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Chapter 1
Strategic Management and
Strategic Competitiveness
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Twenty-First CenturyCompetition
TodaysCompetitive Markets
The globaleconomy
GlobalizationRapid
technologicalchange
Increasingimportance
ofknowledge
and people
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Strategic Competitiveness
Formulation and
implementation of
a superior value-
creating strategy
Commitments and actions to achieve
above-average performance and returns
What the firm
will do
What the firm
will not do
Competitive
advantage
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The Global CompetitiveLandscape
Increasing
Market volatility and instability due tothe rapid pace of change in markets
Blurring of market boundaries
lobali!ed flow of financial capital
"eed for fle#ibility$ speed$ innovation$
and integration in the use of technology Strategic and operational comple#ity
of global-scale competition
%ising product &uality standards
Decreasi
ng 'raditional time for adapting to change
'raditional sources of competitive advantage
'raditional managerial mindset
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Hypercompetition
Creation of new
know-how and
use of first-moveradvantage
(se of
price-&uality
positioning tobuild market
presence
)rotection or
invasion of
establishedgeographic or
product markets
Strategic options in
hypercompetitive
environments
lobal
economy'echnology
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Competitive Success Factors
TopCorporate
erformers
!ave anentreprene"rial
#opport"nistic
mindset
$re market#c"stomer%
needsoriented
Make e&ective"se of val"ablecompetencies
'&er newand innovativeprod"cts and
services
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ec no ogy an ec no og caChanges
'he information age* Internet
and the global proliferation of
low-cost computing power
Increasing rate of technology
diffusion and the emergence
of disruptive technologies
Increasing knowledge intensityas an intangible source of
competitive advantage
'echnology trendsimpacting the
global competitive
environment
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The Industry Organiation !I"O# $odelo% &bove-&verage 'eturns
The (irms
)trategicChoices
*conomiesof scale
+arriers tomarket entry
Diversi,cation
rod"ctdi&erentiatio
n
Ind"stryconcentratio
n
Marketfrictions
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Figure +,
'he I./ Model of
0bove-0verage
%eturns
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I"O $odel &ssumptions
()The e*ternal environment imposes pressuresand constraints that determine strategicchoices)
+)Similarity in strategically relevant resourcescauses competitors to pursue similar strategies)
,)'esource dierences among competitors areshort-lived due to resource mobility across .rms)
/)Strategic decision ma0ers are rational andengage in pro.t-ma*imiing behaviors)
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Five Forces $odel o%Competition
)"ppliers
Substitutes
+"yers
otential*ntrants
Ind"stryRivalry
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Five Forces $odel&ssumptions
Industry pro.tability !i)e)1 rate o% return oninvested capital relative to cost o% capital# is a%unction o% interactions among the .ve %orces)
Industry attractiveness e2uates to itspro.tability potential %or earning above-average returns by3
4roducing standardied goods or services at costs
below competitor costs !a cost leadership strategy#) 4roducing dierentiated goods or services %or which
customers are willing to pay a price premium !adierentiation strategy#)
5 +6(7 CengageLearning) &ll rightsreserved) $ay not becopied1 scanned1 orduplicated1 in whole or in
part1 e*cept %or use aspermitted in a licensedistributed with a certain
(8(+
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The 'esource-9ased $odelo% &bove-&verage 'eturns
Reso"rcesPhysical, human, andorganizationalcapital(tangible andintangible)
CapabilityAn integrated
set ofresources
Corecompetence
A source ofcompetitiveadvantage
9uildin
gcompetit
ive
advant
age
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'esource-9ased $odel &ssumptions
() Firms ac2uire dierent resources)+) Firms develop uni2ue capabilities based
on how they combine and useresources)
,) 'esources and certain capabilities arenot highly mobile across .rms)
/) :ierences in resources and capabilities
are the bases o% competitive advantageand a .rm;s per%ormance rather than itsindustry;s structural characteristics)
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'esources &s CoreCompetencies
Costly to imitate
%are
"onsubstitutable
1aluable
2ow resources
become core
competencies
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Figure +,3
'he %esource-Based
Model of 0bove-0verage
%eturns
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Strategic :ecision $a0ing
Industry /rgani!ation
4I./5 Model
%esource-Based
Model
Competitive
Strategy
6ecision
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Sample
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$ission Statement
speci.es the present businessor businesses in which the .rmintends to compete andcustomers it intends to serve)
has a more concrete1 near-term %ocus on current productmar0ets and customers than
the .rm;s vision) should be inspiring andrelevant to all sta0eholders)
&n
>ective
$ission
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$ission Statement >*amples
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Sta0eholders
0re affected by the strategic
outcomes achieved by the firm
Can affect development of the
firm7s vision and mission
Can have enforceable claims
on the firm7s performance
0re influential when in control
of critical or valued resources
)rimary
stakeholders4individuals$
groups$ and
organi!ations5
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Figure +,8
'he 'hree
Stakeholder
roups
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The Strategic $anagement 4rocess3The &S4 4rocess
&nalyses
C+3 The e*ternal environment
C,3 The internal organiation
Strategies
C/3 9usiness-level strategies C73 $ar0etplace competition
C?3 Corporate-levelstrategies
Strategies !cont;d#
C@3 :iversi.ed port%oliomanagement
CA3 International strategies CB3 Cooperative strategies
4er%ormance
C(63 Governance mechanisms
C((3 Organiational structure
C(+3 Strategic leadership C(,3 Strategic entrepreneurship
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