Summary Strategic Management Competitiveness and Globalization

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This is the summary of the book "Strategic Management Competitiveness and Globalization". The author(s) of the book is/are Volberda. This summary is written by students who study efficient with the Study Tool of Study Smart With Chris.

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Summary - Strategic Management Competitiveness and Globalization

  • 1 Strategic management and strategic competitiveness

  • Strategy
    An integrated and coordinated set of commitments and action designed to exploit core competencies and gain a competitive advantage.
  • What is strategic competitiveness?
    Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.
  • Strategic competitiveness
    When a firm successfully formulates and implements a value-creating strategy -> earns above average returns.
  • What is strategy?
    A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage 
  • Competitive advantage
    When the firm implements a strategy that competitors are unable to duplicate or find too costly to try imitate -> no competitive advantage is permanent
  • What is a competitive advantage?
    A firm has a competitive advantage when it implements strategy competitors are unable to duplicate or find it too costly to try to imitate.
  • Above-average returns
    Returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
  • What are above average returns?
    Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
  • Risk
    The investor's uncertainty about the economic gains/losses that will result from a particular investment.
  • What is risk in strategy?
    Risk is an investor's uncertainty about the economic gains or 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.
  • What are average returns?
    Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk.
  • Strategic management process
    1. 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.
  • What is the strategic management process?
    The strategic management process is the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn 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 competition
    Condition 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 economy
    An economy in which goods, services, people, skills and ideas move freely across geographic borders.
  • Globalization
    The 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 foreignness
    The 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 diffusion
    The speed at which new technologies become available and are used.
  • Perpetual innovation
    Describes how rapidly and consistently new information-intensive technologies replace older ones.
  • Disruptive technologies
    Technologies that destroy value of existing technology and create new markets. It can create a new industry or harm existing industries.
  • The information age
    Is 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.
  • Knowledge
    Information, intelligence and expertise gained through experience, observation and inference is the basis of technology and its application.
  • Strategic flexibility
    A 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 returns
    Performance 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 returns
    Each 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.
  • Resources
    Inputs into a firm's production process such as capital equipment, finances, etc.
    Classified into physical, human and organizational resources.
  • Capability
    The capacity for a set of resources to perform a task or an activity in an integrative manner
  • Core competencies
    Resources 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.
  • Vision
    A 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.
  • Mission
    Specifies 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.
  • Stakeholders
    The 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 culture
    The set of ideologies/symbols/core values shared throughout firm/influences how it conducts business.
  • profit pool
    the total profits earned in an industry at all points along the value chain
  • 4 steps to identify profit pools
    1. 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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What is outsourcing?
Outsourcing is the purchase of a value-creating activity from an external supplier.
What are the four criteria of sustainable competitive advantage?
Valuable capabilities;
  • help a firm neutralise threats or exploit opportunities.

Rare capabilities;
  • are not possessed by many others.

Costly-to-imitate capabilities;
  • 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. 
          
Nonsubstitutable capabilities;
  • No strategic equivalent. 
What are intangible resources?
Intangible resources include assets that are rooted deeply in the firm's histroy, accumalting over time. and are relatively difficult for competitors to analyse and imitate. 

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
What are tangible resources?
Tangible resources are assets that can be observed and quantified.

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
What is judgement?
Judgement is the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete.
What are the three conditions affecting managerial decisions about resources, capabilities and core competencies?
(1) Uncertainty; regarding characteristics of the general and the industry environments, competitors' actions and customers' preferences
(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 is value?
Value is measured by a product's performance characteristics and by its attributes for which customers are willing to pay. Ultimately, creating value for customers is the source of above-average returns.
What is a global mindset?
A global mindset is the ability to analyse understand and manage (if in a managerial position) an internal organisation in ways that are not dependent on the assumptions of a single country, culture or context.
What does the competitor analysis include?
The competitor environment is the final part of the external environment requiring study. Competitor analysis focuses on each company against which a firm directly competes. In a competitor analysis, the firm seeks to understand the following:

  • What drives the competitor, as shown by its future objectives

  1. how do our goals compare with out competitors' goals
  2. where will emphasis be placed in the future?
  3. what is the attitude toward risk?

  • What the competitor is doing and can do, as revealed by its current strategy
  1. How are we currently competing?
  2. Does their strategy support changes in the competitive structure?

  • What the competitor believes about the industry, as shown by its assumptions

  1. Do we assume the future will be volatile
  2. Are we operating under a status quo
  3. What assumptions do our competitors hold about the industry and themselves

  • What the competitor's capabilities are, as shown by its strengths and weaknesses. 
  1. What are our strenghts and weaknesses?
  2. How do we rate compared to our competitors?
What are complementors?
Complementors are the network of companies that sell complementary goods or services or are compatible with the focal firm's own product or service.