Desak Made Laksmi Devi

041113100
English Class
Chapter 1:
Strategic Management and Strategic Competitiveness
1. Nature of Competition: asi! !on!epts
"trateg#
o Integrated and coordinated set of commitments and actions designed to
exploit core competencies and gain a competitive advantage
Competitive $dvantage %C$&
o 'hen a firm implements a strateg# that !ompetitors are una(le to
dupli!ate or find too !ostl# to imitate
"trategi! Competitiveness
o $!hieved )hen a firm su!!essfull# formulates * implements a value+
!reating strateg#
$(ove $verage ,eturns
o ,eturns in e-!ess of )hat investor e-pe!ts in !omparison to other
investments )ith similar risk
,isk
o .nvestor/s un!ertaint# a(out e!onomi! gains0losses resulting from a
parti!ular investment
$verage ,eturns
o ,eturns e1ual to )hat investor e-pe!ts in !omparison to other investments
)ith similar risk
"trategi! Management 2ro!ess %"M2&
o 3ull set of !ommitments4 de!isions and a!tions re1uired for a firm to
a!hieve strategi! !ompetitiveness and earn a(ove average returns
5. .ndustrial 6rgani7ational %.06& Model of $(ove+$verage ,eturns %$$,&
3. 8he ,esour!e+ased Model of $$,
,esour!es
o .nputs into a firm9s produ!tion pro!ess
.n!ludes !apital e1uipment4 emplo#ee skills4 patents4 high+1ualit#
managers4 finan!ial !ondition4 et!.
o asis for competitive advantage: 'hen resour!es are valua(le4 rare4 !ostl#
to imitate4 and nonsu(stituta(le
o 3 !ategories of internal0firm+spe!ifi! resour!es
2h#si!al4 :uman4 6rgani7ational !apital
Capa(ilit#
o Capa!it# for a set of resour!es to perform a task or a!tivit# in an
integrative manner
Core Competen!#
o $ firm/s resour!es and !apa(ilities that serve as sour!es of !ompetitive
advantage over its rival
asi! 2remise + a firm9s unique resources * capabilities is the (asis for firm
strateg# and $$,
o Ea!h organi7ation is a (undle of uni1ue resour!es and !apa(ilities
o 2erforman!e differen!e (et)een firms emerge over time due to these
uni1ue resour!es and !apa(ilities %versus industr#/s stru!tural
!hara!teristi!s&
o Com(ined uni1ueness should define the firms/ strategi! a!tions
o $ firm has superior performan!e (e!ause of
o ;ni1ue resour!es and !apa(ilities4 and the !om(ination makes them
different4 and (etter4 than their !ompetition < driving the !ompetitive
advantage
8he ,esour!e+ased Model of $$,
o asi! 2remise + a firm9s unique resources * capabilities is the (asis for
firm strateg# and $$,
o Ea!h organi7ation is a (undle of uni1ue resour!es and !apa(ilities
o 2erforman!e differen!e (et)een firms emerge over time due to these
uni1ue resour!es and !apa(ilities %versus industr#/s stru!tural
!hara!teristi!s&
o Com(ined uni1ueness should define the firms/ strategi! a!tions
o $ firm has superior performan!e (e!ause of
o ;ni1ue resour!es and !apa(ilities4 and the !om(ination makes them
different4 and (etter4 than their !ompetition < driving the !ompetitive
advantage
4. =ision and Mission
2urpose to inform stakeholders of )hat the firm is4 )hat it seeks to a!!omplish4
and )ho it seeks to serve
=ision
o 2i!ture of )hat the firm )ants to (e and4 in (road terms4 )hat it ultimatel#
)ants to a!hieve
o >ives the firm dire!tion
o 8he responsi(ilit# of a firm9s top strategi! leader < the CE6
o CE6 )orks )ith others to form a firm/s strategi! vision
o "erves as foundation for mission
Mission
o "pe!ifies the (usiness%es& or industries in )hi!h a firm intends to !ompete
and the !ustomers it intends to serve
o More spe!ifi! than the vision
o Mission and vision provide foundation for strateg# formulation and
implementation
?. "takeholders
asi! 2remise < a firm !an effe!tivel# manage stakeholder relationships to !reate
a !ompetitive advantage and outperform its !ompetitors
"takeholders are individuals and groups )ho !an affe!t4 and are affe!ted (#4 the
strategi! out!omes a!hieved and )ho have enfor!ea(le !laims on a firm/s
performan!e
Must minimall# meet the e-pe!tations of ea!h stakeholder group
$$, make this easier to do
3 Ma@or "takeholder >roups

A. "trategi! Leaders
2eople %primaril# managers& lo!ated in different parts of the firm using the
strategi! management pro!ess to help the firm rea!h its vision and mission
o De!isive and !ommitted to firms/ efforts to a!hieve their desired strategi!
out!omes
o Create and sustain organi7ational !ulture
o Can e-ist at different organi7ational levels
Corporate4 (usiness4 fun!tional4 operating
8he 'ork of Effe!tive "trategi! Leaders
o 'ork long hours
o Must (e a(le to think strategi!all#
o Bthink seriousl# and deepl#Ca(out the purposes of the organi7ations the#
head or fun!tions the# perform4 a(out strategies4 ta!ti!s4C..and peopleC
and a(out the important 1uestions C the# need to ask.B
o "et ethi!al tone for organi7ation
o 8r# to predi!t the out!omes of their strategi! de!isions (efore the# are
implemented
o .nvolved in internal and e-ternal anal#ses4 development of vision and
mission4 and strateg# formulation and implementation
D. 'hat is 2erforman!eE
2erforman!e is !entral to the stud# and pra!ti!e of strateg#
6rgani7ational performan!e is !ompli!ated
Numerous definitions4 approa!hes4 and t#pes of performan!e
Can (e an elusive !on!ept
E-amples:
o >oal attainment + =ision0mission4 o(@e!tives
o Effe!tiveness < $ hospital !uring si!k people
o Fualit# < Customer servi!e
o Effi!ien!# + .nputs versus outputs
o 3inan!ial0a!!ounting0e!onomi! ,eturns < ,6$4 E2"
Can also var# (# t#pe of firm
o 3or+profit versus not+for+profit
o 2u(li!l# tradedE
o >overnment
Ma@or $pproa!hes to Measuring 2erforman!e
o 3irm "urvival
$ firm that survives over a relativel# e-tended period of time must
(e generating at least normal e!onomi! performan!e
o "takeholders =ie)
$n organi7ation/s performan!e should (e evaluated relative to the
preferen!es and desires of stakeholders that provide resour!es to a
firm
Different stakeholders !an have different interests and different
!riteria for evaluating performan!e
Ma# need to !hoose )hi!h stakeholders to satisf#
Must minimall# satisf# the interests of ea!h stakeholder group
o "imple $!!ounting Measures
Most popular approa!h
2u(li!l# availa(le for man# firms
8he# !ommuni!ate a great deal of information
Most often rel# on ratio anal#sis
4 Ma@or !ategories of ratios
2rofita(ilit#
Li1uidit#
Leverage
$!tivit#
o 2rofita(ilit# ,atios
,atios )ith some measure of profit in the numerator and some
measure of firm si7e or assets in the denominator
,6$4 ,6E4 margins4 E2"4 p0e ratio
Li1uidit# ,atios
,atios that fo!us on the a(ilit# of a firm to meet its short<term
finan!ial o(ligations
Current ratio4 1ui!k ratio
o Leverage ,atios
,atios that fo!us on the level of a firm/s inde(tedness
De(t to assets4 de(t to e1uit#4 times interest earned
$!tivit# ,atios
,atios that fo!us on the level of a!tivit# in a firm/s (usiness
o .nventor# turnover4 average !olle!tion period
8he ,elative Nature of 2erforman!e
o 2erforman!e is al)a#s relative to other firms
o 2erforman!e should (e !ompared to industr# average%s&
o $$, are a(ove industr# average
o Normal and (elo) normal returns
o .ndustr# ad@ustments
o "ome industries are more profita(le than others
o Can ad@ust for industr# performan!e and !ompare performan!e levels
a!ross industries
o Can also ad@ust for risk
o Looking at trends !an also (e useful
3rom earlier
.06 Model + 2i!k attra!tive industr#%ies& to !ompete in
,esour!e+ased Model + Develop uni1ue (undles of resour!es and
!apa(ilities