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Chapter 1: Strategic
management & strategic
competitiveness
Dr.Satirenjit Kaur Johl

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Knowledge Objectives
Studying this chapter should provide you with the
strategic management knowledge needed to:
Define strategic competitiveness
competitive advantage, and above-average
returns.
Describe the 21st-century competitive
landscape and explain how globalization
and technological changes shape it.

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Knowledge Objectives (contd)


Studying this chapter should provide you with the
strategic management knowledge needed to:
Describe strategic intent and strategic mission
and discuss their value.
Define stakeholders and describe their ability to
influence organizations.
Describe the work of strategic leaders.
Explain the strategic management process.

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Definitions
Strategic Competitiveness
When a firm successfully formulates and implements a
value-creating strategy

Sustainable Competitive Advantage


When competitors are unable to duplicate a
companys value-creating strategy

Strategic Management Process


The full set of commitments, decisions, and actions
required for a firm to achieve strategic competitiveness
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and earn above-average returns
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Definitions (contd)
Risk
An investors uncertainty about the economic gains
or losses that will result from a particular investment

Average Returns
Returns equal to those an investor expects to earn
from other investments with a similar amount of risk

Above-average Returns
Returns in excess of what an investor expects to earn
from other investments with a similar amount of risk

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The Strategic Management
Process

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Figure 1.1
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Current Competitive Landscape


A Perilous Business World (risk)
Investments required to compete on a
global scale are enormous
Consequences of failure are severe
Important Elements of Success
Developing strategy
Implementing strategy
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Competitive 18

Landscape: Hypercompetition
Hypercompetition
A condition of rapidly escalating
competition based on:
Price-quality positioning
Competition to create new know-
how and establish first-mover
advantage
Competition to protect or invade
Hypercompetition established product or
geographic markets
Several factors create
hypercompetitive env & 21st
century competitive landscape:
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global economy & rapid
technological change
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Global Economy
Global Economy
Goods, people, skills, and ideas move
freely across geographic borders
Movement is relatively unfettered by
artificial constraints
Expansion into global arena complicates
a firms competitive environment

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Global Economy (contd)


Globalization

Increased economic
interdependence among countries
as reflected in the flow of goods
and services, financial capital, and
knowledge across country borders
Increased range of opportunities for
companies competing in the 21st-
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century competitive landscape
Technology and Technological
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Changes
Rate of change of technology and speed
at which new technologies become
available
Perpetual innovationhow rapidly and
consistently new, information-intensive
technologies replace older ones
The development of disruptive
technologies that destroy the value of
existing technology and create new
markets
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Technological Change
The Information Age
The ability to effectively and efficiently
access and use information has become
an important source of competitive
advantage
Technology includes personal computers,
cellular phones, artificial intelligence,
virtual reality, massive databases,
electronic networks, internet trade
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Technological change
Telephone 35 years 25% of
all homes in U.S
TV 26 years
Radio 22 years
PC 16 years
Internet 7 years

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Technological Changes
Increasing Knowledge Intensity
Strategic flexibility: set of
capabilities used to respond
to various demands and
opportunities in dynamic and
uncertain competitive
environments
Organizational slack: slack resources
that allow the firm flexibility to
respond to environmental changes
Capacity to learn
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Five Forces Model of Competition


An industrys profitability results from
interaction among
Suppliers
Buyers
Competitive rivalry among firms
currently in the industry
Product substitutes
Potential entrants to the industry

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Five Forces Model of Competition


(contd)
Firms earn above average returns
by
Producing standardized
products or services at cost
below competitors
Manufacturing differentiated
products for which customers
are willing to pay a premium
price
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Strategic Intent
Internally focused
The
leveraging of a firms resources,
capabilities and core competencies to
accomplish the firms goals
Existswhen all employees and levels of
a firm are committed to the pursuit of
a specific, significant performance
criterion

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Strategic Mission
Externally focused
A statement of a firms unique purpose and the
scope of its operations in product and market terms
Establishes a firms individuality and is inspiring and
relevant to all stakeholders
Provides general descriptions of the firms intended
products and its markets
Exp: Johnson & Johnson focuses on customers,
stating the organisations primary responsibility is to
the doctors, nurses & patients, mothers & fathers &
all others who use our products & services.
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Strategic Mission
Exp vision: Mc Donalds - To be the world best quick
service restaurant
Mission Mc. Donalds- be the best employer for our
people in each community around the world and
deliver operational excellence to our customers in
each of our restaurant.
Mission: LNP a GE Plastic Company
Is to be recognized by our customers as the leader
in application engineering. We always focus on the
activities customers desire: we are highly motivated
and strive to advance our technical knowledge in the
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technology
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Stakeholders
Individualsand groups who can affect, and
are affected by, the strategic outcomes
achieved and who have enforceable claims
on a firms performance
Claims are enforced by the stakeholders
ability to withhold essential participation

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The Three
Stakeholder
Groups

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Figure 1.4
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Capital Market Stakeholders

Shareholders and lenders expect the


firm to preserve and enhance the
wealth they have entrusted to it
Returnsshould commensurate with
the degree of risk to the shareholder

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Product Market Stakeholders


Customers
Demand reliable products at low prices
Suppliers
Seek loyal customers willing to pay highest
sustainable prices for goods and services
Host communities
Want companies willing to be long-term employers
and providers of tax revenues while minimizing
demands on public support services
Union officials
Want secure jobs and desirable working conditions

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Organizational Stakeholders
Employees
Expect a dynamic, stimulating
and rewarding work
environment
Are satisfied by a company that
is growing and actively
developing their skills

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Stakeholder Involvement
Two issues affect the extent of stakeholder
involvement in the firm
How to divide returns
to keep stakeholders
involved?

How to increase Capital


Organizational
returns so everyone Market
has more to share?
Product
Market

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Strategic Leaders
People responsible for the design and
execution of strategic management
processes
Decisions they make include
How resources will be developed or
acquired
At what price resources will be obtained
How resources will be used

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Organizational Culture
The complex set of
Ideologies
Symbols
Core values
that are shared throughout the firm,
that influence how the firm conducts
business
Exp PETRONAS share values: loyalty,
professionalism, integrity & cohesiveness
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Strategic Management Process


Study the external and internal environments
Identify marketplace opportunities and threats
Determine how to use core competencies
Usestrategic intent to leverage resources,
capabilities and core competencies and win
competitive battles
Integrate formulation and implementation of
strategies
Seek feedback to improve strategies

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