Ch01 Hitt SM8e Lecture
Transcript of Ch01 Hitt SM8e Lecture
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Strategic Management:Concepts and Cases
Part I: Strategic Management Inputs
Chapter 1: Strategic Management and Strategic
Competitiveness
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Chapter 1: Strategic Management and
Strategic Competitiveness
Overview: Eight content areas
Nature of Competition
The 21st Century Competitive Landscape
I/O Model of Above-Average Returns (AAR)
Resource-Based Model of AAR
Strategic Vision and Mission
Stakeholders Strategic Leaders
The Strategic Management Process
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Nature of Competition: Boeing vs. Airbus
Boeing Historically a global leader in airplane manufacturing Revenue from commercial aircraft division & govt contracts Regained supremacy in 2006: more 787 super jumbo
orders vs. Airbuss more efficient A-380 Changed strategy and design
Different production process Smaller plane (787 Dreamliner)
Airbus EU Government owned and subsidized Won competitor battle with Boeing between 2001 & 2005 Responded to customer demands with more efficient A-380
aircraft
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Nature of Competition: Basic concepts (Contd)
Risk Investors uncertainty about economic gains/losses
resulting from a particular investment
Average Returns Returns equal to what investor expects in comparison to
other investments with similar risk
Strategic Management Process (SMP) Full set of commitments, decisions and actions required for
a firm to achieve strategic competitiveness and earn above
average returns
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The Strategic Management Process
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Chapter 1: Strategic Management and
Strategic Competitiveness
Overview: Eight content areas
Nature of Competition
The 21st Century Competitive Landscape
I/O Model of Above-Average Returns (AAR)
Resource-Based Model of AAR
Strategic Vision and Mission
Stakeholders Strategic Leaders
The Strategic Management Process
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21st Century Competitive Landscape
Introduction: The Competitive Landscape (CL) Pace of change is rapid
Partnerships created by mergers & acquisitions (M&As)
Other CL characteristics: Economies of scale, advertisingbudgets not as effective as before, change in managerial
mind-set from traditional to more flexible and innovative
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21st Century Competitive Landscape (Contd)
Introduction: The Competitive Landscape (CL) Hypercompetition extremely intense rivalry among
competing firms, characterized by
Escalating & increasingly aggressive competitive moves Assumptions of market stability replaced with notion of
INstability and change
Two primary drivers of the competitive landscape:
The global economy Technology
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21st Century Competitive Landscape (Contd)
The Global Economy Goods, services, people, skills and ideas move freely
across geographic borders
Europe, through the European Union (EU) is the worldslargest single market
EU vs U.S. GDP: 35% higher
Emerging major competitive forces: China & India
In summary: globalization increased economicinterdependence among countries as reflected in the flow
of goods and services, financial capital, and knowledge
across country borders
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21st Century Competitive Landscape (Contd)
Technology and Technological Changes 3 categories:
1. Technology diffusion & disruptive
technologies
2. The information age
3. Increasing knowledge intensity
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21st Century Competitive Landscape (Contd)
Technology and Technology Changes (Contd) Technology diffusion
Perpetual innovation: describes how new information-
intensive technologies are replacing older forms Speed to market may be primary competitive advantage
12 18 month timeframe to gather info re: competitor R&D
Disruptive technologies Technologies that
Destroy value of existing technology
Create new markets
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21st Century Competitive Landscape (Contd)
Technology and Technology Changes (Contd) 1. Technology diffusion & disruptive technologies
2. The information age
3. Increasing knowledge intensity
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21st Century Competitive Landscape (Contd)
Technology and Technology Changes (Contd) The information age
Dramatic changes over last several years Major technological developments: computers, phones, artificial
intelligence, virtual reality Internet provides infrastructure for information anytime,
anywhere
Increasing knowledge intensity Defined as information, intelligence & expertise and is the basis
of technology and its application Gained through experience, observations and inferences Strategic Flexibility set of capabilities used to respond to
various demands and opportunities existing in a dynamic anduncertain competitive environment
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Chapter 1: Strategic Management and
Strategic Competitiveness
Overview: Eight content areas
Nature of Competition
The 21st C Competitive Landscape
I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR
Strategic Vision and Mission
Stakeholders Strategic Leaders
The Strategic Management Process
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Industrial
Organizational
(I/O) Model ofAbove-
Average
Returns (AAR)
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Industrial Organizational (I/O) Model of
Above-Average Returns (AAR)
Basic Premise to explain the dominant
influence of the external environmenton a
firm's strategic actions and performance
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Industrial Organizational (I/O) Model of
Above-Average Returns (AAR)
Underlying Assumptions External environmentimposes pressures and constraints
that determine the strategies resulting in AAR Most firms compete within a particular industry/segment
Control similar strategically relevant resources Pursue similar strategies in light of those resources
Resources for implementing strategies are highly mobileacross firms Therefore any resource differences between firms will be short-
lived
Organizational decision makers are rational and committedto acting in the firm's best interests, as shown by their profit-maximizing behaviors
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Industrial Organizational (I/O) Model of
Above-Average Returns (AAR)
Five-Forces Model (Michael Porter) The 5 Forces includes
Suppliers, buyers, competitive rivalry, product substitutes
and potential entrants
Reinforces the importance of economic theory
Analytical tool previously lacking in the field of strategy
Determines the nature/level of competition and profit
potential in an industry Suggests an industrys profitability is an interaction
between these 5 forces
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Industrial Organizational (I/O) Model of
Above-Average Returns (AAR) (Contd)
Limitations Only two strategies are suggested:
Cost Leadership
THE low-cost leader
Differentiation
Customer willing to pay the premium price for being
different
Internal resources & capabilities not considered
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The
Resource-Based
Model of
AAR
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The Resource-Based Model of AAR(Contd)
Basic Premise - a firm's unique [internal]
resources & capabilities, in combination, is the
basis for firm strategy and AAR
Each firms performance difference across timeemerges (vs industrys structural characteristics)
Combined uniqueness should define the firms
strategic actions
Resources are tangible and intangible
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The Resource-Based Model of AAR(Contd)
Resources Inputs into a firm's production process
Includes capital equipment, employee skills, patents,
high-quality managers, financial condition, etc.
Basis forcompetitive advantage: When resources are
valuable, rare, costly to imitate and nonsubsitutable
Internal/firm-specific resources (N=3) Physical
Things you can touch/feel = tangible
Human People / employees
Organizational capital
Relative to the firm itself
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The Resource-Based Model of AAR(Contd)
Capability Capacity for a set of resources to perform a task or
activity in an integrative manner
Core Competency A firms resources and capabilities that serve as sources
of competitive advantage over its rival
Summary
A firm has superior performance because of Unique resources and capabilities, and the combination
makes them different, and better, than their competition
driving the competitive advantage
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Chapter 1: Strategic Management and
Strategic Competitiveness
Overview: Eight content areas
Nature of Competition
The 21st C Competitive Landscape
I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR
Strategic Vision and Mission
Stakeholders Strategic Leaders
The Strategic Management Process
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Vision and Mission
Vision Picture of what the firm wants to be
What the firm ultimately wants to achieve
An effective vision statement is the responsibility of the leaderwho should work with others to form it
Foundation for the mission
Mission
Specifics business(es) in which firm intends to compete andcustomers it intends to serve
More specific than the vision
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Stakeholders
Basic Premise a firm can effectively manage
stakeholder relationships to create a competitive
advantage and outperform its competitors
Stakeholders are individuals and groups They can affect, and are affected by, the strategic
outcomes/performance a firm achieves
Three (3) classifications
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The Three Stakeholder Groups
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Stakeholders (Contd)
Classifications of Stakeholders Capital Market
Expect returns commiserate with risk accepted by
investments Higher the dependency relationship, the more direct
and significant firms response
Product Market The 4 groups benefit due to competitive battles
Organizational The employees
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Chapter 1: Strategic Management and
Strategic Competitiveness
Overview: Eight content areas
Nature of Competition
The 21st C Competitive Landscape
I/O Model of Above-Average Returns (AAR) Resource-Based Model of AAR
Strategic Vision and Mission
Stakeholders Strategic Leaders
The Strategic Management Process
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Strategic Leaders
People located in different parts of the firm using
the strategic management process to help the firm
reach its vision and mission
Decisive and committed to nurturing those around them Create and sustain organizational culture
Organizational culture emerges from & sustained by
leaders
Complex set of ideologies, symbols and core valuesshared throughout the firm
Affects leaders/their work which in-turn shapes culture
Influences how the firm conducts business
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Strategic Leaders (Contd)
The Work of Effective Strategic Leaders Work long hours
Must be able to think seriously and deeplyabout
the purposes of the organizations they head orfunctions they perform, about strategies, tactics,
..and peopleand about the important questions
they need to ask.
Predicting Outcomes: Profit Pools (PP) Anticipates their decisions relative to the PP
Entails the total profits earned in an industry at all
points along the value chain
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Strategic Management Process
Rational approach used by firms to achieve
strategic competitiveness and earn above
average returns (AAR)
Figure 1.1 (Diagram of chapter relationships) Part 1: Strategic Mgmt Inputs
Part 2: Strategic Actions: Strategy Formulation
Part 3: Strategic Actions: Strategy Implementation Part 4: Cases