Strategic Management
PowerPoint Presentation by Charlie Cook The University of West Alabama 2007 Thomson/South-Western. All rights reserved.
KNOWLEDGE OBJECTIVES Studying this chapter should provide you with the strategic management knowledge needed to:
1. Explain the need for firms to study and understand their internal environment.
2. Define value and discuss its importance. 3. Describe the differences between tangible and intangible resources. 4. Define capabilities and discuss how they are developed. 5. Describe four criteria used to determine whether resources and capabilities are core competencies.
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In preparing for battle I have always found that plans are useless, but planning is indispensable.
- Dwight D. Eisenhower
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Suppliers
Customers
Government
The Organization
Labor unions
Competitors
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Additional Dimensions
Political-Legal dimension: the government regulation of business and the general relationship between business and government. International dimension: the extent to which an organization is involved in or affected by business in other countries.
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Competitive Advantage
Firms achieve strategic competitiveness and earn above-average returns when their core competencies are effectively:
Acquired. Bundled. Leveraged.
Over time, the benefits of any value-creating strategy can be duplicated by competitors.
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Global Mind-Set
The ability to study an internal environment in ways that are not dependent on the assumptions of a single country, culture, or context.
Analysis Outcome
Understanding how to leverage the firms bundle of heterogeneous resources and capabilities.
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Organizational Stories
Organizational Heroes
5.1
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Clear Vision
Adapted from Exhibit 2.7 D.R. Denison & A.K. Mishra, Organization Science 6(1995): 204-223
5.2
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Behavioral substitution
is having managers and employees perform a new behavior in place of another behavior
FIGURE 3.1
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Creating Value
By exploiting their core competencies or competitive advantages, firms create value.
Firms create value by innovatively bundling and leveraging their resources and capabilities. Superior value Above-average returns
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Innovation
Innovation is the act of creating
processes Product innovation
Creates products that customersperceive as more valuable and Increases the companys pricing options
Process innovation
Creates value by lowering production costs
Successful innovation can be a major source of competitive advantage by giving a company something unique, something its competitors lack.
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FIGURE
3.2
Conditions Affecting Managerial Decisions about Resources, Capabilities, and Core Competencies
Source: Adapted from R. Amit & P. J. H. Schoemaker, 1993, Strategic assets and organizational rent, Strategic Management Journal, 14: 33. 2007 Thomson/South-Western. All rights reserved.
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Resources
Resources
Are a firms assets, including people and the value of its brand name. Represent inputs into a firms production process, such as:
Capital equipment Skills of employees Brand names Financial resources Talented managers
Types of Resources
Tangible resources
Financial resources Physical resources Technological resources Organizational resources
Intangible resources
Human resources Innovation resources Reputation resources
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TABLE
3.1
Tangible Resources
The firms borrowing capacity The firms ability to generate internal funds Organizational Resources The firms formal reporting structure and its formal planning, controlling, and coordinating systems Physical Resources Sophistication and location of a firms plant and equipment Access to raw materials Technological Resources Stock of technology, such as patents, trademarks, copyrights, and trade secrets Financial Resources
Sources: Adapted from J. B. Barney, 1991, Firm resources and sustained competitive advantage, Journal of Management, 17: 101; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 100102. 2007 Thomson/South-Western. All rights reserved.
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TABLE
3.2
Intangible Resources
Knowledge Trust Managerial capabilities Organizational routines Ideas Scientific capabilities Capacity to innovate Reputation with customers Brand name Perceptions of product quality, durability, and reliability Reputation with suppliers For efficient, effective, supportive, and mutually beneficial interactions and relationships
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Human Resources
Innovation Resources
Reputational Resources
Sources: Adapted from R. Hall, 1992, The strategic analysis of intangible resources, Strategic Management Journal, 13: 136139; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 101104. 2007 Thomson/South-Western. All rights reserved.
The resource based view suggests that a firms unique resources and capabilities provide the basis for a strategy.
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The Resource-Based Model of Superior Returns Action required: Identify firm resources. Study strengths & weaknesses relative to rivals.
Resources
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The Resource-Based Model of Superior Returns Action required: Determine what firm capabilities allow it to do better than rivals.
Resources Capability
Inputs to a firms Capacity for production process. integrated set of resources to integratively perform a task or activity.
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The Resource-Based Model of Superior Returns Action required: Determine how firms resources & capabilities may create competitive advantage.
Resources Capability Inputs to a firms Competitive Capacity for an Advantage production process.
integrated set of resources Ability of a firm to to integratively perform its rivals outperform a task or activity.
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The Resource-Based Model of Superior Returns Action required: Locate an attractive industry. Resources Capability Competitive Inputs to a firms Advantage Attractive Capacity for an An production process. integrated set of Industry Ability of a firm to
resources to Location of outperform integratively perform its rivals an industry a task or activity. with opportunities that can be exploited by firms resources & capabilities
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The Resource-Based Model of Superior Returns Action required: Select strategy that best exploits res.& capabilities relative to opportunities in environments.
Resources Capability Competitive Inputs to a firms Advantage Attractive Capacity for an An production process. integrated set of Strategy Industry resourcesAbility of a firm to Formulation and to Location of outperform its integratively perform a rivals an ind. with opportunities Implementation task or activity.
that can be exploited by firmsStrategic actions taken resources to earn & capabilities above-average returns
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Operations
Outbound Logistics
Inbound Logistics
Primary Activities
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Service
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Management Culture
The set of values, beliefs, behaviors, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important. Organizational culture is important for it determines the feel of the organization. Its starting point is often the founder.
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Environmental Turbulence
Terrorist attacks. Workplace violence. Computer viruses. Such crises affect organizations in different ways.
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Information management
Mergers, takeovers acquisitions, alliances
Social responsibility
The Organization
Strategic responses Organization design and flexibility
Direct influence
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