Ch1-1
Strategic Competitiveness
Achieved when a firm successfully formulates
and implements a value-creating strategy
Above-Average Returns
Returns in excess of what an investor expects to
earn from other investments with similar risk
Ch1-2
The Strategic Management Process
Involves the full set of:
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
Ch1-3
Chapter 2
Strategic External
Environment
The Strategic
Inputs
Strategic Intent
Strategic Mission
Management
Chapter 3
Internal Process
Environment
Strategic
Competitiveness
Feedback Above Average
Returns
Ch1-4
Chapter One: Key Themes
Challenge of Strategic Management
Ch1-8
21st Century Competitive Landscape
Ch1-9
21st Century Competitive Landscape
A country’s Country Competitiveness Rankings
1999 1998 Country Competitiveness Competitiveness
competitiveness is Index 1999 Index 1998
1 1 Singapore 2.12 2.16
achieved through the 2 3 United States 1.58 1.41
accumulation of 3 2 Hong Kong 1.41 1.91
individual firms’ 4
5
6
5
Taiwan
Canada
1.38
1.33
1.19
1.27
strategic 6
7
8
10
Switzerland
Luxembourg
1.27
1.25
1.10
1.05
competitiveness in 8 4 United Kingdom 1.17 1.29
9 7 Netherlands 1.13 1.13
the global economy 10 11 Ireland 1.11 1.05
11 15 Finland 1.11 0.70
12 14 Australia 1.04 0.79
13 13 New Zealand 10.1 0.84
Achieving improved 14 12 Japan 1.00 0.97
15 9 Norway 0.92 1.09
competitiveness 16 17 Malaysia 0.86 0.59
allows a country's 17 16 Denmark 0.85 0.61
18 30 Iceland 0.59 -0.18
citizens to have a 19 23 Sweden 0.58 0.25
higher standard of 20
21
20
18
Austria
Chile
0.37
0.57
0.37
0.57
living 22 19 Korea 0.46 0.39
23 22 France 0.44 0.25
24 27 Belgium 0.39 -0.03
25 24 Germany 0.37 0.15
26 25 Spain 0.16 0.02
Alternative Models of Superior Returns
Industrial Organization Resource-Based
Model Model
The External Environment Resources
Ch1-11
I/O Model of Superior Returns
Ch1-12
I/O Model of Superior Returns
External Action required:
Environment Study the external
environment, especially
General Environment the industry environment.
Industry Environment
Competitive
Environment
Ch1-13
I/O Model of Superior Returns
External Action required:
Environment Locate an industry with
An Attractive high potential for above-
GeneralIndustry
Environment average returns.
Industry Environment
An industry whose
Competitive
structural characteristics
Environment
suggest above-average
returns are possible
Ch1-14
I/O Model of Superior Returns
External Action required:
Environment Identify strategy called for
Attractive by the industry to earn
GeneralIndustry
Environment above-average returns.
Strategy
Industry Environment
An industry whose
Competitive Formulation
structural characteristics
Environment Selection of a strategy
suggest above-average
returns are linked with above-
possible
average returns in a
particular industry
Ch1-15
I/O Model of Superior Returns
External Action required:
Environment Develop or acquire assets
Attractive and skills needed to
GeneralIndustry
Environment implement the strategy.
Strategy
Industry Environment
An industry whose
Competitive Formulation
structural characteristics
Environment Selection ofAssets
suggest above-average and Skills
a strategy
returns are linked with above-
possible
Assetsinand
average returns a skills
required to implement
particular industry
a chosen strategy
Ch1-16
I/O Model of Superior Returns
External Action required:
Environment Use the firm’s strengths
Attractive (its assets or skills) to
GeneralIndustry
Environment implement the strategy.
Strategy
Industry Environment
An industry whose
Competitive Formulation
structural characteristics
Environment Selection ofAssets
suggest above-average and Skills
a strategy
returns are linked with above-
possible
average returns a Strategy
Assetsinand skills
required to
particular industry Implementation
implement
a chosen strategy
Selection of strategic
actions linked with
effective implementation
of the chosen strategy
Ch1-17
I/O Model of Superior Returns
External Action required:
Environment Maintain selected strategy
Attractive in order to outperform
GeneralIndustry
Environment industry rivals.
Strategy
Industry Environment
An industry whose
Competitive Formulation
structural characteristics
Environment Selection ofAssets
suggest above-average and Skills
a strategy
returns are linked with above-
possible
average returns a Strategy
Assetsinand skills
required to
particular industry Implementation
implement
a chosen strategy Superior Returns
Selection of strategic
actions linked with
Earning of above-
effective implementation
average
of the chosen returns
strategy
Ch1-18
Resource-Based Model of Superior Returns
Ch1-19
Resource-Based Model of Superior Returns
Action required:
Resources Identify firm resources.
Study strengths and weak-
Inputs to a firm’s nesses relative to rivals.
production process.
Ch1-20
Resource-Based Model of Superior Returns
Action required:
Resources Determine what firm
Capability capabilities allow it to do
Inputs to a firm’s better than rivals.
production process.
Capacity for an integrated
set of resources to perform
a task or activity.
Ch1-21
Resource-Based Model of Superior Returns
Action required:
Resources Determine how firm’s
Capability resources and capabilities
Inputs to a firm’s may create competitive
production process.
Capacity Competitive
for an integrated advantage.
Advantage
set of resources to
integratively perform a
Ability of a firm to
task or activity.
outperform its rivals
Ch1-22
Resource-Based Model of Superior Returns
Action required:
Resources Locate an attractive
Capability industry.
Inputs to a firm’s
production process.
Capacity Competitive
for an integrated
Advantage
set of resources to
integratively perform aAn Attractive
Ability of aIndustry
task or activity. firm to
outperform its rivals
Location of an industry
with opportunities that
can be exploited by the
firm’s resources and
capabilities
Ch1-23
Resource-Based Model of Superior Returns
Action required:
Resources Select strategy that best
Capability exploits resources and
Inputs to a firm’s capabilities relative to
production process.
Capacity Competitive
for an integrated opportunities in environs.
Advantage
set of resources to
integratively perform aAn Attractive
Ability of aIndustry
task or activity. firm to
outperform its rivalsStrategy
Location of an industry
Formulation
with opportunities that and
Implementation
can be exploited by the
firm’s resources and
Strategic actions taken to
capabilities
earn above-average
returns
Ch1-24
Resource-Based Model of Superior Returns
Action required:
Resources Maintain selected strategy
Capability in order to outperform
Inputs to a firm’s industry rivals.
production process.
Capacity Competitive
for an integrated
Advantage
set of resources to
integratively perform aAn Attractive
Ability of aIndustry
task or activity. firm to
outperform its rivalsStrategy
Location of an industry
Formulation
with opportunities that and
can be exploited Superior Returns
Implementation
by the
firm’s resources and
Strategic actions
capabilities taken
Earning to
of above-
earn above-average
average returns
returns
Ch1-25
Resources and capabilities lead to
Competitive Advantage when they are:
Strategic Mission
An application of strategic intent in terms of
products to be offered and markets to be served.
Ch1-28
Strategic Intent
BUSINESS WEEKS’S 10 Top Managers of the Year, 1999
Name Company Strategic Accomplishment
The most Minoru Arakawa Nintendo America Scored huge hit by bringing Pokė mon to U.S.
effective over objections of co-workers and negative
market research
strategists provide Bernard Arnault LVMH From just 23 in Oct. ’98, LVMH’s U.S. shares
have vaulted 280%, to about 87
a vision (strategic Arthur Blank Home Depot Profits should jump 46%, to $2.3 billion for
fiscal year 1999. Sales are expected to grow
intent) to 25%, to $38 billion
effectively elicit Peter Bijur Texaco After his company was labeled racist, attracted
minorities to key jobs, including treasurer Ira
Hall, a former IBM executive
the help of others
Gordon Binder Amgen Boosted stock price by around 100% last year, to
in creating a about $54
Steve Case America Online Deals to broaden AOL’s availability and services
firm's competitive will help boost income 102% this fiscal year, to
$800 million
advantage. John Chambers Cisco Systems Broadened Cisco into strategic businesses such
as software, consulting, and fiber-optic
communications
Jim Curvey Fidelity Investments Reduced internal conflicts and spurred growth
through management changes
Thierry Desmarest Totalfina Acquired rival French oil company ELF
Aquitaine for $44 billion. Shares up about 35%
in ’99, as profits expected to grow 20%, to $3.1
billion
Bernie Ebbers MCI Worldcom Turned toward more profitable data, Internet,
and international operations
Ch1-29
Stakeholders: Groups who are affected by a firm’s
performance and who have claims on its
wealth
Product Market
Organizational
Primary Customers
Suppliers Employees
Managers
Non-Managers
Ch1-30
Stakeholder Involvement
Each of the key stakeholders
wants a piece of the same pie
2
How do you increase the
size of the pie so that there
is more to go around?
Ch1-31
Chapter 2
Strategic External
Environment
The Strategic
Inputs
Strategic Intent
Strategic Mission
Management
Chapter 3
Internal Process
Environment
Strategic
Competitiveness
Above Average
Feedback
Returns
Ch1-32