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Strategic management competitiveness globalization concepts and case 10e chapter 1

PART 1:
STRATEGIC
MANAGEMENT
INPUTS
CHAPTER 1: Strategic
Management &
Strategic
Competitiveness

Authored by:
Marta Szabo White. Ph.D
Georgia State University


FIGURE 1.1
The Strategic
Management
Process

THE STRATEGIC
MANAGEMENT

PROCESS

©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


KNOWLEDGE OBJECTIVES
● Define strategic competitiveness, strategy,
competitive advantage, above-average returns, and
the strategic management process.

● Describe the competitive landscape and explain how
globalization and technological changes shape it.

● Use the industrial organization (I/O) model to explain
how firms can earn above-average returns.
● Use the resource-based model to explain how firms
can earn above-average returns.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


KNOWLEDGE OBJECTIVES
● Describe vision and 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.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


IMPORTANT DEFINITIONS
● STRATEGIC COMPETITIVENESS achieved when a firm successfully formulates and
implements a value-creating strategy

● STRATEGY - an integrated and coordinated

set of commitments and actions designed to
exploit core competencies and gain a competitive
advantage

● COMPETITIVE ADVANTAGE - when a
firm implements a strategy that creates superior
value for customers; competitors are unable to
duplicate it or find too costly to imitate it
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


IMPORTANT DEFINITIONS
● RISK - an investor’s uncertainty about the
economic gains or losses that will result from a
particular investment

● ABOVE-AVERAGE RETURNS - returns
in excess of what an investor expects to earn
from other investments with a similar amount of
risk

● AVERAGE RETURNS - returns equal to
those an investor expects to earn from other
investments with a similar amount of risk
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


OPENING CASE
ONCE A “GIANT,” BORDERS BECAME A “WEAKLING” ON ITS
KNEES

INABILIT Y TO EARN AVERAGE RETURNS
resulted first in decline and, eventually, failure

BORDERS - OPENING CASE FAILURE EXAMPLE
●Enjoyed considerable success early on
●Tried to enrich its traditional approach with more
marketing and more attractive stores, demonstrating
a lack of market understanding
● Declining book sales for large chain store retailers
●Should have been entrepreneurial, innovative, and
market-oriented
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE STRATEGIC MANAGEMENT
PROCESS

■ FIRST:

External environment and internal
organization are analyzed to determine resources, capabilities,
and core competencies—the sources of “strategic inputs.”

■ NEXT:

Vision and mission are developed; strategies

are formulated.

■ THEN:

Strategies are implemented with the goal of
achieving strategic competitiveness and above-average returns.

■ DYNAMIC PROCESS:

Continuously
changing markets and industry conditions must match evolving
strategic inputs.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE STRATEGIC MANAGEMENT
PROCESS

Rational: the approach firms use to achieve
strategic competitiveness and earn above-average
returns

FORMULATION and
IMPLEMENTATION:
the two types of strategic actions that must be
simultaneously integrated to successfully employ
the strategic management process
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE STRATEGIC MANAGEMENT
PROCESS
• Chapters
2, 3
• Vision/Mission
Chapters
xt
e
t
e
Th
ed
d
i
v
i
is d ree
th
o
t
n
i
.
s
t
r
a
p

4, INPUTS
5, 6, 7,
PART I: STRATEGIC

8&

9 ACTIONSPART II: STRATEGIC

Chapters
STRATEGY FORMULATION
PART III: STRATEGIC ACTIONS10, 11, 12
STRATEGY IMPLEMENTATION
13

&

©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE

■ GLOBALIZATION - emergence of a global
economy

■ TECHNOLOGY - rapid technological changes
■ INDUSTRY BOUNDARIES BLURRING
■ EXAMPLES - 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 percent of NBC Universal and
Comcast owns the remaining 51 percent
■ STRATEGIC MANAGEMENT PROCESS - effective use
of the strategic management process reduces the likelihood of
failure for firms as they encounter the conditions of today’s
competitive landscape
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE

■ HYPERCOMPETITION - characterized
by
■ Market instability and change
■ Rapidly escalating competition
■ Aggressive challengers
■ Strategic maneuvering to establish firstmover
advantage
■ Technology industries

■ T WO DRIVERS
- GLOBALIZATION
- TECHNOLOGY
■ Strategic flexibility - important tool
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
THE GLOBAL ECONOMY
■ Goods,

services, people, skills, and
ideas move freely across geographic
borders
■ New

opportunities and challenges
emerge
Competitive environments are
broader and increasingly more complex


©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
THE GLOBAL ECONOMY
■ The

European Union has become
one of the world’s largest markets,
with 700 million potential customers
■ China

has become the second
largest economy in the world
surpassing Japan
■ India,

the world’s largest democracy,
has an economy that now ranks as the
fourth largest in the world

©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
STRATEGIC
FOCUS
Huawei
also needs
Guanxi in
the United States

GUANXI
■ Strong relationships in which each party

feels obligated to help the other
■ Key element of doing business in China
■ Building strong relationships is an

important dimension of Chinese culture;
Guanxi is also important when conducting
business in the United States
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
THE GLOBAL
ECONOMY
■ Hypercompetitive
business
environment
challenges firms to reconsider which markets to
compete in; this positioning is more critical than ever
■ GE - headquartered in the U.S., yet up to 60% of
its revenue growth through 2015 will be generated
from rapidly developing economies such as China
and India
■ Jeffrey Immelt - suggests that we have entered a
new economic era in which the global economy will
be more volatile and emerging economies such as
Brazil, China, and India will be the major drivers of
growth
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Highly globalized
firms must anticipate
ever-increasing
complexities in their
operations as goods,
services, people, etc.
move freely across
geographic borders.

Globalization is the
product of a large
number of firms
competing against
one another in an
increasing number of
global economies.

Globalization is
increasing economic
interdependence
among countries and
their organizations as
reflected in the flow of
goods and services,
financial capital, and
knowledge across
country borders.

THE MARCH OF GLOBALIZATION

THE COMPETITIVE
LANDSCAPE


©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Firms must learn that
in this twenty-first
century competitive
landscape, only firms
capable of meeting, if
not exceeding, global
standards, have the
capability to earn
above-average
returns.

Free flow of resources
among global
economies, global
sourcing for firms,
global purchasing for
customers, and a
global forum for
workers all serve as a
key source of
competitive
advantage for firms.

Globalization has led
to higher performance
standards in quality,
cost, productivity,
product introduction
time, and operational
efficiency. These
standards translate
and impact domesticonly firms as well.

THE MARCH OF GLOBALIZATION

THE COMPETITIVE
LANDSCAPE


©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

It is critical for firms
competing globally to
remain strategically
committed to and
competitive in both
domestic and
international markets.

With globalization,
firms may overdiversify
internationally, which
can have strong
negative effects on a
firm’s overall
performance.

Significant time is
required for firms to
learn how to compete
in new markets, and
performance may
suffer during this time.

THE RISKS OF GLOBALIZATION

THE COMPETITIVE
LANDSCAPE


THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
CHANGES

THREE CATEGORIES for
TECHNOLOGY TRENDS
Technology is significantly altering the nature of
competition and enabling unstable competitive
environments

■Technology Diffusion & Disruptive
Technologies
■ Information Age
■ Increasing Knowledge Intensity
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
CHANGES

Technology Diffusion - Category
1
■ Technology Diffusion – the speed at which new
technologies become available and are used; has
increased substantially over the past 15 to 20 year.
■ Examples of technology diffusion: How long it
took to get the following into 25 percent of U.S.
homes:
● Telephone — 35 years
● TV — 26 years
● Radio — 22 years
● PCs — 16 years

©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
Technology CHANGES
Diffusion - Category

1

Perpetual Innovation
■ Perpetual Innovation - describes how rapidly and
consistently new, information-intensive technologies
replace older ones
■ Competitive Premium - the shorter product life
cycles resulting from rapid diffusions of new
technologies place a competitive premium on being
able to quickly introduce new, innovative goods and
services
■ Competitive Advantage - speed to market with
innovative products is a primary source of competitive
advantage
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
CHANGES

Technology Diffusion - Category 1
Perpetual Innovation
■ Innovations must be derived from an understanding
of global standards and global expectations in terms of
product functionality
■ Apple - an excellent example of radical innovation
by a large established firm
■ Technology Diffusion - to diffuse the technology
and enhance the innovation value, firms need to be
innovative in incorporating the new technology into their
product
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
CHANGES

Technology Diffusion - Category 1
Perpetual Innovation
■ Rapid Technology Diffusion - now may take only 12
to 18 months for firms to gather information about
research and development and product decisions for their
competitors
■ Patents - may be an effective protection of proprietary
technology in a small number of industries, e.g.,
pharmaceuticals
■ Proprietary Strategies - many firms often do not apply
for patents to prevent competitors from gaining access to
the technological knowledge included in the patent
application, e.g., the electronics industry
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


THE COMPETITIVE
LANDSCAPE
TECHNOLOGY AND TECHNOLOGICAL
CHANGES

Technology Diffusion - Category 1
Disruptive Technologies
■ Disruptive Technologies - technologies that destroy
the value of an existing technology and create new
markets, many times representing radical or breakthrough
innovation
■ Examples: iPods, iPads, WiFi, and the browser
■ Industry Incumbents Harmed or Destroyed – a
disruptive or radical technology creates a new industry,
thereby destroying the existing industry; with superior
resources, experience, and access to the new technology,
some incumbents may be able to adapt
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


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