Chapter 1: Strategic Management &

Competitiveness

Dr. Dodd-Walker

Key Vocabulary #1

Strategic Management Process consists of the

_________________________________ that firms take to
gain/sustain a competitive advantage or at least become
strategically competitive.
Strategic Competitiveness is achieved when a firm
successfully formulates and implements a
___________________.
Strategy: a ______________________ taken by the firm to
gain/sustain a competitive advantage; it requires a
commitment of resources.
(Hitt, Ireland, Hoskisson, 2005)

Key Vocabulary #2

Competitive Advantage exists when the firm implements a

value-creating strategy that ______________________.
Strategic Flexibility is a set of capabilities used to respond
to environmental changes.
Capability is the capacity for a set of resources to perform
a task/activity.
Resources are the firms __________ into its production
process, such as finances, employee skills, equipment,
etc.
(Hitt, Ireland, Hoskisson, 2005)

Key Vocabulary #3
Core

Competencies are resources and

capabilities that serve as a source of
__________________ for a firm over its rivals.
Stakeholders are the individuals/groups who
affect and are affected by the firms strategic
outcomes; they have enforceable claims on a
firms performance.
(Hitt, Ireland, Hoskisson, 2005)

Theory of CA: I/O Model

Find an __________________________ and implement the

strategy dictated by its characteristics.
Assumptions:
1. External environment imposes constraints.
2. Most firms: similar resources/similar strategies.
3. Resources are ___________________ across firms.
4. Decision makers are ___________ and maximize profits.
(Hitt, Ireland, Hoskisson, 2005)

Theory of CA: RBV Model

A firms strategy should be based on its unique bundling

of resources and capabilities:
1. Valuable: ______________________________
2. Rare: Possessed by few.
3. Inimitable: Cannot be imitated.
4. Nonsubstitutable: No functional equivalents.
Assumptions:
1. Firms acquire different resources and develop
unique capabilities.
2. Resources may not be highly mobile across firms.
(Hitt, Ireland, Hoskisson, 2005)

RBV: Sources of Inimitability

1.

Physically Unique (e.g., a resort, patent)

Example: Disney World

2.

Path Dependency (Historical)

Example: New Computer Specialist: Demand= 30K, Supply= 10K

3.

Causal Ambiguity (i.e., Cant disentangle the causes)

Example: Recipe

4.

Social Complexity (i.e., Complex relations)

Example: Employees work well together

(Dess and Lumpkin, 2003; Hitt et al., 2005)

RBV: Matrix
Tangible
Resources

Valuable

Rare

Inimitable Non-substitutable

Competitive
Advantage

Expected
Performance

Disadvantage

BA Returns

Competitive Parity

A Returns

Tempory CA

A to AA Returns

Sustainable CA

AA

Note: You must also generate a matrix for the ____________________.

Stakeholders: Dess & Lumpkin, 2003

Customers
Employees
Suppliers

(goods, services, and capital)

Shareholders
Community at large

Stakeholder Mgt: Dess & Lumpkin, 2003

Symbiosis

or _______________________:
Hey, we are in this thing together!
Zero-sum or ___________: Every man for
himself or the closed system (A+B+C+D+E=0).

Stakeholders: Hitt et al., 2005

Capital Market Stakeholders

1. ____________________
2. Major suppliers of capital (e.g., banks)

Product Market Stakeholders

1. Primary _____________
2. ____________________
3. Host ________________
4. Unions

Organizational Stakeholders
1. ____________________
2. Managers
3. Nonmanagers

Stakeholder Mgt: Hitt et al, 2005

Identify

all important stakeholders

Prioritize stakeholders according to:
1. Power
2. Urgency of satisfying
3. Degree of importance of stakeholder

Stakeholder Satisfaction and Returns

BA Returns

Cant minimally satisfy all

stakeholders, so minimize
support lost.

Returns

Cant maximize all

stakeholder interests, so meet
minimum expectations.

AA Returns

Easy to satisfy all

stakeholders.
(Hitt, Ireland, Hoskisson, 2005)

Person earns below

national income average:
$12,000/yr
Person earns national
income average:
$41,000/yr
Person earns above
national income average:
$100,000/yr

Mission Statements
1.
2.
3.
4.
5.
6.
7.
8.
9.

Customers
Products/Services
Markets
Technology
Survival, Growth, Profitability
Philosophy
Self-Concept/Competitive Advantage
Public Image
Concern for Employees
(David, 2005)