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03.SM - Lecture Notes - Students Version
03.SM - Lecture Notes - Students Version
MANAGEMENT
2
Course Learning Outcomes
3
Course contents
4
CHAPTER 1: STRATEGIC MANAGEMENT
AND STRATEGIC COMPETITIVENESS
Learning objectives
Nature of strategy
Importance of strategy
Strategy models
Firm’s Vision and Mission
Stakeholders and Strategic Leaders
Strategic Management Process
In military theory
the employment of battles to gain the end of war
the art of distributing and applying military means to fulfill the ends
of policy
In game theory
the rules that a player uses to choose between the available
actionable options
In management theory
… determination of the basic LT goals of an enterprise, and the
adoption of courses of action and the allocation of resources
necessary for carrying out these goals [A. Chandler]
... combination of the ends (goals) for which the firm is striving and
the means (policies) by which it is seeking to get there [M.E. Porter]
Rapid
Globalization technological
change
Increasing
The global importance of
economy Today’s knowledge
Competitive and people
Markets
Formulation and
implementation of
a superior value-
creating strategy
Chapter
Chapter 1
1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 9
Firm’s Vision and Mission
Vision
A statement of what the firm wants to be
and expects to achieve
A dream to be shared to stakeholders
Guiding light for strategy
Mission
A statement of why the firm exists
Define firm’s businesses
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 10
Firm’s Vision and Mission (2)
A successful vision
An image, NOT a picture
Ambitious goals for LT
Firm’s values and aspirations
Attractive writing
Organizational
Education Strategic goals
culture and International
and skills of and global
ethical work assignments
employees standards
environment
Resource-Based model
Core
competence
Capability A source of
An integrated set competitive
of resources advantage
Resources
Physical, human, and
organizational capital
(tangible and intangible)
Competitive
Strategy
Decision
Learning objectives
The nature of External Environment
Dimensions of External Environment
Power of buyers
Threat of product substitutes Substitute
Products
General environment
Focused on the future
Industry environment
Focused on factors and conditions influencing a
firm’s profitability within an industry
Competitor environment
Focused on predicting the dynamics of
competitors’ actions, responses and intentions
Opportunities Threats
Critical
Important
global niche
geopolitical
markets
trends Global
Global Different
Focusingcultural and
Focusing
Growth of institutional
the informal attributes
economy
Barriers to Entry
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of scale
Government policy
Expected retaliation
Unattractive
Strong threats from
substitute products
Industry
Intense rivalry
(Low profit potential)
among competitors
Attractive
Few threats from Industry
substitute products
Moderate rivalry
among competitors (High profit
potential)
Competitor Intelligence
The ethical gathering of needed information
and data that provides understanding of:
What drives the competitor, as shown by its future
objectives.
What the competitor is doing and can do, as
revealed by its current strategy.
What the competitor believes about the industry, as
shown by its assumptions.
What the competitor’s capabilities are, as shown by
its strengths and weaknesses.
Future Objectives
• How are we currently
competing?
Current Strategy • Does this strategy
support changes in the
competitive structure?
Future Objectives
Current Strategy
• What are our strengths
Assumptions and weaknesses?
• How do we rate
compared to our
Capabilities competitors?
KSF defined
Important elements required for a company to
compete in its target markets
Competitive elements that most affect every
strategic group member’s ability to prosper in the
marketplace.
Examples of KSF:
Band name
Service quality
Innovation
Leadership
Etc.
Opportunities
and threats
Learning objectives
Competitive advantage
Resources, Capabilities and Core Competencies
5. Explain how firms analyze their value chain for the purpose of
determining where they are able to create value when using their
resources, capabilities, and core competencies.
Unique resources,
capabilities, and
competencies
(required for sustainable
competitive advantage)
Strengths Weaknesses
Resources
Competitive
Advantage Are the source of a
firm’s capabilities.
Are broad in scope.
Core
Competencies
Cover a spectrum of
individual, social and
Capabilities organizational
phenomena.
Resources
Alone, do not yield a
• Tangible competitive advantage.
• Intangible
Human • Knowledge
Resources • Trust
• Skills
• Abilities to collaborate with others
Innovation • Ideas
Resources • Scientific capabilities
• Capacity to innovate
Capabilities
Competitive
Represent the capacity to deploy
Advantage
resources that have been
purposely integrated to achieve a
desired end state
Core
Competencies Emerge over time through
complex interactions among
tangible and intangible resources
Capabilities
Often are based on developing,
carrying and exchanging
Resources information and knowledge
• Tangible
• Intangible through the firm’s human capital
Capabilities (cont’d)
Competitive The foundation of many
Advantage
capabilities lies in:
The unique skills and
Core knowledge of a firm’s
Competencies employees
The functional expertise
Capabilities of those employees
Capabilities are often
Resources
• Tangible
developed in specific
• Intangible functional areas or as
part of a functional area.
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 63
Capabilities
Core Competencies
Competitive Resources and capabilities
Advantage
that are the sources of a
firm’s competitive advantage:
Core Distinguish a firm competitively
Competencies and reflect its personality.
Emerge over time through an
Capabilities organizational process of
accumulating and learning how
to deploy different resources and
Resources capabilities.
• Tangible
• Intangible
Core Competencies
Competitive
Advantage Activities that a firm performs
especially well compared to
competitors.
Core
Competencies Activities through which the
firm adds unique value to its
Capabilities goods or services over a long
period of time.
Resources
• Tangible
• Intangible
Costly-to-Imitate Capabilities
Sustainable
Competitive Historical
Advantage A unique and a valuable
organizational culture or
brand name
Four Criteria of
Sustainable
Ambiguous cause
Advantages The causes and uses of a
competence are unclear
Social complexity
• Valuable Interpersonal relationships,
• Rare trust, and friendship among
• Costly to Imitate
• Nonsubstitutable managers, suppliers, and
customers
Sustainable Nonsubstitutable
Competitive Capabilities
Advantage
No strategic equivalent
Four Criteria of
Firm-specific
Sustainable knowledge
Advantages
Organizational culture
Superior execution of
• Valuable the chosen business
• Rare model
• Costly to imitate
• Nonsubstitutable
Firm Infrastructure
Technological Development
Procurement
Primary Activities
Operations
Service
Outbound Logistics
Value Chain
Shows how a product moves from the raw-
material stage to the final customer.
To be a source of competitive advantage, a
resource or capability must allow the firm:
To perform an activity in a manner that is
superior to the way competitors perform it, or
To perform a value-creating activity that
competitors cannot complete.
Inbound Logistics
Activities used to receive, store, and
disseminate inputs to a product
Operations
Activities necessary to convert the inputs
provided by inbound logistics into final
product form
Outbound Logistics
Activities involved with collecting, storing,
and physically distributing the product to
customers
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 76
Value Chain Analysis: Primary Activities
Procurement
Activities completed to purchase the inputs
needed to produce a firm’s products.
Technological Development
Activities completed to improve a firm’s
product and the processes used to
manufacture it.
Human Resource Management
Activities involved with recruiting, hiring,
training, developing, and compensating all
personnel.
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 78
Value Chain Analysis: Support Activities
Firm Infrastructure
Activities that support the work of the entire
value chain (general management, planning,
finance, accounting, legal, government
relations, etc.)
Effectively and consistently identify external
opportunities and threats
Identify resources and capabilities
Support core competencies
Each activity should be examined relative to
competitor’s abilities and rated as superior,
equivalent or inferior.
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 79
Outsourcing
Learning Objectives
Core Competencies
Customers and Business-Level Strategies
Who will be
served?
Key Issues
in What needs will
Business-level be satisfied?
Strategy
Market segmentation
A process used to cluster people with similar
needs into individual and identifiable groups.
All Customers
Consumer Industrial
Markets Markets
Business-Level Strategies
Are intended to create differences between the
firm’s competitive position and those of its
competitors.
Broad Scope
The firm competes in many
customer segments.
Narrow Scope
The firm selects a segment
or group of segments in
the industry and tailors its
strategy to serving them at
the exclusion of others.
Determine Reconfigure
and control Value Chain
Cost Drivers if needed
Unitary
cost
Cummulative
quantity
Econimies of Scale
Larger production quantity
Smaller marginal cost
Lower price policy
Get market share and become leader
Other drivers
Effective management
Innovation (products, process)
Automation
Outbound production
Etc.
Cost leader is well positioned to: Can mitigate buyers’ power by:
- Lower prices in order to maintain Driving prices far below
its value position. competitors, causing them to
- Make investments to add features exit, thus shifting power with
unavailable in substitutes. buyers (customers) back to the
Substitute
- Buy intellectual property and firm.
patents developed by potential products
substitutes.
Control Reconfigure
Cost Drivers Value Chain to
if needed maximize
Learning Objectives
Single Business
More than 95% of
revenue comes from a A
single business.
Dominant Business
Between 70% and 95% of revenue
comes from a single business.
A
B
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 119
Diversification: Moderate to High Level
A A
B C B C
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 120
Diversification: Very High Level
Unrelated Diversification
no common links between businesses.
B C
High Low
Corporate Relatedness: Transferring Skills
into Businesses through Corporate Headquarters
Operational Relatedness
Created by sharing either a primary activity such
as inventory delivery systems, or a support
activity such as purchasing.
Activity sharing requires sharing strategic control
over business units.
Activity sharing may create risk because
business-unit ties create links between
outcomes.
Corporate Relatedness
Using complex sets of resources and capabilities
to link different businesses through managerial
and technological knowledge, experience, and
expertise.
Learning Objectives
Int’l Opportunities
Int’l Strategy Benefits
Production is standardized
Firm begins
and relocated to low cost
production abroad
countries
Location Advantages
Low cost markets aid in developing competitive
advantage by providing access to:
Raw materials
Transportation
Lower costs for labor
Key customers
Energy
Factors of production
The inputs necessary to compete in any industry
Labor Land Natural resources
Capital Infrastructure
Basic factors
Natural and labor resources
Advanced factors
Digital communication systems and an educated
workforce
Demand Conditions
Characterized by the nature and size of buyers’
needs in the home market for the industry’s goods
or services.
Size of the market segment can lead to scale-efficient
facilities.
Efficiency can lead to domination of the industry in
other countries.
Specialized demand may create opportunities beyond
national boundaries.
Multidomestic
strategy
Global
strategy
Transnational
strategy
The
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international
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Management Problems
Cost of coordination across diverse geographical
business units
Institutional and cultural barriers
Understanding strategic intent of competitors
The overall complexity of competition
Learning Objectives
Organizational Structure and Control
Organizational Structure
Formal reporting relationships, procedures, controls, and
authority and decision-making processes
Dividing and regrouping
Delegation of responsibilities
Coordination mechanisms
Organizational Controls
Indicate how to compare actual results with expected results,
and suggest corrective actions to be taken (if needed)
Strategic controls
Financial controls
Simple Structure
the owner-manager makes all major decisions and monitors all
activities, while the staff serves as an extension of the
manager’s
Functional Structure
a chief executive officer and a limited corporate
staff, with functional line managers in dominant organizational
areas
Multidivisional Structure
a corporate office and operating divisions, each operating
division representing a separate business or profit center
Multidomestic Strategy
Global Strategy
Transnational Strategy
Learning Objectives
Strategic Leadership and Mgnt Process
Strategic Leadership: Key Actions
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