Ch1-1 Chapter 1 Chapter 1 Strategic Management and Strategic Management and Strategic Competitiveness Strategic Competitiveness Michael A. Hitt Michael A. Hitt R. Duane Ireland R. Duane Ireland Robert E. Hoskisson Robert E. Hoskisson ©2000 South-Western College Publishing Ch1-2 Sustained Competitive Advantage Sustained Competitive Advantage Above-Average Returns Above-Average Returns Returns in excess of what an investor expects to Returns in excess of what an investor expects to earn from other investments with similar risk earn from other investments with similar risk Occurs when a firm develops a strategy that Occurs when a firm develops a strategy that competitors are not simultaneously implementing competitors are not simultaneously implementing Provides benefits which current and potential Provides benefits which current and potential competitors are unable to duplicate competitors are unable to duplicate Strategic Competitiveness Strategic Competitiveness Achieved when a firm successfully formulates Achieved when a firm successfully formulates and implements a value-creating strategy and implements a value-creating strategy Ch1-3 which are required for firms to achieve: which are required for firms to achieve: Above-Average Returns Above-Average Returns Strategic Competitiveness Strategic Competitiveness Sustained Competitive Advantage Sustained Competitive Advantage The Strategic Management Process The Strategic Management Process Involves the full set of: Involves the full set of: Actions Actions Commitments Commitments Decisions Decisions Ch1-4 The Strategic The Strategic Management Management Process Process The Strategic The Strategic Management Management Process Process Chapter 3 Internal Environment Chapter 2 External Environment Strategic Intent Strategic Mission Strategy Formulation Strategy Implementation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Inputs Feedback Strategic Outcomes Strategic Strategic Actions Actions Strategic Competitiveness Above Average Returns Ch1-5 Chapter One: Key Themes Chapter One: Key Themes • Industrial Organization Model Industrial Organization Model • Resource-Based Model Resource-Based Model Challenge of Strategic Management Challenge of Strategic Management Changing Competitive Landscape Changing Competitive Landscape Two Models of Superior Profitability Two Models of Superior Profitability Key Stakeholder Groups Ch1-6 Competitive success is transient unless care is taken to preserve competitive position Only 16 of the 100 largest U.S. companies at the start of the 20th century are still identifiable today! In a recent year, 44,367 businesses filed for bankruptcy and many more U.S. businesses failed Challenge of Strategic Management Challenge of Strategic Management Ch1-7 Best Stocks of the Decade Best Stocks of the Decade Challenge of Strategic Management Challenge of Strategic Management The goals of achieving The goals of achieving strategic competitiveness strategic competitiveness and earning above- and earning above- average returns are average returns are challenging challenging The performance of The performance of some companies more some companies more than meets strategic than meets strategic management's management's challenge challenge Ch1-8 • Rapid technological changes • Rapid technology diffusions • Dramatic changes in information and communication technologies • Increasing importance of knowledge Fundamental nature of competition is changing The pace of change is relentless and increasing Traditional industry boundaries are blurring, such as • Computers • Telecommunications 21st Century Competitive Landscape 21st Century Competitive Landscape Ch1-9 The global economy is changing • People, goods, services and ideas move freely across geographic boundaries • New opportunities emerge in multiple global markets • Markets and industries become more internationalized Traditional sources of competitive advantage no longer guarantee success New keys to success include: • Flexibility • Innovation • Speed • Integration 21st Century Competitive Landscape 21st Century Competitive Landscape 1999 1998 Country Competitiveness Index 1999 Competitiveness Index 1998 1 1 Singapore 2.12 2.16 2 3 United States 1.58 1.41 3 2 Hong Kong 1.41 1.91 4 6 Taiwan 1.38 1.19 5 5 Canada 1.33 1.27 6 8 Switzerland 1.27 1.10 7 10 Luxembourg 1.25 1.05 8 4 United Kingdom 1.17 1.29 9 7 Netherlands 1.13 1.13 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 14 12 Japan 1.00 0.97 15 9 Norway 0.92 1.09 16 17 Malaysia 0.86 0.59 17 16 Denmark 0.85 0.61 18 30 Iceland 0.59 -0.18 19 23 Sweden 0.58 0.25 20 20 Austria 0.37 0.37 21 18 Chile 0.57 0.57 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 Country Competitiveness Rankings Country Competitiveness Rankings A country’s A country’s competitiveness is competitiveness is achieved through the achieved through the accumulation of accumulation of individual firms’ individual firms’ strategic strategic competitiveness in competitiveness in the global economy the global economy Achieving improved Achieving improved competitiveness competitiveness allows a country's allows a country's citizens to have a citizens to have a higher standard of higher standard of living living 21st Century Competitive Landscape 21st Century Competitive Landscape [...]... basis for a firm’s Competitive Advantage, Strategic Competitiveness and Ability to Earn Above-average Returns Ch1- Strategic Intent Winning competitive battles through deciding how to leverage internal resources, capabilities, and core competencies Strategic Mission An application of strategic intent in terms of products to be offered and markets to be served Ch1- Strategic Intent BUSINESS WEEKS’S 10 Top... Chapter 7 Acquisitions & Restructuring Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 12 Strategic Leadership Chapter 13 Outcomes Strategic Strategic Actions Strategy Formulation The Strategic Management Process Feedback Entrepreneurship & Innovation Strategic Competitiveness Above Average Returns Ch1- ... Case America Online Deals to broaden AOL’s availability and services will help boost income 102% this fiscal year, to $800 million 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... task or activity of aIndustry outperform its rivalsStrategy Location of an Formulation and industry with Superior opportunities that can Implementation Returns be exploited by the Strategic actions taken to firm’s resources and Earning of aboveearn average capabilities above-averagereturns returns Ch1- Resources and capabilities lead to Competitive Advantage when they are: Valuable allow the firm to... External Develop or acquire assets Environment Attractive and skills needed to GeneralIndustry Environment implement the strategy Strategy Industry Environment An industry whose Formulation Competitive structural characteristics Environment above-averageAssets and Skills Selection of a strategy suggest returns arelinked with abovepossible Assets and average returns in a skills required particular industry... and potential competitors Costly to Imitate when other firms either cannot obtain them or must obtain them at a much higher cost Nonsubstitutable the firm must be organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage Ch1- When these four criteria are met, Resources and Capabilities become: Core Competencies Core Competencies are resources and. .. industry whose Formulation Competitive structural characteristics Environment above-averageAssets and Skills Selection of a strategy suggest returns arelinked with abovepossible Assets and skills average returns in a Strategy required Implementation particular industry to implement a chosen strategy Selection of strategic actions linked with effective implementation of the chosen strategy Ch1- I/O Model... Top Managers of the Year, 1999 The most effective strategists provide a vision (strategic intent) to effectively elicit the help of others in creating a firm's competitive advantage Name Company Strategic Accomplishment Minoru Arakawa Nintendo America Scored huge hit by bringing Pokė mon to U.S over objections of co-workers and negative market research Bernard Arnault LVMH From just 23 in Oct ’98, LVMH’s... whose Formulation Competitive structural characteristics Environment above-averageAssets and Skills Selection of a strategy suggest returns arelinked with abovepossible Assets and skills average returns in a Strategy required Implementation particular industry to implement a chosen strategy Superior Returns Selection of strategic actions linked with Earning of aboveeffective implementation average returns... same pie 1 How do you divide the pie in order to keep all of the stakeholders involved? 2 How do you increase the size of the pie so that there is more to go around? Ch1- Strategic Inputs Chapter 2 External Environment Strategic Intent Strategic Mission Chapter 3 Internal Environment Strategy Implementation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy . 1 Chapter 1 Strategic Management and Strategic Management and Strategic Competitiveness Strategic Competitiveness Michael A. Hitt Michael A. Hitt R. Duane Ireland R. Duane Ireland Robert E Strategic The Strategic Management Management Process Process The Strategic The Strategic Management Management Process Process Chapter 3 Internal Environment Chapter 2 External Environment Strategic. Returns Above-Average Returns Strategic Competitiveness Strategic Competitiveness Sustained Competitive Advantage Sustained Competitive Advantage The Strategic Management Process The Strategic Management Process Involves