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Chapter One:

Strategic Management & Strategic Competitiveness

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Canada is rather cool*

*The Economist 2003

Canada is home not only to world-class commercial competitors but to dominant companies in their industries

2009 Nelson

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Strategic Management & Competitiveness

Knowledge Objectives
1.

2.
3. 4. 5. 6. 7.

Define Strategic Competitiveness, Competitive Advantage, Strategy and Above Average Returns. Describe the 21st century competitive landscape & explain how globalization & tech. change shape it. See how Industrial Organization & Resource-Based models show how firms earn above average returns. Discuss the value of strategic vision & mission. Describe stakeholders ability to influence firms. Describe strategists work & the strat. mgmt. process. Know how Business Models differ from Strategies.
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Desired Strategic Outcomes

Strategic Competitiveness
Achieved when a firm successfully formulates & implements a value-creating strategy.

Sustained Competitive Advantage

Occurs when a firm develops a strategy that competitors are not simultaneously implementing. Provides benefits which current and potential competitors are unable to duplicate.

Above-Average Returns
Returns in excess of what an investor expects to earn from other investments with similar risk.
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Important Definitions
Risk
An investors uncertainty about the economic gains or losses resulting from a particular investment.

Average returns
Returns equal to what an investor expects from other investments with similar amount of risk.

Strategic management process

The full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness & earn above average returns.
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The Strategic Management Process

Strategic Objectives & Inputs
Ch. 1: Strat. Chapter 1: Chapter 3: Mgmt. & Com- The External Strategic Management Environment petitiveness Chapter 4: Ch. 2: Strat. The Internal Mgmt . & Performance Environment Strategic Vision Strategic Mission & Intent / Mission & Strategic Intent

Strategic Competitiveness

Strategy Implementation
Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategic Actions

Strategy Formulation
Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics

Ch. 12: Org. Structure & Controls Chapter 11: Corporate Governance

Chapter 7: Corp.-Level Strategy Chapter 9: International Strategy

Chapter 8: Acquisition & Restructuring

Chapter 10: Cooperative Strategy 1-6

What is Strategy?
An integrated and coordinated set of commitments & actions designed to exploit core competencies and gains and gain a competitive advantage.

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What is Strategy?
A unified, comprehensive, and integrated plan

designed to ensure that the basic objectives of the enterprise are achieved. (Glueck, 1980:9) The pattern or plan that integrates an organizations major goals, policies, and action sequences into a cohesive whole. (Quinn, 1980) A pattern of resource allocation that enables firms to maintain or improve their performance. A good strategy neutralizes threats & exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses. (Barney, 1997:17)
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Intended, Emergent & Realized Strategies

Intended Strategies

Deliberate Strategies

Realized Strategies

Unrealized Strategies

Emergent Strategies

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Intended, Emergent & Realized Strategies Example # 1: ___________________

Break into the Market Got into the Market New Ads & channels

Sell to current types of customers

New Customers

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Intended, Emergent & Realized Strategies Example # 2: ___________________

Break into the Market Got into the Market Build Mfg. & Dist. Op.s

Sell to through current channels

New Channels

Thus, strategy can emerge from a Pattern in the stream of decisions or actions
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Alternative Models of Superior Returns

Industrial Organization Model

The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns

O I

ResourceBased Model
Resources

Capabilities
Competitive Advantage An Attractive Industry Strategy Implementation Superior Returns
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Four Attributes of Resources and Capabilities (Competitive Advantage)

Valuable Rare
Resources and Capabilities

Allow firm to neutralize threats or exploit opportunities in its external environment Possessed by few, if any, current and potential competitors

Costly to Imitate
Organized to be Exploited

When other firms either cant obtain them or must obtain at a much higher cost
Supported by the appropriate structure, controls, and rewards
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Resources and capabilities

meeting these 4 criteria become a source of:
Valuable Rare
Resources and Capabilities

Costly to Imitate Organized to be Exploited

Core Competencies

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Core Competencies
are the basis for a firms:

Competitive advantage
Strategic competitiveness

Core Competencies

Ability to earn above-average returns

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21st Century Business Values

Flexibility

Speed to market
Innovation

Integration
Handling challenges from constantly changing conditions Hypercompetition
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The Global Economy

One in which goods, services, people, skills, and ideas move freely across geographic borders

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Technology & Technological Change

Increasing rate of tech. change & diffusion
Perpetual innovation.

The information age

Personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, e-business.

Increasing knowledge intensity

Information, intelligence, expertise, strategic flexibility.
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Strategic Vision
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.

Strategic Intent / Mission

The mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve.

Together, strategic vision & strategic mission yield the insights required to formulate and implement strategies.
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Tim Hortons Strategic Vision

Our vision is to be the quality leader in everything we do.

Tim Hortons Strategic Mission

Our guiding mission is to deliver superior quality products and services for our customers and communities through leadership, innovation and partnerships. 1-20

Stakeholders

Groups who are affected by firms performance & who have claims on its performance

Firm
Capital Market
Stock market/Investors Debt suppliers/Banks

Organizational Product Market

Primary Customers Host Communities Unions Suppliers Employees Managers Nonmanagers

The firm must maintain performance at an adequate level 1-21 in order to maintain the participation of key stakeholders

Organizational strategists
Top level managers, executives, top management team, or general managers.

Organizational culture
A complex set of ideologies, symbols and core values that influence how the firm conducts its business.
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Predicting Outcomes of Strategic Decisions

1. Define the profit pools boundaries. 2. Estimate the pools overall size. Whats the total value of all business segments? 3. Estimate the size of the value chain. Are some parts of the pool deeper than others?
(Are some market segments more profitable?)

4. Reconcile the calculations.

Find a fit with the deepest parts of the profit pool. (Strategic management calls for a disciplined approach to developing competitive advantage.)
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What are Business Models?

Business models are at heart, stories that explain how enterprises work.
They answer the critical questions of: Who, What, When, Where, Why, How, and Are-you-sure.
The Razor & Blade Model King Gillette practically gave razors away & made money on the blades.
2009 by J. Sheppard 1-24

What are Business Models?

Todays version of the Razor & Blade Model

Who are the customers Whats the value proposition Why When Are-you-sure

Upfront price sensitive buyers Low to no investment Attract the most buyers New product purchases Lower buyer investment
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2009 by J. Sheppard

How do Business Models Differ from Strategies?

Porter notes 3 main differences between business models and strategies: 1. Business models address a series of broad functions that create value for the customer, rather than activities; 2. Business models do not show how an organizations activities are related, but the strategic value chain does; 3. Unlike the strategic value chain, business models do not address competitive advantage.
2009 by J. Sheppard 1-26

The Strategic Management Process

Strategic Objectives & Inputs
Chapter 1: Ch. 1: Strat. Chapter 3: Strategic Mgmt. & Com- The External Management Environment petitiveness Chapter 4: Ch. 2: Strat. The Internal Mgmt . & Performance Environment

Strategic Competitiveness

Strategic Vision Strategic Mission & IIntent// Mission ntent Mission & Strategic Intent

Strategy Implementation
Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategic Actions

Strategy Formulation
Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics

Ch. 12: Org. Structure & Controls Chapter 11: Corporate Governance

Chapter 7: Corp.-Level Strategy Chapter 9: International Strategy

Chapter 8: Acquisition & Restructuring

Chapter 10: Cooperative Strategy 1-27