1. Ch1-1 Chapter 1 Strategic Management and Strategic Competitiveness Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western College Publishing

2. Ch1-2 Sustained Competitive Advantage Above-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk Occurs when a firm develops a strategy that competitors are not simultaneously implementing Provides benefits which current and potential competitors are unable to duplicate Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategy

3. Ch1-3 which are required for firms to achieve: Above-Average Returns Strategic Competitiveness Sustained Competitive Advantage The Strategic Management Process Involves the full set of: ActionsCommitmentsDecisions

4. Ch1-4 The Strategic ManagementProcess ManagementProcess Chapter 3 Internal Environment Chapter 2 External Environment Strategic Intent Strategic Mission Strategy Formulation Strategy Implementation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Entrepreneurship & Innovation Strategic Inputs Feedback Strategic Outcomes StrategicActions Strategic Competitiveness Above Average Returns

5. Ch1-5 Chapter One: Key Themes Industrial Organization ModelIndustrial Organization Model Resource-Based ModelResource-Based Model Challenge of Strategic Management Changing Competitive Landscape Two Models of Superior Profitability Key Stakeholder Groups

6. Ch1-6 Competitive success is transient...unless care is taken to preserve competitive position 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 Challenge of Strategic Management

7. Ch1-7 Best Stocks of the Decade Challenge of Strategic Management 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. Ch1-8 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 The pace of change is relentless.... and increasing Traditional industry boundaries are blurring, such as... Computers Telecommunications Computers Telecommunications 21st Century Competitive Landscape

9. Ch1-9 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 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 Flexibility Innovation Speed Integration 21st Century Competitive Landscape

10. 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 21st Century Competitive Landscape

11. Ch1-11 Alternative Models of Superior Returns Resource-Based Model Industrial Organization 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

12. Ch1-12 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. 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.

13. Ch1-13 Action required: External Environment General Environment Industry Environment Competitive Environment Study the external environment, especially the industry environment. I/O Model of Superior Returns

14. Ch1-14 External Environment General Environment Industry Environment Competitive Environment An Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Action required: Locate an industry with high potential for above- average returns. I/O Model of Superior Returns

15. Ch1-15 External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Action required: Identify strategy called for by the industry to earn above-average returns. Selection of a strategy linked with above- average returns in a particular industry Strategy Formulation Strategy Formulation I/O Model of Superior Returns

16. Ch1-16 External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Strategy Formulation Selection of a strategy linked with above- average returns in a particular industry Action required: Develop or acquire assets and skills needed to implement the strategy. Assets and Skills Assets and skills required to implement a chosen strategy I/O Model of Superior Returns

17. Ch1-17 External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Strategy Formulation Selection of a strategy linked with above- average returns in a particular industry Assets and Skills Assets and skills required to implement a chosen strategy Action required: Use the firm’s strengths (its assets or skills) to implement the strategy. Strategy Implementation Selection of strategic actions linked with effective implementation of the chosen strategy I/O Model of Superior Returns

18. Ch1-18 External Environment General Environment Industry Environment Competitive Environment Attractive Industry An industry whose structural characteristics suggest above-average returns are possible Strategy Formulation Selection of a strategy linked with above- average returns in a particular industry Assets and Skills Assets and skills required to implement a chosen strategy Action required: Strategy Implementation Selection of strategic actions linked with effective implementation of the chosen strategy Superior Returns Earning of above- average returns Maintain selected strategy in order to outperform industry rivals. I/O Model of Superior Returns

19. Ch1-19 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. Resource-Based Model of Superior Returns

20. Ch1-20 Resources Inputs to a firm’s production process. Action required: Identify firm resources. Study strengths and weak- nesses relative to rivals. Resource-Based Model of Superior Returns

21. Ch1-21 Resources Inputs to a firm’s production process. Action required: Determine what firm capabilities allow it to do better than rivals. Capability Capacity for an integrated set of resources to perform a task or activity. Resource-Based Model of Superior Returns

22. Ch1-22 Resources Inputs to a firm’s production process. Capability Capacity for an integrated set of resources to integratively perform a task or activity. Competitive Advantage Competitive Advantage Ability of a firm to outperform its rivals Action required: Determine how firm’s resources and capabilities may create competitive advantage. Resource-Based Model of Superior Returns

23. Ch1-23 Resources Inputs to a firm’s production process. Capability Capacity for an integrated set of resources to integratively perform a task or activity. Competitive Advantage Competitive Advantage Ability of a firm to outperform its rivals An Attractive Industry An Attractive Industry Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities Action required: Locate an attractive industry. Resource-Based Model of Superior Returns

24. Ch1-24 Resources Inputs to a firm’s production process. Capability Capacity for an integrated set of resources to integratively perform a task or activity. Competitive Advantage Competitive Advantage Ability of a firm to outperform its rivals An Attractive Industry An Attractive Industry Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities Action required: Select strategy that best exploits resources and capabilities relative to opportunities in environs. Strategy Formulation and Implementation Strategic actions taken to earn above-average returns Resource-Based Model of Superior Returns

25. Ch1-25 Resources Inputs to a firm’s production process. Capability Capacity for an integrated set of resources to integratively perform a task or activity. Competitive Advantage Competitive Advantage Ability of a firm to outperform its rivals An Attractive Industry An Attractive Industry Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities Action required: Maintain selected strategy in order to outperform industry rivals. Strategy Formulation and Implementation Strategic actions taken to earn above-average returns Superior Returns Earning of above- average returns Resource-Based Model of Superior Returns

26. Ch1-26 Nonsubstitutable the firm must be 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 either cannot obtain them or must obtain them at a much higher cost Resources and capabilities lead to Competitive Advantage when they are:

27. Ch1-27 Core Competencies When these four criteria are met, Resources and Capabilities become: Core Competencies are resources and capabilities that can serve as a source of Competitive Advantage. The Resource-Based model argues that Core Competencies are the basis for a firm’s Competitive Advantage, Strategic Competitiveness and Ability to Earn Above-average Returns.

28. Ch1-28 Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies. Strategic Intent An application of strategic intent in terms of products to be offered and markets to be served. Strategic Mission

29. Ch1-29 The most effective strategists provide a vision (strategic intent) to effectively elicit the help of others in creating a firm's competitive advantage. Strategic Intent

30. Ch1-30 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 OrganizationalOrganizational EmployeesManagersNon-ManagersEmployeesManagersNon-Managers FirmFirm Capital Market Stock market/Investors Debt suppliers/Banks Product Market Primary Customers Suppliers Suppliers

31. Ch1-31 Stakeholder Involvement Each of the key stakeholders wants a piece of the same pie 11 How do you divide the pie in order to keep all of the stakeholders involved? 22 How do you increase the size of the pie so that there is more to go around?

32. Ch1-32 Chapter 3 Internal Environment Chapter 2 External Environment The Strategic ManagementProcess ManagementProcess Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Entrepreneurship & Innovation Strategic Inputs Strategic Actions Strategic Outcomes