Sustained Competitive Advantage

1. Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategy Sustained Competitive Advantage Occurs when a firm develops a strategy that competitors are not simultaneously implementing Provides benefits which current and potential competitors are unable to duplicate Above-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk

2. Commitments Decisions Actions The Strategic Management Process Involves the full set of: which are required for firms to achieve: Strategic Competitiveness Sustained Competitive Advantage Above-Average Returns

3. Chapter 2 External Environment Strategic Intent Inputs Strategic Strategic Mission Chapter 3 Internal Environment Strategy Formulation Strategy Implementation Chapter 4 Chapter 5 Chapter 6 Chapter 10 Chapter 11 Business-Level Competitive Corporate-Level Corporate Structure Strategy Dynamics Strategy Governance & Control Strategic Actions Chapter 8 Chapter 7 Chapter 9 Chapter 12 Chapter 13 Entrepreneurship & Innovation International Acquisitions & Cooperative Strategic Strategy Restructuring Strategies Leadership Strategic Strategic Outcomes Competitiveness Above Average Feedback Returns The Strategic Management Process

4. Challenge of Strategic Management 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 Competitive success is transient...unless care is taken to preserve competitive position

5. Challenge of Strategic Management Best Stocks of the Decade The goals of achieving strategic competitiveness and earning above-average returns are challenging The performance of some companies more than meets strategic management's challenge

6. Fundamental nature of competition is changing The pace of change is relentless.... and increasing • Rapid technological changes • Rapid technology diffusions Traditional industry boundaries are blurring, such as... • Dramatic changes in information and communication technologies • Computers • Telecommunications • Increasing importance of knowledge 21st Century Competitive Landscape

7. Traditional sources of competitive advantage no longer guarantee success 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 New keys to success include: • Flexibility • Innovation • Speed • Integration 21st Century Competitive Landscape

8. Country Competitiveness Rankings A country’s competitiveness is achieved through the accumulation of individual firms’ strategic competitiveness in the global economy Achieving improved competitiveness allows a country's citizens to have a higher standard of living 21st Century Competitive Landscape

9. The External Environment Resources An Attractive Industry Capability Strategy Formulation Competitive Advantage Assets and Skills An Attractive Industry Strategy Implementation Strategy Implementation Superior Returns Superior Returns Alternative Models of Superior Returns Industrial Organization Model Resource-BasedModel

10. I/O Model of Superior Returns The Industrial Organization model suggests that above-average returns for any firm are largely determined by characteristics outside the firm. This model largely focuses on industry structure or attractiveness of the external environment rather than internal characteristics of the firm.

11. I/O Model of Superior Returns Action required: External Environment Study the external environment, especially the industry environment. General Environment Industry Environment Competitive Environment

12. External Environment General Environment Industry Environment Competitive Environment I/O Model of Superior Returns Action required: Locate an industry with high potential for above-average returns. An Attractive Industry An industry whose structural characteristics suggest above-average returns are possible

13. External Environment Attractive Industry General Environment Strategy Formulation Industry Environment An industry whose structural characteristics suggest above-average returns are possible Competitive Environment Selection of a strategy linked with above-average returns in a particular industry I/O Model of Superior Returns Action required: Identify strategy called for by the industry to earn above-average returns.

14. External Environment Attractive Industry General Environment Strategy Formulation Industry Environment An industry whose structural characteristics suggest above-average returns are possible Competitive Environment Assets and Skills Selection of a strategy linked with above-average returns in a particular industry Assets and skills required to implement a chosen strategy I/O Model of Superior Returns Action required: Develop or acquire assets and skills needed to implement the strategy.

15. Action required: External Environment Use the firm’s strengths (its assets or skills) to implement the strategy. Attractive Industry General Environment Strategy Formulation Industry Environment An industry whose structural characteristics suggest above-average returns are possible Competitive Environment Assets and Skills Selection of a strategy linked with above-average returns in a particular industry Strategy Implementation Assets and skills required to implement a chosen strategy Selection of strategic actions linked with effective implementation of the chosen strategy I/O Model of Superior Returns

16. External Environment Attractive Industry General Environment Strategy Formulation Industry Environment An industry whose structural characteristics suggest above-average returns are possible Competitive Environment Assets and Skills Selection of a strategy linked with above-average returns in a particular industry Strategy Implementation Assets and skills required to implement a chosen strategy Superior Returns Selection of strategic actions linked with effective implementation of the chosen strategy Earning of above-average returns I/O Model of Superior Returns Action required: Maintain selected strategy in order to outperform industry rivals.

17. The Resource-Based model suggests that above-average returns for any firm are largely determined by characteristics inside the firm. This model focuses on developing or obtaining valuable resources and capabilities which are difficult or impossible for rivals to imitate. Resource-Based Model of Superior Returns

18. Resource-Based Model of Superior Returns Action required: Identify firm resources. Study strengths and weak- nesses relative to rivals. Resources Inputs to a firm’s production process.

19. Action required: Determine what firm capabilities allow it to do better than rivals. Resources Capability Inputs to a firm’s production process. Capacity for an integrated set of resources to perform a task or activity. Resource-Based Model of Superior Returns

20. Resources Capability Inputs to a firm’s production process. Competitive Advantage Capacity for an integrated set of resources to integratively perform a task or activity. Ability of a firm to outperform its rivals Resource-Based Model of Superior Returns Action required: Determine how firm’s resources and capabilities may create competitive advantage.

21. Resources Capability Inputs to a firm’s production process. Competitive Advantage Capacity for an integrated set of resources to integratively perform a task or activity. An Attractive Industry Ability of a firm to outperform its rivals Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities Resource-Based Model of Superior Returns Action required: Locate an attractive industry.

22. Resources Capability Inputs to a firm’s production process. Competitive Advantage Capacity for an integrated set of resources to integratively perform a task or activity. An Attractive Industry Ability of a firm to outperform its rivals Strategy Formulation and Implementation Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities Strategic actions taken to earn above-average returns Resource-Based Model of Superior Returns Action required: Select strategy that best exploits resources and capabilities relative to opportunities in environs.

23. Resources Capability Inputs to a firm’s production process. Competitive Advantage Capacity for an integrated set of resources to integratively perform a task or activity. An Attractive Industry Ability of a firm to outperform its rivals Strategy Formulation and Implementation Location of an industry with opportunities that can be exploited by the firm’s resources and capabilities Superior Returns Strategic actions taken to earn above-average returns Earning of above-average returns Resource-Based Model of Superior Returns Action required: Maintain selected strategy in order to outperform industry rivals.

24. When these four criteria are met, Resources and Capabilities become: Core Competencies Core Competencies are resources and capabilities that can serve as a source of Competitive Advantage. The Resource-Based model argues that Core Competencies are the basis for a firm’s Competitive Advantage, Strategic Competitiveness and Ability to Earn Above-average Returns.

25. Capital Market Firm Stock market/Investors Debt suppliers/Banks Product Market Organizational Primary Customers Suppliers Employees Managers Non-Managers Stakeholders: Groups who are affected by a firm’s performance and who have claims on its wealth The firm must maintain performance at an adequate level in order to maintain the participation of key stakeholders

26. How do you divide the pie in order to keep all of the stakeholders involved? 1 2 How do you increase the size of the pie so that there is more to go around? Stakeholder Involvement Each of the key stakeholders wants a piece of the same pie

27. Inputs Strategic Strategic Outcomes Chapter 2 The Strategic Management Process External Environment Strategic Intent Strategic Mission Chapter 3 Internal Environment Strategy Formulation Strategy Implementation Chapter 4 Chapter 5 Chapter 6 Chapter 10 Chapter 11 Business-Level Competitive Corporate-Level Corporate Structure Strategy Dynamics Strategy Governance & Control Actions Strategic Chapter 8 Chapter 7 Chapter 9 Chapter 12 Chapter 13 Entrepreneurship & Innovation International Acquisitions & Cooperative Strategic Strategy Restructuring Strategies Leadership Strategic Competitiveness Above Average Feedback Returns