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BUSINESS

SCHOOL
PRESENTATION HEADING
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WORK2210
WORK2210 Lecture Week 1
BUSINESS
SCHOOL
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Lecture 1 - Objectives/Introduction
Welcome note
Course expectations/requirements
Textbook
Unit of Study outline/assessment/tutorials
Introductory lecture: Strategic management and strategic
competitiveness
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Expectations/Requirements
Timeliness lectures commence 9am in Bosch LT3
Tutorials refer to individual timetable. No changes
possible as tutorials are running at full capacity.
Tutorials commence week 2 Group allocations for group
tutorial assessment items. Students must attend all
tutorials.
Pre-readings/recommended readings the more you put
in, the more you get out of this course.
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Required Text
Hanson, D., Hitt, A., Ireland R.D., Hoskisson, R.E. (2014)
Strategic Management: Competitiveness and
Globalisation (Asia-Pacific 5th edition). Sydney. Cengage
(Texbook)
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Unit of Study/Assessment Items
Unit of Study WORK2210 posted on BB
Tutorials commence week 2.
Assessment Items:
1. Mid-term text (in class) week 7 (30%)
2. Tutorial group discussion/participation (10%)
3. Tutorial group presentation & paper, commencing week
4 (20%)
4. Case Study Assignment, individual work (40%) due 24
October 2014
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Lecture 1: Knowledge outcomes
Define strategic competitiveness, strategy, competitive
advantage, above-average returns and the strategic
management process
Describe the 21st century competitive landscape and explain
how globalisation and technological changes shape it
Use the industrial organisation (I/O) model to explain how
firms can earn above-average returns
Describe the Resources-based model
Definitions: core competencies, mission, vision, stateholders,
strategic flexibility.
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Strategy is:
an integrated and coordinated set of commitments and
actions designed to exploit core competencies and gain a
competitive advantage
a game plan to restore the firm's ability to earn above-
average returns
an outline of how a business intends to achieve its goals
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Strategic competitiveness
Strategic competitiveness is the result of successful
formulation and implementation of a value-creating
strategy
By achieving strategic competitiveness and successfully
exploiting its competitive advantage, a firm is able to gain
its primary objective.
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Competitive advantage
Competitive advantage occurs when a firm implements
a strategy that creates superior value for customers,
which competitors are unable to duplicate or find too
costly to imitate
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Average returns
Average returns are equal to those an investor expects
to earn from other investments with a similar amount of
risk.
Firms without a competitive advantage or that are not
competing in an attractive industry earn, at best, only
average returns.
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'Above-average returns' & 'Risk'
Above-average returns in excess of what an investor
expects to earn from other investments with a similar
amount of risk
Risk is an investor's uncertainty about the economic
gains or losses that will result from a particular investment
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Strategic Management
Strategic management is the study of why some firms
outperform others:
! How to compete in order to create competitive
advantages in the marketplace
! How to create competitive advantages in the marketplace.
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The challenge of strategic management
Strategic management process:
! The full set of commitments, decisions and actions
required for a firm to achieve strategic competitiveness and
earn above-average returns
! Conventional sources of competitive advantage no longer
guarantee success
! The fundamental nature of competition is changing
constantly
! The pace of change is relentless and is becoming
increasingly complex.
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Strategic Management Process
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FIGURE 1.1
THE
STRATEGIC
MANAGEMENT
PROCESS
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The 21st century competitive landscape
Globalisation: emergence of a global economy
Technology: rapid technological changes
Industry boundaries blurring: For example,
computer networks and telecommunications have
blurred the boundaries of the entertainment industry.
MSNBC is co-owned by NBC Universal and Microsoft.
General Electric owns 49 per cent of NBC Universal
and Comcast owns the remaining 51 per cent.
Size of business investment can be enormous
The e"ective use of the strategic management
process reduces the likelihood of failure for rms as
they encounter the conditions of todays competitive
landscape.
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Hypercompetition

Hypercompetition is a condition of rapidly escalating


competition arising from strategic moves among global
and innovative combatants (competitors):
! Competition is based on:
! Price-quality positioning
! New know-how
! Strategic maneuvering to establish first-mover advantage
! Protecting and invading product or geographic markets.
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The challenge of strategic management
The rigours of change and competition:
! In Australia, only 10 of the largest 100 enterprises (in
2004) were in business in 1900
! Developing and implementing strategy successfully is a
primary responsibility of CEOs
! Current success is no guarantee of future competitiveness
and above-average returns.
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The global economy
! Definition:
! An economy in which goods, services, people, skills and
ideas move freely across geographic borders
! Europe is now the world's largest single market with 700 million
potential customers and a GDP of US$8 trillion
! China's GDP is predicted to be greater than Japan's by 2015
! The development of emerging and transitional economies is
changing the global competitive landscape
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The march of globalisation
! Globalisation is the increasing economic interdependence
among countries and their organisations.
! Globalisation encourages international integration as it is
reflected in the flow of goods and services, financial capital and
knowledge across country borders.
! Globalisation also affects the design, production, distribution
and servicing of goods and services.
! The emergence of new growth centres and sources of
competitive advantages.
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Technology and technological changes
There is an increasing rate of technological change and diffusion
Perpetual innovation: The rapid and consistent replacement of new
information-intensive technologies.
Disruptive technologies: technologies that destroy the value of existing
technology and create new markets.
The information age: the ability to effectively and efficiently access and
use information has become an important source of competitive
advantage.
Increasing knowledge intensity: firms must adapt and develop strategic
flexibility.
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Strategic flexibility
A set of capabilities used to respond to various demands and opportunities
that are part of a dynamic and uncertain competitive environment
To achieve strategic flexibility, increasingly firms need to develop
organisational slack. Slack resources offer some flexibility to respond to
environmental changes.
To develop strategic flexibility, a firm has to develop the capacity to learn
(i.e. the learning organisation).
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Two models of strategic decision making
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Firms use two major models to help develop their
vision and mission and then choose one or more
strategies in pursuit of strategic competitiveness
and above-average returns.






EXTERNAL
I/O
MODEL
INTERNAL
RESOURCE-
BASED
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The I/O model of above-average returns
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Grounded in economics, the I/O model has four
underlying assumptions:
1. The external environment is assumed to
impose pressures and constraints that
determine strategies that will result in
above-average returns.
2. Most rms competing within an industry or a
segment of that industry are assumed to
control similar strategically relevant
resources and to pursue similar strategies in
light of those resources.
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The I/O model of above-average returns (cont.)
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3. Resources used to implement strategies are
assumed to be highly mobile across rms, so
any resource di"erences that might develop
between rms will be short lived.
4. Organisational decision makers are assumed
to be rational and committed to acting in the
rms best
interests, as shown by their
prot-maximising behaviour.

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The Industrial organisation (I/O) model of above-
average returns
This model specifies that the industry in which a firm competes has a
stronger influence on the performance than the choices managers make
inside their organisations.
Determinants of a firms performance are:
Economies of scale
Barriers to market entry
Diversification
Product differentiation
Degree of concentration of firms in the industry
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The I/O model of above -average returns
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Research ndings support the I/O model in that
approximately 20 per cent of a rms protability is
explained by the industry in which it chooses to
compete.
However, this research also shows that 36 per cent
of the variance in rm protability can be attributed
to the rms characteristics and actions.
These ndings suggest that the external AND
internal environments inuence a companys ability
to achieve strategic competitiveness and earn
above-average returns.
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The I/O model of above-average returns
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FIGURE 1.2
THE I/O
MODEL OF
ABOVE
AVERAGE
RETURNS
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THE RESOURCE-BASED MODEL OF ABOVE
AVERAGE RETURNS
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The resource-based model assumes that each
organisation is a collection of unique resources
and capabilities.
The uniqueness of its resources and capabilities is
the basis of a rms strategy and its ability to earn
above-average returns.
The core assumption of the resource-based model
is that a rms unique resources, capabilities and
core competencies have more inuence on
selecting and using strategies than does the rms
external environment.
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THE RESOURCE-BASED MODEL OF ABOVE-
AVERAGE RETURNS
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A capability is the capacity for a set of
resources to perform a task or an activity
in an integrative manner.
Capabilities evolve over time and must be
managed dynamically in pursuit of
above-average returns.
Core competencies are resources and
capabilities that serve as a source of
competitive advantage.

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THE RESOURCE-BASED MODEL OF ABOVE-
AVERAGE RETURNS
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When these four criteria are met, resources
and capabilities become core competencies:

VALUABLE - They are valuable when they


allow a rm to take advantage of opportunities
to neutralise threats

RARE - they are rare when possessed by a


few, if any, current and potential competitors

COSTLY TO IMITATE - Resources are costly to


imitate when other rms cannot obtain them
or are at a cost disadvantage

NON-SUBSTITUTABLE - They are non-


substitutable when they have no equivalents
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THE RESOURCE-BASED MODEL OF ABOVE-
AVERAGE RETURNS
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The resource-based model has four underlying
assumptions:
1. Di"erences in rms performances across time
are due primarily to their unique resources and
capabilities rather than the industrys structural
characteristics.
2. Firms acquire di"erent resources and develop
unique capabilities based on how they combine
and use the resources.
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RESOURCE-BASED MODEL (CONT.)
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3. Resources and capabilities are not highly
mobile across rms.
4. The di"erences in resources and
capabilities are the basis of competitive
advantages.


Above-average returns are earned
when a rm uses its valuable, rare,
costly-to-imitate and non-
substitutable resources and
capabilities to compete against its
rivals in one or more industries.
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THE RESOURCE-BASED MODEL OF ABOVE-
AVERAGE RETURNS
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FIGURE 1.3
THE
RESOURCE-
BASED MODEL
OF ABOVE-
AVERAGE
RETURNS
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TWO MODELS OF STRATEGIC DECISION
MAKING
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Evidence indicates that both models yield
insights that are linked to successfully selecting
and using strategies.






EXTERNAL
I/O
MODEL
INTERNAL
RESOURCE-
BASED
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Strategic vision and strategic mission
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A vision is a picture of what a rm wants to
be and, in broad terms, what it wants to
ultimately achieve.
Executives and top-level managers must
formulate and implement strategies
consistent with the vision.
A rms vision tends to be enduring, whereas
its mission can change in light of changing
environmental conditions.



VISION
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VISION STATEMENT
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A vision statement articulates the ideal
description of the organisation and gives
shape to its intended future. It is short
and concise, making it easy to remember.
Vision statements reect a rms values
and aspirations and are intended to
capture the heart and mind of each
stakeholder.
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VISION STATEMENT EXAMPLES
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Our vision is to be the worlds best quick
service restaurant McDonalds
To make the automobile accessible to
every American. Ford Motor Companys
vision (when established by Henry Ford)
Our purpose is to create a long term
value through the discovery, development
and conversion of natural resources and
provision of innovative customer and
market-based solutions (BHP
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MISSION
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The vision is the foundation for a rms
mission.
A rms mission is more concrete than its
vision.
A mission species the business or
businesses in which the rm intends to
compete and the customers it intends to
serve.


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MISSION
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Similar to the vision, a mission should
establish a rms individuality and should be
inspirational to all stakeholders.
A rms vision and mission are critical aspects
of the strategic inputs required to engage in
strategic actions that help achieve strategic
competitiveness and earn above-average
returns.
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EXAMPLES OF MISSION STATEMENT
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Be the best employer for our people in each
community around the world and deliver
operational excellence to our customers in
each of our restaurants. McDonalds
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STAKEHOLDERS
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Stakeholders:
are individuals, groups and organisations that
have a stake in the organisation
can a"ect a rms vision and mission
are a"ected by the strategic outcomes
achieved
have enforceable claims on a rms
performance.
Competitive advantage: Firms e"ectively
managing stakeholder relationships outperform
those that do not.
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STAKEHOLDERS
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Organisations are not equally dependent on
all stakeholders, so not every stakeholder has
the same level of inuence.
The more critical and valued a stakeholders
participation, the greater a rms dependence
on it, which gives the stakeholder more
potential inuence over the rm.
Managers must nd ways to accommodate or
insulate the organisation from the demands
of stakeholders controlling critical resources.
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CLASSIFICATION OF STAKEHOLDERS
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There are three groups of stakeholders:
Capital market stakeholders: shareholders
and the major suppliers of a rms capital
Product market stakeholders: a rms
primary customers, suppliers, host
communities and unions representing the
workforce
Organisational stakeholders: a rms
employees, including both non-managerial
and managerial personnel.
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STAKEHOLDER CLASSIFICATION
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FIGURE 1.4
THE FOUR
STAKEHOLDER
GROUPS
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MANAGING STAKEHOLDER CONFLICT
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First, a rm must thoroughly identify and
understand all important stakeholders.
Second, it must prioritise them in case it
cannot satisfy all of them.
Power is the most critical criterion in
prioritising stakeholders.
Other criteria might include the urgency of
satisfying each particular stakeholder
group and the degree of importance of
each to the rms above-average returns.
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STRATEGIC LEADERS
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Strategic leaders are people located in
di"erent areas and levels of a rm who use
the strategic management process to select
strategic actions that help the rm achieve its
vision and full its mission.
Successful strategic leaders are decisive,
committed to nurturing those around them
and committed to helping the rm create
value for all stakeholder groups.
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Definitions: Organisational culture
The complex set of ideologies, symbols and core value shared throughout
the firm that influences the way it conducts its business. Organisational
culture is the social energy that drives - or fails to drive - the organisation.
Culture is critical to strategic leadership and strategic implementation.
An effective culture is a potential source of competitive advantage.
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The strategic management process
The strategic management process is a rational approach
firms use to achieve strategic competitiveness and earn
above-average returns.
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The strategic management process (cont.)
The integration, formulation and implementation of strategies:
Formulating strategies:
Business-level strategy
Competitive dynamics
Corporate-level strategy
Acquisition and restructuring strategy
International strategy
Cooperative strategy.
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The strategic management process (cont.)
Implementation strategies:
Seek feedback to improve selected strategies
Corporate governance, organisational structure and controls, strategic
leadership
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Next Week
Week 2 topic The external Environment - looking outside the firm.
UoS Week 2 required readings
Tutorials commence & group allocations. Make sure youre there!
Review Blackboard announcements regularly
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HEADING
SUB-HEADING
BUSINESS
SCHOOL
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WORK2210
Strategic Management Week 1 Lecture slides
BUSINESS
SCHOOL
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SECTION DIVIDER [1 line only]
QUESTIONS
MMGT6004
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