1. Strategic Management Concepts and Cases

2. About the Authors
Michael A. Hitt is a Distinguished Professor and holds the Joseph Foster Chair in BusinessLeadership and the C. W. and Dorothy Conn Chair in New Ventures at TexasA&M University. He received his Ph.D. from the University of Colorado. He has coauthored or coedited 25 books and 130 journal articles.
Some of his books are: Downscoping: How to Tame the Diversified

3. R. Duane Ireland holds the Foreman R. and Ruby S
R. Duane Ireland holds the Foreman R. and Ruby S. Bennett Chair in Business in the Mays Business School, Texas A&M University. He also serves as the head of the management department in the Mays School. He teaches strategic management courses at all levels (undergraduate, masters, doctoral, and executive). His research, which focuses on diversification, innovation, corporate entrepreneurship, and strategic entrepreneurship, has been published in a number of journals, including Academy of Management Journal, Academy of Management Review, Academy of Management Executive, Administrative Science Quarterly, Strategic Management Journal, Journal of Management, Human Relations, and Journal of Management Studies, among others.

4. Robert E. Hoskisson holds the W. P
Robert E. Hoskisson holds the W. P. Carey Chair in the Department of Management at
the W. P. Carey School of Business at Arizona State University. He received his Ph.D. from the University of California–Irvine. His research topics focus on international diversification, privatization and cooperative strategy, product diversification, corporate
governance, and acquisitions and divestitures. He teaches courses in corporate and
international strategic management, cooperative strategy, and strategy consulting,
among others.

5. What is strategic management?

6. Studying this chapter should provide you with the strategic management knowledge needed to:
1. Define strategic competitiveness, strategy, competitive advantage, above-average returns, and the strategic management process.
2. Describe the 21st-century competitive landscape and explain how globalization and technological changes shape it.
3. Use the industrial organization (I/O) model to explain how firms can earn above-average returns.
4. Use the resource-based model to explain how firms can earn above-average returns.
5. Describe vision and mission and discuss their value.
6. Define stakeholders and describe their ability to influence organizations.
7. Describe the work of strategic leaders.
8. Explain the strategic management process.

7. 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
Above-Average Returns
Returns in excess of what an investor expects to earn from other investments with similar risk 4

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

9. Figure1.1 The Strategic Management Process

10. The strategic management process (see Figure 1
The strategic management process (see Figure 1.1) is the full set of commitments,
decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.

11. 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

12. 21st Century Competitive Landscape
Fundamental nature of competition is changing
Rapid technological changes
Rapid technology diffusions
Dramatic changes in information and communication technologies
Increasing importance of knowledge
The pace of change is relentless.... and increasing
Traditional industry boundaries are blurring, such as...
Computers
Telecommunications

13. 21st Century Competitive Landscape
The global economy is changing
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

14. 21st Century Competitive Landscape
Country Competitiveness Rankings
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

15. The Global Economy
A global economy is one in which goods, services, people, skills, and ideas move freely across geographic borders.
GE is moving boldly into China and other emerging markets.

16. The March of Globalization
Globalization is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders. Globalization is a product of a larger number of firms competing against one another in an increasing number of global economies.

18. Technology and Technological Changes
There are three categories of trends and conditions—technology diffusion and disruptive
technologies, the information age, and increasing knowledge intensity—through which technology is significantly altering the nature of competition and contributing to unstable competitive environments as a result of doing so.

19. Strategic flexibility is a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment.

20. Alternative Models of Superior Returns Industrial Organization Model
Resource-Based Model
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
Superior Returns
Resources
Capability
Competitive Advantage
An Attractive Industry
Strategy Implementation
Superior Returns 31

21. The industrial organization (I/O) model of above-average returns explains the external environment’s dominant influence on a firm’s strategic actions. The model specifies that the industry in which a company chooses to compete has a stronger influence on performance than do the choices managers make inside their organizations.

22. The I/O Model of Above-average Returns
The first model (industrial organization or I/O) suggests that the external environment is the primary determinant of a firm’s strategic actions.
The second model (resource based) suggests that a firm’s unique resources and capabilities are the critical link to strategic competitiveness.

25. The Resource-Based Model of Above-Average Returns
Resources are inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers.

26. A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner.
Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.

29. Groups who are affected by a firm’s performance and who have claims on its wealth
Stakeholders:
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

30. Strategic Leaders
Strategic leaders are people located in different parts of the firm using the strategic management process to help the
firm reach its vision and mission.

31. Southwest Airlines has built a unique corporate culture.

32. 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

33. The Strategic Management Process Strategy Formulation
Chapter 2
The Strategic
Management
Process
External
Strategic
Inputs
Environment
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Strategy Formulation
Strategy Implementation
Chapter 4
Chapter 5
Chapter 6
Chapter 10
Chapter 11
Business-Level
Competitive
Corporate-Level
Corporate
Structure
Strategy
Dynamics
Strategy
Governance
& Control
Strategic
Actions
Chapter 7
Chapter 8
Chapter 9
Chapter 12
Chapter 13
Acquisitions &
International
Cooperative
Strategic
Entrepreneurship
& Innovation
Restructuring
Strategy
Strategies
Leadership
Strategic
Outcomes
Strategic
Competitiveness
Above Average
Feedback
Returns 63

34. REVIEW
QUESTIONS
1. What are strategic competitiveness, strategy, competitive advantage,above-average returns, and the strategic management process?
2. What are the characteristics of the 21st-century landscape? What two factors are the primary drivers of this landscape?
3. According to the I/O model, what should a firm do to earn above-average returns?
4. What does the resource-based model suggest a firm should do to earn above-average returns?
5. What are vision and mission? What is their value for the strategic management process?
6. What are stakeholders? How do the three primary stakeholder groups influence organizations?
7. How would you describe the work of strategic leaders?
8. What are the elements of the strategic management process? How are they interrelated?