1 / 21

Chapter 1: Strategic Management and Strategic Competitiveness

Chapter 1: Strategic Management and Strategic Competitiveness. Overview: Nature of Competition I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR Strategic Vision and Mission Stakeholders Strategic Leaders The Strategic Management Process What is Performance?.

Albert_Lan
Download Presentation

Chapter 1: Strategic Management and Strategic Competitiveness

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 1: Strategic Management and Strategic Competitiveness • Overview: • Nature of Competition • I/O Model of Above-Average Returns (AAR) • Resource-Based Model of AAR • Strategic Vision and Mission • Stakeholders • Strategic Leaders • The Strategic Management Process • What is Performance?

  2. Nature of Competition: Basic concepts • Strategy • Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage • Competitive Advantage (CA) • When a firm implements a strategy that competitors are unable to duplicate or find too costly to imitate • Strategic Competitiveness • Achieved when a firm successfully formulates & implements a value-creating strategy

  3. Nature of Competition: Basic concepts • Above Average Returns • Returns in excess of what investor expects in comparison to other investments with similar risk • Risk • Investor’s uncertainty about economic gains/losses resulting from a particular investment • Average Returns • Returns equal to what investor expects in comparison to other investments with similar risk • Strategic Management Process (SMP) • Full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns

  4. The Strategic Management Process

  5. Industrial Organizational (I/O) Model of Above-Average Returns (AAR)

  6. Industrial Organizational (I/O) Model of Above-Average Returns (AAR) • 4 Underlying Assumptions • External environment imposes pressures and constraints that determine the strategies resulting in AAR • Most firms that compete within a particular industry control similar resources and pursue similar strategies • Resources for implementing strategies are highly mobile across firms – thus any resource differences will be short-lived • Organizational decision makers are rational and committed to acting in the firm's best interests, as shown by their profit-maximizing behaviors • Limitations • Only two strategies are suggested: • Cost Leadership or Differentiation • Internal resources & capabilities are not considered • AAR are earned when a firm implements the strategy dictated by external environment (general, industry, and competitor)

  7. The Resource-Based Model of AAR

  8. The Resource-Based Model of AAR • Resources • Inputs into a firm's production process • Includes capital equipment, employee skills, patents, high-quality managers, financial condition, etc. • Basis for competitive advantage: When resources are valuable, rare, costly to imitate, and nonsubstitutable • 3 categories of internal/firm-specific resources • Physical, Human, Organizational capital • Capability • Capacity for a set of resources to perform a task or activity in an integrative manner • Core Competency • A firm’s resources and capabilities that serve as sources of competitive advantage over its rival

  9. The Resource-Based Model of AAR • Basic Premise - a firm's unique resources & capabilities is the basis for firm strategy and AAR • Each organization is a bundle of unique resources and capabilities • Performance difference between firms emerge over time due to these unique resources and capabilities (versus industry’s structural characteristics) • Combined uniqueness should define the firms’ strategic actions • A firm has superior performance because of • Unique resources and capabilities, and the combination makes them different, and better, than their competition – driving the competitive advantage

  10. Vision and Mission • Purpose to inform stakeholders of what the firm is, what it seeks to accomplish, and who it seeks to serve • Vision • Picture of what the firm wants to be and, in broad terms, what it ultimately wants to achieve • Gives the firm direction • The responsibility of a firm's top strategic leader – the CEO • CEO works with others to form a firm’s strategic vision • Serves as foundation for mission • Mission • Specifies the business(es) or industries in which a firm intends to compete and the customers it intends to serve • More specific than the vision • Mission and vision provide foundation for strategy formulation and implementation

  11. Stakeholders • Basic Premise – a firm can effectively manage stakeholder relationships to create a competitive advantage and outperform its competitors • Stakeholders are individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm’s performance • Must minimally meet the expectations of each stakeholder group • AAR make this easier to do • 3 Major Stakeholder Groups

  12. The Three Stakeholder Groups

  13. Strategic Leaders • People (primarily managers) located in different parts of the firm using the strategic management process to help the firm reach its vision and mission • Decisive and committed to firms’ efforts to achieve their desired strategic outcomes • Create and sustain organizational culture • Can exist at different organizational levels • Corporate, business, functional, operating

  14. Strategic Leaders • The Work of Effective Strategic Leaders • Work long hours • Must be able to think strategically • ”think seriously and deeply…about the purposes of the organizations they head or functions they perform, about strategies, tactics,…..and people…and about the important questions … they need to ask.” • Set ethical tone for organization • Try to predict the outcomes of their strategic decisions before they are implemented • Involved in internal and external analyses, development of vision and mission, and strategy formulation and implementation

  15. The Strategic Management Process

  16. What is Performance? • Performance is central to the study and practice of strategy • Organizational performance is complicated • Numerous definitions, approaches, and types of performance • Can be an elusive concept • Examples: • Goal attainment - Vision/mission, objectives • Effectiveness – A hospital curing sick people • Quality – Customer service • Efficiency - Inputs versus outputs • Financial/accounting/economic Returns – ROA, EPS • Can also vary by type of firm • For-profit versus not-for-profit • Publicly traded? • Government

  17. Major Approaches to Measuring Performance • Firm Survival • A firm that survives over a relatively extended period of time must be generating at least normal economic performance • Stakeholders View • An organization’s performance should be evaluated relative to the preferences and desires of stakeholders that provide resources to a firm • Different stakeholders can have different interests and different criteria for evaluating performance • May need to choose which stakeholders to satisfy • Must minimally satisfy the interests of each stakeholder group

  18. Major Approaches to Measuring Performance • Simple Accounting Measures • Most popular approach • Publicly available for many firms • They communicate a great deal of information • Most often rely on ratio analysis • 4 Major categories of ratios • Profitability • Liquidity • Leverage • Activity

  19. Major Approaches to Measuring Performance • Profitability Ratios • Ratios with some measure of profit in the numerator and some measure of firm size or assets in the denominator • ROA, ROE, margins, EPS, p/e ratio • Liquidity Ratios • Ratios that focus on the ability of a firm to meet its short–term financial obligations • Current ratio, quick ratio

  20. Major Approaches to Measuring Performance • Leverage Ratios • Ratios that focus on the level of a firm’s indebtedness • Debt to assets, debt to equity, times interest earned • Activity Ratios • Ratios that focus on the level of activity in a firm’s business • Inventory turnover, average collection period

  21. The Relative Nature of Performance • Performance is always relative to other firms • Performance should be compared to industry average(s) • AAR are above industry average • Normal and below normal returns • Industry adjustments • Some industries are more profitable than others • Can adjust for industry performance and compare performance levels across industries • Can also adjust for risk • Looking at trends can also be useful • From earlier • I/O Model - Pick attractive industry(ies) to compete in • Resource-Based Model - Develop unique bundles of resources and capabilities

More Related