ch1-1 sustained competitive advantage above-average returns returns in excess of what an investor...

Ch1-1

Sustained Competitive AdvantageSustained Competitive Advantage

Above-Average ReturnsAbove-Average ReturnsReturns in excess of what an investor expects to Returns in excess of what an investor expects to earn from other investments with similar riskearn from other investments with similar risk

Occurs when a firm develops a strategy that Occurs when a firm develops a strategy that competitors are not simultaneously implementingcompetitors are not simultaneously implementing

Provides benefits which current and potential Provides benefits which current and potential competitors are unable to duplicatecompetitors are unable to duplicate

Strategic CompetitivenessStrategic CompetitivenessAchieved when a firm successfully formulates Achieved when a firm successfully formulates and implements a value-creating strategyand implements a value-creating strategy

Ch1-2

which are required for firms to achieve:which are required for firms to achieve:

Above-Average ReturnsAbove-Average Returns

Strategic CompetitivenessStrategic Competitiveness

Sustained Competitive AdvantageSustained Competitive Advantage

The Strategic Management ProcessThe Strategic Management Process

Involves the full set of:Involves the full set of:

ActionsActionsCommitmentsCommitments DecisionsDecisions

Ch1-3

The StrategicThe StrategicManagementManagement

ProcessProcess


ProcessProcessChapter 3Chapter 3InternalInternal

EnvironmentEnvironment

Chapter 2Chapter 2ExternalExternal

EnvironmentEnvironmentStrategic IntentStrategic Intent

Strategic MissionStrategic Mission

Strategy FormulationStrategy Formulation Strategy ImplementationStrategy Implementation

Chapter 4Chapter 4Business-LevelBusiness-Level

StrategyStrategy

Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics

Chapter 6Chapter 6Corporate-LevelCorporate-Level

StrategyStrategy

Chapter 8Chapter 8InternationalInternational

StrategyStrategy

Chapter 9Chapter 9CooperativeCooperative

StrategiesStrategies

Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring

Chapter 10Chapter 10CorporateCorporate

GovernanceGovernance

Chapter 11Chapter 11StructureStructure& Control& Control

Chapter 12Chapter 12StrategicStrategic

LeadershipLeadership

Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation

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StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average

ReturnsReturns

Ch1-4

Competitive success is transient...unless care is taken to preserve competitive positionCompetitive 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!

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 failedIn a recent year, 44,367 businesses filed for bankruptcy and many more U.S. businesses failed

Challenge of Strategic ManagementChallenge of Strategic Management

Ch1-5

Best Stocks of the DecadeBest Stocks of the Decade

Challenge of Strategic ManagementChallenge of Strategic Management

The goals of achieving The goals of achieving strategic competitiveness strategic competitiveness and earning above-and earning above-average returns are average returns are challenging challenging

The performance of The performance of some companies more some companies more than meets strategic than meets strategic management's management's challenge challenge

Ch1-6

• Rapid technological changes• Rapid technological changes

• Rapid technology diffusions• Rapid technology diffusions

• Dramatic changes in information and communication technologies

• Dramatic changes in information and communication technologies

• Increasing importance of knowledge

• Increasing importance of knowledge

Fundamental nature of competition is changingFundamental 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...

Traditional industry boundaries are blurring, such as...

• Computers• Telecommunications• Computers• Telecommunications

21st Century Competitive Landscape21st Century Competitive Landscape

Ch1-7

The global economy is changingThe 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

Traditional sources of competitive advantage no longer guarantee success

New keys to success include:New keys to success include:

• Flexibility• Innovation• Speed• Integration

• Flexibility• Innovation• Speed• Integration


1999 1998 Country CompetitivenessIndex 1999

CompetitivenessIndex 1998

1 1 Singapore 2.12 2.162 3 United States 1.58 1.413 2 Hong Kong 1.41 1.914 6 Taiwan 1.38 1.195 5 Canada 1.33 1.276 8 Switzerland 1.27 1.107 10 Luxembourg 1.25 1.058 4 United Kingdom 1.17 1.299 7 Netherlands 1.13 1.13

10 11 Ireland 1.11 1.0511 15 Finland 1.11 0.7012 14 Australia 1.04 0.7913 13 New Zealand 10.1 0.8414 12 Japan 1.00 0.9715 9 Norway 0.92 1.0916 17 Malaysia 0.86 0.5917 16 Denmark 0.85 0.6118 30 Iceland 0.59 -0.1819 23 Sweden 0.58 0.2520 20 Austria 0.37 0.3721 18 Chile 0.57 0.5722 19 Korea 0.46 0.3923 22 France 0.44 0.2524 27 Belgium 0.39 -0.0325 24 Germany 0.37 0.1526 25 Spain 0.16 0.02

Country Competitiveness RankingsCountry Competitiveness RankingsA country’s A country’s competitiveness is competitiveness is achieved through the achieved through the accumulation of accumulation of individual firms’ individual firms’ strategic strategic competitiveness in competitiveness in the global economythe global economy

Achieving improved Achieving improved competitiveness competitiveness allows a country's allows a country's citizens to have a citizens to have a higher standard of higher standard of living living


Ch1-9

Alternative Models of Superior ReturnsAlternative Models of Superior Returns

Resource-BasedResource-BasedModelModel

Industrial Organization Industrial Organization ModelModel

The External EnvironmentThe External Environment

An Attractive IndustryAn Attractive Industry

Strategy FormulationStrategy Formulation

Assets and SkillsAssets and Skills

Strategy ImplementationStrategy Implementation

Superior ReturnsSuperior Returns

ResourcesResources

CapabilityCapability

Competitive AdvantageCompetitive Advantage




Ch1-10

I/O Model of Superior ReturnsI/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.

Ch1-11

Action required:Action required:External EnvironmentExternal Environment

General EnvironmentGeneral Environment

Industry EnvironmentIndustry Environment

Competitive EnvironmentCompetitive Environment

Study the external environment, especially the industry environment.


Ch1-12

External EnvironmentExternal Environment





An industry whose structural characteristics suggest above-average returns are possible


Action required:Action required:Locate an industry with high potential for above-average returns.


Ch1-13





Attractive IndustryAttractive Industry



Action required: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


StrategyFormulationStrategyFormulation


Ch1-14











Action required:Action required:Develop or acquire assets and skills needed to implement the strategy.


Assets and skills required to implement a chosen strategy



Ch1-15














Action required:Action required:Use the firm’s strengths (its assets or skills) to implement the strategy.


Selection of strategic actions linked with effective implementation of the chosen strategy



Ch1-16














Action required:Action required:





Earning of above-average returnsEarning of above-average returns

Maintain selected strategy in order to outperform industry rivals.


Ch1-17

The Resource-Based model suggests that above-average returns for any firm are largely determined by characteristics inside the firm.

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.

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 ReturnsResource-Based Model of Superior Returns

Ch1-18

ResourcesResources

Inputs to a firm’s production process.Inputs to a firm’s production process.

Action required:Action required:Identify firm resources. Study strengths and weak- nesses relative to rivals.


Ch1-19

ResourcesResources


Action required:Action required:Determine what firm capabilities allow it to do better than rivals.


Capacity for an integrated set of resources to perform a task or activity.

Capacity for an integrated set of resources to perform a task or activity.


Ch1-20

ResourcesResources



Capacity for an integrated set of resources to integratively perform a task or activity.



Ability of a firm to outperform its rivalsAbility of a firm to outperform its rivals

Action required:Action required:Determine how firm’s resources and capabilities may create competitive advantage.


Ch1-21

ResourcesResources







An AttractiveIndustryAn AttractiveIndustry

Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities


Action required:Action required:Locate an attractive industry.


Ch1-22

ResourcesResources










Action required: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



Ch1-23

ResourcesResources










Action required:Action required:Maintain selected strategy in order to outperform industry rivals.






Earning of above-average returnsEarning of above-average returns


Ch1-24

Core CompetenciesCore Competencies

When these four When these four criteria are met, criteria are met, Resources and Resources and Capabilities Capabilities become:become:

Core Competencies are resources and capabilities Core Competencies are resources and capabilities that can serve as a source of that can serve as a source of Competitive AdvantageCompetitive Advantage..

The Resource-Based model argues that Core The Resource-Based model argues that Core Competencies are the basis for a firm’s Competitive Competencies are the basis for a firm’s Competitive Advantage, Strategic Competitiveness and Ability to Advantage, Strategic Competitiveness and Ability to Earn Above-average Returns. Earn Above-average Returns.

Ch1-25

Stakeholders:Stakeholders: Groups who are affected by a firm’s Groups who are affected by a firm’s performance and who have claims on its performance and who have claims on its wealthwealth

The firm must maintain The firm must maintain performance at an adequate level in performance at an adequate level in order to maintain the participation order to maintain the participation of key stakeholdersof key stakeholders

OrganizationalOrganizationalOrganizationalOrganizational

EmployeesEmployeesManagersManagersNon-ManagersNon-Managers

EmployeesEmployeesManagersManagersNon-ManagersNon-Managers

FirmFirmFirmFirm

Capital MarketCapital MarketCapital MarketCapital Market

Stock market/InvestorsStock market/InvestorsStock market/InvestorsStock market/Investors

Debt suppliers/BanksDebt suppliers/BanksDebt suppliers/BanksDebt suppliers/Banks

Product MarketProduct MarketProduct MarketProduct Market

Primary Customers Primary Customers SuppliersSuppliersPrimary Customers Primary Customers SuppliersSuppliers

Ch1-26

Stakeholder InvolvementStakeholder InvolvementEach of the key stakeholders Each of the key stakeholders wants a piece of the same piewants a piece of the same pie

1111 How do you How do you divide divide the piethe pie in order to in order to keep all of the keep all of the stakeholders stakeholders involved?involved?

How do you How do you divide divide the piethe pie in order to in order to keep all of the keep all of the stakeholders stakeholders involved?involved?

2222

How do you How do you increase increase the sizethe size of the pie so of the pie so that there is more to that there is more to go around?go around?

How do you How do you increase increase the sizethe size of the pie so of the pie so that there is more to that there is more to go around?go around?

Ch1-27

Chapter 3Chapter 3InternalInternal

EnvironmentEnvironment

Chapter 2Chapter 2ExternalExternal

EnvironmentEnvironmentThe StrategicThe StrategicManagementManagement

ProcessProcess


ProcessProcess

Strategic IntentStrategic Intent

Strategic MissionStrategic Mission

StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average

ReturnsReturnsFeedback


Chapter 4Chapter 4Business-LevelBusiness-Level

StrategyStrategy

Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics

Chapter 6Chapter 6Corporate-LevelCorporate-Level

StrategyStrategy

Chapter 8Chapter 8InternationalInternational

StrategyStrategy

Chapter 9Chapter 9CooperativeCooperative

StrategiesStrategies

Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring


Chapter 10Chapter 10CorporateCorporate

GovernanceGovernance

Chapter 11Chapter 11StructureStructure& Control& Control

Chapter 12Chapter 12StrategicStrategic

LeadershipLeadership

Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation

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ch1-1 sustained competitive advantage above-average returns returns in excess of what an investor...

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