1. Strategic Management Chapter One:©
Chapter One:
Strategic Management & Strategic Competitiveness
Chapter Three:
The External Environment
Chapter Three:
The External Environment
Hitt, Ireland, Hoskission, Rowe & Sheppard
Strategic
Management
N o t e s
Competitiveness & Globalization

2. Strategic Management & Competitiveness
Knowledge Objectives
Define and list preferred Strategic Outcomes.
See how Industrial Organization & Resource-Based models show how firms earn above average returns.
Discuss the value of strategic vision & mission.
Discuss the the 21st Century Environment.
Describe stakeholders ability to influence firms.
Know how ‘Business Models’ differ from Strategies.

3. Desired Strategic Outcomes
Strategic Competitiveness
Achieved when a firm successfully formulates & 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.
Outcomes & Basic Definitions

4. 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 commitments, decisions and actions required for a firm to achieve strategic competitiveness & earn above average returns.
Outcomes & Basic Definitions

5. The Strategic Management Process
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . & Performance
Chapter 3:
The External Environment
Chapter 4:
The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 1: Strategic Management
Strategic Vision
& Intent / Mission
Chapter 11:
Corporate Governance
Ch. 12: Org. Structure & Controls
Chapter 13:
Strategic Leadership
Chapter 14:
Org. Renewal & Innovation
Strategy Implementation
Inputs
Strategic
Actions
Chapter 5:
Bus.-Level Strategy
Chapter 6:
Competitive Dynamics
Chapter 7:
Corp.-Level Strategy
Chapter 8:
Acquisition & Restructuring
Chapter 9:
International Strategy
Chapter 10:
Cooperative Strategy
Strategy Formulation
Formulation
Implementation
The Strategic Mgmt. Process

6. What is Strategy?
“A unified, comprehensive & 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, & action sequences into a cohesive whole.” (Quinn, 1980)
“A pattern of resource allocation that enables firms to maintain or improve their performance.
… A good strategy… exploits opportunities & neutralizes threats while capitalizing on strengths & avoiding or fixing weaknesses.” (Barney, 1997:17)
An integrated & coordinated set of commitments & actions designed to exploit core competencies and gain a competitive advantage.
What is Strategy?

7. Intended, Emergent & Realized Strategies
Deliberate Strategies
Unrealized
Strategies
Emergent
Strategies
What is Strategy?

8. Intended, Emergent & Realized Strategies Example 1: _________
& 2: __________
Break into the Market
Break into the Market
New Ads &
channels
Got into the Market
New Customers
Sell to current types of customers
Break into the Market
Build Mfg. & Dist. Op.s
New Ads &
channels
Got into the Market
Got into the Market
Sell to current types of customers
Sell to through current channels
New Customers
New Channels
Thus, strategy can emerge from
“a Pattern in the stream of decisions or actions”
What is Strategy?

9. Alternative Models of Superior ReturnsI O O
Resource-Based Model
Industrial Organization 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
Competing Approaches

10. Four Attributes that Create Competitive Advantage
Resources and Capabilities
Valuable Allow firm to offset
threats or exploit opportunities
in its external environment.
Core
Competencies
Rare Held by few, or no, current
and potential competitors.
Costly to When other firms either can-
Imitate not obtain them or must
obtain at a much higher cost.
Are a basis for:
Competitive advantage;
Strategic competitiveness;
Ability to earn above-average returns.
Organized Supported by the appropriate
to be structure, controls & rewards Exploited
Competing Approaches

11. The 21st Century Environment
Values
Flexibility
Innovation
Integration
Speed to market
Hypercompetition
Handling constant change
Globalization
Global Economy: One where goods, services, people, skills & ideas move freely across geographic borders.
Technology
Increasing rate of tech. change & diffusion;
Increasing knowledge intensity;
The information age.
Strategy & the 21st Century

12. Strategic Intent / Mission
Strategic Vision
Strategic Vision
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.
Together, strategic vision & strategic mission yield the insights required to formulate and implement strategies.
The mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve.
Strategic Intent / Mission
Mission & Vision

13. Tim Horton’s Strategic Vision
“Our vision is to be the quality leader in everything we do.”
Tim Horton’s Strategic Mission
“Our guiding mission is to deliver superior quality products and services for our customers and communities through leadership, innovation and partnerships.”
Mission & Vision

14. Groups who are affected by firm’s performance & have claims on its performance
Stakeholders
Firm
Capital Market
Stock market/Investors
Debt suppliers/Banks
Organizational
Employees
Managers
Nonmanagers
Product Market
Primary Customers
Host Communities
Unions
Suppliers
The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders.
Stakeholders

15. What are Business Models?
B O N U S
What are Business Models?
Business models are at heart, stories that explain how enterprises work.
They allow us to think about customer value creation and corp. value capture separately.
Who, What, When, Where,
Why, How, and Are-you-sure.
They answer the critical questions of:
The Razor & Blade Model
King Gillette practically gave razors away & made money on the blades.
& Xerox & Standard Oil.
© 2009 by J. Sheppard
Business Models

16. What are Business Models?
B O N U S
What are Business Models?
Today’s version of the Razor & Blade Model.
Neuman
Who are the customers
What is the value proposition
Why
When
Are-you-sure
Price sensitive buyers.
Low to no investment.
Attract the most buyers.
New product purchases.
Lower buyer investment.
Business Models

17. What are Business Models?
B O N U S
What are Business Models?
How do Business Models Differ from Strategies?
Porter notes 3 main differences between business models and strategies:
Business models address a series of broad functions that create value for the customer, rather than activities;
Business models do not show how an organization’s activities are related, but the strategic value chain does;
Unlike the strategic value chain, business models do not address competitive advantage.
More importantly:
Business models separate out the notion of:
Value creation (for customers) versus,
Value capture (for the organization).
© 2009 by J. Sheppard
Business Models

18. The Strategic Management Process
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . & Performance
Chapter 3:
The External Environment
Chapter 4:
The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 1: Strategic Management
Strategic Competitiveness
Strategic Vision
& Intent / Mission
Chapter 1: Strategic Management
Strategic Competitiveness
Strategic Vision
& Intent / Mission
Chapter 1: Strategic Management
Strategic Competitiveness
Chapter 11:
Corporate Governance
Ch. 12: Org. Structure & Controls
Chapter 13:
Strategic Leadership
Chapter 14:
Org. Renewal & Innovation
Strategy Implementation
Strategic
Actions
Chapter 5:
Bus.-Level Strategy
Chapter 6:
Competitive Dynamics
Chapter 7:
Corp.-Level Strategy
Chapter 8:
Acquisition & Restructuring
Chapter 9:
International Strategy
Chapter 10:
Cooperative Strategy
Strategy Formulation