This PDF includes the understanding of how organisations exploit resources and capabilities to gain a competitive advantage in dynamic, modern sectors. Long-term corporate performance and positive social and ecological effects require strategic positioning, organisational design, and managerial act...
Ch. 1 Strategic management & Competitiveness
Strategic competitiveness is achieved when a firm successfully formulates and implements a
value-creating strategy. A strategy is an integrated and coordinated set of commitments and
actions designed to exploit core competencies and gain a competitive advantage. When choosing
a strategy, firms make choices among competing alternatives as the pathway for deciding how
they will pursue strategic competitiveness. In this sense, the chosen strategy indicates what the
firm will do as well as what the firm will not do.
Strategy: what internal and external factors allow a business to operate
- A good strategy doesn’t focus on the co best thing but rather what they do beat out of all
the company’s.
- Starting point is not how to know the best but how to be unique.
- Strategy is how you position yourself to achieve your goal. IT IS NOT YOUR GOAL.
MUST SAY EXPLICITY WHAT YOUR UNIQUE ADVANTAGE IS.
A firm has a competitive advantage “when it implements a strategy that creates superior value
for customers and that its competitors are unable to duplicate or find too costly to imitate.
Apple Case
1. What, historically, have been Apple’s competitive advantage?
Offered its customers a complete desktop publishing and education thorugh its pioneer of the unique and usable personal computers. Apple stood
out for designing their products from scratch where the customers LOVED using their products and IBM customers “put up” with them. This love
of products can be seen as they focussed highly on ease of use, industrial design and technical elegance.
2. Analyze the personal computer industry. Why did Apple struggle historically in PCs?
1. Competition
- saturated with a lot of competitors. Price comp. Pushing down margins
- 2 main competitors, so very hard for others to join. No market leader
2. Suppliers
- Intel and windows have huge economies of scale to build CPU
- Intel and windows have huge profits
3. Subsitiutes
- Smart phones, tablets, video games
- These substitutes could push PC to have lower prices.
When IBM entered the PC market they made their systems relatively open, which meant many could clone. This put a major strain on Apple as
they refused to license their softwares.. Therefore, IBM PC gained most of the market share while Apple’s market decreased. Also, with cloning
of the IBM PC parts the standard building blocks of microsoft and intel were formed.
The strategic management process is the full set of commitments, decisions, and actions
required for a firm to achieve strategic competitiveness and earn above-average returns (see
Figure 1.1)12.
,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 a firm’s strategic actions. The I/O model suggests that above-average returns are
earned when firms are able to effectively study the external environment as the foundation for identifying an
attractive industry and implementing the appropriate strategyThe firm’s 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
market frictions.
4 Assumptions:
1) The external environment is assumed to impose pressures and constraints that determine the strategies
that would result in above-average returns.
2) Most firms competing within an industry or within a segment of that industry are assumed to control
similar strategically relevant resources and to pursue similar strategies in light of those resources.
3) Resources used to implement strategies are assumed to be highly mobile across firms, so any resource
differences that might develop between firms will be short-lived.
4) Organizational decision makers are assumed to be rational and committed to acting in the firm’s best
interests, as shown by their profit-maximizing behaviors.78
→ The five forces model is an analytical tool used to help firms find the industry that is the most
attractive for them. The model suggests that an industry’s profitability (i.e., its rate of return on invested
capital relative to its cost of capital) is a function of interactions among five forces: suppliers, buyers,
, competitive rivalry among firms currently in the industry, product substitutes, and potential entrants to the
industry)
The Resource-Based Model of Above-Average Returns
The resource-based model of above-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.The resource-based model of superior returns is shown in. This model suggests that the
strategy the firm chooses should allow it to use its competitive advantages in an attractive
industry (the I/O model is used to identify an attractive industry).
→ Thus, to form a vision and mission, and subsequently to select one or more strategies and
determine how to implement them, firms use both the I/O and resource-based models.96 In fact,
these models complement each other in that one (I/O) focuses outside the firm while the other
(resource-based) focuses inside the firm.
- a vision statement articulates the ideal description of an organization and gives shape to
its intended future. In other words, a vision statement points the firm in the direction of
where it would like to be in the years to come
- A mission specifies the businesses in which the film intends to compete and the
customers it intends to serve.101 The firm’s mission is more concrete than its vision. A
mission specifies the businesses in which the film intends to compete and the customers it
intends to serve. The firm’s mission is more concrete than its vision.
Ch. 2 External environment
Why do we care about External Enviro:
Without the external data you may only have a PLAN (not strategic).
Your plan must show how you are DIFFERENT
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