PPT Hitt - CH1-1-36 PDF
PPT Hitt - CH1-1-36 PDF
PPT Hitt - CH1-1-36 PDF
Management
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
3
Studying this chapter should provide you with the
strategic management knowledge needed to:
• Define strategic competitiveness, strategy, competitive
advantage, above-average returns, and the strategic
management process.
• Describe the competitive landscape and explain how
globalization and technological changes shape it.
• Use the industrial organization (I/O) model to explain how
firms can earn above-average returns.
• Use the resource-based model to explain how firms can earn
aboveAverage returns.
• Describe vision and mission and discuss their value.
• Define stakeholders and describe their ability to influence
organizations.
• Describe the work of strategic leaders.
• Explain the strategic management process.
DEFINITIONS
Above-Average Returns
Occurs when a firm develops a strategy that
competitors are not simultaneously
implementing
Dynamics of strategic
maneuvering among
global and innovative
combatants
Price-quality
positioning, new know-
how, first mover
Hypercompetitive environments
Protect or invade
established product or
Fundamental nature of geographic markets
competition is changing
9
Competitive Landscape
Spread of economic
innovations around the
world.
Hypercompetitive environments
Political and cultural
adjustments are
Fundamental nature of required.
competition is changing
10
Competitive Landscape
Increasing rate of
Emergence of technological change and
global economy diffusion
Rapid technological The information age
change
Increasing knowledge
intensity
Hypercompetitive environments
Fundamental nature of
competition is changing
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Strategic Flexibility
12
Strategic Flexibility
Organizational
slack
Strategic Strategic
reorientation Flexibility
flexibility
Capacity to
learn
13
I/O Model of Above-Average Returns
1. External Environments
General
1. Strategy dictated by the
Global external environments
of the firm (what
Industry opportunities exist in
Environment
these environments?)
2. Firm develops internal
skills required by
Competitor external environment
Environment (what can the firm do
Technological about the
Environment opportunities?) 14
Four Assumptions of the I/O Model
15
Four Assumptions of the I/O Model
16
I/O Model of Above-Average Returns
Industrial Organization 1. Study the external environment,
especially the industry environment
Model • economies of scale
• barriers to market entry
The External Environment • diversification
• product differentiation
• degree of concentration of firms in
the industry
17
I/O Model of Above-Average Returns
Industrial Organization 2. Locate an attractive industry with a
high potential for above-average
Model returns
18
I/O Model of Above-Average Returns
Industrial Organization 3. Identify the strategy called for by the
attractive industry to earn above-
Model average returns
An Attractive Industry
19
I/O Model of Above-Average Returns
Industrial Organization 4. Develop or acquire assets and skills
needed to implement the strategy
Model
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills Assets and skills: those assets and skills
required to implement a chosen strategy
20
I/O Model of Above-Average Returns
Industrial Organization 5. Use the firm’s strengths (its developed or
acquired assets and skills) to implement the
Model strategy
An Attractive Industry
Strategy Formulation
21
I/O Model of Above-Average Returns
Industrial Organization
Model
The External Environment
An Attractive Industry
Strategy Formulation
Superior Returns
22
Resource-based Model of Above Average
Returns
Resources
Resources: inputs into a firm’s production
process
25
Resource-based Model of Above Average
Returns
Resource-based 2. Determine the firm’s capabilities--what
it can do better than its competitors
Model
Resources
26
Resource-based Model of Above Average
Returns
Resource-based 3. Determine the potential of the firm’s
resources and capabilities in terms of a
Model competitive advantage
Resources
Capability
27
Resource-based Model of Above Average
Returns
Resource-based 4. Locate an attractive industry
Model
Resources
Capability
Competitive Advantage
28
Resource-based Model of Above Average
Returns
Resource-based 5. Select a strategy that best allows the
firm to utilize its resources and
Model capabilities relative to opportunities in
the external environment
Resources
Capability
Competitive Advantage
An Attractive Industry
Strategy formulation and implementation:
Strategy Form/Impl strategic actions taken to earn above
average returns
29
Resource-based Model of Above Average
Returns
Resource-based
Model
Resources
Capability
Competitive Advantage
Superior Returns
30
Four Attributes of Resources and Capabilities
(Competitive Advantage)
allow the firm to exploit opportunities or neutralize
Valuable threats in its external environment
32
Resources and capabilities that meet these
four criteria become a source of:
Valuable
Rare
Resources and Capabilities
Core Competencies
Costly to imitate
Nonsubstitutable
33
Core Competencies are the basis for a firm’s
Competitive
advantage
Strategic
competitiveness Core Competencies
Ability to earn
above-average
returns
34
VISION
Vision
is a picture of what the firm wants to be and, in broad terms, what it
wants to achieve. Thus, 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. An effective vision
stretches and challenges people as well.
EX. :
Our vision is to be the world’s best quick service restaurant.
(McDonald’s)
To make the automobile accessible to every American. (Ford Motor
Company’s vision when established by Henry Ford)
Delivering happiness to customers, employees, and vendors.
(Zappos.com)
MISSION
• The vision is the foundation for the firm’s mission.
A specifies the businesses in which the firm
intends to compete and the customers it intends
to serve.
• The firm’s mission is more concrete than its vision.
EX.
• Be the best employer for our people in each
community around the world and deliver
operational excellence to our customers in each of
our restaurants. (McDonald’s)
• Provide the best customer service possible. Deliver
WOW through service. (Zappos.com)
The Firm and Its Stakeholders
Stakeholders
Groups
The firmwho
mustaremaintain
affected by a
firm’s
performance
performance
at an adequate
and who
have
level in
claims
orderontoits
retain
wealth
the
participation of key
stakeholders
37
The Firm and Its Stakeholders
Stakeholders
Shareholders
Capital Market Stakeholders Major suppliers of capital
•Banks
•Private lenders
•Venture capitalists
38
The Firm and Its Stakeholders
Stakeholders
Primary customers
Product Market Stakeholders Suppliers
Host communities
Unions
39
The Firm and Its Stakeholders
Stakeholders
Employees
Organizational Stakeholders Managers
Nonmanagers
40
Stakeholder Involvement
1
How do you divide the returns to Product
keep stakeholders involved? Market
42
Stakeholder Involvement
2
How do you increase the returns Product
so everyone has more to share? Market
43
Strategic Leaders
• are people located in different areas and
levels of the firm using the strategic
management process to select actions that
help the firm achieve its vision and fulfill its
mission.
Strategic Inputs
Chapter 2
The External
The Strategic
Environment
Strategic Intent
Strategic Mission
Management
Chapter 3
The Internal
Environment
Process
Strategy Formulation Strategy Implementation
Chapter 5 Chapter 11
Chapter 4 Chapter 6 Chapter 10
Competitive Rivalry Organizational
Strategic Actions
Chapter 7
Chapter 8 Chapter 9 Chapter 12 Chapter 13
Acquisition and
International Cooperative Strategic Strategic
Restructuring
Strategy Strategy Leadership Entrepreneurship
Strategies
Strategic Outcomes
Strategic
Competitiveness
Above-Average
Returns
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