Strategic Management & Competitiveness - 1

STRATEGIC MANAGEMENT &
COMPETITIVENESS
Chapter 1
The Strategic Management

Process
Strategic Management Process: The Strategic
Management Process is
a rational approach (full set of commitments, decisions,
& actions
required) to achieve Strategic Competitiveness and
Above Average
Returns.

Process
Strategic Management Process: The Strategic Management
Process is
a rational approach (full set of commitments, decisions, & actions
required) to achieve Strategic Competitiveness and Above
Average
Returns.
Strategic Competitiveness; is achieved when a firm successfully
formulates implements a value creating strategy. When choosing a
strategy, firms make choices among competitive alternates as the
pathway for deciding how it will pursue strategic competitiveness.
Above Average Returns; are returns in excess of what an
investor expects to earn from other investments with a similar
amount of risk. The most successful companies learn how to
effectively manage risk. Effectively, managing risks reduces
investors uncertainty about the results of their investment.

Process
Stage 1 - Strategic Inputs
1st Step: Analyze the External Environment to
identify market place opportunities & threats.
2nd Step: Determine Internal Organizational
Resources & how to use Resources, Capabilities
& Core-competencies.
3rd Step Firms Develop Vision & Mission

Process
Stage 2 - Strategic Actions
Strategy Formulation
Strategy Implementation

Process
Stage 2 - Strategic Actions
Strategy Formulation
Strategy Implementation
Stage 3 Strategic Outcomes; basically the
process is developed to gain Strategic
Competitiveness & Above Average Returns.
The Competitive Landscape

Hyper-Competition
Nature of Competition is Changing
Resulting in Highly Turbulent & Chaotic
Environment
Different Mindset For Strategic Leaders
The Competitive Landscape

Hyper-Competition
Nature of Competition is Changing
Resulting in Highly Turbulent & Chaotic
Environment
Different Mindset For Strategic Leaders
Primary Factors For Hyper-competition
Global Economy Globalization of Industries &
Markets
Technological Changes
Globalization of Industries &

Markets
Global Economy; is the one in which goods,
services, people, skills, and ideas move freely across
geographic borders. Interesting opportunities and
challenges are associated with the emergence of
global economy
The March of Globalization; Globalization is the
economic interdependence among countries and
their organizations as reflected in the flow and goods
and services, financial capital, and knowledge across
country borders. Globalization is a product of a large
number of firms competing against one another in an
increasing number of global economics.
Globalization
Globalization: Companies are organizing them
globally & connected with their customers &
marketing partners all over the world.
Global Marketing
Trade agreements have increased marketing
opportunities within countries.
Most nations regardless of their degree of
economic development & political philosophyrecognize the importance of marketing beyond
their national border.
Nations designed marketing system for their
raw material for global customers.
Globalization
An English princess with an Egyptian boyfriend crashes in a
French tunnel, riding in a German car with a Dutch engine,
driven by a Belgian who was drunk on Scottish whisky. Followed
closely by Italian press photographers, on Japanese
motorcycles, treated by an American doctor, using Brazilian
medicines.
This is sent to you by a Canadian, using American Bill Gates'

technology, and you're probably reading this on your computer,
that uses Taiwanese chips, and a Korean monitor assembled in
a Singapore plant transported by Indian truck drivers.
That isGlobalization!
Technology Diffusion; is the speed, at which new

technologies become available and are used, has increased
substantially over the past 15 to 20 years.
Disruptive Technologies; technologies that destroy the
value of an existing technology and create new markets
surface frequently in todays competitive markets. A
disruptive technology can create what is essentially a new
industry.
Technological Trends
Technology Diffusion; is the speed, at which new technologies
become available and are used, has increased substantially over the
past 15 to 20 years.
Disruptive Technologies; technologies that destroy the value of an
existing technology and create new markets A disruptive
technology can create what is essentially a new industry.
Information Age
Technological Development in Information Age; Dramatic
advances in IT have given small firms more flexibility in competing
with large firms, in case technology is efficiently used. The declining
cost of IT & increased accessibility is evident in the current
competitive landscape.
Increasing Knowledge Intensity: The probability of achieving
strategic competitiveness is enhanced for the firm that realizes that
it survival depends on the ability to capture intelligence, transform it
into usable knowledge, and diffuse it rapidly throughout the
company.
I/O Model of Above Average

Returns
External Environment has a dominant influence on firms

performance, the I/O Model challenges firms to identify the
most attractive industry to compete.
Firms performance is determined by industrial properties
like: economics of scale, barrier to market entry,
diversification, product differentiation.
Assumption of I/O Model
First: External Environment impose constraints that
determine strategies to achieve Above Average Results.
Second: Firms competing within an industry should
control strategically relevant resources.
Third: Resources used to implement strategies are
highly mobile among firms and short lived.
Fourth: Organization decision makers should
concentrate on profit maximization.

Returns
The External Environment: The external environments dominant

influence on the firms strategic actions. It is challenging and
complex. Because of the external environments effect firms
performance.

Returns
The External Environment
The External Environment: The external environments

dominant influence on the firms strategic actions. It is
challenging and complex. Because of the external
environments effect firms performance.
Types of External Environment:
The General Environment: These are elements in the
broader society that affects industry and the firms operating
in that industry.
The Industry Environment: The model specifies the
industry in which in which company chooses to compete.
Factors that influence the industry environment are the
firms competitive actions and responses, and the industry
profit potential.
The Competitor Environment: The firms performance is
believed to be determined by industry properties, including

Returns

performance.
An Attractive Industry: . Firms performance can be increased only
once they operate in the industry with the highest profit potential.
Firms can use Five Forces Model to identify the attractiveness of an
industry (likely profitable potential).
I/O Model of Above Average Returns

An Attractive Industry
An Attractive
Industry
Firms
performance
can be increased
only once they
operate in the
industry with the
highest profit
potential. Firms
can use Five
Forces Model to
identify the
attractiveness of
an industry

Returns

performance.
Strategy Formulation: 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.

Returns

performance.
Assets and Skills: Companies that develop or acquire the internal
skills needed to implement a chosen strategies required by external
environment are likely to succeed, while those that do not are likely
to fail.

Returns

performance.
to fail.
Strategy Implementation: Use the firms strength (its developed or
acquired assets and skills) to implement the strategy. Selection of

Returns

performance.
to fail.
Strategy Implementation: Use the firms strength (its developed or
acquired assets and skills) to implement the strategy. Selection of
Assignment 1
Refer Opening Case (page 5)
Bharti Airtel Limited started its operations in 1995 as an underdog
against a powerful incumbent, the state owned Bharat Sanchar
Nigam
Limited (BSNL). By 2010 it became the leading telecom company in
India, and Airtels performance during this period suggests that it
has
become highly competitive and has registered Above Average
Returns
in the Indian Telecome sector consistently.
Requirement
How the Bharti Airtel Limited achieved this position? Identify the
decisions and action it took while pursuing Strategic
Competitiveness
And Above Average Returns.
The Resource-Based Model of Above-Average

Returns
Resources: Resources are inputs into a firms production process, firms
resources are classified into three categories; Physical, Human, and
Organizational capital. Resources are transformed into a competitive
advantage when they are formed into capability.

Returns
Capability: A capability is the capacity for a set of resources to perform
a task or an activity in an integrative manner. Difference in firms
performance is primarily due to their unique resources/capabilities rather
than the industrys structural characteristics.

Returns
Competitive Advantage: Firms acquire different resources and develop
unique capabilities based on how they combine and use these resources.
The difference in recourses and capabilities are the basis of competitive
advantage.

Returns
advantage.
An Attractive Advantage: The strategy a firm chooses should allow it to
use its competitive advantages in an attractive industry (the I/O model is
used to identify an attractive industry).

Returns
advantage.
An Attractive Advantage: The strategy a firm chooses should allow it
to use its competitive advantages in an attractive industry (the I/O model
is used to identify an attractive industry).
Strategy Formulation and Implementation: Strategic actions are
taken to earn above average returns. Organization should select a
strategy that best allows the firm to utilize its resources and capabilities

Returns
resources are classified into three categories; Physical, Human, &
advantage.
An Attractive Advantage: The strategy a firm chooses should allow it
to use its competitive advantages in an attractive industry (the I/O model
is used to identify an attractive industry).
Strategy Formulation and Implementation: Strategic actions are
taken to earn above average returns. Organization should select a
strategy that best allows the firm to utilize its resources and capabilities
Superior Returns
The resource-based model suggests that the strategy a firm chooses should
allow it to use its competitive advantages in an attractive industry. Not all
firms resources & capabilities have the potential for competitive
advantage.
This potential is realized when resources and capabilities are valuable, rare,
costly to imitate, and non-substitutable.
Valuable: Resources are valuable once it allows a firm to take
advantage of opportunities & neutralize threats.
Rare: They are rare when possessed by a few customers.
Costly to Imitate: Resources are costly to imitate when other firms
cannot obtain them or at a cost disadvantage in obtaining them
compared with the firm already possess.
Non-Substitutable: These are non-substitutable when they have no
structural equivalents. Many resources can be imitated or substituted
over time. Therefore, it is difficult to maintain the competitive advantage
based on resources alone.
Vision and Mission

Vision: Vision is a picture what a firm wants to be and in broad
terms, what it wants to ultimate achieve. Thus a vision statement
articulates the ideal description of an organization and gives
shape to its intended future. CEO is responsible for working with
others to form firms vision. Experience shoes that the most
effective vision statement results when CEO involves a host of
stake holders.
Example: Nucor, one of the largest steel manufacturers, have
tied-up all their strategic actions around its vision to be the worlds
lowest cost steel manufacturer.
Organizational Mission; Organizational mission is a very broad
statement of organizational direction. Adeclaration of
anorganizationscore purpose and focus that normally remains
unchangedover a period of time. Organization mission comprises
of its purpose and philosophy.
Mission Statement: A writtendeclaration of an organizations
core purpose. . For any firm organizational mission is normally
summarized and documented in a mission statement.
Mission & Vision Statements

AMOCO Corporation
Mission Statement; what is our business?
AMOCO is a worldwide integrated petroleum and
chemical company. We find and develop petroleum
resources and provide quality products and services for
our customers. We conduct our business responsibly to
achieve a superior financial return balanced with our long
term growth, benefiting shareholders and fulfilling our
commitment to the community and the environment.
Vision Statement; what we want to become?
Amoco will be a global business enterprise,
recognized throughout the world as preeminent by
employees, customers, competitors, investors and public.
We will be standard by which other businesses measure
their performance. Our hallmarks will be the innovation,
ORGANIZATIONAL MISSION
Organizational Mission; Organizational mission is a very broad
statement of organizational direction. Adeclaration of
anorganizationscore purpose and focus that normally remains
unchangedover a period of time. Organization mission comprises of
its purpose and philosophy.
Organizations Purpose Line of Business
Purpose identifies why an organization exists & what is the line of
business of the organization. It defines the activities that the
organization performs or intends to perform and the kind of
organization that it is or intends to be.
Organization purpose must be defined at its inception but also
must be defined regularly during both difficult and successful
periods.
Defining organizational purpose starts by identifying present &
potential customers;
Changes in purpose can lead to major changes in organization
operations.
Organizations Philosophy How to conduct Business
CONTENTS OF MISSION
Company Product or Service; This information identifies the goods or
services produced by an organization --- that which the company offers to its
customers.
Market; This information describes the customers of an organization, who
these are and where they are located?
Technology; The information generally includes such topics as tools,
machines, materials, techniques & processes used to produce organizational
goods / services.
Company Objectives; Most mission statements make general reference to
company objectives. For many firms, these include the intention to survive
through continuing growth and profitability.
Company Philosophy; Statements of company philosophy (also called
company creed) commonly appear as part of mission statement. Company
philosophy is a statement reflecting the basic beliefs and values that should
guide an organization member in conducting organizational business.
Company Self-Concept; Mission statements inevitably contain or
accompanied by information on self concept of the company. Company selfconcept is the companys own view or impression of itself.
Public Image; Mission statements generally contain some reference, either
direct or indirect, to the type of impression the company is attempting to
leave with the organizations public.
Mission & Vision Relationship

The vision is the foundation for firms mission, but the
firms mission is more specific than its vision.
Vision and mission statements is to inform stake holders
of what the firm is, what it seeks to accomplish, and who
it seeks to serve.
A firms vision tends to be enduring, while its mission
can change in light of changing environmental
conditions.
Vision and mission are critical of strategic inputs it
requires to engage in strategic actions as the foundation
for achieving.
Vision and Mission is a strategic focus, firms must accept
the challenge of developing effective vision and mission
statement.
Evaluation of
INFOSYS
Vision and Mission
Vision
To be a globally respected corporation that provides
best-of-bread business solutions, leveraging technology,
delivered by best-in-class people.
Mission
To achieve our objectives in an environment of fairness,
honesty and courtesy towards the clients, employees,
vendors and society at large.
Evaluation; Notice how the mission statement of
INFOSYS flows from its vision of being a globally
respected software company through technology
and people.
Stakeholders
Stakeholders are the individuals and the groups who are affected by the
firms performance and who have claims on its performance. Claims on a
firms performance and all have their divergent claims. Managers must
find ways either accommodate or insulate the organization from the
demands of stakeholders controlling critical resources.
Stakeholders
Stakeholders are the individuals and the groups who are affected by the
firms performance and who have claims on its performance. Claims on a
firms performance and all have their divergent claims. Managers must
find ways either accommodate or insulate the organization from the
demands of stakeholders controlling critical resources.
Claimants
Employees
Consumers
Suppliers
Stockholder
Claimants Demand
Want higher pay, more benefits and job security.
Safe and reliable products at reasonable prices.
Want that their products will be bought.
High return on their investment and security of
s
their money.
Government Taxes be paid by the enterprise and comply with
Community
their laws.
Enterprise to act as "Good Citizen," provision of
Other
jobs, with minimum pollution.

Legitimate claim of fair play.
Claimants
Classification of Stakeholders
Capital Market Stakeholders: They are the shareholders or major
suppliers of a firms capital. They expect from the firm to preserve and
enhance the wealth they have entrusted, and expect a return
commensurating with the degree of risk. Low returns are expected from
the low degree investments while higher return is expected with high-risk
investments. Dissatisfied shareholders may reflect their concern by selling
their stock.
their stock.
Product Market Stakeholders: These are the firms customers,
suppliers and host communities. Customers as stakeholders, demand
reliable, quality products at the lowest possible prices. Suppliers seek
loyal customers who are willing to pay highest sustainable prices for
goods, services, and raw-material they receive. The community wants
companies to be long term employers and discharge their social
responsibility. Thus product-market stakeholders are generally satisfied
when a firms profit margin reflects at least a balance between the returns
to capital market stakeholders.
their stock.
Product Market Stakeholders: These are the firms customers,
suppliers and host communities. Customers as stakeholders, demand
reliable, quality products at the lowest possible prices. Suppliers seek
loyal customers who are willing to pay highest sustainable prices for
goods, services, and raw-material they receive. The community wants
companies to be long term employers and discharge their social
responsibility. Thus product-market stakeholders are generally satisfied
when a firms profit margin reflects at least a balance between the returns
to capital market stakeholders.
Organizational Stakeholders: All of the firms employees include both
managerial and non-managerial personnel. They expect the firm to
provide a dynamic, stimulating, and rewarding work environment.
Employees are usually satisfied working for a company that is growing
Strategic Leaders
CEO and other top level managers are the strategic leaders.
Responsibility: Strategic Leaders are people located in
different parts of the firm using the strategic management
process to help the firm in reaching its vision and mission.
Regardless of their locations successful strategic leaders are
decisive, and committed in helping the firm to create value for
all stakeholder groups.
Delegation of Responsibility: The effective CEOs and top
level managers understand how to delegate strategic
responsibilities to people throughout the firm who influences to
use the organizational resources.
Organizational Culture : Strategic Leaders decisions and
their work shape a firms culture. Organizational culture refers
to complex set of ideologies, symbols, myths, core values that
are shared throughout the firm and that influence how the firm
conducts business.
Profit Pools
Predicting Outcomes of Strategic Decisions: Strategic

leaders attempt to predict the outcomes of their decisions before
taking efforts to implement them, which is difficult to do. Many
decisions are the part of strategic management process is
connected with an uncertain future.
Profit Pools: Entails the total profit earned in an industry,
analyzing an industrys profit pool is something strategic leaders
can do to anticipate the possible outcome of different decisions.
It helps a firm see something others are unable to see (to
understand the primary sources of profit in an industry). There
are four steps in identifying a profit pool:
Define the pool boundaries.
Estimate the pools overall size.
Estimate the size of value chain activity in the pool
Reconcile the calculations

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STRATEGIC MANAGEMENT &

The Strategic Management

The Strategic Management

The Strategic Management

The Strategic Management

The Strategic Management

The Competitive Landscape

The Competitive Landscape

Globalization of Industries &

This is sent to you by a Canadian, using American Bill Gates'

Technology Diffusion; is the speed, at which new

I/O Model of Above Average

External Environment has a dominant influence on firms

I/O Model of Above Average

The External Environment: The external environments dominant

I/O Model of Above Average

The External Environment: The external environments

I/O Model of Above Average

The External Environment: The external environments dominant

I/O Model of Above Average Returns

I/O Model of Above Average

The External Environment: The external environments dominant

I/O Model of Above Average

The External Environment: The external environments dominant

I/O Model of Above Average

The External Environment: The external environments dominant

I/O Model of Above Average

The External Environment: The external environments dominant

The Resource-Based Model of Above-Average

The Resource-Based Model of Above-Average

The Resource-Based Model of Above-Average

The Resource-Based Model of Above-Average

The Resource-Based Model of Above-Average

The Resource-Based Model of Above-Average

Vision and Mission

Mission & Vision Statements

Mission & Vision Relationship

Vision and Mission

jobs, with minimum pollution.

Predicting Outcomes of Strategic Decisions: Strategic

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