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Summary - Strategic Management Competitiveness and Globalization
1 Strategic management and strategic competitiveness
StrategyAn integrated and coordinated set of commitments and action designed to exploit core competencies and gain a competitive advantage.
Strategic competitivenessWhen a firm successfully formulates and implements a value-creating strategy -> earns above average returns.
Competitive advantageWhen the firm implements a strategy that competitors are unable to duplicate or find too costly to try imitate -> no competitive advantage is permanent
Above-average returnsReturns in excess of what an investor expects to earn from other investments with a similar amount of risk.
RiskThe investor's uncertainty about the economic gains/losses that will result from a particular investment.
Returns are measured in terms of accounting figures (ROA, ROE, etc.), on basis of stock market returns and in smaller firms in terms of amount and speed of growth.
Strategic management process1. Analyze its external environment and internal organization to determine its resources, capabilities and core competencies.
2. Develop a vision and mission and formulate strategy
3. Take actions towards achieving strategic competitiveness and above-average returns.
Characteristics of the current competitive landscape- financial capital is scarce
- markets are increasingly volatile
- conventional sources of competitive advantage (economies of scale) are uneffective
- governments are involved
Hyper competitionCondition of rapidly escalating competition based on price-quality positioning, competition to create new know-how and establish first mover advantage, and competition to protect/invade established product/geographic markets.
The emerge of a global economy and technology are primary drivers.
Global economyAn economy in which goods, services, people, skills and ideas move freely across geographic borders.
GlobalizationThe increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital and knowledge across country borders.
Liability of foreignnessThe risks of participating outside a firm's domestic country in global economy. These risks include the amount of time required for firms to learn how to compete in markets that are new to them and substantial amounts of globalization.
Technology trends can be placed into two categories:1. Technology diffusion and disruptive technologies
2. Information age and increasing knowledge intensity
The rate of technology diffusionThe speed at which new technologies become available and are used.
Perpetual innovationDescribes how rapidly and consistently new information-intensive technologies replace older ones.
Disruptive technologiesTechnologies that destroy value of existing technology and create new markets. It can create a new industry or harm existing industries.
The information ageIs the era in which changes in info technology has lead to the ability to effectively and efficiently access and use information -> important source of competitive advantage.
KnowledgeInformation, intelligence and expertise gained through experience, observation and inference is the basis of technology and its application.
Strategic flexibilityA set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment.
I/O model of above-average returnsPerformance is determined by range of industry properties; economies of scale, barriers to market entry, diversification, product differentiation and concentration degree firm.
1. External environment imposes pressures and constraints
2. Most firms control similar strategically relevant resources and pursue similar strategies because of 1
3. Resources used to implement strategies are highly mobile across firms
4. Challenges firms to find most attractive industry to compete in and shape that industry to their advantage.
Model suggests that returns are determined primarily by external characteristics rather than by the firm's unique internal resources and capabilities.
The resource-based model of above-average returnsEach organization is a collection of unique resources and capabilities and this uniqueness is the basis for a firm's strategy.
1. Differences in performance occur primarily because of firm's unique resources and capabilities
2. Firms acquire different resources and develop unique capabilities based on how they combine/use resources
3. Resources and certainly capabilities are not highly mobile across firms.
4. Differences in resources and capabilities are the basis of competitive advantage.
ResourcesInputs into a firm's production process such as capital equipment, finances, etc.
Classified into physical, human and organizational resources.
CapabilityThe capacity for a set of resources to perform a task or an activity in an integrative manner
Core competenciesResources and capabilities that serve as a source of competitive advantage for a firm over its rivals.
Only when resources or capabilities are valuable, rare, costly to imitate and non-substitutable can they become core competencies.
VisionA picture of what the firms wants to be and, in broad terms, what it wants to ultimately achieve.
It reflects a firm's values and aspirations and is enduring.
MissionSpecifies the business in which the firm intends to compete and the customers it intends to serve. It can change in light of changing environmental conditions.
StakeholdersThe individuals and groups who can affect the firm's vision and mission; are affected by the strategic outcomes the firm achieves through its operations; and have enforceable claims on the firm's performance.
Power, urgency and degree of importance are important criteria in prioritizing stakeholders.
Stakeholders can be divided into 4 main groups:1. capital market stakeholders; shareholders, suppliers of capital
2. product market stakeholders; customers, supplier
3. organizational stakeholders; employees
4. societal stakeholders; government
Organizational cultureThe set of ideologies/symbols/core values shared throughout firm/influences how it conducts business.
profit poolthe total profits earned in an industry at all points along the value chain
4 steps to identify profit pools1. define pool's boundaries
2. estimate pool's overall size
3. estimate size of value-chain activity in pool
4 reconcile the calculations
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- help a firm neutralise threats or exploit opportunities.
- are not possessed by many others.
- historical; a unique and a valuable organisational culture or brand name.
- Ambiguous cause; the causes ad uses of a competence are unclear.
- social complexity; interpersonal relationships, trust, and friendship among managers, suppliers and customers.
- No strategic equivalent.
Human Resources; knowledge, trust, managerial capabilites, organisational routines.
Innovation Resources; Ideas, scientific capabilities, capacity to innovate
Reputational Resources; reputation with customers, brand name, perceptions of product quality, reputation with suppliers, efficient, effective, supportive and mutually beneficial interactions and relationships
Financial Resources; the firm's borrowing capacity, the firm's ability to generate internal funds
Organisation Resources; The firm's formal reporting structure and its formal planning, controlling and coordinating systems
Physical Resources; Sophistication and location of a firm's plant and equipment.
Technological Resources; Stock of technology, such as patents, trademarks, copyrights and trade secrets
(2) Complexity; regarding the interrelated causes shaping a firm's environments and perceptions of the environments
(3) Intra-organisational conflicts; among people making managerial decisions and those affected by them
- What drives the competitor, as shown by its future objectives
- how do our goals compare with out competitors' goals
- where will emphasis be placed in the future?
- what is the attitude toward risk?
- What the competitor is doing and can do, as revealed by its current strategy
- How are we currently competing?
- Does their strategy support changes in the competitive structure?
- What the competitor believes about the industry, as shown by its assumptions
- Do we assume the future will be volatile
- Are we operating under a status quo
- What assumptions do our competitors hold about the industry and themselves
- What the competitor's capabilities are, as shown by its strengths and weaknesses.
- What are our strenghts and weaknesses?
- How do we rate compared to our competitors?