Strategic Management and Strategic Competitiveness

Chapter 1: Strategic Management and Strategic Competitiveness

WHAT IS STRATEGY?

  • Definition of Strategy
    • Strategy: Allocation of resources to achieve common goals.
    • A strategy constitutes an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.

Key Concepts Related to Strategy

  • Competitive Advantage
  • Average Returns vs. Above-Average Returns
  • Sustainable Competitive Advantage

Perspectives on Above-Average Returns

  • Three Models:
    1. I/O Model (Industrial Organization Model)
    2. Resource-Based Model
    3. Stakeholder Model

I/O Model of Above-Average Returns

  1. Study the External Environment
    • Focus especially on the industry environment.
  2. Locate an Attractive Industry
    • An industry with high potential for above-average returns.
  3. Identify Strategy for Attractive Industry
    • Formulate the specific strategy needed to earn above-average returns.
  4. Develop or Acquire Required Assets and Skills
    • Necessary to implement the identified strategy.
  5. Utilize Firm's Strengths to Implement Strategy
    • Leverage developed or acquired assets and skills effectively.

Key Definitions

  • External Environment: Includes the general environment, industry environment, and competitor environment.
  • Attractive Industry: An industry characterized by structural traits that imply above-average returns.
  • Strategy Formulation: The act of selecting a strategy linked with above-average returns in a designated industry.
  • Strategy Implementation: The process of choosing strategic actions connected to the effective rollout of the selected strategy.
  • Superior Returns: The achievement of above-average returns compared to peers.

Resource-Based Model of Above-Average Returns

  1. Identify Firm's Resources
    • Assess strengths and weaknesses against competitors.
  2. Determine Firm's Capabilities
    • What capabilities allow better performance compared to competitors?
  3. Evaluate Potential for Competitive Advantage
    • Assess firm resources and capabilities for competitive leverage.
  4. Locate an Attractive Industry
    • Identify industries ripe for exploitation by the firm's strengths.
  5. Select Strategy
    • Choose a strategy that maximizes the use of firm resources in alignment with opportunities in the environment.

Key Definitions

  • Resources: Inputs into a firm's production process.
  • Capabilities: The integrated capacity of a set of resources to perform specific tasks or activities optimally.
  • Competitive Advantage: The firm's ability to offer superior value to its customers compared to rivals.

Stakeholder Model of Above-Average Returns

  1. Study External Environment for Key Stakeholders
    • Identify which stakeholders are critical to value creation.
    • Stakeholders: Entities with a legitimate interest in the firm’s operations.
  2. Develop Relationships
    • Establish connections with employees and external stakeholders based on principles of fairness, respect, and trust.
  3. Collect Valuable Information
    • Gather insights from stakeholders relevant to strategic planning.
  4. Incorporate Stakeholder Feedback into Strategies
    • Utilize stakeholder information to identify areas for potential collaboration and innovation.
  5. Execute Collaborative Plans
    • Implement strategies that involve the active engagement of stakeholders.

Key Definitions

  • Reciprocity: A mutual relationship where stakeholders are engaged, loyal, inform the firm, and support its objectives.

Strategic Management Process

  • Components:
    1. Mission
    2. Objectives
    3. External Analysis
    4. Internal Analysis
    5. Strategic Choice
    6. Competitive Advantage Implementation

Role of General Managers

  • Performance Evaluation
    • Use various indicators for assessing performance including self and social comparisons.
  • Decision Making
    • Manage operational and strategic decisions through continuous scanning, monitoring, and forecasting of environments.
  • Handling Uncertainty
    • Recognize the inherent uncertainties present in strategic management processes.

What's Next?

  • Next Session: Chapter 2 - Case Study on the Chinese Firework Industry
    • Note: Purchase the case from Ivey Publishing.