What is Strategic

Management

Strategic Management
Strategy is an integrated and coordinated
set of commitments and actions designed
to exploit core competencies and gain
competitive advantage
A firm has competitive advantage when it
implements a strategy that rivals are
unable to duplicate or find it too costly to
copy

Industrial Organisation ( I/O model)

It stresses the external environments dominant
influence on a firms strategic decisions
According to it the industry in which a
company chooses to compete has a stronger
influence on performance than do the choices
managers make inside their organisation
The firms performance is determined by range
of industry properties economies of scale,
barriers to market entry, diversification, product
differentiation etc.
Case study of Micromax

Assumptions for I/O Model

External environment impose pressures and constraints
that determine the strategies that result in above
average returns.
Most firms competing within an industry or within a
certain segment of that industry are assumed to control
similar strategically relevant sources and to pursue
similar strategies in the light of resources
Resources used are assumed to be highly mobile
across firms, so any resource difference that may
develop between firms shall be short lived
Organization decision makers are assumed to be
rational and committed to acting in the firms best
interest.

The I/O model

1.
2.
3.
4.
5.

Study the external environment general environment,

industry environment and competitor environment
Locate an industry with high potential for above
average returns
Identify the strategy called for by the attractive industry
to earn above average returns
Develop or acquire assets and skills needed to
implement the strategy
Use the firms strengths( its developed or acquired
assets and skills) to implement the strategy

The Resource based model

It assumes that each organisation is a collection
of unique resources and capabilities and that is
the basis of its strategy
Resources inputs in the production process
capital equipment, employee skills, patents,
finances etc
Resources can be source of competitive
advantage if they are formed into a capability
Capability is a set of resources to perform a
certain task
Case study of Tata Eye +

The Resource based model

According to RB model, firms
performances is dependent on firms
resources and capabilities rather than
industry structure
In order to generate competitive
advantage, resources should be
Valuable
Rare
Costly to imitate
nonsubstitutable

The Resource based model

1.
2.
3.
4.
5.

Identify the firms resources and study its strengths

and weaknesses compared with those of rivals
Determine the firms capabilities what do the
capabilities allow the firm to do better than its rivals ?
Determine the potential of the firms resources and
capabilities in terms of a competitive advantage
ability of firm to outperform rivals.
Locate an attractive industry with opportunities that
can be exploited by the firms resources and
capabilities
Select a strategy that best allows the firm to utilise its
resources and capabilities relative to opportunities in
the external environment