Strategic Management & Strategic Competitiveness Strategic Management & Strategic Competitiveness Chapter One © 2006 by Nelson, a division of Thomson Canada Limited.

Strategic Competitiveness Strategic Competitiveness Chapter 4 Internal Environment Chapter 3 External Strat. Intent Strat. Mission The Strategic . Management . Process Strategic Inputs Strategy Formulation Strategy Implementation Chapter 5 Bus. - Level Strategy Chapter 6 Competitive Dynamics Chapter 7 Corp. - Level Chapter 9 International Chapter 10 Cooperative Strategies Chapter 8 Acquisitions & Restructuring Chapter 11 Corporate Governance Chapter 12 Structure & Control Chapter 13 Strategic Leadership Chapter 14 Entrepreneurship & Innovation Strategic Actions Strategic Outcomes Feedback Above Average Returns Chapter 2 Strategic Competitiveness Chapter 1 Strategic Competitiveness Chapter 1 © 2006 by Nelson, a division of Thomson Canada Limited.

“Canada is rather cool”* *The Economist 2003 “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. 1-3

Strategic Management and Strategic Competitiveness Knowledge objectives Define strategic competitiveness, competitive advantage and above average returns. Describe the 21st century competitive landscape and explain how globalization and technological changes shape it. Use the industrial organization (I/O) model to explain how firms can earn above average returns. Use the resource-based model to explain how firms can earn above-average returns. © 2006 by Nelson, a division of Thomson Canada Limited.

Strategic Management and Strategic Competitiveness Strategic Management and Strategic Competitiveness Knowledge objectives – continued… 5. Describe strategic intent and strategic mission and discuss their value. 6. Define stakeholders and describe their ability to influence organizations. Describe strategists’ work. Explain the strategic management process. © 2006 by Nelson, a division of Thomson Canada Limited.

Desired Strategic Outcomes Strategic Competitiveness Achieved 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 Provides benefits which current and potential competitors are unable to duplicate. Above-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk. © 2006 by Nelson, a division of Thomson Canada Limited.

Important definitions Risk An 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 process The full set of committee's 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.

The Strategic Management Process The Strategic Management Process The 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.

The Strategic Management Process © 2006 by Nelson, a division of Thomson Canada Limited.

© 2006 by Nelson, a division of Thomson Canada Limited. What is Strategy? An integrated and coordinated set of commitments & actions designed to exploit core competencies and gains and gain a competitive advantage. © 2006 by Nelson, a division of Thomson Canada Limited.

© 2006 by Nelson, a division of Thomson Canada Limited. 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.

Intended, Emergent and Realized Strategies © 2006 by Nelson, a division of Thomson Canada Limited.

Alternative Models of Superior Returns O I Industrial Organization Model Resource-Based Model The External Environment An Attractive Industry Resources Capabilities Competitive Advantage Strategy Formulation Assets and Skills An Attractive Industry Strategy Implementation Strategy Implementation Superior Returns Superior Returns © 2006 by Nelson, a division of Thomson Canada Limited.

Four Attributes of Resources and Capabilities (Competitive Advantage) Four Attributes of Resources and Capabilities (Competitive Advantage) Valuable Allow the firm to exploit opportunities or neutralize threats in its external environment. Rare Possessed by few, if any, current and potential competitors. Resources and Capabilities Costly to imitate When other firms cannot obtain them or must obtain them at a much higher cost. Organized to be exploited The firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage. © 2006 by Nelson, a division of Thomson Canada Limited.

© 2006 by Nelson, a division of Thomson Canada Limited. Resources and capabilities that meet these four criteria become a source of: Valuable Rare Core Competencies Core Competencies Resources and Capabilities Costly to imitate Organized to be exploited © 2006 by Nelson, a division of Thomson Canada Limited.

Core Competencies are the basis for a firm’s Core Competencies are the basis for a firm’s Competitive advantage Strategic competitiveness Core Competencies Ability to earn above-average returns © 2006 by Nelson, a division of Thomson Canada Limited.

CEO’s ranking of business importance A strong & well thought out strategy Maximizing customer satisfaction & loyalty Business leadership, quality products & services Concern for consistent profits 5. Strong & consistent profits © 2006 by Nelson, a division of Thomson Canada Limited.

© 2006 by Nelson, a division of Thomson Canada Limited. 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.

© 2006 by Nelson, a division of Thomson Canada Limited. 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.

World competitiveness ratings © 2006 by Nelson, a division of Thomson Canada Limited.

Technology and Technological Change Increasing rate of technological change and diffusion Perpetual innovation The information age Personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, e-business Increasing knowledge intensity Information, intelligence, expertise, strategic flexibility. © 2006 by Nelson, a division of Thomson Canada Limited.

© 2006 by Nelson, a division of Thomson Canada Limited. 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.

© 2006 by Nelson, a division of Thomson Canada Limited. Stakeholders © 2006 by Nelson, a division of Thomson Canada Limited.

Organizational strategists Organizational strategists Top level managers, executives, top management team, or general managers © 2006 by Nelson, a division of Thomson Canada Limited.

Organizational culture 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.

Predicting Outcomes of Strategic Decisions Define the profit pool’s boundaries. 2. Estimate the pool’s overall size. 3. Estimate the size of the value chain. 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.