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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.

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competing for advantage robert e hoskisson michael a hitt r duane ireland
Competing for AdvantageRobert E. HoskissonMichael A. HittR. 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.

introduction to strategic management

Chapter 1

Introduction toStrategic Management

Robert E. Hoskisson

Michael A. Hitt

R. Duane Ireland

©2003 Southwestern Publishing Company

slide3

The Strategic Management Process

Chapter 1

Introduction to

Strategic Management

Chapter 2

Strategic Leadership

Strategic

Thinking

Chapter 3

The External

Environment

Chapter 4

The Internal

Organization

Strategic Intent

Strategic Mission

Strategic

Analysis

Chapter 5

Business-Level

Strategy

Chapter 6

Competitive Rivalry and

Competitive Dynamics

Chapter 7

Corporate-Level Strategy

Creating

Competitive

Advantage

Chapter 8

Acquisition and

Restructuring Strategies

Chapter 9

International Strategy

Chapter 10

Cooperative Strategy

Monitoring

And Creating

Entrepreneurial

Opportunities

Chapter 11

Corporate Governance

Chapter 12

Strategic Entrepreneurship

discussion questions
Discussion Questions
  • What is strategy?
  • What is happening in the strategic environment?
  • What is strategic flexibility and why is there a need for it?
  • What is the Industrial Organization (IO) Model of Strategy?
  • What is the Resource-Based Model of Strategy?

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More discussion questions

discussion questions cont
Discussion Questions (cont.)
  • What is strategic intent and how is it related to strategic mission?
  • How do stakeholders affect strategy?
  • What is the role of the strategist (top executive)?

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discussion question 1
Discussion Question 1

What is strategy?

definitions
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.

definitions1
Definitions

Average Returns

Returns that are equal to those an investor expects to earn from other investments with a similar amount of risk

Above-Average Returns

Returns that are in excess of what an investor expects to earn from other investments with a similar amount of risk

definitions2
Definitions

Risk

An investor’s uncertainty about the economic gains or losses that will result from a particular investment

Return to Discussion Questions

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discussion question 2
Discussion Question 2

What is happening in the strategic environment?

competitive landscape
Competitive Landscape

Dynamics of strategic maneuvering among global and innovative combatants

Price-quality positioning, new know-how, first mover

Hypercompetitive environments

Protect or invade established product or geographic markets

Fundamental nature of competition is changing

competitive landscape1
Competitive Landscape

Goods, services, people, skills, and ideas move freely across geographic borders

Emergence of global economy

Spread of economic innovations around the world

Hypercompetitive environments

Political and cultural adjustments are required

Fundamental nature of competition is changing

competitive landscape2
Competitive Landscape

Increasing rate of technological change and diffusion

Emergence of global economy

Rapid technological change

The information age

Increasing knowledge intensity

Hypercompetitive environments

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Fundamental nature of competition is changing

discussion question 3
Discussion Question 3

What is strategic flexibility and why is there a need for it?

strategic flexibility
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

strategic flexibility1

Strategic

reorientation

Capacity to

learn

Organizational

slack

Strategic Flexibility

Strategic

Flexibility

Strategic

Flexibility

Strategic

flexibility

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discussion question 4
Discussion Question 4

What is the Industrial Organization (IO) Model of Strategy?

i o model of above average returns

General

Global

Political/Legal

Demographic

Economic

Sociocultural

Technological

Environment

I/O Model of Above-Average Returns

1. External Environments

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?)

Industry Environment

Competitor Environment

four assumptions of the i o model
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

four assumptions of the i o model1
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

slide21

The External Environment

I/O Model of Above-Average Returns

  • 1. Study the external environment, especially the industry environment
    • economies of scale
    • barriers to market entry
    • diversification
    • product differentiation
    • degree of concentration of firms in the industry

Industrial Organization Model

slide22

The External Environment

An Attractive Industry

I/O Model of Above-Average Returns

2. Locate an attractive industry with a high potential for above-average returns

Industrial Organization Model

Attractive industry: one whose structural characteristics suggest above-average returns

slide23

The External Environment

An Attractive Industry

Strategy Formulation

I/O Model of Above-Average Returns

3. Identify the strategy called for by the attractive industry to earn above-average returns

Industrial Organization Model

Strategy formulation: selection of a strategy linked with above-average returns in a particular industry

slide24

The External Environment

An Attractive Industry

Strategy Formulation

Assets and Skills

I/O Model of Above-Average Returns

4. Develop or acquire assets and skills needed to implement the strategy

Industrial Organization Model

Assets and skills: those assets and skills required to implement a chosen strategy

slide25

The External Environment

An Attractive Industry

Strategy Formulation

Assets and Skills

Strategy Implementation

I/O Model of Above-Average Returns

5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy

Industrial Organization Model

Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy

slide26

The External Environment

An Attractive Industry

Strategy Formulation

Assets and Skills

Strategy Implementation

Superior Returns

I/O Model of Above-Average Returns

Industrial Organization Model

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Superior returns: earning of above-average returns

discussion question 5
Discussion Question 5

What is the Resource-Based Model of Strategy?

resource based model of above average returns

The Firm

Resource-based Model of Above Average Returns

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?)

1. Firm’s Resources

slide29

Resources

Resource-based Model of Above Average Returns

1. Identify the firm’s resources-- strengths and weaknesses compared with competitors

Resource-based

Model

Resources: inputs into a firm’s production process

slide30

Resources

Capability

Resource-based Model of Above Average Returns

2. Determine the firm’s capabilities--what it can do better than its competitors

Resource-based

Model

Capability: capacity of an integrated set of resources to integratively perform a task or activity

four attributes of resources and capabilities competitive advantage
Four Attributes of Resources and Capabilities (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

Resources and Capabilities

Costly to imitate

when other firms cannot obtain them or must obtain them at a much higher cost

Nonsubstitutable

the firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage

resources and capabilities that meet these four criteria become a source of
Resources and capabilities that meet these four criteria become a source of:

Valuable

Rare

Core Competencies

Core Competencies

Resources and Capabilities

Costly to imitate

Nonsubstitutable

core competencies are the basis for a firm s
Core Competencies are the basis for a firm’s

Competitive advantage

Value Creation

Core Competencies

Ability to earn above-average returns

slide34

Resources

Capability

Competitive Advantage

Resource-based Model of Above Average Returns

3. Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage

Resource-based

Model

Competitive advantage: ability of a firm to outperform its rivals

slide35

Resources

Capability

Competitive Advantage

An Attractive Industry

Resource-based Model of Above Average Returns

4. Locate an attractive industry

Resource-based

Model

An attractive industry: an industry with opportunities that can be exploited by the firm’s resources and capabilities

slide36

Resources

Capability

Competitive Advantage

An Attractive Industry

Strategy Form/Impl

Resource-based Model of Above Average Returns

5. Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment

Resource-based

Model

Strategy formulation and implementation: strategic actions taken to earn above average returns

slide37

Resources

Capability

Competitive Advantage

An Attractive Industry

Strategy Form/Impl

Superior Returns

Resource-based Model of Above Average Returns

Resource-based

Model

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Superior returns: earning of above-average returns

discussion question 6
Discussion Question 6

What is strategic intent and how is it related to strategic mission?

strategic intent mission
Strategic Intent & Mission
  • Strategic Intent
  • Winning competitive battles by leveraging the firm’s resources, capabilities, and core competencies
  • Strategic Mission
  • An application of strategic intent in terms of products to be offered and markets to be served

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discussion question 7
Discussion Question 7

How do stakeholders affect strategy?

the firm and its stakeholders

THE FIRM

The Firm and Its Stakeholders

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 retain the participation of key stakeholders

the firm and its stakeholders1
The Firm and Its Stakeholders

Stakeholders

Capital Market Stakeholders

  • Shareholders
  • Major suppliers of capital
    • Banks
    • Private lenders
    • Venture capitalists
slide43

The Firm and Its Stakeholders

Stakeholders

Capital Market Stakeholders

Product Market Stakeholders

Primary customers

Suppliers

Host communities

Unions

slide44

The Firm and Its Stakeholders

Stakeholders

Capital Market Stakeholders

Product Market Stakeholders

Organizational Stakeholders

Employees

Managers

Nonmanagers

stakeholder involvement
Stakeholder Involvement

Two issues affect the extent of stakeholder involvement in the firm

Capital Market

Organizational

1

How do you divide the returns to keep stakeholders involved?

Product Market

slide46

Stakeholder Involvement

Two issues affect the extent of stakeholder involvement in the firm

Capital Market

Organizational

2

How do you increase the returns so everyone has more to share?

Product Market

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discussion question 8
Discussion Question 8

What is the role of the strategist (top executive)?

organizational strategists
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