Terms in this set (66)
A process of maintaining a dynamic fit between the firms external environment and internal resources and capabilities for a competitive advantage that is sustainable.
Is an integrated and coordinated set of commitments and actions to exploit core competencies and gain a competitive advantage.
- The strategy indicates what a firm will and won't do.
- The strategy demonstrates how the firm differs from its competitiors.
Resources are the inputs into the firm's production process.
- Tangible resources: organizational, technological, financial and physical resources.
- Intangible resources: resources that are deeplg imbedded in history, accumulated over time and significantly hard to understand or imitate; human, innovation and reputational resources.
Set of resources performing an activity or task in an integrated manner.
- Functional expertise is foundation for many capabilities:
the unique skills and knowledge of employees.
- Integrate the individuals functional expertise to create organizational knowledge.
- Bundling unique resources.
1. Valuable capabilities: are capabilities that exploit the opportunities and neutralize threats of the external environment.
2. Rare capabilities.
3. Non-susbstitutable capabilities
4. Costly-to-imitate capabilites:
- Historical: unique organizational culture and brand name.
- Ambiguity causes: the causes and uses of core competencies are unclear.
- Social complexity: interpersonal relationships, trust and friendship between employees, managers, competitiors, suppliers and customers.
The implementation of a strategy, competitiors are unable to duplicate or find too costly to imitate.
- A competitive advantage isn't permanent.
- value: superior to that provided by competitors or to create a value-creating activity that a competitor cannot perform.
A firm successfully formulation and implementation of a value-creating strategy.
Sustainability of competitive advantage
- The rate at which competencies become obsolence because of environmental changes.
- The availability of substitutes of core competencies.
- The imitability of core competencies
challenge: effectively manage curent cc and develop new cc
Returns in excesss of what an investor expects to earn form other investments with similar risk or for small businesses: growth and speed.
- Presence of competitive advantage is required.
- Foundation to satisfy its stakeholders.
An investor's uncertainty about its economic gains or losses that result from a particular investment.
Are returns equal to the returns an investor expect to earn from other investments with similar risks.
- Inability to earn average return = failure: investors withdraw their investments from firms with below-average returns.
Strategic management process
Full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness (value-creating strategy) and above-average returns; only result when the core competencies (internal organization) are matched with opportunities (external environment)
Difficulties Mangerial decisions
1. Uncertainty: in characteristics external environment, competitors actions and customer preferences.
2. Complexity: in causes shaping environment
3. Intra-organizational conflicts
External environment analysis
To identify opportunities and threats.
- Scanning: identify early signals for environmental changes and trends - study all segments of general environment.
- Monitoring: observe environmental changes to see if important trends emerge; short-term and long-term
- Assessing: determining the timing and importance of environmental changes and trends for a firm's strategies and management.
* General environment, industry environment and comptetitive environment.
The segnments external to the firm; for which it wants to determine the strategic relevance in terms of changes and trends.
1. Demographic segment
2. Economic segment: nature and direction of the economy in which the firm competes.
3. Political/legal segment
4. Socio-culutral segment: society's attitudes and cultural values.
5. Technological segment: the institutions and activities involved with creating new knowledge and translating that into new outputs, products, processes and materials.
6. Physical segment
7. Global segment
All factors that directly influence a firms competitive actions and responses.
- Industry enviroment has a greater effect on the firms strategic management process than the general environment
- Environment is focused on the factors and conditions influencing the industry's profit potential.
Group of firms producing products that are close substitutes.
The challenge for a firm is to locate within an industry where it can favourably influence the five factors or can
successfully defend against their influence.
- Threats of product substitution
- The bargaining power of suppliers
- The bargaining power of buyers
Treat of new entry 6
Threatens the marketshare of existing competitiors
- Barriers to enter; competitive disadvantage
* Economies of scale
*Cost advantages other than economies of scale; desirable location, favorable access to raw materials.
* Product differentation
* Access to distribution channels
* Switching cost
- Expected retaliation: reaction of firms in industry.
Economies of scale
The cost of producing each unit declines as the quantity increases.
- Provides flexiblity; higher profit margin (constant price) or quanitities sold (lower price).
Intensity of rivalry among competitors 6
- Number of competitors; equally balanced.
- Industry growht; rivalry increases in no-growth/ slow-growht.
- Height of fixed and storage cost; rivarly increases by high costs.
- Strategic stakes
- Differentation: lack of substitutes increases rivalry
- Exit barriers
The amount of firms that want to accomplish the same strategic goals.
Specialized assets, fixed cost of exit, strategic interrelationships, emotial barriers and governmental/social restrictions.
Competitor environment analysis
Firms make respond profiles for each of its competitors.
- Actions, responses and intentions
- Suppliers (integrating forward) and customers (integration backwards) can become competition
- What drives the competior - future objective
- What is the competitor doing and can do - current strategy
- what does the competitor believe about the industry - assumptions
-what are the competitors capabilites - strenght and weaknesses.
Public policies intelligence
information about public policies around the world
Network of firms that sell complemenatry products; adds value
Market stability is replaced by notions of of instability and change.
- Competition based on price-quality position, creating know-how, protect product and establish first-movers advantage.
The flow of goods, services, financial capital and knowledge across country boarders.
(increasing) Economic interdependence among countries and their organizations.
- Product of a large number of firms competing against one another in global economies.
- Globalization has led to hihger level of performance standards.
Relevent new global markets, changing existing markets, important international political events and cultural/institutional characteristics of global markets.
The ability to analyze, understand and manage an international organization in ways that it is not dependent on the assumptions of a single country, culture or context.
Liability of foreigness
Risks of participating outside a firm's domestic market
The speed at which new technologies become available and used.
The rapid and consistant speed of new information-intense technologies replaced older ones.
- Rapid diffusion of new technologies place a competitive premium on being able to quickly introduce new, innovative goods and services.
are technologies that destroy the value of an existing technology and create new markets.
Information, intelligence and expertise
Set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment
- Coping with uncertainty and its risks
- To be strategic flexiblity develop capacity to learn; up-to-date set of skills to adapt to external environment.
I/O model of above-average returns
- The external environment has a dominant influence on strategic actions; challenges the firm to the most attractive industry to compete in.
- The industry in which a firm chooses to compete has a larger influence on the firms performance than the internal organizational decisions.
- The returns are primarly determined by the external characterisitcs and succesful implementation of the strategy dictated by it.
1. The external environment constraints and pressures the determining of the above-average return strategy.
2. Firms competing in the same industry control similar strategic relevent resources and pursue similar strategies in light of these resources.
3. Resources are highly mobile across firms; resource difference are short-lived.
4. Managers are rational and are commited to act in best interest of firm.
Firm produces standardized products at a cost below those of competitors.
Firm produces differentiatied products for which customers are willing to pay a price premium.
Resource-based model of above-average returns
A firm is a collection of unique resources and capabilities.
- Resources become a competitive advantage; rare, valuable, non-sustitutable and costly-to-imitate; above-average returns
Vission and Mission
is a picture of what the firm wants to be and what it ultimately wants to achieve; ideal description of organization and gives shape to intended future or direction
- Should reflect firm's values and aspirations - catch heart of employees/ stakeholders
- For a firm to reach intended state, the statement should clearly be tied to the conditions of the external environment and internal organization.
- Vission is the foundation for a mission:
Specifies the business(es) in which a firm intends to compete and the customers it intends to serve.
- Business ethics is a vital part of the mission.
The individuals and groups who can affect the firm's mission and vission, are affected by the strategic outcomes, and have enforcable claims on the performance.
- Firms that manage the stakeholder relationships effective outperform those that do not.
- The more critical and valued the stakeholder participation; the greater the firms dependency on it.
Types of stakeholders
1. Capital market stakeholders: shareholders and major suppliers of capital; expect returns in line with the risk of the investment.
2. Product market stakeholders: primary customers, suppliers and unions; benefit from firm engaging in competitive battles; returns: lowest possible price, loyalty
3. Organizational stakeholders: managers and employees.
4. Societal stakeholders: government, institutions and activist.
People located in different parts of the firm that use the strategic management process to help the firm reach its vision and mission.
- Leaders need to work hard, thorougly analayze situations facing the firm, be brutally and consistently honest, and ask the right questions to the right people at the right time.
- Strategic leaders' decisions shape the firms culture
Focusses on the firm operating in ways that are consitatent with the values of all stakeholders rather than only foucsing on maximizing the profits for shareholders.
social energy that drives or fails to drive the organization.
Is the total profit earned in an industry at all points along the value chain.
- Helps firms by showing what the primary sources of profit are in the industry.
- Mapping profit pool is something strategic leaders to to anticipate the outcomes of different decisions; calculation to prevent ineffective strategy.
Value chain analysis
It shows light at the operations that create value and those that do not; essential idea is to capture value without incurring unnessecary cost while doing so.
- Primary and supporting activities
Stages: raw-materials to final customer
Activities involved with the product's physical creation, sale, distribution and after-sale..
Activities which provide the assistance necessary for the primary activities to take place.
- Increased flexibility
- Risk and capital investment reducement
Firm has strong relationships with suppliers and customers.
Happens when a firm manages its need to grow with its ability to succesfully manage growht.