Chapters 1 & 13 Strategic Management and Strategic Competitiveness How do we begin? 1 The Strategic Management Process Involves the full set of: Commitments Decisions Actions which are required for firms to achieve: Strategic Competitiveness Sustained Competitive Advantage Above- 2 Defining Entrepreneurship Corporate Entrepreneurship Firm s capabilities to develop new goods or services and manage the innovation process Invention Creating or developing a new product or process idea Innovation Creating a commercializable product from invention Imitation Adoption of innovation by a population of similar firms 3
Internal Corporate Venturing Corporate Intrapreneurship can occur as either a bottom-up process or as a top-down process Autonomous strategic behavior is a bottom-up process through which Product Champions pursue new product ideas to commercialization Induced strategic behavior is a top-down process in which the current strategy and structure foster product innovations that are closely associated with the current strategy Product Champions are individuals who have an entrepreneurial vision for a new product and seek support for its commercialization 4 Strategic Intent Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies. Strategic Mission An application of strategic intent in terms of products to be offered and markets to be served. 5 The Strategic Management Process Strategic Intent must ask: Where are we now? Where do we want to go? How will we get there? Involves thinking strategically about the company s external market and internal situation and capabilities? Involves thinking strategically about what top management wants to be like in 5-10 years - what level of performance to reach - what financial outcomes to achieve - what strategic outcomes to achieve Involves thinking about what STRATEGY the company should pursue to perform successfully and get from where it wants to go? 6
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 7 I/O of Above- 1. External Environments General Political/Legal Sociocultural Global Industry Environment Competitor Environment Technological Environment Demographic Economic 1. Strategy dictated by the external environments 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?) 8 I/O of Above- 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 9
I/O of Above- 2. Locate an attractive industry with a high potential for above-average returns Attractive industry: one whose structural characteristics suggest above-average returns 10 I/O of Above- 3. Identify the strategy called for by the attractive industry to earn above-average returns Strategy Formulation Strategy formulation: selection of a strategy linked with above-average returns in a particular industry 11 I/O of Above- 4. Develop or acquire assets and skills needed to implement the strategy Strategy Formulation Assets and Skills Assets and skills: those assets and skills required to implement a chosen strategy 12
I/O of Above- 5. Use the firm s strengths (its developed or acquired assets and skills) to implement the strategy Strategy Formulation Assets and Skills Strategy Implementation Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy 13 I/O of Above- Strategy Formulation Assets and Skills Strategy Implementation Superior Returns Superior returns: earning of above-average returns 14 of Above 1. Firm s 1. Strategy dictated by unique resources and capabilities of the firm (what can the firm do best?) 2. Find an environment in which to exploit these assets (where are the best opportunities?) 15
of Above 1. Identify the firm s resources- - strengths and weaknesses compared with competitors : inputs into a firm s production process 16 of Above 2. Determine the firm s capabilities--what it can do better than its competitors : capacity of an integrated set of resources to integratively perform a task or activity 17 Four Attributes of and Capabilities (Competitive Advantage) Valuable Rare Costly to imitate Nonsubstitutable and Capabilities allow the firm to exploit opportunities or neutralize threats in its external environment possessed by few, if any, current and potential competitors when other firms cannot obtain them or must obtain them at a much higher cost the firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage 18
and capabilities that meet these four criteria become a source of: Valuable Rare Costly to imitate Nonsubstitutable and Capabilities Core Competencies 19 Core Competencies are the basis for a firm s Competitive advantage Strategic competitiveness Ability to earn above-average returns Core Competencies 20 of Above Competitive Advantage 3. Determine the potential of the firm s resources and capabilities in terms of a competitive advantage Competitive advantage: ability of a firm to outperform its rivals 21
of Above 4. Locate an attractive industry Competitive Advantage An attractive industry: an industry with opportunities that can be exploited by the firm s resources and capabilities 22 of Above 5. Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment Competitive Advantage Strategy Form/Impl Strategy formulation and implementation: strategic actions taken to earn above average returns 23 of Above Competitive Advantage Strategy Form/Impl Superior Returns Superior returns: earning of above-average returns 24
Stakeholders: The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders Groups who are affected by a firm s performance and who have claims on its wealth Firm Capital Market Stock market/investors Debt suppliers/banks Product Market Primary Customers Suppliers Organizational Employees Managers Non-Managers25 Stakeholder Involvement Each of the key stakeholders wants a piece of the same pie 1 How do you divide the pie in order to keep all of the stakeholders involved? 2 How do you increase the size of the pie so that there is more to go around? 26