CHAPTER 1: Strategic Management AND Competitiveness. THE STRATEGIC MANAGEMENT PROCESS. The Strategic Management Process. KNOWLEDGE OBJECTIVES. IMPORTANT DEFINITIONS. ● STRATEGIC COMPETITIVENESS - achieved when a firm successfully formulates and implements a value-creating strategy
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The Strategic Management Process
● STRATEGIC COMPETITIVENESS -achieved when a firm successfully formulates and implements a value-creating strategy
● STRATEGY -an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage
● COMPETITIVE ADVANTAGE - when a firm implements a strategy that creates superior value for customers; competitors are unable to duplicate it or find too costly to imitate it
●RISK -an investor’s uncertainty about the economic gains or losses that will result from a particular investment
● ABOVE-AVERAGE RETURNS -returns in excess of what an investor expects to earn from other investments with a similar amount of risk
●AVERAGE RETURNS - returns equal to those an investor expects to earn from other investments with a similar amount of risk
■ FIRST:External environment and internal organization are analyzed to determine resources, capabilities, and core competencies—the sources of “strategic inputs.”
■ NEXT:Vision and mission are developed; strategies are formulated.
■ THEN:Strategies are implemented with the goal of achieving strategic competitiveness and above-average returns.
■ DYNAMIC PROCESS: Continuously changing markets and industry conditions must match evolving strategic inputs.
Rational: the approach firms use to achieve strategic competitiveness and earn above-average returns
FORMULATION and IMPLEMENTATION:
the two types of strategic actions that must be simultaneously integrated to successfully employ the strategic management process
■ GLOBALIZATION - emergence of a global economy
■ TECHNOLOGY - rapid technological changes
■ INDUSTRY BOUNDARIES BLURRING
■ STRATEGIC MANAGEMENT PROCESS - effective use of the strategic management process reduces the likelihood of failure for firms as they encounter the conditions of today’s competitive landscape
■ HYPERCOMPETITION - characterized by
■ Market instability and change
■ Rapidly escalating competition
■ Aggressive challengers
■ Strategic maneuvering to establish first- mover advantage
■ Technology industries
■ TWO DRIVERS
■ Strategic flexibility - important tool
Grounded in economics, the I/O model has
First, the external environment is assumed to impose pressures and constraints that determine the strategies that would result in above-average returns.
Second, most firms competing within an industry or within a segment of that industry are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources.
Four Underlying Assumptions
Third, resources used to implement strategies are assumed to be highly mobile across firms, so any resource differences that might develop between firms will be short-lived.
Fourth, organizational decision-makers are assumed to be rational and committed to acting in the firm’s best interests, as shown by their profit-maximizing behavior.
The Five Forces Model of competition is an analytical tool used to help firms find the industry that is the most attractive, as measured by its profitability potential.
The Five Forces Model suggests that an industry’s profitability (i.e., its rate of return on invested capital relative to its cost of capital) is a function of interactions among the Five Forces: suppliers, buyers, rivalry, product substitutes, and potential entrants to the industry.
FIRMS CAN EARN ABOVE-AVERAGE RETURNS:
● Cost Leadership Strategy – producing standardized goods or services at costs below those of competitors
● Differentiation Strategy -producing differentiated goods or services for which customers are willing to pay a price premium
The I/O model suggests that above-average returns are earned when firms are able to effectively study the external environment as the foundation for identifying an attractive industry and implementing the appropriate strategy.
KEY WORD: INTEGRATIVE
The Resource-Based Model of Above Average Returns
ACCOR’S STRATEGIC VISIONAccor has refocused on its core hotel business and in September 2011 it unveiled several major changes to its brands, operating strategy and financial objectives. The group is now a pure-player in hotels and boasts a unique and universal business model as an owner, operator and franchisor of budget to luxury hotels on all five continents.
The new Accor strategy is based on four pillars: - A powerful marketing approach, with a revitalization of the Economy Hotels activity and the Accor brand. - Unique operational expertise derived from Accor’s skills and capabilities in its three strategically aligned businesses – hotel owner, operator and franchisor – in all segments and all regions. - A value-creating asset management strategy that improves the Group’s business performance, optimizes its balance sheet and support growth.- A development strategy that aims to consolidate the Group’s current leadership in Europe and Latin America and position it among the leaders in Asia-Pacific, especially China.
To be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares. Our mission
To be the best company to work for whereby employees are treated as part of a big family
Create a globally recognized ASEAN brand
To attain the lowest cost so that everyone can fly with AirAsia
Maintain the highest quality product, embracing technology to reduce cost and enhance service levels
We make the low fare model possible through the implementation of the following key strategies, Safety First:Partnering with the world’s most renowned maintenance providers and complying with the with world airline operations.
High Aircraft Utilisation:Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs and higher productivity.
Low Fare, No Frills:Providing guests with the choice of customizing services without compromising on quality and services.
Streamline Operations:Making sure that processes are as simple as possible.
Lean Distribution System:Offering a wide and innovative range of distribution channels to make booking and travelling easier.
Point to Point Network:Applying the point-to-point network keeps operations simple and costs low.
Three groups of stakeholders:
● Shareholders and the major suppliers of a firm’s capital
● A firm’s primary customers, suppliers, host communities, and unions representing the workforce
● Firm’s employees, including both non-managerial and managerial personnel
Capital market stakeholders