1. Strategic Management and Strategic Competitiveness1

2. The Strategic Management Process
Decisions
Involves the full set of:
Commitments
Actions
which are required for firms to achieve:
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns 9

3. Important Definitions
Strategic Competitiveness
Achieved when a firm successfully formulates and implements a value-creating strategy
Sustained Competitive Advantage
Occurs when a firm develops a strategy that competitors are not simultaneously implementing
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 4

4. The Strategic Management Process Strategy Formulation
Strategic Intent
External
Environment
Internal Environment
Strategic Mission
The Strategic
Management
Process
Strategic
Outcomes
Actions
Strategic
Inputs
Strategy Formulation
Strategy Implementation
Business-level Strategy
Competitive Dynamics
Corporate-Level Strategy
International Strategy
Corporate Governance
Structure & Control
Strategic
Competitiveness
Above Average
Returns
Feedback 10

5. Today’s Context Challenge of Strategic Management
Changing Competitive Landscape
Two Perspectives of Superior Profitability
Industrial Organization Model
Resource-Based Model 20

6. Challenge of Strategic Management
Only 16 of the 100 largest U.S. companies at the start of the 20th century are still identifiable today!
In a recent year, 44,367 businesses filed for bankruptcy and many more U.S. businesses failed
Competitive success is transient...unless care is taken to preserve competitive position 22

7. Challenge of Strategic Management
Best Stocks of the Decade
The goals of achieving strategic competitiveness and earning above-average returns are challenging
The performance of some companies more than meets strategic management's challenge

8. 21st Century Competitive Landscape
Rapid technological changes
Rapid technology diffusions
Dramatic changes in information and communication technologies
Increasing importance of knowledge
Fundamental nature of competition is changing
The pace of change is relentless....
and increasing
Traditional industry boundaries are blurring, such as...
Computers
Telecommunications 25

9. 21st Century Competitive Landscape
In the
Global Economy
People, goods, services and ideas move freely across geographic boundaries
New opportunities emerge in multiple global markets
Markets and industries become more internationalized
Traditional sources of competitive advantage no longer guarantee success
New keys to success include:
Flexibility
Innovation
Speed
Integration 30

10. 21st Century Competitive Landscape
A country’s competitiveness is achieved through the accumulation of individual firms’ strategic competitiveness in the global economy
Achieving improved competitiveness allows a country's citizens to have a higher standard of living
Country Competitiveness Rankings 2002
(1) USA 1
(29) MALAYSIA 26
(3) FINLAND 2
(28) KOREA 27
(4) LUXEMBOURG 3
(27) HUNGARY 28
(5) NETHERLANDS 4
(35) CZECH REPUBLIC 29
(2) SINGAPORE 5
(26) JAPAN 30
(15) DENMARK 6
(33) CHINA MAINLAND 31
(10) SWITZERLAND 7
(32) ITALY 32
(9) CANADA 8
(34) PORTUGAL 33
(6) HONG KONG 9
(38) THAILAND 34
(7) IRELAND 10
(31) BRAZIL 35
(13) ICELAND 12
(30) GREECE 36
(14) AUSTRIA 13
(37) SLOVAK REPUBLIC 37
(11) AUSTRALIA 14
(39) SLOVENIA 38
(12) GERMANY 15
(42)
SOUTH AFRICA 39
(19) UNITED KINGDOM 16
(40) PHILIPPINES 40
(20) NORWAY 17
(36) MEXICO 41
(17) BELGIUM 18
(41) INDIA 42
(21) NEW ZEALAND 19
(45) RUSSIA 43
(24) CHILE 20
(46) COLOMBIA 44
(22) ESTONIA 21
(44) TURKEY 46
(25) FRANCE 22
(49) INDONESIA 47
(23) SPAIN 23
(48) VENEZUELA 48
(18) TAIWAN 24
(43) ARGENTINA 49
(16) ISRAEL 25
(2001 rankings are in brackets)

11. Alternative Perspectives for Superior Returns
Industrial Organization
Perspective
Resource-Based Perspective
The External Environment
Resources
An Attractive Industry
Capability
Strategy Formulation
Competitive Advantage
Assets and Skills
An Attractive Industry
Strategy Implementation
Strategy Implementation
Superior Returns
Superior Returns 31

12. I/O Model of Superior Returns
The Industrial Organization model suggests that above-average returns for any firm are largely determined by characteristics outside the firm.
This model largely focuses on industry structure or attractiveness of the external environment rather than internal characteristics of the firm. 33

13. Resource-Based Model of Superior Returns
The Resource-Based model suggests that above-average returns for any firm are largely determined by characteristics inside the firm.
This model focuses on developing or obtaining valuable resources and capabilities which are difficult or impossible for rivals to imitate. 41

14. Integration of Perspectives: External and Internal Analyses
General
Environment
Sociocultural
Global
Technological
Political/Legal
Demographic
Economic
Industry
Competitor
By studying the external environment, firms identify what they might choose to do
Opportunities and threats

15. Integration of Perspectives: External and Internal Analyses
The Firm
By studying the internal environment, firms identify what they can do
Unique resources, capabilities, and core competencies
(sustainable competitive advantage)

16. This Integration Accumulates Into Strategic Intent and Mission Statements
External
Environment
Internal Environment
Strategic Intent
Strategic Mission

17. Strategic Intent Strategic Mission
Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies.
An application of strategic intent in terms of products to be offered and markets to be served.
Strategic Mission 55

18. Stakeholders: Groups who are affected by a firm’s performance and who have claims on its wealth
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders
Capital Market
Stock market/Investors
Debt suppliers/Banks
Firm
Product Market
Primary Customers
Suppliers
Organizational
Employees
Managers
Non-Managers 59

19. Stakeholder Involvement
Each of the key stakeholders wants a piece of the same pie 1
How do you divide the pie in order to keep all of the stakeholders involved? 2
How do you increase the size of the pie so that there is more to go around? 62