TOPIC 1 – Introduction to Strategic Management

Above-average returns – these are returns in excess of what investors

Organizations or business firms would like to sustain their presence in the expect to earn from other investments with a similar amount of risk.
industry for a long period of time. They have to set their sights on how to
improve productivity, or profitability for that matter, in order to remain in the Risk – it is an investor’s uncertainty about the economic gains or losses
business. There are so many forces to consider for them to have a foothold on that will result from a particular investment.
what they claim to be.
A strategic plan is set and pursued with the use of existing technology and The I/O (Industrial Organization) Model of Above Average Returns
sophisticated logistics. Objectives are set and responsible individuals are placed to - It suggests
take charge of the complexed tasks in order to deliver and achieve the objectives.
Competition is one of the forces that organizations have to live by. Each
of them would try to go ahead while others would fight to keep up. Everyone The External Environment
believes that “Success today is no guarantee of success tomorrow.” Changes and 1. Study the external
● The general environment
adjustments have to be done even if you stick with the master plan. environment, especially the
industry environment
Strategic Competitiveness ● The industry environment
- It is achieved when a firm successfully formulated and implements a value-
creating strategy. ● The competitor environment

What is Competitive Advantage? An Attractive Industry

It is how an organization operates with a combination of attributes that 2. Locate an industry with high
● An industry whose structural
allow it to outperform its rivals. Or comes from operating in successful ways that potential for above=average
are difficult to imitate. returns characteristics suggest above-
average returns
Strategy - it is a comprehensive action plan that identifies the long-term direction
Strategy Formulation
for an organization and guides resource utilization to achieve sustainable
competitive advantage. 3. Identify the strategy called for
● Selection of a strategy linked with
by the attractive industry to
earn above-average returns above-average returns in a
Strategic Intent - all organizational energies directed toward a unifying and
particular industry
compelling target or goal. (It is a comprehensive plan guiding resource allocation
to achieve long-term organizational goals. Assets and Skills

Strategic Management – it is the process of formulating and 4. Develop or acquire assets and
● Assets and skills required to
implementing strategies to accomplish long-term goals and sustain skills needed to implement the
strategy implement a chosen strategy
competitive advantage.

5. Use the firm’s strengths to
implement strategy
The Resource-Based Model of Above Average Returns
1. Identify the firm’s
resources. Study its
strengths and weaknesses
compared with those of
competitors.
2. Determine the firm’s
capabilities. What do the
capabilities allow the firm
to do better than its
competitors?
3. Determine the potential of
Strategy Implementation
● Selection of strategic actions
linked with effective
implementation of the chosen
strategy
Superior Returns
4. Locate an attractive
● Earning of above-average returns
5. Select a strategy that best
Resources
● Inputs into a firm’s production
Capability
● Capacity of an integrated set of
resources to perform a task or
activity
Competitive Advantage
the firm’s resources and
● Ability of a firm to outperform
capabilities in terms of a
its rivals
competitive advantage.
An Attractive Industry
● An industry with opportunities
industry.
that can be exploited by the
firm’s resources and capabilities
Strategy Formulation and
Implementation
allows the firm to utilize its
● Strategic actions taken to earn
resources and capabilities
relative to opportunities in above-average returns
the external environment.
Superior Returns
● Earning of above-average
returns