1. 1 Competing for Advantage Robert E. Hoskisson Michael A. Hitt R. Duane Ireland The PowerPoint slides for this textbook were prepared by: R. Dennis Middlemist Professor of Management Colorado State University If you have any concerns, contact me directly at Dennis@Middlemist.com This slide is informational only. Do not display in the classroom.

2. ©2003 Southwestern Publishing Company 2 Introduction to Strategic Management Robert E. Hoskisson Michael A. Hitt R. Duane Ireland Chapter 1

3. 3 Chapter 2 Chapter 2 Strategic Leadership Strategic Leadership Chapter 4 Chapter 4 The Internal The Internal Organization Chapter 6 Chapter 6 Competitive Rivalry and Competitive Rivalry and Competitive Dynamics Competitive Dynamics Chapter 9 Chapter 9 International Strategy International Strategy Chapter 1 Chapter 1 Introduction to Introduction to Strategic Management Strategic Management Chapter 3 Chapter 3 The External The External Environment Chapter 5 Chapter 5 Business-Level Strategy Chapter 8 Chapter 8 Acquisition and Acquisition and Restructuring Strategies Restructuring Strategies Chapter 11 Chapter 11 Corporate Governance Corporate Governance Strategic Intent Strategic Intent Strategic Mission Strategic Mission Chapter 7 Chapter 7 Corporate-Level Strategy Corporate-Level Strategy Chapter 10 Chapter 10 Cooperative Strategy Cooperative Strategy Chapter 12 Chapter 12 Strategic Entrepreneurship Strategic Entrepreneurship Strategic Analysis Strategic Thinking Creating Competitive Advantage Monitoring And Creating Entrepreneurial Opportunities The Strategic Management Process

4. 4 Discussion Questions 1. What is strategy? 2. What is happening in the strategic environment? 3. What is strategic flexibility and why is there a need for it? 4. What is the Industrial Organization (IO) Model of Strategy? 5. What is the Resource-Based Model of Strategy? Click Here Click Here Click Here Click Here Click Here Click Here More discussion questions

5. 5 Discussion Questions (cont.) 6. What is strategic intent and how is it related to strategic mission? 7. How do stakeholders affect strategy? 8. What is the role of the strategist (top executive)? Click Here Click Here Click Here

6. 6 Discussion Question 1 What is strategy?

7. 7 Definitions Strategic Management Process The full set of commitments, decisions, and actions required for a firm to create value and earn above-average returns Value Creation What is achieved when a firm successfully formulates and implements a strategy that other companies are unable to duplicate or find too costly to imitate.

8. 8 Definitions Returns that are in excess of what an investor expects to earn from other investments with a similar amount of risk Above-Average Returns Returns that are equal to those an investor expects to earn from other investments with a similar amount of risk Average Returns

9. 9 Definitions Risk An investor’s uncertainty about the economic gains or losses that will result from a particular investment Click Here Return to Discussion Questions

10. 10 Discussion Question 2 What is happening in the strategic environment?

11. 11 Fundamental nature of competition is changing Competitive Landscape Hypercompetitive environments Dynamics of strategic maneuvering among global and innovative combatants Price-quality positioning, new know- how, first mover Protect or invade established product or geographic markets

12. 12 Fundamental nature of competition is changing Hypercompetitive environments Competitive Landscape Emergence of global economy Goods, services, people, skills, and ideas move freely across geographic borders Spread of economic innovations around the world Political and cultural adjustments are required

13. 13 Hypercompetitive environments Competitive Landscape Emergence of global economy Rapid technological change Increasing rate of technological change and diffusion The information age Increasing knowledge intensity Fundamental nature of competition is changing Click Here Return to Discussion Questions

14. 14 Discussion Question 3 What is strategic flexibility and why is there a need for it?

15. 15 Strategic Flexibility A set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment It involves coping with uncertainty and the accompanying risks

16. 16 Strategic Flexibility Strategic Flexibility Strategic Flexibility Strategicflexibility Strategicreorientation Capacity to learn Organizationalslack Click Here Return to Discussion Questions

17. 17 Discussion Question 4 What is the Industrial Organization (IO) Model of Strategy?

18. 18 1.Strategy dictated by the external environment of the firm (what opportunities exist in these environments?) 2.Firm develops internal skills required by external environment (what can the firm do about the opportunities?) GeneralEnvironment Global Technological Economic Sociocultural Political/Legal Demographic 1. External Environments Industry Environment Competitor Environment I/O Model of Above-Average Returns

19. 19 Four Assumptions of the I/O Model 1.The external environment is assumed to possess pressures and constraints that determine the strategies that would result in above-average returns 2.Most firms competing within a particular industry or within a certain segment of it are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources

20. 20 Four Assumptions of the I/O Model 3.Resources used to implement strategies are highly mobile across firms 4.Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interests, as shown by their profit-maximizing behaviors

21. 21 Industrial Organization Model I/O Model of Above-Average Returns 1.Study the external environment, especially the industry environment economies of scaleeconomies of scale barriers to market entrybarriers to market entry diversificationdiversification product differentiationproduct differentiation degree of concentration of firms in the industrydegree of concentration of firms in the industry The External Environment

22. 22 I/O Model of Above-Average Returns 2.Locate an attractive industry with a high potential for above-average returns Attractive industry: one whose structural characteristics suggest above-average returns Industrial Organization Model The External Environment An Attractive Industry

23. 23 I/O Model of Above-Average Returns 3.Identify the strategy called for by the attractive industry to earn above-average returns Strategy formulation: selection of a strategy linked with above-average returns in a particular industry Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation

24. 24 I/O Model of Above-Average Returns 4.Develop or acquire assets and skills needed to implement the strategy Assets and skills: those assets and skills required to implement a chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills

25. 25 I/O Model of Above-Average Returns 5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation

26. 26 I/O Model of Above-Average Returns Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns Superior returns: earning of above-average returns Click Here Return to Discussion Questions

27. 27 Discussion Question 5 What is the Resource-Based Model of Strategy?

28. 28 1.Strategy dictated by the firm’s unique resources and capabilities 2.Find an environment in which to exploit these assets (where are the best opportunities?) Resource-based Model of Above Average Returns 1. Firm’s Resources

29. 29 1.Identify the firm’s resources-- strengths and weaknesses compared with competitors Resources: inputs into a firm’s production process Resource-based Model of Above Average Returns Resource-basedModel Resources

30. 30 2.Determine the firm’s capabilities--what it can do better than its competitors Capability: capacity of an integrated set of resources to integratively perform a task or activity Resource-based Model of Above Average Returns Resource-basedModel Resources Capability

31. 31 Four Attributes of Resources and Capabilities (Competitive Advantage) the firm is organized appropriately to obtain the full benefits of the resources in order to realize a 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 Costly to imitate when other firms cannot obtain them or must obtain them at a much higher cost Nonsubstitutable Resources and Capabilities

32. 32 Core Competencies Resources and capabilities that meet these four criteria become a source of: Valuable Rare Costly to imitate Nonsubstitutable Core Competencies Resources and Capabilities

33. 33 Core Competencies are the basis for a firm’s Competitive advantage Value Creation Ability to earn above-average returns Core Competencies

34. 34 3.Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage Competitive advantage: ability of a firm to outperform its rivals Resource-based Model of Above Average Returns Resource-basedModel Resources Capability Competitive Advantage

35. 35 4.Locate an attractive industry An attractive industry: an industry with opportunities that can be exploited by the firm’s resources and capabilities Resource-based Model of Above Average Returns Resource-basedModel Resources Capability Competitive Advantage An Attractive Industry

36. 36 5.Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment Strategy formulation and implementation: strategic actions taken to earn above average returns Resource-based Model of Above Average Returns Resource-basedModel Resources Capability Competitive Advantage An Attractive Industry Strategy Form/Impl

37. 37 Resource-based Model of Above Average Returns Resource-basedModel Resources Capability Competitive Advantage An Attractive Industry Strategy Form/Impl Superior Returns Superior returns: earning of above-average returns Click Here Return to Discussion Questions

38. 38 Discussion Question 6 What is strategic intent and how is it related to strategic mission?

39. 39 Strategic Intent & Mission Strategic Intent Strategic Intent Winning competitive battles by leveraging the firm’s resources, capabilities, and core competencies Winning competitive battles by leveraging the firm’s resources, capabilities, and core competencies Strategic Mission Strategic Mission An application of strategic intent in terms of products to be offered and markets to be served An application of strategic intent in terms of products to be offered and markets to be served Click Here Return to Discussion Questions

40. 40 Discussion Question 7 How do stakeholders affect strategy?

41. 41 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 retain the participation of key stakeholders The Firm and Its Stakeholders Stakeholders

42. 42 Capital Market Stakeholders The Firm and Its Stakeholders Shareholders Major suppliers of capital BanksBanks Private lendersPrivate lenders Venture capitalistsVenture capitalists Stakeholders

43. 43 Capital Market Stakeholders Product Market Stakeholders The Firm and Its Stakeholders Primary customers Suppliers Host communities Unions Stakeholders

44. 44 Capital Market Stakeholders Product Market Stakeholders Organizational Stakeholders The Firm and Its Stakeholders EmployeesManagersNonmanagers Stakeholders

45. 45 Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm How do you divide the returns to keep stakeholders involved? 1 Capital Market Product Market Organizational

46. 46 Stakeholder Involvement Two issues affect the extent of stakeholder involvement in the firm How do you increase the returns so everyone has more to share? 2 Capital Market Product Market Organizational Click Here Return to Discussion Questions

47. 47 Discussion Question 8 What is the role of the strategist (top executive)?

48. 48 Organizational Strategists Serve as a major source of competitive advantage Are held responsible by stakeholders Make decisions regarding development, acquisition, cost and use of resources Assess risks of strategic actions