Strategic Management Inputs and

Competitiveness
KeyTerms in Strategic
Management

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Activity
Competitive Vision External opportunities
advantage and threats
Strategy Mission policies
Strategist Internal strengths and risk
weaknesses
Annual objectives Long-term objectives Above-average returns
Average returns hypercompetition Strategic
competitiveness

Choose a word and explain it in your own words.

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Competitive advantage
– any activity a firm strategists– Vision statement– what
does especially when individuals most do we want to become?
compared to activities responsible for
done by rival firms, or the success or Mission statement–
any resource a firm failure of an enduring statements of
possesses that rival organization. purpose that distinguish
firms desire. one business from other
External opportunities and similar firms.
threats– economic, social,
cultural, demographic Internal strengths and
environmental, political, legal, weaknesses–
governmental, technological, organization’s
and competitive trends and controllable activities
events that could significantly that are performed
benefit or harm an organization especially well or poorly.
in the future.
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Long-term objectives –
long term means more
than one year. Annual objectives –
Objectives are essential Strategies – means by
short-term milestones
for organizational which long-term
that organizations must
success because they objectives will be
achieve to reach long-
provide direction; aid in achieved.
term objectives.
evaluation; create
synergy; reveal
priorities; focus
coordination; and
Policies – means by which annual
provide a basis for
objectives will be achieved.
effective planning,
organizing, motivating
and controlling risk- uncertainty about the economic
activities. gains or losses that will result from a
particular investment.
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 Strategic
competitiveness– is Above-average returns – are returns
achieved when a firm in excess of what an investor
successfully formulates expects to earn from other
and implements a value investments with a similar amount of
creating strategy. risk.

Average returns– Hypercompetition – competition that

returns equal to those is excessive such that it creates
an investor expects to inherent instability and necessitates
earn from other constant disruptive change for firms
investments with a in the competitive landscape.
similar amount of risk

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Strategic-management
process
An objective, logical, systematic
approach for making major
decisions in an organization.

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Stages of Strategic Management
Strategy Formulation
- mission and vision, SWOT analysis,
long-term objectives, alternative
strategies, choosing particular
strategies
Strategy implementation
-strategy-supported culture, effective
organizational structure, marketing
efforts, preparing budgets,
information system, compensation to
Strategic
organizational performance. Management
Strategy Evaluation Art and science of formulating,
implementing, and evaluating cross-
- reviewing external and internal factors that functional decisions that enable an
are the bases for current strategies organization to achieve its objectives.
- Measuring performance
- taking corrective actions
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The Strategic-
Management
Model
1. Where are we now?
2. Where do we want to go?
3. How are we going to get there?

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Benefits of Engaging in Strategic Management
Strategic management allows an organization to be more proactive than reactive in
shaping its own future; it allows an organization to initiate and influence (rather than
just respond to activities – and thus to exert control over its own destiny.

Financial Benefits Nonfinancial Benefits

Greater
Deeper/Improved Commitment
Enhanced Understanding The result
communication a. To achieve All managers and
a. Of others’ views objectives
a. Dialogue employees on a
b. Of what the firm b. To implement mission to help the
b. participation is doing/planning strategies firm succeed
and why
c. To work hard

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The I/O Model of Above-Average Returns
The industrial organization (I/O) model of above-average returns explains the external
environment’s dominant influence on firm’s strategic actions. The model specifies that
the industry or segment of an industry in which a company chooses to compete has a
stronger influence on performance than do the choices managers make inside their
organizations.
The firms performance is believed to be determined primarily by a range of industry,
properties, including economies of scale, barriers to market entry, diversification, product
differentiation, the degree of concentration of firms in the industry, and the market
frictions.
The five forces model of competition is an analytical tool used to help firms find the
industry that is the most attractive for them. It encompasses variables and tries to
capture the complexity of competition. These are suppliers, buyers, competitive rivalry
among firms currently in the industry, product substitutes, and potential entrants to the
industry.

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 The External Environment
1. Study the external environment, -the general environment
-the industry environment
especially the industry environment. -the competitor environment

2. Locate an industry with high An Attractive Industry

An industry whose structural characteristics suggest above-average returns.
potential for above-average returns.

Strategy Formulation
3. Identify the strategy called for by the
-selection of a strategy linked with above-average returns in a particular industry.
attractive industry to earn above-
average returns.

4. Develop or acquire assets and skills Assets and Skills

-assets and skills required to implement a chosen strategy.
needed to implement the strategy.

5. Us the firm's strengths to implement

strategy. Strategy Implementation
-selection of strategic actions linked with effective implementation of the chosen strategy

Superior Returns

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The Resource-Based Model of Above-Average Returns
• The resource-based model of average returns assumes that each
organization is a collection of unique resources and capabilities. The
uniqueness of its resources and capabilities is the basis of a firm’s
strategy and its ability to earn above-average returns.

• Resources are inputs into a firm’s production process, such as capital

equipment, the skills of individual employees, patents, finances, and
talented managers.
• Capability is the capacity for a set of resources to perform a task or an
activity in an integrative manner.
• Core competencies are capabilities that serve as a source of competitive
advantage for a firm over its rivals.
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1. Study its strengths and weakness Resources
-inputs into a firm’s production process
compare to its competitors.

2. What do the capabilities allow the Capability

-capacity of an integrated set of resources to interactively perform a task or activity
firm to do better than its competitors?

Competitive Advantage
3. Determine the potential of a firm’s
-ability of a firm to outperform its rivals.
resources and capabilities in terms of a
competitive advantage.

4. Locate an attractive industry. An Attractive Industry

-an industry with opportunities that can be exploited by the firm’s resources and capabilities..

5. Select a strategy that best allows the

firm to utilize its resources and Strategy Formulation and Implementation
-strategic actions taken to earn above-average returns.
capabilities relative to opportunities in
the external environment.

Superior Returns

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-Earning of above-average returns
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Vision/Mission Statements
• Vision-Mission Statement Analysis.pptx

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