitiveness and above-average returns.
Key Concepts: Strategic
Competitiveness &
Strategy
• Strategic Competitiveness: Achieved
when a firm successfully formulates and
implements value-creating strategies.
• Strategy: An integrated set of
commitments and actions designed to
exploit core competencies and gain
competitive advantage.
• Competitive Advantage: Gained when
competitors are unable to duplicate or find
too costly to imitate.
Strategic Management Process

Strategy Formulation: Analyzing the external

environment and internal resources.

Strategy Implementation: Putting the chosen

strategy into action.

Feedback: Monitoring results and adjusting where

necessary.
 The Competitive
Landscape
Globalization
• The increasing interconnectedness of markets worldwide allows
goods, services, people, and information to flow across borders.
• Firms face competition not just from local companies but from
global players.
Technological Advancements
• Rapid tech changes (e.g., AI, cloud computing) reshape industries
and create new competitive pressures.
• Firms need to continuously innovate and adapt to keep up with
disruptive technologies.
Hypercompetition
• Industries today face hypercompetition, where the pace of
competition is accelerating and markets are in a constant state of
flux.
McDonald's Case Study (Part
1):Crisis (2003)
In 2003, McDonald’s saw its first quarterly loss since its
founding. Stock prices dropped, and customer
satisfaction waned.

The fast-food giant failed to keep up with changing

customer preferences for healthier options and more
convenient services.

Competitors like Subway and Starbucks gained market

share by offering products that aligned better with
emerging trends.
McDonald's Case
Study (Part 2):
Strategic Shift
McDonald's leadership realized the need
for change. They moved away from
aggressive expansion and refocused on:
• Product Innovation: Introduced
premium salads, chicken
sandwiches, and healthier options.
• Operational Efficiency:
Upgraded stores, added McCafes,
and expanded hours.
• Customer-Centric Approach:
Listened to customer demands for
healthier, convenient, and value-
driven products.
 The I/O Model of Above-Average Returns
• This model suggests that a firm’s external
The environment, rather than internal capabilities,
is the primary determinant of its ability to earn
Industrial above-average returns.

Organizati Key Points:

• Firms should analyze their industry’s
on (I/O) structure and find the most attractive
industry to compete in.
Model • Industry attractiveness is defined by factors
such as the degree of competition, barriers
to entry, and potential for profitability.
Example Industries
• High-tech sectors, pharmaceuticals, and luxury
goods are examples of industries with the
potential for above-average returns due to
strong entry barriers and innovation.
 The Resource-Based View (RBV) Model
• The RBV suggests that internal resources and
capabilities are the key to a firm's success, not
just external factors.

Resource- Resources can be tangible (factories, machines)

or intangible (brand, culture, patents).
Based A capability is the capacity for a set of
resources to perform a task or an activity in an
Model (1) 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 for a firm over its rivals. Core
competencies are often visible in the form of
organizational functions.
 To achieve a sustained competitive advantage,
Resource- resources must be:
• Valuable: Enable the firm to exploit
Based opportunities.
• Rare: Not possessed by competitors.
Model (2) • Costly to Imitate: Difficult or expensive
for competitors to copy.
• Non-Substitutable: Cannot be replaced
by other resources.
 Vision Statement
• The vision statement outlines what a company
Vision and aspires to become in the future. It’s future-
oriented and idealistic.
Mission • Example: McDonald's vision is "to be the
world’s best quick-service restaurant."
Statement Mission Statement
s • The mission statement is more practical and
focused on what the company does now, the
markets it serves, and its core objectives.
• Example: McDonald's mission is "to be the best
employer and deliver operational excellence to
customers in every restaurant"​.
 McDonald’s Vision: “To be the world’s
Vision and best quick-service restaurant.”
Mission Ford’s Original Vision: "To make the
automobile accessible to every
Examples: American."
Examples A clear vision and mission help guide
strategic decision-making and ensure
that all stakeholders understand the
company’s direction.
 Who are Stakeholders?
• Stakeholders are individuals, groups, or
organizations that affect or are affected by a
firm's activities.
• They are critical to the success of the firm and
Stakehold can influence strategy.
ers Types of Stakeholders:
• Capital Market Stakeholders: Shareholders,
Overview investors, and creditors who provide financial
capital.
• Product Market Stakeholders: Customers,
suppliers, communities, and unions.
• Organizational Stakeholders: Employees,
managers, and non-managerial staff.
 Capital Market Stakeholders
• These stakeholders provide the financial
resources needed to operate and grow the
business.
Managing • They expect competitive returns on their
Stakehold investment.
Product Market Stakeholders
er • Customers expect quality products at
Relations affordable prices, while suppliers want stable,
long-term contracts. Communities seek jobs
and economic benefits.
Organizational Stakeholders
• Employees expect fair wages, growth
opportunities, and a positive work environment.
Firms must balance their needs with those of
other stakeholders.
 Role of Strategic Leaders
• Strategic leaders shape the vision and strategy
of the firm. They guide the firm through
Strategic competitive and operational challenges.
• Leadership involves making tough decisions,
Leadershi managing risk, and ensuring that all parts of
the organization are aligned with the strategy.
p Key Leadership Qualities
• Visionary thinking, adaptability, effective
communication, and the ability to inspire and
motivate employees.
 McDonald's Strategic Leadership (2003-
McDonald' 2009)

s • McDonald's leadership played a crucial role in

turning the company around.
Leadershi • They shifted focus from rapid expansion to
improving operational efficiency and product
p Example offerings.
• By listening to customer feedback and adapting
to new trends, leadership helped McDonald's
regain market leadership​.
Globalizat
ion and Globalization and its Impact
• Globalization has led to increased competition
Strategic from firms around the world.
• Firms must now consider global competitors
Managem and customer preferences across borders.

ent McDonald’s Example

• McDonald’s operates in 118 countries and
tailors its offerings to local tastes and cultures.
This requires strategic thinking and adaptation​.
 What is Hypercompetition?
• Hypercompetition refers to an environment
where there is intense and continuous
competitive pressure.
• Companies must be prepared to innovate
rapidly and stay agile to maintain competitive
Hypercompetit advantages.
ion Characteristics:
• Short product life cycles, rapid technological
advances, and constantly shifting market
dynamics
Technology
and
Strategic • Technological Advancements: Technologies
such as AI, cloud computing, and automation
Manageme are reshaping industries.

nt : Role of • Disruptive Technologies: These create new

markets or disrupt existing ones (e.g.,
Technology smartphones disrupting the camera industry).
Firms must adopt and integrate new technologies
to stay competitive.
Strategic Flexibility

What is Strategic Flexibility?

• It is the ability to rapidly adapt to new opportunities or threats in the
external environment.
• Involves continuously learning, innovating, and reallocating resources
when necessary.
Example:
• Companies like Apple excel at strategic flexibility by constantly
innovating and expanding into new product lines like wearables and
services.
 • Strategic Management is crucial for firms to
achieve long-term success in a competitive and
Conclusio globalized world.

n • The environment is constantly changing, so

firms must